Buying the dip, Is it too soon?

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Buying the dip, Is it too soon?

Rental Property Investor · Sicklerville, NJ (08081) · Member since 2020 · 10 posts · 2 votes

When are we buying the house dip? I know it still has more to go down but when do we jump in to grab it? I'm currently looking to purchase a STR in Tennessee or Florida.

When do you guys think that area will be good to purchase?

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Avery CarlBusiness Member

Real Estate Agent · USA · Member since 2016 · 909 posts · 1k+ votes

Timing the market is like trying to catch a falling knife. You know the general direction that is going, but catching it at exactly the right time is pure luck. Just run your numbers at the price and interest rate you're able to get a property for and if they work they work. If not, move on to the next deal. I don't like everyone running around saying "marry the house, date the rate." I feel that it encourages people to buy deals that don't work and bank on refinancing and lowering the rate later. Make sure that the deal works NOW and if you can refinance to a lower rate later, then that's extra.

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Avery CarlBusiness Member
Real Estate Agent · USA · Member since 2016 · 909 posts · 1k+ votes
3y
Timing the market is like trying to catch a falling knife. You know the general direction that is going, but catching it at exactly the right time is pure luck. Just run your numbers at the price and interest rate you're able to get a property for and if they work they work. If not, move on to the next deal. I don't like everyone running around saying "marry the house, date the rate." I feel that it encourages people to buy deals that don't work and bank on refinancing and lowering the rate later. Make sure that the deal works NOW and if you can refinance to a lower rate later, then that's extra.
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Paul De Luca
Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
3y
@John Zurzolo
What the market does is out of your control. You're better off focusing on your actions, namely identifying and buying good deals. The market could "crash" tomorrow, 6 months from now, a year from now.....nobody knows. The opportunity cost of waiting should always be considered as well.
2 Reply
Bob S.
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
3y
Quote from @John Zurzolo:

When are we buying the house dip? I know it still has more to go down but when do we jump in to grab it? I'm currently looking to purchase a STR in Tennessee or Florida.
When do you guys think that area will be good to purchase?

It sounds like you are trying to time the market, bad idea. Never works. Just buy them right. If you are renting them who care about up or down 10% when you are making 10% net ,
0 Reply
John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
3y
I agree with everyone's comments on timing the market.
I think we have further to go towards a
dip.
1. Interest rates will go up further from here, reducing potential buyers.
2. Days on market and price reductions are currently increasing.
3. Motivated sellers who need to sell will have to reduce prices from what properties where selling a year ago to entice buyers.
4. New mortgage apications are at a 20 plus year low right now.
I'd would buy if the numbers work, but I'd be looking for a deal to offset risk.
I'm looking more for cheap LTR properties for near future. I have one under contract for 50k that is a $250/sqft ARV area. I will likely keep it as a rental in my ROTH IRA.
3 Reply
Account Closed
Investor · Denver, CO · Member since 2022 · 184 posts · 78 votes
3y
I don't think timing the market is as ambiguous as everyone says. We still have another 50 or 75 bps hike, another 50 or 25 bps coming after, then our last likely last 25 bps coming in March 2023. Real estate takes a while to price in rate hikes and sellers in markets I'm dealing in are still living in the 2021 fantasy land with their ask prices. Also, let the 10-year guide you here. As long as it's this elevated, we got more pain coming in real estate.
Demand makes values go up. What demand is there when a risk-free treasury is yielding 4.25% while most cash on cash returns right now are 4% or lower.
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Scott E.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
3y
My next buy will be when there are some indicators that we've reached a bottom. We've already dipped ~15% in my market There are some very motivated sellers out there right now. But there is no hope of the pain stopping anytime soon, with inventory rising and rates forecasted to go up a couple more times.
It seems like within the next 6-12 months we will start to see some indications that we've reached a bottom. I think it's a good plan to keep some cash around until then.
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Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
3y
You can kinda sorta 'time the market', but it is not a science obviously....
So for what it's worth (zero) I would say the bottom will be close just before next spring (Feb-Mar '23)
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Steven Foster Wilson
Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
3y
Quote from @John Zurzolo:

When are we buying the house dip? I know it still has more to go down but when do we jump in to grab it? I'm currently looking to purchase a STR in Tennessee or Florida.
When do you guys think that area will be good to purchase?

