How should us new investors think about this?

Question

Hello all,

It seems like another RE dip is inevitable. None of us have magic crystal balls but I given the data coming out, from all angles, there will be another dip in the next 1-3 years.

So for you experienced guys, my question is simple, how should new investors be operating RIGHT NOW?

Let me add some context... I was on another small bloggers site and the options she laid out were as follows:

• Gamble on appreciation.
• Wholesale
• Lend

The caveat to number 2 is that many seasoned investors (perhaps many of you) are turning down more and more deals that wholesalers are bringing to you, deals you would have snapped up 3 or 4 years ago. So, it seems to me that wholesalers are "fishing for suckers."

But on the flip side I remember reading on this forum that some of you can care less about buying rentals at the top of a market.  I found that fascinating.

That being said, for you experienced guys, what would be your advice to folks who are simply house hacking at the moment?  If you don't have a ton of properties that are positively cash flowing, and you're simply house hacking, should you even consider acquiring rentals (especially using leverage) at this stage of the game?

Interested in hearing you guys' thoughts!

Cassi Justiz · Answer

I definitely wouldn't consider myself one of the more experienced investors on here, but I've gotten some great advice from my mentors.

They are saying to at least get started on buy and hold rentals now, but budget super conservatively. Basically, they are preaching to budget for stagnant rents and make sure you can still cash flow (or pay off the note) if your non-fixed loans adjust up to a 10% interest rate. I have NO issues buying rentals right now as long as I know they are cash flowing well and should theoretically continue to do so. I'm not touching something without significant cashflow though.

The theory behind getting started now instead of waiting for the crash is risk tolerance for the banks. You don't want to be a brand new investor trying to get financing for the first time at the bottom of the market. In a down turn, banks would rather loan to safe borrows that have established relationships with them. Brand new investors are generally not the safest group to loan to.

Michael Kistner · Answer

Account Closed

Predicting another dip is a fools errand. You can find so much data pointing to a coming crash or a healthy economy. Stick to sound investing principles and you'll be fine in any market. Buy below value properties that you can force appreciation. It's a lot harder to do right now but it's still possible.

"Be fearful when others are greedy. Be greedy when others are fearful." - Warren Buffet

Account Closed · Answer

The more I learn about the economy, the more intriguing this all becomes.  Thinking about the pending retirement crisis is a deep enough rabbit hole.

I agree, never predict the timing of the economy... but It think it doesn't hurt to anticipate the cyclical nature of the economy staying, cyclical.

Account Closed · Answer

I agree, and disagree. Predicting the timing of another dip is a fools errand. Stating flatly that there will be another dip, is a bet you'd win 100% of the time if given infinite time for said dip to occur.

We do live and exist in a fiat currency debt bubble and part of existing in a fiat currency debt bubble is the reality that booms and busts are perfunctory per design of the system.  We can't pinpoint timing, but under the current economic system, I'd bet my last dollar that there will be another bust (date unknown). No odds maker will touch that bet! lol.

This specific topic fascinates me as guys in my area are unloading portfolios, sitting on cash, and waiting for the next dip.  Some are doing 1031 exchanges into larger multi units, etc.  But many are backing away from the SFR market.

Then, there are experienced guys like yourself who view their complacency as an opportunity to be greedy.  The thing is, you know exactly what you're doing, and they know exactly what they're doing.  That's the intriguing part.

But Cassi made the strongest argument I've heard regarding not being "green" when it's time to buy the bottom.  That makes a LOT of sense.

Michael Kistner · Answer

You’re absolutely correct about the current economic debt bubble. And it’s something to follow that’s part of the game. I just wouldn’t avoid investing because of loose predictions.

I always find the predictions funny because it’s always a general statement but every market is different. Not every market will get hit the same way.

And @Cassi Justiz is absolutely right. Building those relationships are key when the market is up.

Alexander Felice · Answer

Don't time the economy, but constantly learn about it

Invest by what your investment market tells you is working, don't try to fit what you want to do into the market

volatility is unpredictable, but interest rate increases aren't speculative, they are announced.

learn the greater fool theory

play the long game, you don't have to get rich in the next 24 months to be successful.

How should us new investors think about this?

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