Buy my 1st investment property now or wait for a crash?

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Buy my 1st investment property now or wait for a crash?

Kathleen McCabe
Rental Property Investor · Dallas, TX · Member since 2019 · 38 posts · 11 votes

Hi all! I'm getting anxious, I want to buy my first investment property, however I can't help but listen to the rumors of a crash in the next 1-3 years. Should I stock-pile my cash and wait, or get the ball rolling on my real estate empire and start investing asap ? Am I being too eager? 

Thanks!

Katie

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Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
7y

We have been replying to this same post every week for the past five years.  And, truth be told, tomorrow never happens for those who wait for tomorrow...there are always conditions that get in the way of decisions.

Good locations, cash flow, prudent debt, add value, reserves...and we will be fine.

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

    We had a real estate crash in 1934 (I think thats the year) and the next one was 2007....so that should put us on track for one right around the year 2080.

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    14Reply
  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    7y

    How will you feel 20 years from now if a crash never happens?

    Just be sure what you buy has strong cash flow and stress test it with lower rents and higher vacancies.  If it works when stress-tested, it should be amazing if the economy remains strong.

    5Reply
  • Jake S.
    Rental Property Investor · MN · Member since 2017 · 864 posts · 555 votes
    7y

    Hey @Kathleen McCabe if the numbers make sense, and it cash flows well, I wouldn't wait. No one truly knows when/if the market will tank, it's been predicted for the past several years now and I wouldn't wait around on it and miss good opportunities.

    Get the ball rolling!!

    2Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    7y

    We have been replying to this same post every week for the past five years.  And, truth be told, tomorrow never happens for those who wait for tomorrow...there are always conditions that get in the way of decisions.

    Good locations, cash flow, prudent debt, add value, reserves...and we will be fine.

    18Reply
  • Bob Okenwa
    Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
    7y

    5 years ago, there were rumors of a crash "a year from now". 4 years ago, those same rumors persisted. A real estate crash is almost a once-in-a-century kind of event as @Russell Brazil alluded to. Holding your breath for one and trying to time the market has shown to be an exercise in futility. Do your due diligence and buy in the right area at the right price and you should be fine.

    2Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Kathleen McCabe wait 75 years for the next one just to be safe

    4Reply
  • Marc Winter
    Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    @Kathleen McCabe

    "The sky is falling!"  

    Chicken Little

    So this is perhaps the absolutely WORST time to buy real estate.  

    Or not.

    IMHO the most wondrous things about real estate are the numbers and its illiquidity.  You can analyze a deal and KNOW if it makes sense for you or not.   If it makes sense, you buy, if not, you pass.  You don't have to chase a market and you don't have to wait for a pullback/cycle change/crash or tumble.  And even if you actually KNEW the top is here, you cannot sell on demand like you can with stocks.

    Wall Street mainly works off of emotion of the masses.  Most people buy high and sell low. The losers allow their fear and greed to cloud their thinking.  That can lead to massive panic selling and buying.  Up and down, then back up and down.  

    If buying real estate for long-term hold and cash flow, investors can run 'worst case' proformas and if the numbers work under stress, then that's a deal.  Simple.  Logical.  Unemotional.  Like a real successful investor.

    Keep in mind, tops and bottoms are only seen in the rearview mirror.  And if you don't keep moving forward, you are losing ground.  Afraid to pull the trigger now?  How will you feel when the market is crashing all around you and other investors are running to hide and lick their wounds?  It takes skill and guts to 'catch a falling knife';  it takes courage to make a smart decision when everyone else is in a panic.  

    The vast majority of people are broke.  They wait, looking for a break that never seems to come.  Do what the majority of folks do and you will end up where they are.  

    Good luck!

    8Reply
  • Larry Turowski
    Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes
    7y

    @Kathleen McCabe If you buy wisely then timing shouldn't matter.

    I'm an experienced investor and I'm a little nervous too--less about a real estate "crash" than about a recession and a downturn.  I've said this before but google "the wisdom of the crowd."  There has been an increasing amount of chatter about a recession coming in 2020 or 2021.  If there were downvotes I'm sure I'd get downvoted for this.  I wasn't worried about it in the last few years but I am worried about it now.

    But I'm still buying.  Just because the probability of a recession might be higher now that doesn't mean it will happen.  SO I'm not going to just sit on my hands waiting.  The key is you want to be recession proof.  The rentals that I buy will cash flow nicely regardless of a recession and I'll buy them at a price that would allow me to sell them below current market rates and still not lose money.  The flips that I buy will not take a year to complete.  I'll be in and out of them in a few months.

    There will always be deals regardless of the economic environment.