I think it is all about if the numbers line up. If it makes sense then do it. I have talked to many old-time investors that bought properties at 12% rates yet they could still make sense with it and when the rates dropped they just refinanced. The only things I have regretted are not acting fast and passing on a deal that would have been great but I had analysis paralysis.
3 Reply
Leslie Anne Morris
Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes
3y
Underwriting metrics are key now. Also consider your individual investing goals. If things line up buy now, don’t wait.
2 Reply
Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
3y
Just buy if its a good deal. I wouldn't buy an OK deal right now it has to be great. I just offered on a condo thats $20k below comps and makes around 10% COC. Stuff like that is a win. Can flip it off higher when rates stabilize in a few years and hold it in the mean time.
1 Reply
Conner Olsen
Real Estate Agent · Austin, TX · Member since 2020 · 1k+ posts · 941 votes
3y
Quote from @John Zurzolo:

When are we buying the house dip? I know it still has more to go down but when do we jump in to grab it? I'm currently looking to purchase a STR in Tennessee or Florida.
When do you guys think that area will be good to purchase?

Buy when the returns hit your goals and you have good cash flow and you can hold for 5+ years.
0 Reply
Shiela R.
Investor · Boulder, CO · Member since 2017 · 304 posts · 347 votes
3y
@John Zurzolo, good question. To those who say you can't time the market, I'd beg to differ. I mean no one has a crystal ball but...all markets are cyclical. And all markets go up and down. Recession-Proof RE Investing by J Scott is a good read re this.
You have to be an expert in your area. When you see DOM increasing and prices decreasing, that's heading toward the bottom. You don't want to buy at the top or on the way down to the bottom; rather on the way up. I haven't even looked at buying residential since 2017. Except for when a deal landed in my lap and I tied it up for $10. That being said, don't put yourself at risk, unnecessarily. It's okay to pass on a deal - in fact, I'd say successful investors pass more often than not. I was taught to buy at a 20%+ discount so bidding against another buyer for one property is absurd to me. Hence, not buying for the last 5 years. I have still invested, just in different asset classes.
1 Reply
Ricardo Hidalgo
Real Estate Agent · Member since 2019 · 569 posts · 257 votes
3y
Quote from @John Zurzolo:

When are we buying the house dip? I know it still has more to go down but when do we jump in to grab it? I'm currently looking to purchase a STR in Tennessee or Florida.
When do you guys think that area will be good to purchase?

I would start focusing on value add such as property needing renovation that are sitting longer and offering less than list price. If the numbers cashflow properly with a strong equity position I would buy it now.
0 Reply
Fernando E.
Rental Property Investor · SF Bay Area · Member since 2016 · 234 posts · 103 votes
3y
@John Zurzolo you got some good comments above. My 2 cents, as long as the math works and it aligns with your financial goal, its a good deal in my book. Good luck.
0 Reply
Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3y
Quote from @John Zurzolo:

You jump in when it makes sense. That could be today if you're in the right market.
The market will continue to drop for at least six months. I predict we won't hit bottom until 2023, maybe even 2024. Then we'll have a contentious election year, so all hell may break loose again. Who knows?
People are finding good deals today. They'll find them again tomorrow and the next month. You may have to be more selective, you may need to pivot to a new form of investment or type of property, or you may choose to use this time to improve your education, refine your business, or take a break and have a really good vacation. We should regularly evaluate where we are and where we want to be to see if we need to change things up.

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Jeremy Horton
Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
3y
Quote from @Account Closed:

I don't think timing the market is as ambiguous as everyone says. We still have another 50 or 75 bps hike, another 50 or 25 bps coming after, then our last likely last 25 bps coming in March 2023. Real estate takes a while to price in rate hikes and sellers in markets I'm dealing in are still living in the 2021 fantasy land with their ask prices. Also, let the 10-year guide you here. As long as it's this elevated, we got more pain coming in real estate.
Demand makes values go up. What demand is there when a risk-free treasury is yielding 4.25% while most cash on cash returns right now are 4% or lower.
Check out Meet Kevin on YouTube.

This is along my thinking
Looks like a lot of prices peaked in June/July - this is ONLY 4 months ago. We KNOW more interest rate hikes are coming, we see DOM increasing, lots of prices dropping already and they will continue further in my opinion, inventor increasing. What has changed positively in the market? Nothing that I can think of. Not only that, sellers/realtors are comparing to comps up to 6 months ago...when interest rates were half and prices were highest.
Remember when the news was talking and pumping up btc (when it was 60k), now no one is talking about it and it's at 19k. Same kinda deal going on with STRs in my opinion. They've been the craze the last year and a half (when prices have been the highest). Let the mainstream craze come down and prices will as well.
2 Reply
Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y
Don't try to catch the falling knife. Know what you want and make sure you're buying well under market value
0 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
3y
Full time investors are already buying the dip, paying 10-15% less in many markets, and adding 10-20+% in value...both of which help mitigate valuation risk.

