Buy Now or Wait for the much talked about recession?

[Shaquan Webster]

Good Day Bigger Pockets Fam, 

I'm 24 years old. I currently own 1 property (that I live in) in Virginia Beach, Virginia. I;m new to Bigger Pockets and I'm new to real estate in general. I want to invest in rental properties that cash flow in this area. I've been doing a lot of research over the past couple months about real estate and more specifically rentals. With all this talk about the market being out of control with high prices and the upcoming recession, do you feel its best for me (as a "newbie") to wait until then? Should I just keep growing my knowledge and saving so that I can buy more when/if the recession hits?

P.S: If you're in the Virginia Beach area or anywhere in the 757, send me a message I'd love to connect with you!

Thank You

[Derek Armstrong]

@Shaquan Webster I’m just getting started as well. I’m under the mindset of recession or not, a good deal is a good deal 🤷🏻‍♂️

[Frank Wong]

Bears watching the "Big Short" and salivating for the next recession. Each recession is different with different variables.  I am not sure why there is so much pessimism of people wanting this thing to come. Why ruin a great party.  When there is this much talk it usually does not happen. Bears will show their true teeth when no one is looking. 

[Marcus Auerbach]

You might be waiting for something that never happens again (like 2009, which started as mortgage crisis, turned into economic rescession, different animal). Economic recessions have historically had little to no impact on property values, what changed was time on market. At the moment properties sell very fast, 18 days is what we are currently looking at in Milwaukee. 180 days (6 months) is the norm. This shows how big the supply gap is - we just have not built enough in the last ten years. I expect days on market to normalize a little, but even 60 days or 90 days would still be a hot market.

The best day to plant a tree was 30 years ago, the seond best day is today.

[Amanda R. Barlow]

@Shaquan Webster

@Jazlynn Gibbs I like this question. I have my single-family home on the market now in hopes to sell before winter. I plan on taking that cash renting through the winter and looking for an investment property in the spring. Would anyone take a look at my listing and give me thoughts. Should I take it off and wait till spring to sell? Or should I sell now and go along with my plan of throwing the cash in the bank. The property is listed on all the normal website Zillow etc. 221 Linden St. in Fall River MA. I appreciate any feedback!

I am hoping no recession but if so I plan on buying multi family so I can live in and rent out, is this a good plan? It’s my first time so any feedback is helpful as long as it’s done in a positive way!

[Will Gaston]

@Shaquan Webster how many trillions of opportunity cost dollars have been lost my people sitting on the sideline?

[Dennis M.]

You are a product of the decisions you made yesterday and unless you take action today it’s going to be the same for you tomorrow. Your going to sit around and watch the world pass you by because of fear ? Fear is not part of my business plan and I’d recommend it not be a part of yours either!

[Jackson Hulgan]

@Shaquan Webster

Buy conservatively and safely. If your plan is to wait until the market drops to invest then you’ll likely never invest.

[Amanda R. Barlow]

@Shaquan Webster

@Jazlynn Gibbs I like this question. I have my single-family home on the market now in hopes to sell before winter. I plan on taking that cash renting through the winter and looking for an investment property in the spring. Would anyone take a look at my listing and give me thoughts. Should I take it off and wait till spring to sell? Or should I sell now and go along with my plan of throwing the cash in the bank. The property is listed on all the normal website Zillow etc. 221 Linden St. in Fall River MA. I appreciate any feedback!

I am hoping no recession but if so I plan on buying multi family so I can live in and rent out, is this a good plan? It’s my first time so any feedback is helpful as long as it’s done in a positive way!

[Noah Mccurley]

@Shaquan Webster

In my opinion you should take action when you feel you are ready no matter the market because I know that if I was waiting for a recession i would keep waiting hoping prices would drop even more.

[Matt Millard]

@Will Gaston

To counter your argument, how many people didn’t repair for last recession or thought they did but still got wiped out?!?

[Will Gaston]

@Matt Millard there's nuance and wisdom required in every investment. But fortune favors the bold.

[Dennis Cosgrave]

I never looked at whether a recession is coming. I always looked at affordability. If prices/rents were rising much faster than incomes, it was just a matter of time before supply outstripped demand because so many people were forced out of the market. At that point, I would sell, keep my powder dry until the market corrected where prices were back in synch with incomes. 

[Alex G.]

>I want to invest in rental properties

Recession is going to boost the rental business by reducing the homeownership rate. In this cycle, on top of the usual hurdles, first-time homebuyers will face stiff competition from cash-rich institutional investors looking for higher ROI (e.g. ibuyers)

Take advantage of the U.S. becoming a nation of renters. 

[Brent Paul]

The recession didn't hurt my market at all.  If anything it made it nearly impossible for me to find a place to rent during that time.  Every single place I applied for I was told there were already over a dozen applicants.  Demand was huge and several apartment buildings were constructed during that time.

