400k to invest.. Experienced investors say WAIT?

Question

Sold in NY, moved to Tampa, have 400k+ to invest. It's sitting in a money market account waiting for an opportunity. I've spoken to investors, mortgage and real estate brokers, etc. Almost all of them say to wait. Prices are coming down and the market is still inflated in Tampa area. What's the general sentiment here?

Also.. I had my heart set on condo/townhouse type properties as long term rentals. The majority of people have said to forget that and focus on single and multi units. When I think of owning another SF or MF property in addition to my own home, all I can think about is the amount of work I do in my house and the insane home owner's insurance rates here. In other words, the taxes on a condo are 1/2 or less than a house, no landscaping, no ridiculous insurance rates. They do have maintenance fees, but for the minimal fees, seems like a lot less aggravation. Thoughts?

Joe Villeneuve · Answer

OK.  Wait.  Wait for what?  Do you have a specific event, number, opportunity, etc...that you are waiting for?  If you don't, you'll be waiting for ever, for some "trigger" that, since you never defined what it was (specifically), it will never happen.

Define what you are waiting for, and when it happens, don't wait anymore.

Remember my tagline:  "The things that come to those who wait, are the things that are left behind, by those that got there first."

Simon Ashbaugh · Answer

I would only wait until you find a good deal. There's no reason to pass up good deals that will make you money just to wait for another good deal in a year..

Leo R. · Answer

@John Peter trying to time the market is notoriously difficult--and even the biggest "experts" in the world tend to get it wrong.

If a deal is a deal right now, then I'm going for it--regardless of what people think the market *might* do in the future...even if I think prices will drop in 6-12 months, if I find a deal today, I'm buying it today. Plus, I buy property to hold for 10-30+ years--in 20 years, I guarantee you I won't be worrying about whether I bought property A at 15% below the prices of 12 months before the purchase, or whether I bought property B at a five-year market peak, or whether property C was bought at 6.5% versus 6% interest. All I'll care about is the fact that the properties cashflowed, the tenants paid them off, they were (relatively) easy to manage, and they appreciated at a decent clip.

That's why I'm always looking for deals, and I'm always going after deals--regardless of speculations about the market.

Now, having said that--I do agree that there's a good chance prices will come down in the relatively near future (and already are coming down in some areas)...but, I just won't let that deter me from buying a deal today.  I bought a property recently, and I knew very well that I was probably buying at the peak of the market, but the property was a deal, it fit my needs, it's in a recession-resistant A-class area, and it's producing great returns--and my net worth and cashflow are better with the property than without it, so I don't really care what the short term market dynamics were when I bought it.

If you're still concerned about timing, you could spread out your $ over multiple purchases over time--basically DCA. Buy a deal now, then another in 12 months, then another in 12 months, etc.

...and I agree with what others have said--condo HOAs introduce too much risk and uncertainty into the mix for my taste. I rarely if ever hear investors who have had condos long-term who say "Oh, my HOA has been GREAT!", but I've heard countless stories from investors complaining about how their HOA is incompetent/doesn't fulfill their obligations/acts erratically/passes no-rent regulations that blow up the deal/does other stuff to make their investment not perform, etc., etc.

If there ARE any investors out there who have held condo investments for more than a few years, who have been happy with their HOAs and their investment returns, I'd be interested to hear those stories...

Taylor L. · Answer

I don't like condos for a few reasons.

- Associations can be fickle and can turn against investors in a heartbeat. Conversely, your unit can be negatively impacted by irresponsible owners who do not vet or manage their tenants and let them run wild (learned that one firsthand)

- Associations' ability to properly manage maintenance and finances can vary wildly as well. They can get too focused on short term savings & leave long term maintenance items unattended. The piper still needs to be paid!

- Condo values tend to fall much faster than other assets during down markets. Condo values also take the longest to recover during up markets.

If you're not ready to get into a deal, then don't get in. However, don't use the "waiting for an opportunity" mentality as a reason to sit back, to stop learning, and to stop evaluating deals. Most people who sit on the sidelines waiting for the market to correct are really just giving themselves an excuse to not put in the work.

Kristina Kuba · Answer

@John Peter

Here my thoughts: Tampa home prices have grown exponentially in the last 2 years. Will this break neck rate continue? Absolutely not. Are we seeing a softening market? Yes

Now it depends on what your goals are.

Overall, rent is stable and still increasing in some areas of Tampa. Here is a an article discussing Tampa rents - Florida, Tampa Bay rent prices on the rise while other big metros slow

STR (airbnb) - We are seeing a softening in occupancy levels and ADR (average daily rate) as the American confidence in the economy continues to decrease and we are entering a weird stalemate between inventory and interest rates. If you want to buy an Airbnb, make sure it will cash flow or break even as a LTR before you proceed. You don't want to buy an investment property solely based on STR projected income and not run your LTR numbers as a backstop.

