Investing in 2022 single family homes

[Thuy Phung]

Hi everyone, I am new to investing in real estate. Is it a bad time to start buying now With inflation going up, interest rate hikes, and it being a sellers market? Houses are selling fast so it’s hard to find a deal that’s 20% off and a seller cover closing cost. Should I hold off buying?

[Randall Alan]

I would say do what the numbers tell you. When I first started in real estate I set a line in the sand that said, " I want to make at least make $300/door for a financed deal to be "worth it" after PITI (Principal, Interest, Taxes, and Insurance), plus a maintenance reserve." Just starting out it is sometimes hard to know what a good deal looks like. If you make $100 a month positive cash flow, is it a good deal? What about negative cash flow? For me, those last two would be a "No". We have been lucky to find the occasional deal that give us $500-$800/month cash flow on a single family home, but most are closer to the $300/month on average. So run the numbers and follow what the math tells you.

Yes, getting in now is definitely more expensive, but I don’t see prices coming back down significantly in the near future, and no one really knows what will happen… so to some degree it is a crap shoot on timing.  I would say don’t buy just to get started, but rather wait for a deal that makes sense.  Owning a poor performing property is not how you want to get started.   For me, in the end it’s all about the math, because ultimately most of us in this business are doing it to make money.  There is also appreciation and mortgage pay-down  that comes into play, but for me it starts with monthly income.  The other two are bonuses!  

Don't just search the MLS… we have found some of our most profitable deals on Craigslist, believe it or not! Wholesalers are also a great place to look… even signs on the side of the road. Check them out, make sure they are legit, and always go through a title agency to close and you should be fine!

As for financing, you should be able to find a 30 year residential mortgage on a 1-4 unit property.  Just shop around.  15 years is ridiculous.  Commercial loans typically amortize a bit shorter… for us 20-25 years, with a rate that resets every 5 years, but I would recommend a mortgage brokerage company, versus a typical mainstream bank.  Smaller banks tend to be more flexible as well.

all the best

Randy