Wrong time to acquire rentals?

12 Replies

Hello, David Noble here. I live in Lexington Ky. My day job is residential renovations. I’ve been doing high end kitchens and baths for the last twelve years. I “house hacked” my previous home which had an apartment over the detached garage. We moved out of the house, which I had fully renovated, last year and kept the property. Now I rent the apartment as well as the house. The two units combined make a nice profit over the mortgage. And it’s led me to the realization I need more properties.

That idea led me to BP podcasts, which in turn led me here. Ultimately I would like the passive income of more rentals. But I’m tentative to buy/hold at the top of the market. So I’m also thinking of flips. I have a lot to learn. I have a lot of questions. So here I am.

Everyone has their own speculations about what the housing market will do. And it depends on your local area. But interest rates are moving up along with home price-- sounds like an equation for more renters and less home ownership.

Ancient Chinese proverb :

Best time to plant tree is twenty years ago
Second best time to plant tree is now

People that are successful don’t sit and wait around for things to happen - they get going and make things happen . As long as there is divorce death illness unemployment etc..There will always be deals to be had even at the top of the market . Now that being said most of those good deals won’t be listed on the MLS so you may need to be creative

You make money on the purchase.... if you buy smart there will always be deals. I can tell you the market in KC for example is all over the place. Flips... to many people that have no idea what they are doing bid up the prices. Buy and hold same way, but it's desperate investors or locals looking for place.  Search hard enough though, you can still make deals happen.

@David Noble , you have been doing high-end kitchens and baths for 12 years.  What happened to your business during the last recession?  Did work slow down?  Did it stop entirely?  Were you forced to lower your project cost?  Did you have to change careers?

Or did you get through it and are profiting more now?

If you are into creating long-term monthly-income producing wealth, then buy the right house, for the right price, in the right neighborhood.  Fix it and rent it to solid tenants at slightly below market rent.

If you see a financial storm coming, keep your powder dry, but don't stop doing deals.

Keep moving forward!

I started a year ago and I’m already sitting on thousands of dollars in appreciation. People have been saying now the wrong time to buy for 2-3 years.

Conservatively I think we have around 18 months left and it could end up being another 12-18 after that or more. No one really ever fully knows.

Secondly, you need to understand why timing the market is a bad idea. You need to be right twice. When to get out and when to get back in. If you’re wrong you’ll lose money.

Trying to time the RE market is like trying to time the stock market.  Most people suck at doing it.  Those that can do it will be very successful but for every one of them there are many that think they can correctly time the market and are wrong.

I am still looking for smart RE purchases.  I am not under the belief that the RE will continue to appreciate like it has for the last 6 or 7 years.  But I also am not of the belief that the market is about to totally collapse.  Because I make smart purchases I should be fine regardless.

Good luck

Originally posted by @David Noble :

 Ultimately I would like the passive income of more rentals. But I’m tentative to buy/hold at the top of the market. So I’m also thinking of flips.

Long term buy and hold is a way better strategy then flipping if you think we are at the top of the market. 

@David Noble , so I have to second the idea of buy and hold vs flip.  Im not opposed to rehab/turn the property, but if you have a good day job, search hard and find something that where the numbers work for you to hold on it and rent it.  Market speculation is just plain stressful for me and I can honestly say if we were sitting around and "waiting for the correction" so we could buy "cheap deals", we would have missed out on so much opportunity!

We have been investing for a short period (13 months), but in that time have been able to lock up a total of 14 doors (duplex, triplex, SFR, etc), successfully perform one flip (barely successful, but hey!), and made so many great contacts with not only agents but other investors. We even found several sellers via small, concentrated direct mail campaigns that yielded 2 deals! Just with relentless perseverance, one of the owners we talked with has 5 other multi family properties on the same street that were not listed, but because of networking with him and just being a real person with him, we have a master lease on those buildings with the idea of purchasing one per year from him!

I cant emphasize enough, do you homework, look harder than those around you and you WILL find a deal and start working towards the ultimate goal:  options (financial freedom)

i’m with you @David Noble . I’ve come to accept as long as interest rates are low and assets are in the Class C+\B- areas, you should make it through a downturn. Clientele may be different, have some turnover, possibly evictions, but should make it through the downturn. This also means I’m more patient at what I’m looking at. 

I appreciate everyone's feedback.  Obviously, your answers were what I wanted to hear.  I appreciate how positive everyone is on this forum.  It's a breath of fresh air on the internet.  I look forward from learning from this community.  

great question and I think there are many answers. However, what we do is let the market determine our exit strategy. We focus on highest and best use. Rentals are great, but so are owner finance, and lease options. It all depends on the market, the location, the property, and your relative desire of responsibility to the property. I would love to discuss more if you would like. 

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