Should I rent a home?

Question

I’m just getting started in REI. Before I realized this is what I wanted to do, my wife and I lived in a condo that we rented. To save some money for our first investment, a multifamily we’d house hack, we decided to move in with family. We’ve been grinding for over a year now trying to find something that we feel comfortable living in and will cash flow when we move out and we simply can’t find anything. I live in a really hot market (Boston) which is making it even more difficult. We’re at our breaking point and need to do something, but I can’t justify buying a single family home due to a crash we know is inevitable in the next few years and there simply aren’t any multi family’s in my area that fit our criteria. We’re to the point of strongly considering renting an apartment until we either find a good multi or see what the markets going to do. Is this crazy? Am I crazy? Has anyone done this? I honestly would rather rent at this point then buy a bad deal and then have the market crash on top of it.

Jason D. · Answer

@Kristopher Werner there is always an inevitable crash coming. If you let that stop you from buying, you'll never find a deal.

Charlie MacPherson · Answer

@Kristopher Werner I don't think there's an inevitable crash - at least not in eastern Mass.  People have been talking about it for years, but the fundamentals that caused the 09 crash, just aren't in play.  That was caused in large part by predatory lending which isn't happening anymore.

Look at the local economy.  If we were an oil town and oil prices crashed, it would be a different story.  There, the entire economy suffers - but that's not Boston or anywhere in eastern Mass.

We have so many thriving industries here that we're well diversified.  Education, biotech, defense, IT, medicine, finance - and none of them are in decline.

Take a look at this historical data from Q1 2006 to Q2 2019. Those who listened to the naysayers in Q1 2015 and have waited until now have watched median values climb from about $375,000 to $600,000.  Even if there's a crash, it's not going to drop below that mark.  Those who waited will never make up that difference.

My advice is to consider buying.  If you can't pay Boston prices, look to the south.  Prices in Plymouth, Norfolk and Bristol counties are a lot lower and have also appreciated nicely since the bottom of the last crash in Q1 09.

Khalid Bryan · Answer

@Kristopher Werner I’d look at the main benefit of renting over buying being the fixed expense (not having to worry about surprise repairs). Also the limited commitment (1 year leases make it a bit better to be flexible, as your investments do well or poor you can adjust your housing expenses accordingly.)

Angelo Mart · Answer

I rented a townhouse because in my area of North Jersey you are more at risk buying the same townhouse at $410,000 / $6,000 / $350 HOA when it can be rented at $2,350/Month which is a fixed amount. I then took my cash and invested it as much as I can in Cash Flow Deals

Kristopher Werner · Answer

@Justin Rank I’ll definitely step up my driving for dollars game and I’ll check that site out too. Thanks for all the info!

Justin Rank · Answer

@Kristopher Werner I totally get it! Two things I would suggest trying. Work an absentee owner list where you are looking to buy and then drive for dollars. If you see some place you like write them a letter. You can usually get an accessors database from the city/town you live in and figure out 1-4 family and who lives separate from the address. Also, check out Flyhomes.com. They are going to launch in Boston early next month and it gives you the ability to make cash offers for owner occupant 1-4 family homes. They make their money by getting the realtor commission and charging you rent until your loan closes.

Kristopher Werner · Answer

@Charlie MacPherson thanks for the response and the detail. I think the part that’s making me nervous is that I feel like this upward trend isn’t sustainable. I just have to remind myself that 2008 was a completely different beast and the next downturn should be easier to ride through than that.

Kristopher Werner · Answer

@Justin Rank thanks for the response. It totally make sense. I know I’m the type of person that gets “analysis paralysis” which is why I’m fearful of a market downturn. In order to find a deal, I’ve spent a lot of my time first listening to BP, I took the real estate salesperson class, read a number of books, articles and anything else I can consume to first learn the how first and decide what type of investing I want to do (buy and holds). I’ve met numerous agents and brokers along the way trying to find the right properties. I just can’t seem to connect with the right people or anyone that’s has the same excitement around this space that I do. Things hit the MLS and i think is somewhat of a deal is gone in hours or I’m getting blown away with cash offers that I can’t compete with. Any suggestions on better places to look?

Justin Rank · Answer

I'm just curious, what things have you been doing to find a deal? We are closer to a downturn in the economy that a rebound from a bottom, but no one really knows. We don't even know what it would look like, we aren't facing the same pressures like we did in 08. The next downturn could hit stocks and barely scrape the housing market.  It's not the time to be overly aggressive, but if you are a long term buy and hold investor it's not impossible to find the right deal. I have been using a portfolio approach right now getting x amount of units each year similar to what I do with my stock portfolio. Some years I will buy higher in the market and some years lower. When we cycle into a buyers market i can be a little more aggressive in adding units but that is not stopping me right now from finding deals.  When I sell my portfolio down the road I should be in pretty good shape.

Sean Rooks · Answer

Boston is a desirable travel destination, maybe you can factor in AirBNB for your multifamily and see if that makes the numbers work.

Should I rent a home?

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