This is Not the Real Estate Environment for Rookie Investors

152 Replies

@Kevin Hill , being a new investor, I appreciate the advice provided in your post. I see some more experienced investors @Jay Hinrichs and @Alexander Felice I recognize on this thread. What extra steps of caution are some of the more experienced investors taking? I have heard that strategic investors can make money in different stages of the cycle, so what sort of shifts are people taking to their approaches? Are some people putting investing in RE on hold, just waiting for more indicators of a down cycle to show up?

@Kevin Hill

Record unemployment while stock market going gangbusters, meanwhile daily there are “how do I finance 100% of a house without good credit?” threads... what could go wrong?

Instagram has become equivalent to the late night informercial for real estate “educators” that make their $ primarily off being a “brand partner” or “coaching” not real estate investments and they’re hocking whatever this week’s flavour of acronym is as a complete functional business plan.... and thousands of people are falling for it.

A shaky environment for flips does not mean it's a bad environment for "investing."  It indicates a bad environment for flipping, building or developing.  And it won't be the same in every market across the country.  So while every rookie should be cautious, please don't take the OP's advice - which I do believe was given with genuine concern - as admonition to stay on the sidelines.  If opportunity exists in your strategy and in your market, take it.

Just this past weekend, I had 30 showings of a run-of-the-mill rental house for which I would normally have 5-6 showings. Rental inventory is extremely low in the area (I suspect due to Airbnb) and many of the listings that do exist come fully furnished (which I also suspect are Airbnbs trying to pull in some LTR while waiting for the STR market to boom again). Some people wanted it sight-unseen, which we don't allow, and others were offering escalating prices to be put in the front of the line. I wish I had 5-10 more houses to offer in the area. I would have filled them all this weekend alone.

But I'm not flipping, which is what I think OP is really talking about.  Just want to point out to the rookies that it's not horrible in every space.

I still think there are smart ways to get started...the smartest of which is a house hack followed by a live-in flip - you are still lower risk then the average home buyer.  

We are seeing the same conditions the OP describes here in Marin County which is positioned similarly to Bergen County but as to San Francisco.  Everything that is habitable is being snapped up as a flood of millennials and others are making lifestyle changes which mean a move away from the city.  As Google just announced that its work from home policy will continue until at least summer 2021, I suspect this trend will have longer legs than many presently think.

@Kevin Hill  Is there ever a "perfect" or "easy" time to invest? Don't think so. But, you have sound advice that all real estate investors should follow in 'easy" or "hard" environments. 

If you're a rookie investor, you have to get started at some point. Instead of waiting for the right time to invest, you can take the plunge now and gain experience so you are prepared for the "easy" environment (whenever that may come). You may not find a home-run deal, and you may even lose money because the rehab took 3 months longer than expected, but the experience you will gain is invaluable. 

@Kevin Hill if buying a rental who cares about up or down 10 -15 20% Its all about cash flow and it always comes back. As long as you are getting the ROI you want, ( for me its 20% net +++ ) then who cares. Also buying props at a discount helps. Me I am buying as many as I can as are my clients,

Good Luck