Do i buy now or wait?

Question

Hello everyone!

I'm excited to have finally joined the Bigger Pockets community! I live in RI and i was planning on purchasing my first multifamily property in January of this year considering i finally have 2 years of work history to show the bank. The dilemma i'm faced with is, do i still buy a multi family with the prices as high as they are today and take the cash flow loss on an owner occupied house or do i just wait for the prices to drop? Sorry if this is a no brainer, i'm new to the game! Give me a break! =D HAHA. Thanks!

Erik W. · Answer

Do I buy now when "prices are so high" or do I wait?

Great question: here's how you ALWAYS answer it -- Would you have bought Amazon shares when they were "way up" at $30?  Would you have bought Bitcoin when it was "way up" at $5,000 about a year ago?

*grins

We can't predict the future.  Prices do seem high now, and everyone is going nuts saying "the bubble is ready to pop!"

Guess what: people have been predicting a bubble pop for about 7 years now here on BP.  Hasn't happened yet.  People who were afraid have lost out ... a LOT!  That being said, it could pop tomorrow.  We simply do not know

Can prices go higher?  Well, sure....nothing stopping them.  Will you be kicking yourself in the tail 2 years from now when everything is 20% higher?

My rule is I buy when the deal makes sense.  Will rents support the operating expenses and debt service?  Are incomes and economic activity growing, stagnate, or fading?  Is the economy diversified or relying on a handful of super-big players who would tank everything if they moved out of town and/or demand for product X goes down?

It's not as simple as "prices are up."

Do your due diligence, then go forth and conquer!

Michael K Gallagher · Answer

Hey @Devin Ellinwood welcome to BP and congrats on jumping in!!  I am not too familiar with the RI market as I'm in central Ohio...However, this is a pretty common question I think everyone deals with.  As David Greene has said many times...trying to time the market is a fools errand.  No-one has a crystal ball and no-one can tell you what the market is going to do....if they try to they are either 1) full of SH*T or 2) they are really really high up in the FED and might actually know something so pay attention to them hahaha!  I kid I kid!

In all seriousness I tend to look at it this way...Real estate can get very competitive, as in "my deal did better than your deal" which is great and usually in good fun, but when starting out really try to focus on if the deal will make your specific situation better.  Will it get you closer to your goals?  will it improve your current situation?  If yes, then I'd say to go for it, of course assuming the numbers make sense.  You said "negative cash flow" I take this to mean that you would still need to pay some portion of the mortgage while you are living in your unit.  That is fairly common, that happened to me with my house hack.  The real question is what will things look like when you move out...if it does not cashflow then I'd say to look elsewhere...while there are reasons and ways to make that work it does not work for my goals.  It might work for yours though.

I say all that to say, don't buy into the "market dropping" or "market to the moon" hype.  If its a good deal, its a good deal in any market.  And even if you break even, and gain some experience...that could be worth it to you too.  A base hit for your first deal is not only ok...its incredible and you should be proud of that base hit.  Because guess what...99% of people don't even make it to the dugout.

Que Tran · Answer

Hi everyone!  I feel like, it is always a good time to buy.  You never want to just analyze a property to death and miss the boat on a good buy. I first bought about 15 years ago when the markets started to crash. Everyone was telling me to wait - even my husband was worried.  I didn't listen and bought anyways (these were single family homes in the $20k to $25k range) so I felt the risk was worth it. Fast forward to today, I've made mistakes, and had some bumps, but pushed through and still enjoying the rewards. Last year, I bought 4 (everyone told me don't do it).  Still making money :)

Jackson Babcock · Answer

@Devin Ellinwood

Make sure you are buying for positive cash flow and not appreciation. The market is hot but there are still deals to be found.  You can buy in all cycles of the market, just make sure the numbers work at the current time.  Buying for positive cash flow and not over leveraging is key.  Even if we go into a market downturn, you can still cash flow the property and wait for the market to come back.  As @Erik W. said, you don’t want to look back in two years wishing you had bought and the market is 20% higher.  We can’t predict the future, we can only evaluate what the current situation is.

Zachary H. · Answer

@Erik W.

Completely agree. Within the last two years a lot of people have said that the market is going to pop. As long as you have plenty of equity and buy in a decent area, you won’t have any problems. I never dreamed that an outdated 1,000 sqft houses in my area would go for $120/ft. But they’re selling like hot cakes. Thankful we were aggressive the last several years.

Thanks for the input!

Devin Ellinwood · Answer

Thanks so much @Michael K Gallagher I really appreciate the response and great advise that I will certainly be taking into consideration! I just need to go after it and start this journey of mine =D! Thanks again

Blake Park · Answer

You have to get started at some point why not now? There are always good deals out there. So do your research and join in on the fun.

Dillon Cook · Answer

@Devin Ellinwood

I hope I'm not repeating someone else here, but this boils down to where the economy is headed. But double check with a local agent on the area you're looking in.

Long term (10 years), I'm worried for our economy, but in the mid term (5 years or so), I don't see anything dropping in price. Three reasons - interest rates, inflation, and insane stimulus and spending.

I would guess you're best off finding a duplex you can afford now.

Jeffrey Donis · Answer

Welcome @Devin Ellinwood.  I agree with @Michael K Gallagher. Make sure doing the deal is justified based on what it does for you. If it helps you reach your financial goals, and outweighs the cons of doing the deal, then do it. Waiting in real estate can become indefinite, or so I've heard.

Devin Ellinwood · Answer

Thanks everyone for the great responses! You guys are a very big help!

Do i buy now or wait?

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