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Should I wait to invest due to economy?

Posted Jun 20 2022, 06:29

Hi Everyone,

I'm looking for people's takes on the market and investing at this time. With a recession creeping in soon, should I wait to invest in a duplex?  I've been looking for months but I've been told by some people that it's wise to wait right now, build more cash reserves, then make my play after seeing how the market plays out within the next year. Obviously a deal is a deal, and I'm not going to completely stop looking. However, with interest rates very high, is it wise to ease up a little bit and wait? 

Columbus, Ohio

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Nathan Grabau
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Nathan Grabau
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Replied Jun 20 2022, 06:34

Even if there is a recession, it will be hard for me to see a situation where monthly payments goes down in future, so you are not that much better off waiting. 

My base case scenario is actually that fear of a recession or a recession drops oil prices enough to stall inflation later this year, which will lead to rates cooling off and could lead to another appreciation window. I am looking for and encouraging people to buy now or in the next few months with the goal of taking advantage of the slowing market, with the potential upside of being able to refi at a lower rate 8-10 months from now. 

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Bruce Woodruff#2 All Forums Contributor
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Bruce Woodruff#2 All Forums Contributor
  • Contractor
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Replied Jun 20 2022, 06:55

Interest rates are still pretty low, so if the right deal comes along it is always good to go for it. There may be less opportunities out there and there may be more risk, but there are always deals, especially in the fixer-upper arena....

My .02.....

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Lien Vuong
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Lien Vuong
  • Real Estate Agent
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Replied Jun 20 2022, 07:00

You can look at ARM options in the mid 3%'s for lending as well as underwrite opportunities at a reasonable discount. Sellers are more nervous in this moment so there's opportunities out there.

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Replied Jun 20 2022, 07:01

There's a lot of competition in the market right now, and if this is your first deal, then it might not be a bad idea to wait a little longer. As you mentioned in your post, you're not going to stop looking completely and if the right deal comes along then it sounds like you're going to pull the trigger on it. I think that is a great strategy. What you don't want to do, is buy the wrong deal in the wrong location. Wait for the right deal to come along that fits most of your criteria, and I say go for it! 

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Justin Fox
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Justin Fox
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Replied Jun 20 2022, 07:02

@Lara Ishtayeh
The goal is to always find deals that make money and cashflow on the buy.  So if you find a deal that works and you have adequate reserves, pull the trigger.  I would not suggest floating any negative cashflow hoping for a refinance anytime soon. 

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Scott E.
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Scott E.
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Replied Jun 20 2022, 07:13

As Bruce says, there is money to be made in any market. Underwrite the deal following the same principles and criteria that you always would. If the location and numbers make sense, go for it. 

You can't fixate on rates too much. If you buy today and lock in at a 6% but then rates drop back down to 4.5% in a couple of years, just refinance your loan.

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Brian M Sweeney
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Brian M Sweeney
  • MBA, CFP®, EA
  • Columbus, OH
Replied Jun 20 2022, 11:18

I've always based my investment decisions only on the deal itself, not on the economy. The reason being is that we truly have no control over economic factors nor can we predict them accurately (economists will tell you differently). If its a truly a good investment, it will be a good investment in good or bad times. Try to value a deal exclusive of other factors. 

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Benjamin Aaker
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  • Brandon, SD
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Benjamin Aaker
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  • Brandon, SD
Replied Jun 20 2022, 12:34

As interest rates rise, there will be less buyers willing to pay what the mortgage requires. Sellers will have to drop their prices to sell. It's not a quick process, but it is already happening. Take a drive in your community and you'll see more for-sale signs than you have in the past 2 years. Those sellers are going to be competing with each other for buyers and a big way to do that is to drop the price. You'll be paying more to the bank now but less to the seller. As long as the deal works with the price paid and the expenses (including mortgage) now is a great time to buy. Keep looking, just do your diligence, like at any other time.

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Elbert O.
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Elbert O.
Replied Jun 20 2022, 17:18

Yeah just to add to @Benjamin Aaker's comment, here are the rest of the Fed scheduled meetings for 2022:

July 26-27
September 20-21*
November 1-2
December 13-14

They've already signaled that it will be extremely likely that they will be raising the fund rate again (they predict it will be 3.4% by year end; it's about 1.5 - 1.75% now).  Each time they raise has a ripple effect on the rest of the economy, including the real estate market, which can translate into buying opportunities if you look hard enough.  

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Lori Goldsmith
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Lori Goldsmith
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Replied Jun 20 2022, 17:24
Quote from @Lara Ishtayeh:

Hi Everyone,

I'm looking for people's takes on the market and investing at this time. With a recession creeping in soon, should I wait to invest in a duplex?  I've been looking for months but I've been told by some people that it's wise to wait right now, build more cash reserves, then make my play after seeing how the market plays out within the next year. Obviously a deal is a deal, and I'm not going to completely stop looking. However, with interest rates very high, is it wise to ease up a little bit and wait? 

