WSJ "Worst Time to Buy a House"--Applies to Rentals?

Question

Hello everyone, happy holidays and Merry Christmas to those who celebrate! This is my first time posting on the forum; I have a background in finance but am new to real estate. Curious of everyone's thoughts on the recent WSJ article(s) calling right now the worst time ever to buy a house. Does that apply to buying rentals as well?

https://www.wsj.com/economy/housing/theres-never-been-a-wors...

Obviously, today's higher home prices and higher rates mean that as the owner of a newly purchased unit, you would have to charge much more for rent, which makes it difficult to make the numbers work versus owners who bought their houses a few years back and have much lower mortgage payments (and thus can charge less rent). Renting is currently cheaper than buying because renters are renting from owners who bought during a low-interest rate environment and when home prices weren't so high. Am I understanding that correctly? Have people on the forum been making it work with units they've bought over the last year or so, or are people sitting it out for a bit?

Of course, if/when rates go down, the competition for houses (from other landlords, normal people, and investment firms) could go up even more, making it even more difficult to buy something, right? In other words, generally speaking, is this a situation where you would still pull the trigger on the right deal if possible (acknowledging that the "right" deal is extremely subjective), because things won’t necessarily improve much in the near to medium term?

Thanks all for any input!

Greg Scott · Answer

A good investor buys a property with value built into the deal. So, anytime is a good time to buy as a real estate investor.

Michael Paling · Answer

Depending on the property, it's always a great time to buy investments just as much as it's always the worst time for another property. If you found a cash flowing or undervalued property, then it's a good deal to pursue regardless of headlines. Ignore these kinds of headlines and just find a profitable deal.

Russell Brazil · Answer

Whatever the headlines say.....the opposite is typically true.

Ren McKnight · Answer

Thank you, everyone, really appreciate the feedback and input. Very helpful!Yes, I am looking to stay local, at least for the first one. Given everything mentioned above / general market trends, I am going to look further into "house hacking" using an FHA loan in the NYC area. Easier said than done I'm sure, but there may be something there! Thanks again.

Carlos Ptriawan · Answer

I would say making money is very hard these days

V.G Jason · Answer

So in order to see this as not one of the worst times to buy is if median household income tightens to median house price. I think both go down, income more so than price. That's not to say we're void of opportunity, we have some. Just not a perfect time to buy like post GR, high rental demand and great intrinsic. If it does tighten drastically it mean wage inflation exceed actual inflation and home appreciation. That sounds cool, but very detrimental long term. I think it slowly tightens but first gets wider. We see unemployment pick up to high 4s first, then supply come up quite a bit, and then primary rates come down to low 5s/high 4s, investors with .5-1 over the course of next 12-18 months.

Chris Seveney · Answer

@Ren McKnightIf you are looking for a primary residence or a listing on mls then yes now is probably the worst time to buy do to limited inventory and higher interest rates. Why? Because your percentage of income to cost to own and maintain a home are near all time highs and is not sustainable.

V.G Jason · Answer

$100/door is trash.Anyone viewing the actual deal metric on the insignificant cash flow it derives is missing the forest for the trees. You buy premium land, you make the physical structure is up to par and appealing, then you hold on it. The cash flow will be slightly up, slightly down. This $100/door is wiped away with 1 water heater and you lose 20 months worth of revenue. You are chasing pennies costing dollars. You lose probably 40 months on 1 tenant turn. The "B" area is the right way to look at it. In regards to timing, you buy it when it makes sense for you to buy it irrespective of time. 2023 was the worst year to buy rentals, they said the same shit about 2009 albeit for different reasons. You buy when it makes sense. Sense doesn't mean a $100 surplus, it means when scarce land with an active unit it sitting fresh on it below rebuild cost. You take it if you can afford to, and keep it moving. You hold onto it at least 7 years, hopefully 10+.

Jill F. · Answer

On Dec 15, we closed on 6 2bed/1.5 bath duplexes in a "B" rental area. We ask for extra money in our loan to buy time to get the rents up to market. Even at the current (8%) rates with 25% down we should cash flow 100/door and when we add the third bedroom we are planning to add, we should make significantly more and be able to rent at the low end of the market rents for a nicer than average property. Also, we will refi into a better rate just as soon as it make sense and we'll do better still ;)

Ecaterina Katerina Morosan · Answer

If the numbers make sense in the current market, they will make even more sense if you add value, refinance in lower interest rate, negotiate better terms etc. Remember, NYC market is a totally different beast. Make sure you talk to local real estate experts and try not to apply nationwide data and market trends to NYC market if you're looking to stay locally. Best of luck!