I am a new investor in the Grand Rapids area. I currently house hack a three bedroom condo in Grand Rapids I purchased in 2017. I am looking to pickup another property in 2019 but am constantly told to, "wait for the next downturn". It is difficult to say what the market will do in the next few years in our market however, I have 20k ready to put into my next deal. Should I pull the trigger on anything that cash flows $300+ a month?
In my opinion, waiting for the next downturn is not the best option. I agree that it still seems like something is coming soon but we can’t predict for sure when it will actually happen. I have been listening to some older podcasts and there are a few where people are talking about how overheated the market was even since about 2014 (5 years ago). Imagine all of the gains you would have seen from appreciation and cashflow if you had been collecting for the last 5 years.
That being said, my guess is that we are closer to the next downturn vs farther away but even if you buy and it does happen, I think that is okay as long as you are investing for the long term. I say this because:
- 1)If you dollar cost average and buy property both when the market is up and when it’s down you reduce your overall volatility/ the swings in prices of properties that you purchase
- 2)You will continue to gain experience and be more equipped to handle more upcoming deals
- 3)You are making $300 per month cashflow (I think this is probably the most important). If the numbers are solid then it seems like a good idea. Even if the property loses a lot of value in the short term and your net worth drops, you will still have your cashflow and it is very likely that it will eventually climb back up based on previous markets.
I have been investing since 2012, and have had someone tell me that we are nearing a peak every year since. If you can buy a solid cash flowing deal with fixed rate debt, go for it. When there is a downturn, you can just ride it through whether it comes next year or in 5 years. You’ll collect cash flow, pay down principle, and gain a lot of valuable experience in the meantime.
I also hear people say there aren't cash flowing deals in GR anymore. Also not true, even on the MLS.
@Chris Winslow I love your answer! The best investors buy in all markets! I do have a quick sub question that ties back in with the original question! How much in cash reserves would you put aside in order to plan ahead for a correction? 6 to 12 months mortgage payments? How do you plan ahead?
@Evan DeVisser 6-12 months of reserves is very conservative. Based on BP podcast you should have a minimum of 2-3 months covered.
I agree with @James
@James Marshall People have been saying the next downturn is around the corner pretty much since right after the last downturn needed. And if you are cash flowing who cares?
Just don't over leverage and be sure there's room in your numbers in case rents drop a little.
I am investing in Grand Rapids, MI as well. I am also about in the same stage of my real estate journey as you are. If you would like to DM me, I have a deal that I am currently working on getting the remaining funds for. I would be happy to review it with you, via email if you are interested in it. Either way I love to connect with fellow investors from the area, and I look forward to hearing from you.
I invest in the SW GR area. 300/ month cash flow is great for me..... but i don't run your business i dont know your goals :)
if you want me to take a look at anything for you I would sit and talk about where you plan to be!
Pull the trigger if the numbers meet your goals!! Don't wait.
@Kevin Andringa Yes you should buy. If you buy in a good area that has value you can weather a recession. Grand Rapids has super strong fundamentals so won't be hit as hard by a market correction and is still very affordable. For a city that size you can easily buy at 100-120 sq foot. When you look at other markets the rent to price ratio is nowhere even as close. With that being said you have to be patient. Its a very competitive market and the prices and rents keep skyrocketing.
@Charles Kao I appreciate the insight, we have continued searching!
@Tim VandenToorn I will, appreciate your feedback!
@Nick Watkins I will pm you with any questions on my next deal, thank you for the help!