Market crash looming? Or will this market keep appreciating?

Question

I am looking to purchase my first rental property soon in Cincinnati.  I have two experienced investors (30+ years each) telling me to wait 1-3 years for a crash and then buy properties at more appropriate prices.  My thinking is that if I can purchase a rental that will return me 12% or more cash on cash, why should I care about paying a 10% premium in this market?  They usually answer this by saying they only buy properties with 30% returns or more and that they never overpay.  My worry is that if I listen to them and wait, I will be priced out of my home market within the next 1-3 years.  Thoughts?

Greg Scott · Answer

What evidence do they have that a crash will happen in the next 3 years?  I've heard that same argument regularly since about 2015.

If you can make 12%, who cares if there is a crash?  You can hold until property values go back up.

If you choose not to invest, not only do you lose the cash flow, but you also lose out on the tax benefits.  Also, instead of a crash, what seems to me to be the most likely scenario is inflation, which is already starting to happen.  Suppose the property prices remain flat but the price of everything else goes up, including rents.  How would you feel three years from now?

Forrest Williams · Answer

Say these investors are correct, and you wait 3 years to get into real estate so you can buy a property dirt cheap. Congratulations, it's 2024 and you can start making money.

On the flip side, say you buy one now which gives you a 12% return and set aside that money. In three years, you'll have an income producing property as well as money to buy a new one at those dirt cheap prices. Sounds way better to me.

In 2017 I was flipping my second house and asked a friend if he was ever going to get in on it. He told me his brother-in-law works for a financial firm, and their projection was a market crash in 2019, so he'll wait until then. 4 years and one pandemic later, he still doesn't have a place. I did four in that time. Don't wait.

Joe Villeneuve · Answer

Why does it have to be one or the other?...Crash or the same highs continuing?

Market crash looming? Or will this market keep appreciating?

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