Big dilemma - Buy at high prices now or wait for a correction

Multi-Family and Apartment Investing
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Big dilemma - Buy at high prices now or wait for a correction

Anna Sam
Investor · Jacksonville, FL · Member since 2008 · 61 posts · 12 votes

Hello BP friends

I am currently looking for smaller Multi family opportunities in a few states and for the most part seeing very high prices per unit. On the one hand I feel like its better to wait for a correction and on the other want to leverage best opportunities that are currently available at the current prices. 

It seems smart to wait for a correction but in these crazy times not sure how many more years to wait for it and lose precious time.

Its sometimes hard to find too many cash flowing properties at this time . Any of you in the same boat and wondering about it. Kindly share your thoughts. 

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Arn CenedellaPro Member
Rental Property Investor · Greenville, SC · Member since 2008 · 786 posts · 1k+ votes
4y

@Anna Sam

There is no answer to your question. 
It’s a matter of opinion. 

I am still a buyer for MF. Long term, the fundamentals are positive for real estate in general and MF in particular. Population is growing and there is a severe lack of housing in the US especially affordable. And honestly I see little or no way to solve this problem. 

Yes the market may hit some turbulence in the short term. 

Whether a market is at the top or at the bottom is only known 6 months after the fact. 

I’ve been investing in real estate since 1978 and I don’t begin to believe I can predict the market. 

I would suggest considering the following:

Time in the market is more important than timing the market. 

[email protected]650-575-6114
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  • Arn CenedellaPro Member
    Rental Property Investor · Greenville, SC · Member since 2008 · 786 posts · 1k+ votes
    4y

    @Anna Sam

    There is no answer to your question. 
    It’s a matter of opinion. 

    I am still a buyer for MF. Long term, the fundamentals are positive for real estate in general and MF in particular. Population is growing and there is a severe lack of housing in the US especially affordable. And honestly I see little or no way to solve this problem. 

    Yes the market may hit some turbulence in the short term. 

    Whether a market is at the top or at the bottom is only known 6 months after the fact. 

    I’ve been investing in real estate since 1978 and I don’t begin to believe I can predict the market. 

    I would suggest considering the following:

    Time in the market is more important than timing the market. 

    [email protected]650-575-6114
    8Reply
  • Nate Sanow
    I​nvestor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
    4y

    If waiting on a correction that wait could honestly be 10 years. A lot of indicators to say we will be going on this path for awhile. I wish you well on getting started. 

    3Reply
  • Zachary Inman
    Specialist · Indianapolis, IN · Member since 2021 · 312 posts · 282 votes
    4y

    Classic but true: "Time in the market beats timing the market."

    No one knows the future, no one knows what's going to happen. Get skin in the game but hedge your bets with strategies to weather a downside market. 

    7Reply
  • Jon KellyPro Member
    Investor · Bethlehem, PA · Member since 2016 · 929 posts · 951 votes
    4y

    @Anna Sam a deal is a deal. If you find a deal now then buy it. If/when a correction occurs and you find a deal, then buy that one too. 

    People sitting around waiting for a correction confuses me. How will you know when the bottom of the correction is? Don't you think the market will be flooded with investors/buyers if/when a correction occurs? 

    Set your parameters and go after deals. 

    1Reply
  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    4y

    @Anna Sam, while I agree with all the others, I will approach from another angle.

    What do you think is going to cause this correction you want to wait for?  Inflation? Interest rate rises? Decreased demand? Global pandemic? Administration change? 

    I don't have an answer for this, but I also don't think a big "correction" is going to occur.  I think values will come down in cap rates rising terms, but prices won't come down.  As this astronomical rent growth market we are in starts to normalize, buyers will price in rent growth like they currently are. 

    1Reply
  • Arn CenedellaPro Member
    Rental Property Investor · Greenville, SC · Member since 2008 · 786 posts · 1k+ votes
    4y

    @Anna Sam

    To piggy back a few other comments:

    If one buys real estate with proper leverage, ample cash reserves, and manages the property in a professional manner, LONG TERM the investor is almost certain to win barring a complete economic collapse. 

