To wait out the seller's market or take a risk now?

Question

Hi All,

I would like to get some thoughts on the current market and what one should do as an investor. Curious about your opinions. From what I've experienced from the past few months and from discussions with friends and realtors across the US, it's clearly a seller's market. Inventory is extremely low and buyer demand is high. It seems to be the case all around the country, but where I live in MA, it's absolute insanity. The competition is so fierce all the open houses have queues, homes are being sold within days of listing, and offers have to be made at least 10k above asking in order to have a shot. Or you need to have cold hard cash, which I have some of, but clearly not enough to have any skin in the game.

Because of the market here in Boston, I am starting to look out-of-state (within 1 hour's drive) for more opportunities, but the competition is similar. Long story short...I really want to get into real estate investing (particularly buying a multi-family as a start), but all signs point to "No, don't do it!" Even my realtor in MA is saying that homes are selling at a premium and investing now is not a good time because I would be buying at top of the market. This all makes sense and there is truth in all that, but I just don't know how long I should wait. On one hand, I don't want to be stupid and start investing at the worst time ever and buy something during a seller's market, but on the other hand, I don't want to sit by the sidelines and let potential opportunities pass me by. I've read/watched/listened to many books/webinars/podcasts and a lot of them say that you can be successful in any market as long as you can find a good deal.

In your opinion, for a first-time investor, what are your personal, honest thoughts? Due to COVID, I've spent the past year working from home and saving enough money for a down payment, so I am extremely eager and motivated to put my money to work in real estate rather than letting it sit in my bank account and stocks. I have so much momentum after educating myself in real estate investing and joining BiggerPockets and I'm so afraid to lose it. Everyone around me is telling me to wait. Are they just naysayers or are they right? I'm so torn.

Any perspectives and thoughts on this dilemma would be greatly appreciated. I would love to hear your thoughts!

Thank you,

Connie

Russell Brazil · Answer

The sellers market in DC has lasted 12 years now. Im not sure where in MA you are, but the sellers market in Boston is about 8 or 9 years in.Im not sure about you, but Im only planning on living 80 or 85 years. So I dont have a decade or so to wait til a sellers market might end to start investing.Also, for perspective, lets say you bought a median priced property Dec 2007, the very height of the housing bubble with 20% down. You held that property til now, and it exactly matched up with the median price of property today, and your rent raises only went up with the inflation rate. Your IRR (internal rate of return) in that situation would have averaged 14%. So literally, if you bought a property at the worst month in history to every by a property, and held it til now, coincidentally, 14 years later, you would have averaged a 14% return yearly.

Jonathan Bombaci · Answer

Hi @Connie Tang I run a team of 16 investor focused agents in MA & NH and I currently own 74 units in the area. Your question is a good one and we get it all the time. The honest truth is I have no idea what the market is going to do in the next 3 weeks, 3 months, or 3 years, but over 30 years I would bet that property will be worth more than it is now. With inflation looming and the the market the way it has been over the last decade it’s anyone’s guess as to what happens in the short term. I’ve heard some people saying rents will be halved or double or only be payable through crypto. I don’t know what’s going to happen but We’re still buying properties ourselves, and helping plenty of clients buy property as well. That being said everything we’re buying, or help people buy, we have to have a plan to get it to cashflow within 12 months or it’s not the right property for us. Once the property is cash flowing and assuming we’re buying and holding long-term, to me, it really doesn’t matter what property value does in the short-term. There are still plenty of cash flowing properties for sale within 1 hour of Boston. I know because we have a bunch under contract and have offers in on a bunch more for clients this weekend. Best,Jon

David McMaster · Answer

@Connie TangThanks! You'll find something, just keep at it.

Connie Tang · Answer

Congrats @David McMaster! That’s amazing. I can’t wait to get started...just need to find a worthwhile deal. Haven’t seen anything worth investing in so far in my area, but I hope to find something soon.

David McMaster · Answer

@Connie TangI had the same questions and was also having a difficult time finding something to get going. I have just been keeping my mind open and networking as much as I can.I'm closing on my first triplex this week. It needs a ton of work, but should be nice when complete. I didn't believe it until I got into it, but there are deals out there. Keep your head up!

Ray Lin · Answer

The best time to buy is now. I purchased my primary residence during the housing crash in 2008. I paid at the highest point and felt like an idiot. I was in a rush to buy. The price was $500K. Today, my neighbor sold his house for $775. Your market maybe similar to my market, it will only go up.

Caleb Brown · Answer

There will never be a "perfect" time. Run numbers and buy in the right areas. REI is a long term investing game.

Connie Tang · Answer

Thank you, everyone! I appreciate your thoughts on this question!

De Rasche · Answer

i showed a property today to an investor that was $790,000. Looked at the property few years back for about $400,000 and 10 years ago for $250,000. If it is in a good spot, with jobs and safe, and it fits an exit strategy, best not to wait till a perfect time.

Theresa Harris · Answer

If you can find a place where the numbers makes sense, it is always a good time to buy.