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

[Connie Tang]

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]

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.