This is Not the Real Estate Environment for Rookie Investors
I don't want to announce the sky is falling and be a Debbie Downer, but in my opinion, now is NOT the time to be investing in real estate for rookie investors, especially flips. I keep seeing a lot of posts from newbie investors about investing in their first deal and I'm worried for them. I am in North Jersey (Bergen County) and this is what I am seeing in my area.
COVID-19 has only decreased available housing inventory during the pandemic causing a spike to home prices and demand. I keep reading about the residents who want to escape from New York City and New Jersey is one destination for them. Houses are routinely gone within a week now with multiple offers at full or over the list price. This is not a good time for an investor (especially one without experiences in different economic cycles). This is not sustainable with the high rate of unemployment, mortgage delinquencies, homeowners going into forbearance, Sheriff foreclosure sales currently on hold to at least October now, increased requirements for mortgage qualifications, small businesses going out of business, and a likelihood that children will be at home again in the fall for distance learning, restricting parents' ability to work.
Overpaying for the property, delays in securing contractors/finishing the renovation, towns slow in completing Certificate of Occupancy/permit inspections, delays on getting the title work done, etc in a market that could turn on a dime is a recipe for disaster. Yout can't do a BRRR strategy if you don't have any equity after the flip is complete.
Be very careful out there. Get a mentor, hire an agent who is really looking out for you and not just trying to close a sale, and be patient. The great deals will be coming once we enter into a down cycle. Real estate is cyclical and cycles typically run 7-10 years and we are at about year 9 in North Jersey. Down cycles don't last as long, so pile your cash and be ready to strike when the good buying opportunities are here again!
-
Real Estate Agent NJ (#0894817)
- 201-214-1349
- http://www.LiveBergenCounty.com
Our offer on our first rental property was accepted the day before our state shut down and Covid took over. There were many times we thought about backing out, but we went through with the deal. It has been an uphill battle, for sure, but I don't regret moving forward. If we would have backed out, there's a good chance we still wouldn't have that first property and would have missed out on all those learning opportunities and connections along the way. It was, and still is, a risk during these times, but our "why" is big enough that we are going to make this work no matter what.
Great post Kevin,
The crisis has certainly impacted various property types differently. Broadly speaking, retail has been hit hardest. I think the dynamics of office and multifamily real estate will likely evolve as a result of the pandemic. I believe that all investors will have to adapt because of this.
Your "boots on the ground" is everything for an oos investor. I'm a Realtor who works very closely with my city. I serve on an Affordable Housing and Safer Neighborhood committee, with my local Chamber of Commerce. I know my city well and it benefits my investors greatly. Not only does Independence, MO have great cash flow opportunities, we have a ton of need for rentals. I take my job seriously and I get VERY excited finding great deals for my clients. My personal eviction rate is .05% for the last 5 years (500 properties managed). I just got my client a $400+/month cash flow and rented it within a week AND in a tax abatement area for the next 10 years. I'm going today to look at a $500/month cash flow deal. If I don't think it's going to do that we'll for him, I'm going to tell him exactly that. Your agent is key, Expect Better!
-
Real Estate Agent Missouri (#Notary), Kansas (#2021XXXX), and Missouri (#20017XXXX)
Life is too short to wait to get started, time the market, etc. The best time to get started on anything is now, because soon, we will all be gone. That is just my opinion.
Make mistakes, learn as you go, and honestly, take some risks. Do everything you can to learn and minimize that risk, but remember you don't have an endless amount of time to figure this stuff out and conditions are never going to be optimal.
Originally posted by @Tyler Y.:Life is too short to wait to get started, time the market, etc. The best time to get started on anything is now, because soon, we will all be gone. That is just my opinion.
Make mistakes, learn as you go, and honestly, take some risks. Do everything you can to learn and minimize that risk, but remember you don't have an endless amount of time to figure this stuff out and conditions are never going to be optimal.
Well put and to the point. My sentiments exactly. I try to learn as much as possible as I go knowing the conditions may never be perfect but if I can qualify for it, and it is within my investment parameter, then it's a deal worth pursuing.
