Still buying or holding off for now?

Question

With all of that has gone on in the last 3 weeks, I am curious to know who is still pushing forward and continuing to look for deals and will still buy and how many of those that are going to sit back and wait for things to unfold.  And either way, why?  I feel like it's still ok to buy but need to be much more conservative on your underwriting, especially in Years 1 and 2.  Will capital be tougher to raise?

Greg Dickerson · Answer

My mentees and I are still going full steam ahead. Lot's of buyers are getting cold feet so it could be a good time to be the only seat at the table. On the flip side a few sellers have backed out of negotiations as well stating they want to wait a few weeks until things settle down.

Dan H. · Answer

I am holding off on any purchases.  About a month ago someone beat me out on a RE purchase and I was disappointed.  Today, I am not disappointed that I lost out on the purchase (but I am watching to see if it falls out of escrow).

I figure one of two things will happen with RE 1) prices fall due to loss of net worth, uncertainty, etc.  2) RE prices do not fall and RE continues to hold its value.  What I do not see is that RE prices will rise significantly.  So there is no significant upside to purchase now, but there is potentially an upside in waiting.

I likely will be extracting equity to increase my liquidity.  If RE prices fall, I will have additional liquidity to purchase.  If RE prices do not fall, I will attempt to place the liquidity into the stock market near its low.  It may help offset some of my large losses.

Greg Dickerson · Answer

It's actually easier right now and will continue to get easier with all the uncertainty in the markets. The more sophisticated investors are looking for safer more predictable yield and returns vs Stocks, Bonds and Commodities. I advised all my clients to go all cash the week before this all started. They also know this whole thing is short lived but know the markets will snap back but likely will not have much upside over all.

Alex Olson · Answer

@Kyle Mitchell I think having a slightly more conservative approach to buying and selling right now is acceptable. If there is a good deal, keep going after it, if there is a deal on the fence, wait and see. You may be able to get it for cheap(er). Will be an interesting 30-90 days and I think if anyone says they know what is going to happen, they are speculating.

Kent Ritter · Answer

@Kyle Mitchell still focusing on buying. Not panicking and staying active now will produce something good opportunities.

Investors should be considering asset class. Class C properties will be hit the hardest as hourly workers cope with reduced hours and struggle to make rent.  Class A and B with more salaried tenants will fare better.

Will G. · Answer

@Evan Polaski totally agree, this may very well be the start of m.m.t. which also is a brave new world of unchained money supply and money printing to infinity and beyond. Next stop...why pay taxes if money only needs printed from fed?

We can all be trillionairs!

Evan Polaski · Answer

@Kyle Mitchell still buying overall.  Actually not even changing underwriting standards, but that is because we were planning for a downturn for a few years now.  It makes it harder to find deals, yes, but you aren't caught with your pants down when it does happen. As for capital raising, it is coming up on more of my calls, but general sentiment seems to be that changing long term goals over a 3-6 month slow down is short sighted.  Additionally, when you look back at the hopefully deeper recession in 2009/10, multifamily was the top performing asset class (maybe self storage, but that was not a widely recognized investment class at the time, per my research).  And as @Greg Dickerson mentioned, with this type of volatility, money starts to flow towards hard/tangible assets: real estate, gold, silver, etc.

@Will G. I am curious why you think this is any worse than the great recession in 2009/10 that was truly real estate centered. The H1N1 pandemic hit in 2009 as well, and within 6 months markets came back 18% and up 35% in a year.  This was also happening during the housing crash and credit crunch that was occurring outside of the pandemic.

Will G. · Answer

Biggest financial event of our lifetimes! Giant, global, macro economic issues need to be dealt with right now, and if the giant credit bubble comes unglued, we could easily see r.e. values go to trend line. Serious deflationary pressures in place now, with gold, bitcoin, and next r.e. in jeopardy.

Todd Dexheimer · Answer

Good, cash flowing assets in Class A and B will be your best bets. Future projections are always set to be wrong if a recession happens, which is why you shouldn't count on inflation from the start.

Clint G. · Answer

I'm in the middle of buying a SFH in a booming TX town, and I will continue with the purchase. I'm being an optimist with regards to the energy industry here holding up during a downturn. Everyone will still needs gas, electricity, and steel. No cases of Covid-19 down here....yet.

If I was in another part of the country that was getting hit hard and had some shaky industry, then I'd definitely lose some sleep over making some decisions right now.

Still buying or holding off for now?

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