Invest now or wait to see if market tanks?

Buying & Selling Real Estate
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Invest now or wait to see if market tanks?

Account Closed
Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
I sold my duplex and I’m sitting on a pile of cash. Moving forward I will implement the BRRRR strategy to get up to 10 properties, recycling as much capital as possible. I’m excited to move forward in my REI career, but also apprehensive because it seems the market may be headed down. I don’t want to buy before a crash and sabotage the refinance. Should I wait?
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y

So far we have had 1 real estate crash in the last 90 years....why do you think we will now have 2 in 10 years?

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  • Charles Kao
    Specialist · Grand Rapids, MI · Member since 2016 · 1k+ posts · 611 votes
    7y
    @Jonathan Hulen Be picky and only buy anything 20 percemt below market that cashflows well. I'd also stay asay from small markets that are not job diverse if market crash but if you can't find anything I'd wait and strenghten your position for a crash. We are waiting but I had an opportunity to buy a 8 plex for 330k with 8000 gross rents. Yeah, not walking away from that.
    23Reply
  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    7y

    Looking for a 10-20 unit; if I find a deal that meets my criteria I'm in; just being extra fussy in this market.

    7Reply
  • Account Closed
    Member since 2018 · 214 posts · 175 votes
    7y

    I would definitely not sell my properties at 20% below the market price to a buyer.  

    I wonder who would want to sell it 20% below the market price.  

    14Reply
  • Cailyn AunePro Member
    Tacoma, WA · Member since 2015 · 176 posts · 88 votes
    7y
    @Ran L. It happens. Wholesalers and flippers do that and more every day. @Jonathan Hulen - don’t be discouraged by that. It’s hard work to find good deals. But they are out there.
    16Reply
  • Kent Hall
    Rental Property Investor · Member since 2018 · 57 posts · 75 votes
    7y

    Markets go up and markets come down. Buy a property if it makes sense, don't spend too much time gazing into the crystal ball of what may happen in the market .

    If you have the cash to buy 10+ more properties then buy them slowly and make sure you stick to your numbers. Then you will likely the the benefit from dollar cost averaging. 

    Keep in mind, everyone has been waiting for the collapse of the real estate market for at least the last 5-7 years. And just because the stock market is hitting a correction does not mean we are about to fall off the cliff of depression/recession again.

    32Reply
  • Soddee R. Knight
    Investor · Oklahoma City, OK · Member since 2017 · 33 posts · 20 votes
    7y

    If you’re worried about a future downturn in the market, you may want to consider investing in an area of the country that doesn’t typically experience large swings in market value during economic downturns. 

    4Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Account Closed:

    I would definitely not sell my properties at 20% below the market price to a buyer.  

    I wonder who would want to sell it 20% below the market price.  

     properties below market usually mean they are fixers at some level.. or in markets were you have Faux valuations.. IE appraisals can come in high but cash buyers will never pay appraised value there for there is only equity to the lender in reality the value is what someone pays for it.. 

    C class and lower trades under market so so called market commonly.. along with sellers who just dont know what they dont know and some wholesaler talks them into selling for under market..

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  • Lesley Resnick
    Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    I keep hearing about this market crash?

    When is it scheduled?  How bad will it be?

    The next event will look nothing like the last one.  

    The greatest risk I see is a number of the EU countries are bankrupt, Turkey, Italy, etc.

    Should we see an event, liquidity will dry up.  If you have Scrooge McDuck piles of cash, you will be able to buy some properties cheap.  However, if are you dependent on w2 income or other investments or know someone who is, they will be suffering. 

    My advice, buy smart and keep moving forward.  There is nothing wrong with planning for the future, but to wait for a single event, you may spot on or you could be waiting a long time to make a move.   

    16Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y

    So far we have had 1 real estate crash in the last 90 years....why do you think we will now have 2 in 10 years?

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    34Reply
  • Daniel Schiller
    Rental Property Investor · Houston, TX · Member since 2014 · 91 posts · 76 votes
    7y
    @Charles Kao market value is what you pay for an asset. Anyone who tells you otherwise is making more money from e-books than cash flow focused real estate.
    4Reply
  • Daniel Schiller
    Rental Property Investor · Houston, TX · Member since 2014 · 91 posts · 76 votes
    7y
    @Ran L. whatever I offer you, and you accept, is the value of the property. Everything else is imaginary. Any models I see with some sort of imbedded value related to purchase price go straight to the trash.
    9Reply
  • Marie Fries
    Whitman, MA · Member since 2018 · 104 posts · 80 votes
    7y
    @Soddee R. Boston, Massachusetts is growing. It's not stopping anytime soon.
    6Reply
  • Mo C.
    Saint Paul, MN · Member since 2016 · 7 posts · 7 votes
    7y
    @Jonathan Hulen I just popped a chunk of my cash for my next BRRRR into a Capital One 360 Money Market Account. Better than a saving acct, not the risk of the stock market.
    1Reply
  • Account Closed
    OP
    Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
    7y
    @Russell Brazil I suppose “tanks” is a strong word. I’m worried that I’m catching the market in a downturn, and that will effect my refinance after the 6 month period. I don’t think we are going to see another 08.
    2Reply
  • Account Closed
    OP
    Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
    7y
    @Kent Hall Thanks for the advice. I know if I try to time the market I could be sitting on the sidelines for years, and I’m not going to do that. I’m not getting any younger I need to keep moving forward. Having cash will give me larger margins because I won’t have the added costs of a hard money loan.
    1Reply
  • Todd Powell
    Rental Property Investor · Corvallis, OR · Member since 2018 · 840 posts · 1k+ votes
    7y

    @Charles Kao Wow, that's amazing! My son and had to pay $650,000 for a 8 plex, and it was a fix needing $75,000 to rehab units to get our rents to $8500! I would love to be in your market. And, BTW, this property appraised for $800,000 the way it sat with only $5000 in gross rents and units in bad condition. So, well done! our 8 plex is in Forest Grove which is a superb of Portland, Or.

