How to Combat Media Noise to Accomplish Your REI Goals This Year

Written by: Max Vishnev, licensed NJ Realtor and RE Investor

Are you tired renting? Are you hoping to buy your first property this year, but you feel lost and confused by all the mixed messages and scary headlines on social media and in the news? I’m here to help you cut through the noise and achieve your real estate goals.

First, remember that all headlines are designed to maximize clicks and views. The scarier the headline, the more likely we are to click on it. This applies to YouTube, Facebook, news sites, and email newsletters. Essentially, all content creators are hungry for our clicks and views, so they intentionally craft the most eye-catching headline or title, in the hopes we will be tempted to click on it. But a catchy headline has very little to do with high-quality, accurate, and helpful content. In fact, I would take it a step further: The more sensational the headline, the less likely it is to offer content that is of high quality.

Second, remember that all market predictions are just guesses – some educated, some not so much. It’s important to remember that their guess is as good as yours, since none of us have a crystal ball and there are too many variables involved. Even so-called “experts” that you see on national TV as talking heads are wrong more often than right – it’s just that when they guess correctly, they remind the whole world, but when their predictions are incorrect, or in some cases, way off, they never bring it up for obvious reasons. “Black Swan” events happen more often than people realize, and these have a massive impact on outcomes across the board. Just think of the first 22 years of this century alone. What prognosticator could have predicted the events on 9/11 or the immediate global impact of COVID-19?

Third, focus on the fundamentals. Why are you thinking about buying your first property? Answer this question honestly for yourself. Are you trying to time the market or are you buying because you think real estate investing presents you with a wonderful opportunity to generate cashflow in the near term and build wealth in the long term? If it’s the former, you are doing it for the wrong reasons and may end up making bad decisions. Flipping as a strategy is very risky in any market, but especially a volatile one. And flipping is not investing, it’s speculating. Rehabs take longer and cost more than anticipated more often than not, and a successful exit is never guaranteed. That is why even experienced flippers sometimes lose their shirts (particularly if they mistime the market).

If, on the other hand, you have a long-term time horizon and are in it for wealth-building over time, then you shouldn’t care about what’s going to happen in 3 months, 6 months, or a year. Building real wealth is a long game. If you take a long enough time horizon, you shouldn’t care much where mortgage rates are right now either (you can always refinance down the road if they come back down).

Fourth, focus on the facts. If you are currently renting for $3000 a month and your landlord has a sent a lease renewal notice stating that your new rent would be $3300 in two months, then you KNOW for a fact that if you stay, you will shell out almost $40,000 over the following year. And that’s $40k of hard-earned after-tax dollars, with no tax advantages to speak of. On the other hand, if you can buy a multi-family property where you can live in one unit and rent out the other (or others) and your net out-of-pocket, after running the numbers, would be lower than your rent, you’d save money each year compared to renting. That’s easy to grasp. And that number won’t change regardless of what happens to real estate prices in the near term. In fact, that number should improve every year, since your rent likely would have continued to go up, whereas as a landlord, YOU would be the one to raise the rent on YOUR tenants.

To put it another way, the opportunity cost (purely from a cashflow perspective) of continuing to rent versus buying your first multi-family to “house hack” would grow with each passing year that you stay in your rental.

Fifth, there are opportunities in every market. Yes, a year ago you could have locked in a 30-yr mortgage rate in the low 3s. As of this writing, the average rate is double. But, when it was in the low 3s, almost every decent property got multiple offers and buyers had to waive contingencies left and right just to have a shot at winning. Now, the market is much saner and buyers definitely have more leverage (compared to a year or two ago). This may be a great opportunity to enter the market and then look to refinance your mortgage when rates eventually come down. Granted, no-one expects them to come back down to the 3s, but even a single percentage point drop from today’s rates could end up significantly lowering your monthly payment in the future.

Another point worth noting is that rents have gone up, on average, as well – in some cases, quite substantially – over the last couple of years, which mitigates some of the impact of higher mortgage rates.

In summary, if you’re serious about buying your first property, and you’re in it for the right reasons, all you have to do is block out all the noise around us, focus on the fundamentals, find a great agent and lender, and go out there and start looking at properties. One thing is certain – sitting on the sidelines maintaining the status quo won’t get you closer to your goals.

Photo by Brooke Cagle on Unsplash