Starting Out
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
Updated about 4 years ago, 10/07/2020
Rookie investors - should we be on the sidelines for the moment?
Hello BP community,
I am new to REI, and have been reading and listening consistently for the past 7 months (spent our quarantine time well). I am in an expensive market, which is also blazing hot it seems at the moment. Every house has multiple offers, some cash, some site unseen, some have all three. It also seems that houses are selling for ridiculous prices (I haven't seen many places selling under 400K that I would consider). My question to the community is it not a good time to get into REI without experience? I know that is a very vague question, but I would like to see what kind of different points of view I can drum up here. I have the capital to buy my first one and house hack, which makes me feel much more secure for my first one, but is the market to hot / unpredictable to take my first leap?
Any and all opinions are welcomed!
also would like to note, I am looking for duplexes / triplexes only. No single family.
Hey Jake, I would consider holding off until after the elections, which is what I'm doing for now. However, if a great deal comes along, then I would invest. Especially given that you have the funds and are confident enough, and you'll be house hacking, then you have direct access to the whole process, and tenants. Good luck in whatever you choose.
I’m in the exact same boat:-/ Even more expensive here in Hawaii... We may hold off on our original game plan (house hacking w/ multi-family rentals) and shift gears a bit for the time being. This isn’t a solid cash flow area but appreciation is always higher than elsewhere and recessions don’t hit as hard here. Not sure about your locale in Jersey but if you’re willing to hold onto a property for longer term, then you should be able to ride out any dips in the market. It always recovers eventually. Question is... can you float the whole mortgage if your tenants can’t pay rent and you can’t get rid of them?
@Jennifer A Barry Thank you for your response. And yes, especially as I plan on house hacking, I can cover the mortgage if needed. I plan on holding properties for the long term, which seems like it will make any investment less risky if the goal is to hold onto it 30+ years.
@Craig Anderson Thanks for your response. Of course, if a great deal comes across my way, I will jump on it.
Real Estate Rookie did a podcast about this subject... it's from May 20 (featuring J Scott) but I'm listening to it now and it's still relevant. You might want to take a listen. Good luck!
Originally posted by @Jake Drappi:
Hello BP community,
I am new to REI, and have been reading and listening consistently for the past 7 months (spent our quarantine time well). I am in an expensive market, which is also blazing hot it seems at the moment. Every house has multiple offers, some cash, some site unseen, some have all three. It also seems that houses are selling for ridiculous prices (I haven't seen many places selling under 400K that I would consider). My question to the community is it not a good time to get into REI without experience? I know that is a very vague question, but I would like to see what kind of different points of view I can drum up here. I have the capital to buy my first one and house hack, which makes me feel much more secure for my first one, but is the market to hot / unpredictable to take my first leap?
Any and all opinions are welcomed!
Jake,
You should do some math on this.
Most big data companies (like Zillow and CoStar) expect home prices to continue to rise next year (and duplexes and triplexes will rise with SFRs). Like others, I'm worried that prices will drop. The question is, by how much? Americans have too much equity in their homes right now for there to be another huge crash. At worst, a lot of people will be forced to sell next year, not forced into foreclosure. So, at worst, inventory will go up as demand goes down, and prices will drop.
Again, by how much? I'd say no more than 10%.
So, when considering a duplex or a triplex, figure out how much cashflow you'd earn (or cost of living you'd save if the property doesn't cashflow but does lower your cost of living) between now, say, nine months from now. Then run on the numbers on the same property with a 10% lower price. If you end up ahead by buying now rather than waiting nine months and paying 10% less, buy now.
But I wouldn't live in fear of real estate falling off a cliff. I don't think anybody serious is seeing that as happening.
Good luck!
Best,
Jon
@Jake Drappi hey Jake. I bought my first property, a duplex two months ago. You have to take risks in my opinion. No condition is ever going to be perfect. At worst if I lost everything I’d still be ok. I guess it all boils down to you’re gut feeling. Each state and city is different.
Peoples will always need affordable housing so that’s what I went for.
@Jake Arnold Yes, you are correct. Investing always has risks. Another concern I have is inheriting tenants, especially right now with the current laws. Did you inherit tenants on your place?
@Jon Schwartz thank you for your response Jon. I didn't even think of that, so it is very helpful.
@Jake Drappi that's really going to boil down to your level of education, your plan, and your determination. I think it's crucial here is to be conservative with your numbers to account for both the uncertainty and longevity on the pandemic.
I am looking for deals now, because its the best way to find something worthwhile. If your numbers fit your goals, and you can structure good deal then go for it. The key is to always make informed and calculated decisions.
Good luck!
@Jake Drappi the tenant moved out the day of purchase. I’m not sure how laws are right now but I had the option to terminate the lease upon purchase in August. I would request rent payment history.
