Buying Rentals in an Uncertain Market

[Joe Blakley]

Last week I pulled the plug on the purchase of a fourplex during inspection because the numbers weren't going to work out if the RE market dropped much and the property needed rehab the owner didn't want to deduct for.  (I dropped the offer substantially) Then I decided to wait a bit and watch the market a few months and "buy low" later. 

Fast forward to yesterday and a better deal just fell into my lap. Better looking numbers, nicer unit, lower purchase price, etc. But in a "C" town nearby for sure instead of "B". 

In my local market (Eastern Idaho) its tough to find 1% rental property most of the time, but this one actually meets the criteria. 

My only hesitation is tying up cash now on deals if the deals are going to look much better in the coming months /years with the economic uncertainty. If values drop and rents actually need to drop in the coming months this deal goes from great to bearable... 

I watch the forums and keep the pulse of the industry as well as I can. I see 3 schools of thought here:

1. Realtors of the group are still singing praises and telling everyone to buy. 

2. The savvy and well capitalized investors are starting to smell blood in the water and are waiting for the feeding frenzy. 

3. Many are in between, hoping to weather the storm and come out without losing everything they've worked hard to build. 

I'd love to see what the general consensus is. Where do you fit in these three categories and what are you doing right now in the current market? Would you take a good deal now or wait until it gets better. I realize some have nearly unlimited amounts of cash and will take every good deal that comes along, but for the rest of us who need to be careful about our purchases what are your thoughts?

Thanks! 

[Joe Blakley]

Thanks for the replies Jace and Don.  Good to hear from a couple of like minded guys from E. Idaho.  Just wanted to update you both since you took the time to post.  I offered asking on the property since it met the 1% rule and I could cover some missing or reduced rents no problem if we had issues with payments due to Corona Virus. (Which I DO anticipate)  Seller had 4 offers, and countered at $35K over asking. I only upped my offer a few thousand dollars and they took another offer.  Not heart broken to miss a normally good deal this week!  I'm anticipating much better deals coming by in the next months/years.  This is almost an identical scenario to the one I had with the four-plex earlier in the month, except that I was ready to pay the 30K over asking price until the financial markets started to tank!   Good for the sellers right now being able to still get reasonable offers while they can in this market!  I'm just not ready to pay pre-recession prices while we're staring off the edge of a potential cliff in the RE markets.  After those two deals, I think I owe my realtor and his wife a gift card for a steak dinner!