When to time the market?

Question

Hey everyone, my name’s Blake and I’m an Aerospace Engineering student out of Springfield, Mo. I’m not an investor quite yet, but I am familiar with REI. I know the saying “time in the market is better than timing the market,” but is that always true? I know it’s probably not ALWAYS true, so what are some signs, statistics, and metrics I should keep an eye out for that might make me want to wait a couple of months before closing on a deal?

Joe Villeneuve · Answer

You can't time the market. It sin't quite like throwing a pass over the middle to a WR to a spot before the WR turns towards that spot, because you anticipated he would be there when the ball got there. There are too many outside influences that the REI has no control over that impact the REI markets.

Rick Albert · Answer

I think the better questions are the following:1. Does it meet your current and financial goals?2. How long do you plan on keeping the property?Think about those that bought at the height of 2008. Assuming they kept their properties, the values have not only come back but most likely exceed AND they are almost halfway done with their mortgage payments. They could probably refinance into a 15 year and still be fine.Every person I have spoken to that has tried to time the market has not only purchased but has now been priced out of their own market. Just make sure you are comfortable with what you are doing and jump in.The other way to look at it is let's say the average appreciation over the next 2 years, is 10% (5% per year to make math easy). If in two years the market take a 5% dip (which is extremely rare and has only happened more than that in 2008 and in the 1920s), you are still ahead. You still have equity and you are two years in.I understand this doesn't directly answer your question and I also understand where you are coming from (high prices with high demand). But we need to start thinking that the world is going to do what the world is going to do, whether we act in it or not.

Drew Sygit · Answer

No one can time the stock market, so why would you think anyone can time the real estate market?You are in analysis paralysis mode - get out of it!

Joshua Janus · Answer

Hey @Blake Ramsey welcome to BP fellow engineer. Best thing you can learn at this point is how to run the numbers on a property and see if it is profitable. Timing the market is not worth your time and you'll never join the party that way. I would focus on one rule called the one percent rule, which states that the monthly gross rents must be >= 1% of the purchase price. Some markets this is common and others it will never be possible so it is relative and should be implemented that way. Another rule of thumb is the 50% rule which is where your monthly expenses (Property Insurance, Property Taxes, Maintenance/Repairs, Utilities, Property Management and Reserve Funds/Capital Expenditures) will account for 50% of the monthly gross income. If the property breaks the one percent rule and stacks up with this measurement as well, it is worth a closer look. Of course factors such as really high property tax, insurance and HOA fees can come into account here and name the entire calculation void. Do your due diligence and overestimate your expenses and underestimate your rents in some cases so you are confident the asset will perform through numerous market cycles.https://learn.roofstock.com/bl...

Daniel Sanchez · Answer

Supply and Demand. If there is significant supply coming online that is not offset by increased demand stay away from that market. There is always a good place to invest!

Nate Sanow · Answer

I’d look at how much average equity is in a house. How many houses are owned free and clear. How many are highly leveraged. Nationwide they say almost 40% of all houses are owned free and clear. And almost 50% are 1/2 paid off. So just because things are up, doesn’t necessarily mean they are about to fall. If you are able to buy below market value in your area; you are winning no matter the market cycle we are in, IMO. We all will ride the wave up or down together and the trick is to hold on.

Evan Conner · Answer

Hi Blake!I am an agent here in Springfield. If you aren't already working with an agent and you would like to grab coffee and chat about REI I would be happy to! I could go over some local market statistics with you as well that might better answer your questions here. Feel free to reach out.