Good Time to Start REI??

Question

Hi everyone, I am an investor in Northern Virginia and looking to buy my first rental property. Due to prohibitive prices in my market, I am looking elsewhere in the Norfolk, VA area. My question is more broad.

I spoke with a few property managers who are also investors and they were of the opinion that now is NOT the best time to enter the market and look for a deal. I’m curious what other people think in terms of the general market (supply/demand) and also the factor of mortgage forbearance and renter assistance potentially coming to an end.

I’m more than a little excited to put my savings to work and get started in REI, but if this is a bad time to start it may be better to be patient...unfortunately.

Excited to hear everyone’s thoughts!

Marcus Auerbach · Answer

What's the alternative? Going back 10 years would certainly be great, but to my best knowledge not an option. Surprisingly housing is more affordable today than it was between 1990 and 2007 - google: housing affordability index. We are short on inventory, high on demand and the "wave of forclosures" we will see next year from forbearance will barley get our toes wet, do some math. More about 2021 on my YouTube channel. Predicting a housing crash is fantastic click bait, but when you study the data you see whats going on!

So yes, today is the best day to get started!

Jonathan Schweinefuss · Answer

Hey Andris, I'm in Northern VA also. Looking to buy a rental in Norfolk area. Did you end up getting a property there?

Dustin Morris · Answer

@Andris Linauts absolutely long term you have to be able to find deals where the numbers work and if you work hard enough you can do that in an up or down market. Good luck on getting started!

Andris Linauts · Answer

Thanks for all the input everyone! It's great to hear from several sources with different viewpoints. I personally think that because this is a long-term / retirement strategy for me with SFH rentals - as long as the number line up then it would make sense to jump in. The great thing that I've learned through the forum is that numbers are king.

Sean Rooks · Answer

In every cycle there is a strategy to match. For example it may be time to refi your personal home, or take out a HELOC. Also securing some buy-and-holds or BRRRR's with low financing would be good too. Its hard to predict where the market will go, but with BRRRR you are usually insulated and somewhat protected.

Josue Vargas · Answer

Not a good time for a first time investor, but who knows, keep looking.  Worst thing you may do is gain experience.  Just be careful analyzing the properties, there will always be more properties ahead.

Not sure, but in my area there are very few properties available.  It's a sellers market, may take few months to start seeing a more busy market.  Unfortunately, REI adjustments are typically slow, so it may take some time for the market to adjust (more properties/less demand/better options), but there is always good deals available, which tends to go very fast for the investors with cash.  Summertime looks more promising, I hope, with the news of the vaccine approval and more people willing to sell and move.  I definitely expect more movement in the comings months ahead.

Benjamin Whitney · Answer

Andries,

Congratulations on getting started on your REI journey! I am also a N. Virginia based investor who owns properties in the Hampton Roads area.

To your question of is now the right time to enter the market? I would say it really depends on what you are trying to do? Buy and hold, fix and flip, BRRRR, etc... I believe there are strategies and deals to be had for every market cycle, maybe it just might take more time to find them.

I find it is useful to talk to many people involved in REI in your area to get their opinions (and property managers are definitely a great source), but at the same time you need to formulate your own ones based off your own research. Have a look at the data related to vacancy, rents, collections in the Hampton Roads area, by in large the area has performed well. For my properties we have maintained 95+% occupancy and collection.

In terms of looking at mortgage forbearance going away, I would recommend looking at and underwriting deals where you are not factoring this into your strategy. While the forbearance may be being offered, it could make it harder down the line to secure loans as you look to grow your portfolio.

While these are certainly more uncertain times than normal, I still believe you can successfully underwrite deals. Something to think about; how big of a factor will a potential end to renter assistance be? If your property is in an area that rents heavily to govt/military (like some areas of Hampton Roads), then this may not be as big of a factor as these jobs are likely more secure. If it is a factor, and say for example much of the tenant base is in the service industry, then have this discussion with the seller and ensure the risk is reflected in your purchase price. Keep in mind the concerns you have buying, the seller likely also has in holding so may be more willing to negotiate on price.

Wish you all the best in your search, feel free to reach out or direct message me if you ever want to discuss REI more.

Good Time to Start REI??

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