Is now, a good time to invest in real estate?

[Chris Good]

As a realtor and real estate investor myself, I get asked this question a lot, and here are some of my thoughts on that question for buy and hold investors based on my experience, and after listening to folks that are a lot smarter and more experienced than myself.

1. 1. Time is your friend, and the passing of time is how wealth is built in real estate. While the real estate market does have cycles just like the stock market (usually not as dramatic), it’s difficult to time it just right. Some folks think if they wait, maybe they can get a better deal and maybe they can, but the more likely scenario is that they find themselves a few years down the road still waiting for the “market correction” while in the meantime, missing out on the cashflow, price appreciation, tax benefits, and mortgage pay-down from the tenants. Most real estate investors I know wish they had started investing in real estate earlier “back when houses were cheap” no matter how early they started.

1. 2. What about the high interest rates? My answer to that would be, interest rates don't matter that much if the property cashflows and your interest rate is fixed. Your tenant is the person paying your mortgage anyway and, in the future, if/when the interest rates drop, you can refinance and improve your cashflow! But until then, why not let your tenant pay down your mortgage, put some cash in your pocket each month, let inflation erode the value of your loan (more on that another day), and take advantage of the tax benefits?

1. 3. According to National Association of Realtors, we are over 5 million housing units short nationwide (other sources I've seen show 4-6 million housing units short). While some pockets of the country are affected worse than others, here in Central PA we are definitely experiencing a shortage. A real estate market is considered "balanced" when there is 4-6 months' worth of housing inventory for sale. As I write this in March of 2023, our average monthly supply of houses for sale over the past year averaged 1.1 months' supply of inventory according to Bright MLS. Also, the supply shortage is not just affecting the buy and sell side, the residential rental market is also affected by the shortage which has caused rents to increase rapidly. (Over 18% nationwide in the past 2 years) And while I don't have a stat to show you on this, we have been getting units leased within a week or two after it hits the market. And guess what low supply and high demand does to prices?? That's right, increases them! (It'll be interesting to see what happens to inventory and prices if/when interest rates drop)

We’ve all heard the adage that says, “The best time to plant a tree was 20 years ago, but the second-best time is now” I think it’s safe to say investing in real estate is much the same. I am still buying with the intention to hold for the long term and plan on continuing buying so long as God grants me the gift of life. 😊