Is now a bad time to start given the insanity of property prices?

Question

Newbie and first time poster here. My wife and I had a rental property condo unit in a NJ shore town that was able to cover its expenses and then some, even though it was just a seasonal rental. We sold it 3 years ago (I know, bad timing) and I have regretted it ever since. Looking to re-enter the market, but am hesitant due to the insane run-up in prices--literally 30% over the past 2 years. So is this a bad time to try to jump back in?

Joe Villeneuve · Answer

Deals are made not found. They are based on the minimum cash out of pocket (DP) and the terms for how the rest is paid for by someone/something else. What you described as a reason to not enter the market now (or anytime for that matter) has no bearing if you understand how money works, and what true cost is to the investor. The total cost of the deal isn't the same thing as the cost to the REI. If it is, you have a bad deal. The greater the gap between total cost and REI cost, the greater the deal. The only thing that is included in the cost to the REI is the cash out of pocket, and this should be restricted to the down payment. When you pay all cash, you paid full price. When you paid 20% DP, you only cost was only 20% of the property value.

Russell Brazil · Answer

At 99.99% of all times on a timeline, real estate as at an all time high price. You can wait, but the statistical probability is that when you decide to jump in, prices will be higher then.

Danielle Jackson · Answer

Never a bad time to get started, however there are times where there is less room for error. This market with prices where they are, and some uncertainty of what the next several years look like, its critical that you are spot on when underwriting/analyzing your investment. Make sure you aren't banking on certain market performance on the short term to justify the investment. By that, I mean don't expect the same level of YoY natural appreciation we've seen in the past several years. Educate yourself as much as you can as you jump in....but JUMP IN!

Nick C. · Answer

It's never a bad time to buy a good deal. You're right to be wary of the prices though. A lot of bad deals were bought from 2010 - 2018, but turned in to good deals by a seemingly never ending rise in prices. Hopefully that's come to an end. Now investors buying a bad deal might actually get burned, which was relatively hard to do for more than a decade.

Isaiah Williams · Answer

@Jamie BsalesThe best time to do something was yesterday, the next best time Is today. - unknown Don't wait just do it!

Bruce Woodruff · Answer

Most on here would say there is no bad time to buy given that you find the right property, and I agree since I generally buy distressed properties and fix them up, so there is always a big upside.But take into account that prices have been insanely high for a few years now.....add in the current state of the economy with possible hyper inflation rolling in and the Fed stating that they will raise rates at least 3 times in 2022.So I personally think you could buy now but I would be very careful, this is not like buying 3-5 years ago when you could almost do no wrong......

Isaiah Williams · Answer

@Jamie BsalesWhile there is Never a bad time to get into real estate, I do believe it is important to learn about your market and invest in whatever way aligns with your personal goals and what you are looking for. I would be willing to over pay on houses if the payments are low enough compared to what I can get renting it out (of course there is more into it then just that but you get the picture), but that's because I don't plan on selling Any of my properties until they are paid off 15-30 years from now. Some people are in it for different reasons, but like @Joe Villeneuve said deals are made not found. If your numbers can make sense on the property then go for it.

David Adams · Answer

@Joe VilleneuveJoe. I’m with you on this . Leverage is the way to go . My problem is I leveraged from day 1 over 20 yrs ago and now have about 100 doors. Now I’m in a position with a lot of cash making zero in the bank . I’m 62 yrs old and want to continue buying but I don’t want to leverage anymore. My thought is now start to pay cash going forward since it’s a better return than the bank . With current inflation at 7% I’m loosing $7K on every $100k of cash

Cameron Braig · Answer

Leveraging broker relationships can be helpful. With the level of seal flow they see it can help provide data and insight to help evaluate a deal. Hope things progress well in 2022.

Jim Spatzenfeld · Answer

In many areas rent went up just as much, so the tenant will pay for the higher purchase price, not you. Plus, your mortgage payment will almost stay the same while rent goes up every year, so your profit gets better every year.