Is now a good time to invest in real estate?

Question

not sure if we should wait for the market to settle... if it will settle anytime in the near future. we're looking for our next single family rental property. wanted to see what the overall consensus is out there on the time to buy.

Tyler Fontaine · Answer

It's always a good time to invest in real estate. How you do it; how you underwrite the deals; exactly what you're buying can all change to fit with the market but its always a good time.

If you keep waiting to jump in the pool then eventually you never will.

Mark Jones · Answer

I don't think we are going to see sales prices drop significantly so if you wait for that to happen, you may be waiting a long time.  The only time you know when the market has bottomed out is when you are on the other side of it going up.  I would know your market area and make sure you know your numbers and jump in when you see a good deal!

Eric Fernwood · Answer

Hello @Teesh L.,

There is no good or bad time to invest in real estate. There are good deals and bad deals.

Real estate is a long-term investment. Today, people are waiting for interest rates to fall and once they do, they will buy. However, this will not work. If there is even a discussion about the probability of interest rates falling, prices will rise in anticipation of a decrease. And then it is too late. For example, suppose you are considering a $400k property today and would be putting 25% down. The loan amount would be $300,000. At 6%, debt service is about $1,799/Mo.

However, once interest rates begin to fall, prices will almost instantly increase due to pent-up demand. By the time you purchase a property and prices rise by even 6% ($424k), you will pay more for the property and have a higher debt service of $1,806/Mo. ($318k loan amount at 5.5%)

The best approach is to buy high-quality real estate now. When interest rates fall, refinance it. This method enables you to take advantage of the current price and start capturing appreciation and rent growth.

There is no effective way to time the market in real estate (and maybe not with stocks). Invest in solid fundamentals, then sit back and ride the price and rent appreciation curves.

What is far more important is selecting the right location, tenant segment, and property.

Location - The location determines all long-term income characteristics, including appreciation and rent growth.

Tenant pool - The tenant pool defines income reliability, including paying all the rent on schedule, length of stay, and more.

Property - The property defines the tenant pool, initial return, time to rent, maintenance costs, and renovation costs.

If you choose the right location, tenant pool, and property, the odds of achieving a reliable passive income that keeps pace with inflation and lasts a lifetime are very high. They do not rely on a perfect time to buy.

Bob S. · Answer

Its always a good time, its all about what you pay. I get deals weekly all 50% or so below the current values.

Marian Huish · Answer

@Teesh L. It’s always a good time to invest in real estate providing you have sufficient cash reserves and aren’t over leveraged.  Market conditions are constantly fluctuating…. 20 years from now you’ll say ‘I shoulda’ back when prices and rates were so low!  😯

Jaron Walling · Answer

Prices were high in 2018 and that's when I jumped in the pool. Now the nationwide housing shortage is even worse. Waiting to buy real estate is a bad idea. Get confident on the numbers (actually $$$, not %'s) in targeted neighborhoods, create a budget, and attack.

Becca F. · Answer

It's a great time to buy. The rates are high so there's less competition but in some markets/select properties there are multiple offers - I was outbid on one SFH. This is in the Indianapolis metro area. I kept looking and just made an offer and am in escrow. I was able to negotiate a significant amount off the list price. I'll refinance later when the rates drop (hopefully).

Eliott Elias · Answer

Now is the best time, when rates are high and sellers are in need of selling. Realtors are more responsive to my offers and there is less competition.

Is now a good time to invest in real estate?

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