Investing in 2022 single family homes
Member since 2022 · 6 posts · 1 vote
Hi everyone, I am new to investing in real estate. Is it a bad time to start buying now With inflation going up, interest rate hikes, and it being a sellers market? Houses are selling fast so it’s hard to find a deal that’s 20% off and a seller cover closing cost. Should I hold off buying?
I would say do what the numbers tell you. When I first started in real estate I set a line in the sand that said, " I want to make at least make $300/door for a financed deal to be "worth it" after PITI (Principal, Interest, Taxes, and Insurance), plus a maintenance reserve." Just starting out it is sometimes hard to know what a good deal looks like. If you make $100 a month positive cash flow, is it a good deal? What about negative cash flow? For me, those last two would be a "No". We have been lucky to find the occasional deal that give us $500-$800/month cash flow on a single family home, but most are closer to the $300/month on average. So run the numbers and follow what the math tells you.
Yes, getting in now is definitely more expensive, but I don’t see prices coming back down significantly in the near future, and no one really knows what will happen… so to some degree it is a crap shoot on timing. I would say don’t buy just to get started, but rather wait for a deal that makes sense. Owning a poor performing property is not how you want to get started. For me, in the end it’s all about the math, because ultimately most of us in this business are doing it to make money. There is also appreciation and mortgage pay-down that comes into play, but for me it starts with monthly income. The other two are bonuses!
Don't just search the MLS… we have found some of our most profitable deals on Craigslist, believe it or not! Wholesalers are also a great place to look… even signs on the side of the road. Check them out, make sure they are legit, and always go through a title agency to close and you should be fine!
As for financing, you should be able to find a 30 year residential mortgage on a 1-4 unit property. Just shop around. 15 years is ridiculous. Commercial loans typically amortize a bit shorter… for us 20-25 years, with a rate that resets every 5 years, but I would recommend a mortgage brokerage company, versus a typical mainstream bank. Smaller banks tend to be more flexible as well.
all the best
Randy
I would say do what the numbers tell you. When I first started in real estate I set a line in the sand that said, " I want to make at least make $300/door for a financed deal to be "worth it" after PITI (Principal, Interest, Taxes, and Insurance), plus a maintenance reserve." Just starting out it is sometimes hard to know what a good deal looks like. If you make $100 a month positive cash flow, is it a good deal? What about negative cash flow? For me, those last two would be a "No". We have been lucky to find the occasional deal that give us $500-$800/month cash flow on a single family home, but most are closer to the $300/month on average. So run the numbers and follow what the math tells you.
Yes, getting in now is definitely more expensive, but I don’t see prices coming back down significantly in the near future, and no one really knows what will happen… so to some degree it is a crap shoot on timing. I would say don’t buy just to get started, but rather wait for a deal that makes sense. Owning a poor performing property is not how you want to get started. For me, in the end it’s all about the math, because ultimately most of us in this business are doing it to make money. There is also appreciation and mortgage pay-down that comes into play, but for me it starts with monthly income. The other two are bonuses!
Don't just search the MLS… we have found some of our most profitable deals on Craigslist, believe it or not! Wholesalers are also a great place to look… even signs on the side of the road. Check them out, make sure they are legit, and always go through a title agency to close and you should be fine!
As for financing, you should be able to find a 30 year residential mortgage on a 1-4 unit property. Just shop around. 15 years is ridiculous. Commercial loans typically amortize a bit shorter… for us 20-25 years, with a rate that resets every 5 years, but I would recommend a mortgage brokerage company, versus a typical mainstream bank. Smaller banks tend to be more flexible as well.
all the best
Randy
thank you so much for your feedback! those are all good points. I am going back to the drawing board to keep all those numbers in mind.
Just curious, have you seen any investment property that have solar panels? Is that a good investment for a rental property because the up front cost is about 45k.
Hi Thuy,
One of your comments stuck out and that comment was what your realtor told you. You might want to find a different source other than a realtor. Find a "quality" wholesaler in your market and see what they have available that's off market. However, the Texas market in general right now, is on fire. So finding a good deal might be tough, but they're out there. I think you have a better chance of finding a good deal off market. Just be careful who you deal with. There's a LOT of unscrupulous wholesalers out there! Best of luck.
The name of the rental game is minimizing YOUR expenses. Ask yourself how spending an extra $45k (on anything for REI) does that and you will have your answer. ;)
That $45,000 cash out of pocket is an entire down payment on another house.
Not necessary. To prove the point, search for rentals with solar panels… there may be a few that owners moved out of, but there will be millions that don’t have it because it makes no sense investment wise for rentals.
All the best!
randy
No to solar panels on a rental. The ROI is forever....and you're trying to make a profit, correct?
And yes this is not the best time in history to buy a house. However, there are always houses out there that will hit your numbers. Always.
You will have to look harder, maybe look out of your ideal area and maybe take a house that needs some repairs, but there will be a house for you if you want it.
Although inflation is an issue for an investor, bear in mind it is also a positive because your rents and property value will go up faster as well......
Scott,
I'm new to this so I'm not sure how to find a quality wholesaler. Do you have any recommendations? Thank you!
Randy,
I was recommended by a friend to invest in solar panels (because electricity costs in texas is rising) but I'm glad I posed this question out there. What you're saying is definitely true in terms of down payment. Thank you again for another perspective!
Bruce,
Could you tell me more about what you mean by staying the ROI is forever? I thought a high ROI is good?
Hi Thuy! A local San Antonio investor and Realtor here.
To answer your question- is it the best time to buy properties? Maybe not, but that doesn't mean there aren't good deals out there- you'll just have to search a little harder. Because of how the market is right now, a lot of people are having to rent because they're tired of the multiple offer situations or they're having to move and relocate to another rental because landlords are selling. If going after a turn key property that just hit the market- definitely expect to pay well over asking price, the title policy, and all your closing costs. I normally guide my investor buyers to stray away from properties new on market because that gives us leverage on the homes we do go after and my clients love this route and we have no problem getting under contract on some really solid deals where they're able to offer at list price (or even below and also get some closings cost credits!).
Regarding lenders- definitely shop around rates and services. I work very closely with lenders who take wonderful care of my investor buyers and buyers in general. You should be able to find a 30 year no problem.
The key to working with a Realtor is working with a Realtor who has investor knowledge, knows the market, and knows the different real estate avenues and opportunities based on what the numbers dictate. Most of my client base are local and out of state investors that we cater to and we run in depth analytics for them to see the potential growth from the "big picture". Realtors are great to work with, you just need to ensure they're like minded and that they "walk the walk" :) Best of luck to you!
Meghan,
Thank you so much for your feedback. I will actually be reaching out to your team for some advice about the area.
It’s great to have you on the forums!
This site is great if you are looking to invest into real estate.
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