Since covid began, I completed 7 refis (all at the same time with one bank), 5 purchases, and 3 exchanges. It may never be the most optimal time but NOW is always the perfect time to get started.
Originally posted by @Sam Yin:Originally posted by @Tyler Y.:Life is too short to wait to get started, time the market, etc. The best time to get started on anything is now, because soon, we will all be gone. That is just my opinion.
Make mistakes, learn as you go, and honestly, take some risks. Do everything you can to learn and minimize that risk, but remember you don't have an endless amount of time to figure this stuff out and conditions are never going to be optimal.
Well put and to the point. My sentiments exactly. I try to learn as much as possible as I go knowing the conditions may never be perfect but if I can qualify for it, and it is within my investment parameter, then it's a deal worth pursuing.
Since covid began, I completed 7 refis (all at the same time with one bank), 5 purchases, and 3 exchanges. It may never be the most optimal time but NOW is always the perfect time to get started.
/quote
Exactly! Thank you. It sounds like you are right in the thick of it and making it happen - that's exactly what we should all be aiming to do!
I totally agree with you're saying but I also think I'm a "rookie investor". I won't ever know to do something like that unless I work with seasoned investors, as well as new properties to be able to learn.
The time is always now, it's all we've got :)
Originally posted by @Monique Pett:I totally agree with you're saying but I also think I'm a "rookie investor". I won't ever know to do something like that unless I work with seasoned investors, as well as new properties to be able to learn.
The time is always now, it's all we've got :)
The time might always be "now", but "now" isn't always a good time to go out in the water.
His advice sill stands.
Originally posted by @Account Closed:Originally posted by @Monique Pett:I totally agree with you're saying but I also think I'm a "rookie investor". I won't ever know to do something like that unless I work with seasoned investors, as well as new properties to be able to learn.
The time is always now, it's all we've got :)
The time might always be "now", but "now" isn't always a good time to go out in the water.
His advice sill stands.
As a youngster, I thought investing was so simple. Buy when low, sell when high.... When my parents took a big hit on their stocks/investments a long time ago, I asked them why don't they just buy when low and sell when high? Their response? "It's not that simple son." OK, I didn't understand it back then and I still don't understand it today. Trying to buy right now is going against something that even grade-schoolers understand. So unless you have an active strategy that can somehow find value and you're also willing to ignore all the things going on right now that may ultimately lead to a major correction (like several hundred billion dollars in double digit coupon debt from developers in China), I would agree with the title of this thread.
This may seem obvious but I think anyone investing in real estate has to be careful of every single deal they decide to pull the trigger on. Think about how dumb the average person is and then realize that 50% of the population is dumber than that, this applies to real estate just like everything else in life. Some half-assed "flippers" looking for a quick buck because they think they're on TLC will lose everything just like they did in 08-09. Whether you have no experience or 10 years experience you have to be careful, have a process, be efficient, know your strengths, don't venture outside your comfort zone, and always have a backup plan or two. Deals can be found in any market you just need to be more diligent and/or creative in a hot market.
Originally posted by @Tony Kim:Originally posted by @Account Closed:Originally posted by @Monique Pett:I totally agree with you're saying but I also think I'm a "rookie investor". I won't ever know to do something like that unless I work with seasoned investors, as well as new properties to be able to learn.
The time is always now, it's all we've got :)
The time might always be "now", but "now" isn't always a good time to go out in the water.
His advice sill stands.
As a youngster, I thought investing was so simple. Buy when low, sell when high.... When my parents took a big hit on their stocks/investments a long time ago, I asked them why don't they just buy when low and sell when high? Their response? "It's not that simple son." OK, I didn't understand it back then and I still don't understand it today. Trying to buy right now is going against something that even grade-schoolers understand. So unless you have an active strategy that can somehow find value and you're also willing to ignore all the things going on right now that may ultimately lead to a major correction (like several hundred billion dollars in double digit coupon debt from developers in China), I would agree with the title of this thread.
Appreciate the honesty. Frequently on these forums people get so caught up with the notion of "taking action"- so often touted, rain or shine, by the people who run BP- that they fail to see that sometimes the best action to take, is simply not taking a bad one.