    6Reply
  • Bill Plymouth
    Real Estate Agent · Philadelphia, PA · Member since 2018 · 416 posts · 396 votes
    7y

    There is a difference between a “crash” and a cycle.   All cycles have their ups and downs.  A crash is extreme, out of character, and sudden.

    Any time is a good time to buy as long as you buy right.  If you’re running around paying full market value for every property then You’ll have a problem.  

    If you buy right and add value to your assets you’ll be right as rain.  Then when a crash comes, you will have enough experience to buy up everything you see.  

    3Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y

    @Kathleen McCabe if you are anxious to invest in this economy, there is no way you will invest in crash. A crash happens when everyone is selling and NOBODY is buying. The odds that you will be a buyer when that happens are low. You will just be freaked out like everyone else. In a down turn rumors turn even more ugly. Keep in mind rumors are junk information. By definition a rumor has no credible source. 

    3Reply
  • Keyonte SummersPro Member
    Harper Woods, MI · Member since 2017 · 384 posts · 311 votes
    7y

    I had the same mindset for awhile and kicked myself from the deals ive missed hope in now and when the market drop dive nose first

    0Reply
  • Kathleen McCabe
    OP
    Rental Property Investor · Dallas, TX · Member since 2019 · 38 posts · 11 votes
    7y

    Hi All, 

     Thank you so much for all of your input here - Maybe I should have used the word "Downturn" not crash... I did not intend for everyone to think that I meant wait for another Great Depression or 2008 :) My mistake. But I'm getting the feeling your replies would generally be the same - Don't wait.  

    Big shout out to @Larry Turowski who risked getting some virtual down votes to go out on a limb and acknowledged that a downturn does cross his mind! For a minute I was thinking I was the only one.

    @Greg Scott I really like the idea of the stress test! Thank you.

    @Marc Winter - To your point, numbers don't lie! I can always fall back on this. :)

    Everyone else who replied - You rock! I really appreciate the honesty and you've all encouraged me to get the ball rolling sooner rather than later.

    3Reply
  • Robert Higdon
    Real Estate Agent · Smyrna, GA · Member since 2018 · 31 posts · 35 votes
    7y

    The right time to buy or sell real estate is today, because you know what you are getting under today's circumstances.   Whether its the impending crash, or change in interest rates, no one knows or can seem to predict it correctly.    For example, regarding interest rates, if you look back at last year the prediction was that rates would rise (what?) 3 times in 2019.    If you look at rates today, they continue to drop and stay low.   

    **Though it would be pretty awesome to see a drop at a time when we can all take advantage!

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Joe Splitrock:

    @Kathleen McCabe if you are anxious to invest in this economy, there is no way you will invest in crash. A crash happens when everyone is selling and NOBODY is buying. The odds that you will be a buyer when that happens are low. You will just be freaked out like everyone else. In a down turn rumors turn even more ugly. Keep in mind rumors are junk information. By definition a rumor has no credible source. 

     not only that credit dries up like western lakes in the middle of a 7 year drought.. that's the major flaw the wait till the crash happens crowd has..  if U do not have cash your not going to buy anything anyway..

    so we all love leverage.. the reason so many foreign investors did well in the crash is they DID have cash.. and that was the birth of the hedge funds raising billions and paying cash for everything.

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    4Reply
  • Syed H.
    Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
    7y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Joe Splitrock:

    @Kathleen McCabe if you are anxious to invest in this economy, there is no way you will invest in crash. A crash happens when everyone is selling and NOBODY is buying. The odds that you will be a buyer when that happens are low. You will just be freaked out like everyone else. In a down turn rumors turn even more ugly. Keep in mind rumors are junk information. By definition a rumor has no credible source. 

     not only that credit dries up like western lakes in the middle of a 7 year drought.. 

     everyone always forgets this. Everyone would have bought more if credit was easier in 2009-2012. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Syed H.:
    Originally posted by @Jay Hinrichs:
    Originally posted by @Joe Splitrock:

    @Kathleen McCabe if you are anxious to invest in this economy, there is no way you will invest in crash. A crash happens when everyone is selling and NOBODY is buying. The odds that you will be a buyer when that happens are low. You will just be freaked out like everyone else. In a down turn rumors turn even more ugly. Keep in mind rumors are junk information. By definition a rumor has no credible source. 

     not only that credit dries up like western lakes in the middle of a 7 year drought.. 

     everyone always forgets this. Everyone would have bought more if credit was easier in 2009-2012. 

     in those days even banks could not borrow money..  that's one reason the values cratered so hard.. you take liquidity out of the market in the form of credit and that what you get a free fall.  in areas were renters left in droves that loss of value was becaseu cash flow not only went down in many markets it went to zero.. so those that think rentals are immune most never lived through the 07 to 2012 markets or they were in a market that did not suffer but many markets did.. 

