Are we at Peak Market?

[Phillip Kim]

Robert Kiyosaki stated that the historical market crashes every 8-10 years. I know the last crash happened 2008-09, that leaves us at right around that 10 year period. I am curious to know if this is the right time to buy multi family rental real estate. I know no one has a crystal ball and has the definitive answer, however does anyone have any idea or knowledge of how the historical market works and whether you think we are at the peak? Is this the right time to buy? 

[Andrew Johnson]

Phillip Kim What few think through is that “peak market” isn’t something that is a randomly independent variable. Let’s say the market does have a hiccup, do you think...

1.) General economic hiccups come along (generally) with employment issues. So there’s no guarantee your W2 will hold up in a “crash” environment.

2.) Will banks be as free with their capital or will restrictions and qualification criteria get tighter?

3.) Will rents be the same on these multifamily properties? Or will they drop so cash-flow ends up relatively similar?

4.) Will interest rates be the same or will (perhaps) rising rates contribute to a plateau in the market?

None of this means that you should buy now or wait until later. Simply that most people look at one variable: price. They ignore everything that would/could/may contribute to a price reduction.

It’s not crazy to think: Oh the price decreased 10%! But now the bank wants 25% down instead of 20%. And their interest rate is 6% instead of 5%. So now my “cash-on-cash” (one metric people on BP like) is actually worse!

Or maybe it won’t go down that way, nobody has that crystal ball.