In the areas that I service, things are still going strong with inventory still low, with the slightest decrease in list price we are still seeing multiple offers in these desired areas with better school districts. 
I say if you find the "Right" property that speaks to you, Move forward with the buy and hold on to it. 

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Luke Tomaselli
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Luke Tomaselli
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Replied Jun 20 2022, 17:53

No,

Establish a buy box or your crystal clear criteria, study it every day, learn what average is, and only do great deals.  It takes some time to see what average is, but once you know, you’ll understand what a great deal is when it comes about.

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Replied Jun 20 2022, 18:02

If you are planning on holding it long term and the numbers make sense, buy it now.  Interest rates are going up.

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Jason Deangelis
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  • Chicago, IL
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Jason Deangelis
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Replied Jun 20 2022, 19:59

@Lara Ishtayeh I am about to close on a deal that works for me. If you do the research and see that a deal makes sense financially for you, I say why wait? What if the market doesn’t crash for years hypothetically. Those are good years gone. There are many ways to get funding for future projects and those deals will be there when that time comes. I feel it has to make sense to you most importantly.

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David Song
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David Song
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Replied Jun 20 2022, 20:09
Quote from @Lara Ishtayeh:

Hi Everyone,

I'm looking for people's takes on the market and investing at this time. With a recession creeping in soon, should I wait to invest in a duplex?  I've been looking for months but I've been told by some people that it's wise to wait right now, build more cash reserves, then make my play after seeing how the market plays out within the next year. Obviously a deal is a deal, and I'm not going to completely stop looking. However, with interest rates very high, is it wise to ease up a little bit and wait? 

 I am waiting. It is each person’s personal choice as to when and where to buy. I see a lot of turbulence in the market now. Therefore, I decided to take some time off and monitor the market for a few months, There are a lot of deals popping up now. The bidding war has stopped. Some patience might pay off.

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Eric Larson
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  • Wooster, OH
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Eric Larson
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Replied Jun 21 2022, 05:59

@Lara Ishtayeh no matter what your decision is, you will convince yourself that you are right. In my eyes, real estate is a long term play, multiple years, and through that window of time there will be recessions and appreciation windows. Likely a couple. Over time, if you bought a good asset and cared for it and managed it well, you should do just fine. Reserves are always necessary, but we can also convince ourselves that we're saving reserves when we're just nervous to jump in the market.

If this is your first deal and it fits your needs, plan, and budget and you would go forward irrespective of the market then go for it. It will pay off in the long run to take that first step.

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Nick Barlow
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Nick Barlow
  • Warsaw, IN
Replied Jun 21 2022, 10:54

@Lara Ishtayeh nope, this is the “crash” we’ve all been waiting for…time to go all in. J/K.

All kidding aside, if a deal makes sense, and meets your criteria, it’s time to invest.

I would advise to have a few months reserves after down payment, after a rehab budget, and be able to comfortably support a new purchase.

Your criteria shouldn’t change, in my opinion, but for the reasons you mentioned, your reserves and contingency plans should be more conservative and stronger than before COVID-or since. Good luck!

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Luka Milicevic
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Luka Milicevic
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Replied Jun 21 2022, 11:02

@Lara Ishtayeh

I don't think there will ever be a "right time" to invest. There will always be SOMETHING!

I've been in real estate now for 8 years and have consistently heard the same thing for 8 straight years "market is too hot"

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Conner Olsen
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Conner Olsen
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Replied Jun 21 2022, 12:51

@Lara Ishtayeh If you have a strong financial position (6+ months of expenses) and the numbers make sense, I say go for it! Interest rates can always go down.

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Kristopher Cress
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Kristopher Cress
  • Real Estate Agent
  • Columbus, OH
Replied Jun 24 2022, 06:13

Hey! I know it is always tough to figure out when it is a good time to invest. It also sounds like you have a great strategy. I would just suggest that you make sure you feel comfortable and confident with whatever investment you make. It is always extremely tough to predict the bottom of a market, but like you said, if the numbers look right and you feel confident then it is always a good time to pull the trigger. There is always money to be made! Happy investing! 

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Nicholas Salman
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Nicholas Salman
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Replied Jun 24 2022, 08:57

Hey, Lara!  I know it can be kind of intimidating and uncertain but there is one thing that we do know, inflation is high and the interest rates will continue to rise. You looking at duplexes is a great investment.  Cash flow will always be king and along with the interest rates rising, so too should rent!  Hope that helps.  Let's connect and hop on a call!