LTR - Okay so let’s say there is a 10-15% correction. Are you keeping your rental for 7+ years? You won’t even feel it. Rents continue to rise (albeit at a smaller increase) and slower but steady appreciation is expected especially in Tampa proper (city of tampa limits). I would consider Tampa an appreciation market, not a cash flow market. Research into Gas Worx, the development will create a walkable neighborhood in Tampa’s urban core, providing for pedestrian and bike traffic as well as green space. The first phase is slated for 2024 and anticipates 510,500 square feet of office space and 140,200 square feet of retail space. Also dig deep into the $3.5 billion water street project, backed by Bill Gates.

I would stay away from condos and townhomes if your primary goal is a LTR or STR.  Two reasons:

1) Since there is such lax STR regulation, HOAs and condo associations in Tampa and Florida are coming down hard on STRs and they are also going a step further and putting a max percentage of units that can be rented long term to non primary occupied.  Also, some want detailed info and registration of your LTR tenant and for the homeowners association to approve them prior to placement.

2) If you are looking at the Tampa urban core, SFR appreciation heavily beats condo/ townhome appreciation over the last 5 years.  Tampa Bay is landlocked in 3 different directions by water, and lack of land is what keeps the Tampa market somewhat stable even while heading in a potential deep recession by next quarter.

You mentioned in your post that you have concerns about maintenance issues and costs.  To answer your question… interview a few agents and ask them if they own STRs and LTRs and who THEIR team is.  .  An investor friendly real estate agent will have a roldedex of people that are well priced and reliable.  For example on my properties my lawn guy is $25 a cut and all I do is text him and venmo him.  Same with power washing roof/ driveways for $200 once every 2 years to keep our rental fresh.  These are the contacts you need in your phone. It makes life super easy and takes only a few minutes a week for managing multiple properties.  If you have the right people in place, running a SFR or multiple properties will not be difficult.

Feel free to reach out if you have any questions. Best of Luck!

Jon A. · Answer

@John Peter I can't say definitively wait. But be careful. We could be at the height of the market, or the fed could drop rates in 2023 and the market picks back up. No one knows. So don't buy just to buy; make sure you're buying at a discount and are adding some value to create an equity buffer.

RE condos vs sfh, that's very market specific. In some markets, condos are more desired; in others, they sell at a discount. The HOA fees and taxes usually make it hard to condos to generate a good return unless you're the sponsor/developer. The HOA fees are basically property manager fees but often more than 10% of gross rent...Multi family is usually the way to go, as it's more efficient to have multiple apts with only one roof, one set of systems, etc.

Stephen Dispensa · Answer

Here is what you can control:

1. The price you buy at through negotiation

2. The condition of the property through renovation

Here is what you can't control:

1. Interest rates

2. The underlying market conditions.

The good news is, the current market offers the exact type of opportunities we should be looking for. Overpriced properties (that were initially priced and marketed when cap rates were lower) and rental rates that continue to rise. Now is the perfect time to be aggressively hunting multifamily deals. There's still plenty of room for value add.

The guys who are in the worst position to get burned right now are developers who started working on projects when money was cheaper and now are seeing loan issues on their refi's. But guess what? As they abandon projects or slow down progress, guess who needs work? Contractors. And if you can pay guys cash for quick apartment remodels, it's become easier to find that labor for less right now.

So what we're really seeing is a great environment to make deals happen. The whole trick is to make thoughtful offers that really show the seller what the property is actually worth. When you make a fair, educated offer to someone who's been sitting on the market for 90 days or more, chances are they entertain it.

Mark Munson · Answer

If you are trying to time the market to wait for the perfect time, then you will be waiting forever. Just run your numbers and buy at the right price. Look off-market if needed, as there are still deals out there. When it comes to condos, just be aware that condos can be deemed warrantable and non-warrantable, the latter limits the funding options available and can be harder to sell when the time comes.

Darius A. · Answer

Sounds like you have some relatively honest realtors. Look at the data, everything points to further deflation in the housing market. Massive slow down in sales and price cuts galore.

Housing is not like the stock market, it lags and the impact of rates takes quite some time to hit. Many experts are calling for housing prices to drop significantly in 2023.

Examples of price cuts in SW Florida.

Ismael Reyes · Answer

Definitely look into multifamily - either as a passive or active partner. Feel free to reach out if you have any questions about it.

400k to invest.. Experienced investors say WAIT?

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