    If an economic collapse occurs, what do you think will happen to the stock market? It will certainly collapse too. 

    [email protected]650-575-6114
    1Reply
  • Mike Smith
    Boise, ID · Member since 2018 · 203 posts · 188 votes
    4y

    I agree with everyone else, but with a couple of caveats.

    "The market timing hall of fame is empty" is one of my favorite quotes.  You can't begin to predict the top or the bottom or the middle of the market.  However,

    "Irrational exuberance" is another of my favorite quotes.  People didn't make a mistake investing in the .com bubble due to market timing.  They made is mistake due to throwing away all normal investing fundamentals.  Companies with zero sales were trading at huge market caps and trillions were lost because of it.

    My advice would be to do your underwriting well and only invest if the deal makes sense.  It will be harder to find good deals in the current market conditions, but it is possible.  Just don't get drawn into a bad deal because "you can't go wrong with multi-family" in today's market.

    0Reply
  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    4y

    @Anna Sam I look at a few things in a deal. I want to feel like I would live in the property, not an emotional attachment but that it’s safe, clean, and maybe needs some cosmetic work but can be made to be nice enough to meet my standards. No slum properties in my portfolio.

    I look at cash flow. In my market if a property is cash flowing $200 or more per door after you’ve paid the mortgage and all the bills and put aside for your reserves it’s a pretty good deal.

    Then i loosely look at the cash on cash return. The higher this is the better the deal. Some people want like a 12-18% CoC return. I've gotten 15-16% on a couple of mine but mostly I'm around 10%. This mostly means you've got more cash in the deal than you should the lower the percentage is but the lender I use requires 25% down for investment property so it's hard to get around that.

    0Reply
  • Kyle Pillay
    Member since 2018 · 4 posts · 1 vote
    4y

    Yes I’m having the same issue as far as high prices. I just put in an offer on my first duplex. It doesn’t quite meet the 1% rule, but should still cash flow nicely. I’m in Florida and I don’t see much of a correction happening here. Seems like a high influx of people moving here and not enough new houses being built. Plus there a ton of people buying all cash. Of course, I could be wrong, but I didn’t want to wait on the sidelines too long. 

    0Reply
  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    4y

    Too many people are waiting for something. Sometimes a seller's market is actually a buyer's market. In the first three months of the pandemic, it was perceived a seller's market, but how well do you think those buyers did who bought two years ago. 20-30% more equity now most likely almost anywhere in the country, even if they paid high at the time. In hot areas, people are going to keep pushing the values up. Lifelong investors don't look at down times or up times, they are all investing times, it's just how you look at it and how much confidence you have in your target markets and your own eye.

    [email protected]Podcast Guest on Show BiggerPockets Daily 667: 5 Amazing Benefits Multifamily Investments Offer (That Single Family Homes Don’t) by Gino Barbaro
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    0Reply
  • J Zev J.
    CPA · Colorado Springs, CO · Member since 2016 · 413 posts · 258 votes
    4y

    What's the alternative if not investing now? It could be you could come up with alternatives (ie building capital some other way) which might make sense for your personal situation and risk profile. 

    0Reply
  • Maksu Ize
    Investor · Vancouver · Member since 2021 · 165 posts · 137 votes
    4y

    Some people have been waiting for a correction since 1960.

    Didn't work out for them

    0Reply
  • Shalini Kadaveru
    Investor · Northern California · Member since 2020 · 33 posts · 17 votes
    4y

    @Anna Sam, I would go back to your "why" for real estate investing. At this point in your life journey, are you looking to build wealth, or do you want to quit your job and rely on the cash flow from rental properties? Since you are looking at small multifamily, you are probably doing this as a side hustle as long as you are underwriting conservatively and ensure that the property cashflows, you will be ok. I have heard this from several industry experts that, unlike the 2008 crisis, this time around, the underwriting standards are high. I also fall into the camp that "Time in the market is better than timing the market."

    0Reply
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