    One of the things I like to put out there is.. how many 75k escalades would roll of the lot if there was no financing.. for that matter how many cars at all.. we would be like any other third world country.. with no credit.. those that were not in the top 10% or so in net worth and income would be driving old old cars and or scooters.. 

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    3Reply
  • Bob B.
    Investor · Jasper GA · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    I remember how bad Y2K was going to be and how we needed to stockpile everything from candles to toilet paper.  It never happened but I bet the candle manufactures made a ton of money.  

    You should be ok if you don't over leverage, buy decent properties and have adequate reserves. 

    Be careful, Y3K might be the really bad one.

    0Reply
  • David Stumpf
    Rental Property Investor · Baltimore, MD · Member since 2017 · 142 posts · 125 votes
    7y

    "If you wait for all the traffic lights to turn green before you leave your house, you will never get started"

    1Reply
  • Andre' Arceneaux
    Rental Property Investor · Orange County, CA · Member since 2019 · 151 posts · 92 votes
    7y

    @Kathleen McCabe Money can be made in ANY e environment. Much of this kind of talk is to continue to thin the herd, keeping people on the sidelines

    1Reply
  • Junior Soares
    Contractor · San Jose, CA · Member since 2018 · 262 posts · 407 votes
    7y
    @Kathleen McCabe If you sit around and wait, you'll miss alot of good opportunities! And if you do want to wait for that super discount day, if it ever happenes again, just sock away some extra money so you can keep playong during the downturn. My personal opinion, dont wait. If you're in a good financial state now, why not jump on in. If you plan to buy and hold, chances are you'll win over the long haul no matter what.
    1Reply
  • Cassandra Sifford
    Rental Property Investor · New Castle, DE · Member since 2016 · 376 posts · 158 votes
    7y

    If you've educated yourself with the process, have people that you trust to help with renovation and insight, go for it!  You can't foresee the future and there's no better time than the present!  Just imagine if you wait, 2-5 years and the crash doesn't happen or it does happen, but you have the opportunity to gain invaluable experience and passive income, but didn't.  You'd be kicking yourself in the tail for waiting.

    1Reply
  • Al Pat
    Rental Property Investor · Atlanta, GA · Member since 2016 · 325 posts · 253 votes
    7y

    @Kathleen McCabe I have been hearing that crash is coming for now over 2 years and nothing has happened. If you look and do your due diligence, there is always a property or two at any given time that will make your expectations. I have been buying every year.

    0Reply
  • John Franklin
    Specialist · Salado, TX · Member since 2014 · 69 posts · 50 votes
    7y

    I vote both.  

    I had a TX RE Law professor who once told the class “there has never been a 20 year period in history when TX RE didn’t go up in value”.  Of course he followed with, “but there have been many, many 10 year periods when it went down”.

    If you can find a solid rental property that stays leased and actually cash flows well above current/future expenses and debt service in today’s market, Buy it!  Also develop a strategy for a downturn as it will come.

    I can’t speak for other states but personally, I’ve seen 4 significant crashes/downturns in the TX RE market in the past 33 years.  In all cases values dropped at minimum 35% from peak and all lasted a minimum of 2-3 yrs.  This dropped rents and occupancies, commensurately.

    I know many investors who built their entire portfolio in a couple years during downturns because they had cash available to buy at 25-50% of prior values.  So, that is a legitimate RE investment strategy and a contrarian play on today’s extended market cycle. 

    An investor who socks away savings for a downturn or fire sale, and takes advantage of any current opportunities to buy with solid ROI, will profit in either scenario.

    As always, Your mileage may vary...

    1Reply
  • Cody Ruff
    Rental Property Investor · Evansville, IN · Member since 2019 · 41 posts · 24 votes
    7y

    @Kathleen McCabe I would go ahead and get started and start building cash flow. So when and if the next market crash happens in the next few years you can use savings and existing cash flow to buy even more properties at a discount. So when the market inevitably rebounds which it always does you can sell your houses for a profit due to appreciation or up your rent on your rental units at the current market value.

    0Reply
  • Brent Shields
    Rental Property Investor · Sacramento · Member since 2019 · 129 posts · 108 votes
    7y
    Originally posted by @Bob B.:

    I remember how bad Y2K was going to be and how we needed to stockpile everything from candles to toilet paper.  It never happened but I bet the candle manufactures made a ton of money.  

    You should be ok if you don't over leverage, buy decent properties and have adequate reserves. 

    Be careful, Y3K might be the really bad one.

    I was thinking that same thing. 

    Y2K made me realize if everyone is talking about a crash, then it's not going to happen.

    0Reply
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