Should I buy now or wait?

[Michael Furey]

I’m looking to buy a condo around Disney to put on air BnB. It’s no secret interest rates are so high right now but I wasn’t sure if they’re going to keep going higher or if they might come back down a bit. Should I buy something now or just wait a bit and see if prices fall further as well?

[Dan H.]

As is often the case, I am the contrarian. I am being very cautious on my purchases. Here is some of my thinking: 1) there is no guarantee that rates will any time soon approach the rates of a year ago. Today's rate (6.5% average) is low in historical terms and could be here to stay for quite a few years. 2) if the rates do not fall soon, property values are likely to decline further. Why buy today if prices are likely to be cheaper in 6 months? 3) the rates with the current average selling price places high LTV financed properties at an all-time high in terms of monthly payment. This is because prices have not fallen to compensate for the increased rate. So those that discuss going back to the feeding frenzy are referring to a frenzy that still resulted in a lower monthly payment than you would be paying today (there has never been in this country a higher monthly payment than today for high LTV purchase).

Many of the responders who advocate buy now have never not advocated buying.  Worse is many have a vested interest in the RE market having transactions (agents, lenders, etc.).

I recommend continuing to look, but to use cautious underwriting.  For example, my proforma is depicting a 10% near term price decline and no appreciation for 5 years.  I always want my pro forma to be cautious, but this is only the second time in the last 12 years that I was showing a price decline (the other time was the first couple/few of months of COVID).

If your conservative pro forma shows that the purchase is solid, then possibly proceed.  Note I have not purchased since Dec 2021 (I purchased $4M that month) which means that I am not finding stuff that satisfies my conservative underwriting.  Also look at the syndicators and the number of new offerings by the experienced, successful syndicators.  They also are not finding many purchases that meet their underwriting requirements.  I know of at least one with long, successful track record with a large presence on BP that indicated he is staying out of this market for the time being.  Some of these syndicators are the most experienced, successful RE investors anywhere.

Good luck