    1Reply
  • Kyle Schlosser
    Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
    7y
    @Charles Kao Where was that 8 plex? Solid potential numbers 👍
    2Reply
  • Jeff W.
    Lender · Irvine, CA · Member since 2017 · 14 posts · 3 votes
    7y
    Originally posted by @Kyle Schlosser:
    @Charles Kao Where was that 8 plex? Solid potential numbers 👍

    I would to know too! We are currently in contract for an two 4-units in adjacent lots for $320K that grosses $4200/month.

    2Reply
  • John CasmonPro Member
    Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes
    7y

    Big difference between a crash and a correction. While many are predicting a correction, not many are expecting a flat our crash. I would suggest buying conservatively and focusing on cash-flow assets where you can force appreciation.

    If you try to time the market, you may run into other issues such as higher interest rates and stricter lending terms. 

    11Reply
  • Patrick S.
    San Antonio, TX · Member since 2018 · 24 posts · 12 votes
    7y

    I think there are good deals to be had in any market, however, we have had a 10 year bull market in housing, and it seems like the multi-decade bull market in the bond market (where interest rates have continued to fall) may also now be over.

    To me, this is the time to be selective about deals, not to stretch to make a deal work.  Depending on your situation, it may be wise to stockpile more cash.  If you are using any loans besides fully amortizing, 30 year loans, you should watch the maturity dates.  If you had a performing loan that matured and needed to be refinanced a month or two after Lehman fell, you might have been in trouble, even if you never missed a payment.

    1Reply
  • Ken Virzi
    Long Beach, CA · Member since 2017 · 107 posts · 82 votes
    7y

    First crash was obviously coming for years based on two things. The crazy loans and free money combined with the expectation that the move from single income households to dual income households was a trend as opposed as a one time event. 

    We still have had a period of cheap money, but the loans have been less out of control, however much of the appreciation in certain markets have come from investors. A combination of foreign cash investors and the growth of things like biggerpockets have increased the demand artificially. If that is the case in your market it is more of a traditional pyramid scheme in that once that foreign money runs out or the local investors tie up their capital, or the prices get too high where cash flow markets stop working (looking at you Cleveland), than at that point the demand drops. If you buy at this high point and the driving factor was investors, if the investors stop coming you may see a stubborn market that corrects or even crashes.

    I do think many markets are bloated and have been for some time. Others are more protected. But there does seem to be a commonality of outside money in those markets (be it foreign purchase, relocations, or investors such as us). 

    1Reply
  • Kevin M Lane
    Member since 2018 · 1 post · 0 votes
    7y
    @Jonathan Hulen Few factors to consider. Purchase price vs retail value. A deal is a deal. Project time line. Appreciation will slow but not stop just yet. The market will slow due to people not qualifying for a larger amount. IT WILL TAKE MORE THAN 1% TO MAKE THE FALL
    0Reply
  • Bryan Clement
    Rental Property Investor · Union, ME · Member since 2018 · 161 posts · 104 votes
    7y

    one of the key factors to property values (especially multi-family) is population growth. Even in a market downturn people still need a place to live, and people still have kids graduate and move out of their parents houses. The only other option is homelessness, which in my market (Maine) isn't viable. Price downturns should only happen in places with severe oversupply of new builds where the market can't sustain it: even then, the population will eventually grow to fit the additional supply. 

    2Reply
  • Shawn Coverdell
    Investor · Clatskanie, OR · Member since 2014 · 212 posts · 233 votes
    7y

    I have no idea what is next for home values. I am no economist, but I cannot find anyone below the age of 45-65 range that can even complete simple tasks reliably without major drama and attempts to cheat me. Judging by that alone, I think we are looking at some sort of population uselessness bubble. I mean how can this be good? I hear it constantly from my friends as well. It's very difficult to find help that will be worth even minimal wages!!!

    You are not alone, there are a lot of spooky things out there. a lot of this value run up is probably due to pure inflation and Fed Reserve Quanative Easing (pumping more cash into circulation)

    I don't know, but something don't feel right. 

    I have 3 offers out right now and will continue forward with caution. I will say this is the longest period I have gone in a buy cycle without closing. I have pretty high equity cushions in each property, so I can absorb a pretty good value drop, but even if my properties did go underwater, One hidden benefit of using this BRRRRR strategy is that each property is top notch and desirable. So I think I will still attract tenants. Can lower rents quit a bit even to keep them full.

    Pantry is stocked. Cows have hay, chickens are fed. Lets do this drop thing!!!!

    Homes in the Hood

    1Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    7y

    You are always looking for deals to buy. The velocity of deals being done can make  a difference in market cycles at various points in time.

    Buying assets with top market rents and high debt could be a bad thing as it saddles you with non-producing with loss or neutral debt load which can hurt ability by more properties.

    I saw in the last downturn of 2007,2008 where people had a buy anything mentality and the train stopped. Their good properties were feeding the dogs for propping up cash flow. Someone can always usually point to some reason for not buying a property. They are serial lookers for years and never do anything. There is not a no risk property just different levels of risk.  

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