If you are buying cash flowing properties at a decent price it really shouldn't affect you too much.  Now if you are buying banking on huge appreciation then it could.  Everyone needs something to eat, and shelter. 

[Jeremy A.]

My 2 cents. Find biggest number  units under one roof( 10 plus ) in the best location for employers and fill them with diverse long term employed renters that work in different industries offer great rates and services. This will reduce risk of just 1-3 renters all loosing job at once if laid off. Diversification is key, not all retail, not all self employed, not all on disability etc. 

This is biggest risk to anyone esp if when recession hits on keeping current on your mortgage holding costs or payment. 

I just did this bought 13 units over 2 bld and spent $25k per door including repairs to 8 of 13 units.  Deals are all over. Even on mls. 

[Timothy Swenton]

@Shaquan Webster

Just don’t buy properties that have ridiculous rents that have sky rocketed too quick, or don’t do that yourself. I live in Maine. I can literally see the cities and towns that have grown too fast. I can see where the rent is beyond market rates. Hence why I buy where it is still below market. Also these areas are more easy to handle economic distress.

There’s good deals in bad or good markets, just find the right deal for you.

[Katie Magoun]

As always, it's a numbers game. If the numbers (and we always use conservative numbers in our analysis) work, then it's worth pursuing. If you're really concerned about a downturn, run the numbers again assuming a downturn. Are you still above water? If yes, then you can feel confident moving forward on the deal. As others have said, there may be shocks or adjustments to the market over the next few years, but over the long term, prices tend to rise. Yes, you should be prepared for those bumps and dips, but know that buy and hold investing is just that. Over the long term, you will see gains. 

Also keep in mind that recession impacts investment classes differently. For example, if you're investing in luxury rentals in a resort area then you might be more exposed to market corrections as the percentage of people who can afford your rentals shrinks. Conversely, if you're focused on working class (C/D level) modest rentals, then you might actually see a bump up in demand for your units as more people at the top of the rental market are forced to cut back on housing expenses and/or lose their homes. 

Overall, I think it's great that you're thinking about it carefully. Too many people dive in without as much thought and it never hurts to be more prepared rather than less. 

[Rodney Robinson]

@Shaquan WebsterThere are always deals available. There is always distress, even in economic growth. People always need to get rid of houses for personal reasons (Death, divorce, financial), some houses will always available that need significant repairs(roof, foundation, etc); therefore, opportunities are always available. Luck is where preparation meets opportunity. Take advantage of this time that you have to save $, research and analyze deals daily and make calls for off-market deals. I am doing the same. It will certainly pay off.

[Bart H.]

Originally posted by @Shaquan Webster:

Good Day Bigger Pockets Fam, 

I'm 24 years old. I currently own 1 property (that I live in) in Virginia Beach, Virginia. I;m new to Bigger Pockets and I'm new to real estate in general. I want to invest in rental properties that cash flow in this area. I've been doing a lot of research over the past couple months about real estate and more specifically rentals. With all this talk about the market being out of control with high prices and the upcoming recession, do you feel its best for me (as a "newbie") to wait until then? Should I just keep growing my knowledge and saving so that I can buy more when/if the recession hits?

P.S: If you're in the Virginia Beach area or anywhere in the 757, send me a message I'd love to connect with you!

Thank You

I wouldnt let an impending recession or anything else determine whether I bought or not.  IMO its the wrong question.

1) For one real estate prices have historically gone up over time.  If you are in a growing market, values will go up over time.  10 years from now almost whatever you buy will be worth more than it is now.

2) There are always deals in every market.  You wont know what a deal looks like unless you are looking.

IMO the question you should ask yourself is what is your criteria? What are your goals? Do you want capital appreciation? cash flow? SF? MF? condos? commercial? Industrial? Air B&B? Vacation rentals? flips? BRRR?....etc.

In our case we look for houses that we can BRRRR in neighborhoods near the path of progress. We target around the 1% rule, with a general goal of 10%+ or ROI as a rental, and positive cash flow after ALL expenses (capital, repairs, property management etc) and rehab is done. We look for a property that can be rented by middle to lower middle income individuals, ie for Dallas we try to target rents around or below 1,700-2,000.

We love properties with multiple exit strategies, ie can we rent, flip, rehab, tear down and rebuild etc etc.  If we can find one of those we would go a little higher.  Our strategy is to have long term amortizing loans that are paid off as we enter retirement.  In the future we will likely move to small multifamily or commercial properties.

Now we had been buying a couple of properties a year, but of late we havent found anything that meets our criteria, so we havent bought in a long time (for us).  So to some extent we are holding off buying because of a potential downturn, but not because we are worried about investing.  If we find something that meets our criteria, we would buy tomorrow.

If I was trying to get into the real estate game for the first time, and had a 10+ year time horizon, I would buy today and learn the business.