Should I wait to buy first investment home in this market?

Question

Hello! My question is very location specific. I live in Columbus, OH. Where I plan to invest in my first multi home building. I will be seeking an fha 203k loan as I don’t have much liquid cash to get started. (Want to use the banks money anyways) Would I be doing myself an injustice to wait for the market cycle to come down here or should I work to get a long term loan thru a bank and hold the property? Please and thanks for all responses.

P.s.. I was recently referred to BP.com and I love the exchange of financially motivated people!

Shiloh Lundahl · Answer

@Christian E Hardin I am going to say something offensive.  If you are an adult and you do not have much liquid cash to get started then you should not be investing in real estate.  You need to first take control of your finances before you start to invest.  If you don't and you start to do well in real estate, you will likely take your same habits of not saving into your real estate investing and create a potentially bigger problem.

I would suggest you start out with reading the book The Richest Man in Babylon and follow the principles in that book.  The first being, pay yourself first and do not let it be less then 10% of what you make.  Without living this first principle, it is very difficult to become successful financially for the majority of people.  Then, after you have lived this principle for at least a year, then buy a property and you will do much better because you already have the discipline saving to invest.  Of course you should invest in yourself through listening, reading, and associating as well during that year.

Ben Leybovich · Answer

If you were in any other market in Ohio, I'd tell you to wait. In Columbus you are probably safe.

You need to understand something. As a general rule, the money in investing is made in the Delta. Meaning, whatever the market is, find a deal that had advantages relative to the market and you'll make money.

For example:

If Columbus small multi trades at 5.5 Cap, find a small multi that you can pay 5.5 Cap and them increase the revenue so that your basis becomes an 8 Cap. This does 2 things. One - you can turn around and offer your asset for sale to the market at market Cap, which in this example is 5.5 Cap. The 3 Cap Delta between your basis and the market allows you to make money. Two - if the market cools down you can afford to dip 3 Cap and still be in good shape relative to market.

So you see, the market doesn't matter. The Delta matters. Find a real deal and you should be good in any market.

Matt Crusinberry · Answer

@Christian E Hardin, I would suggest you look for a deal, no matter what the market is doing, and continue to learn the in's and out's of real estate. People buy in up markets, down markets, or plateaued markets. My recommendation would also be to make sure you have enough cash reserve, acquire long term debt, and buy for cash flow. Joe Fairless actually talks about this in his book too, and we have been doing it as well. If you plan for the worst case scenario, your numbers are still good, and you're able to take down the property, I would do it. Otherwise you may be waiting a long time to figure out what the market is doing. I hope this helps, and  good luck!

Brandon Sturgill · Answer

@Christian E Hardin Welcome. @Robert Ellis and @Joe Villeneuve are right on. No need to wait, brother. Just get started with your search now and make sure your buying criteria are clear. And as always, I would encourage to start your own marketing campaign and source your own deals. You may be limited with 203k, so don't let that be your defining criteria. There are lots of options including FHA and Home Ready if you want into a property for cheap...and there are lots of sub-markets around Columbus.

Best of luck

Patricia Steiner · Answer

When to buy isn't the driving factor for an investor.  But it doesn't appear that you're ready to buy.  Here's some considerations:

1.  What's your niche? (Rentals, flips/rehabs)

2.  What's the market demand for what you want to accomplish?  What's the rental price in that market?

3.  Financing.  You need to figure this out sooner versus later.  For investment properties, you'll need 25% down PLUS closing costs.  FHA is not even the best choice for the first time home buyer.  You need to gain resources in this area.

4. Inventory. Is there anything to buy in your price point?  Will it require rehab? Does it meet code?  How will you pay for improvements?

As a buyer, you do not pay real estate commissions. So why not bring on a realtor who works with investors to add bench strength to your plan.  Realtors have lending resources, inspectors, and the like who can help you navigate the process.  I recommend NOT waiting.  Get a seasoned investor knowledgeable realtor, start talking to lending partners, save more money, start looking at available properties and analyze whether it makes sense to buy or not.

When to buy is not the driver.  When to get started is now.  Rock on, Christian.

Derek Guivehchi · Answer

@Christian E Hardin Odds are you’ll probably never time a downturn correctly. If you do it’s just luck. It doesn’t matter what the market is doing though so don’t be distracted. Your job is to find a deal that works.  Look at properties, run your numbers and get good at knowing what works and doesn’t.  Meet some real estate agents, a banker or mortgage broker, insurance agent, contractors and a handyman. Start building your team.

Joe Villeneuve · Answer

Two things:

1 - Find a different market.

2 - The things that come to those who wait, are the things that are left behind, by those that get there first.

Theo Hicks · Answer

Don't try to time the market. Underwrite the deal conservatively and if it makes sense, submit an offer.

Anthony Solis · Answer

No need to wait as long as you find the deal you want. Everyone continues to talk about the market crashing but who truely knows if and when that would affect your area. Best of luck!

@Christian E Hardin

Caleb Heimsoth · Answer

@Christian E Hardin I bought my first investment property in 2017.  At the time pretty sure everyone would have said don’t buy in this market.  Don’t you agree?  Yet here I am 2 plus years later still buying (and selling).

Should I wait to buy first investment home in this market?

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