We need to spend less time discussing "the market" and more time on "investing" activities. The discussions are just distractions from the real work. That's the harsh truth.
5 Reply
Account Closed
Investor · Denver, CO · Member since 2022 · 184 posts · 78 votes
3y
Quote from @Jeremy Horton:

Quote from @Account Closed:

I don't think timing the market is as ambiguous as everyone says. We still have another 50 or 75 bps hike, another 50 or 25 bps coming after, then our last likely last 25 bps coming in March 2023. Real estate takes a while to price in rate hikes and sellers in markets I'm dealing in are still living in the 2021 fantasy land with their ask prices. Also, let the 10-year guide you here. As long as it's this elevated, we got more pain coming in real estate.
Demand makes values go up. What demand is there when a risk-free treasury is yielding 4.25% while most cash on cash returns right now are 4% or lower.
Check out Meet Kevin on YouTube.

This is along my thinking
Looks like a lot of prices peaked in June/July - this is ONLY 4 months ago. We KNOW more interest rate hikes are coming, we see DOM increasing, lots of prices dropping already and they will continue further in my opinion, inventor increasing. What has changed positively in the market? Nothing that I can think of. Not only that, sellers/realtors are comparing to comps up to 6 months ago...when interest rates were half and prices were highest.
Remember when the news was talking and pumping up btc (when it was 60k), now no one is talking about it and it's at 19k. Same kinda deal going on with STRs in my opinion. They've been the craze the last year and a half (when prices have been the highest). Let the mainstream craze come down and prices will as well.

Then again, there is no rule that says assets will lose value when rates go up. There are some huge earnings this week that can and will move the equities markets. People also forget, and the media doesn't cover, that US industrial production is at all-time highs. Europe situation surely scary, China scarier. I like cash right now.
0 Reply
J. Mitchell Bernier
Lender · Southwest Georgia · Member since 2017 · 312 posts · 278 votes
3y
Quote from @Avery Carl:

"I don't like everyone running around saying "marry the house, date the rate." I feel that it encourages people to buy deals that don't work and bank on refinancing and lowering the rate later. Make sure that the deal works NOW and if you can refinance to a lower rate later, then that's extra."

Please say this louder!!! I have seen countless amounts of mortgage brokers roll this out and it is no different than the teaser rates banks use to offer back before the last downturn. I even seen some where the rate is a 5.5% now and goes up to 6.5% in year 1 and year 2 it then hits 7.5%. It is maddening that people are pushing this.
0 Reply
Bradley Swartz
Accountant · Shrewsbury, MA · Member since 2020 · 6 posts · 2 votes
3y
@John Zurzolo hard to time that market. If you do your analysis & the numbers work & the returns are what you looking for - buy, don't wait.
0 Reply
Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
3y
The market will hit bottom on February 18th, 2023, at 5:12pm EST. Don't bother doing any underwriting, making any offers or negotiating on anything until then, and only then.
2 Reply
Simon Ashbaugh
Realtor · Columbus Ohio, Cleveland Ohio · Member since 2022 · 849 posts · 830 votes
3y
Im recommending my clients keep buying. Prices may go down but who knows what interest rates will do.
0 Reply
James DainardPro Member
Real Estate Broker · Bellevue, WA · Member since 2015 · 415 posts · 1k+ votes
3y
Hey John,
In terms of "timing the market" the time is now. If you are able to identify a property that works on your proformas and is insulated enough from the swings that we're seeing in the macro-econ of the US right now you should be good.
The hit to affordability is creating deals right now. If you can figure out how to take down a cash-neutral or cash-flowing property with the interest rates we have now, you'll be in a great place to refinance once we're through this mess.
Make sure you're mitigating your risk and triple checking your numbers/budgets.
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Ryan MoyerBusiness Member
Property Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 991 posts · 1k+ votes
3y
Quote from @Steve K.:

The market will hit bottom on February 18th, 2023, at 5:12pm EST. Don't bother doing any underwriting, making any offers or negotiating on anything until then, and only then.

I'm thinking February 30th seems more likely.
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