To invest or not Invest? Another bubble?

Question

So i have been hearing alot of doom's day talk  from friends and news outlet that we are in another bubble due to the low interest rate set by the FEDs.  I am slightly concern with my current investment and how to protect it.

What are your thoughts regarding riding through a potential crash from the upcoming bubble?

What are some tips to protect your assets?

Anyone with experience before 2008 and after?

Franky Maslim · Answer

In my opinion, and please correct me if I'm wrong, a bubble affects flippers much more than buy-and-hold investors. Even if there's a bubble and it bursts, the rent will not go down as much as the house price would for flippers. You can still hold and ride out the wave until prices come back up.

So if you balance equity and leverage right (not overleveraged), you should be fine.

Joshua D. · Answer

@Jd Martin said it perfect. Real-estate is local.

Billings, MT did not go down at all in the last crash. Rents went up. More jobs came in and other than a slow 1% growth during 09 and 10 due to a few more foreclosures on the market, we are back to our steady 3-4% appreciation.

But here average house sales are 150-250k.  This is near the cost of construction and therefore I feel we are not in a crazy bubble.

I try to tell people in our area to look at properties that cost 70-110k and rent between $850- $1100. This is a great number to shoot for and if you do this you will be way less effected by market swings.

Now if you are looking at buying a 800k condo on the coast?!?and rent it for $2500!  you might want to question weather this is a good time to buy.  Bubble will pop... just a mater of when. could go up for 10 more years. or could be next week.

Have cash reserves... you could go broke in good times without being extra padded.

Just my thoughts

Roman M. · Answer

I don't care if it goes up or down. I get paid anyways  because I bought properties for their return. Numbers must make sense. If they don't then don't buy it.

Alan Grobmeier · Answer

I think it depends on what you are trying to do.  I think that leverage is bad right now.  Margins are thin due to higher prices.  But if you were to come in with 50 percent down or all cash, and you are going for a long term buy and hold, it doesn't really matter.

After all when was the best time to buy real estate?  20 years ago.  Second best time?  Today  ;-)

John Horner · Answer

I know folks holding cash for the market to dip, and some have been holding that cash for 9 months waiting.  How long to wait, and what if the decline is small and comes right back?  If you are buying right and rental rates are strong I think long term holds are still a great idea.

JD Martin · Answer

Buy low. Sell high. Keep cash reserves. Be ready to buy if your market collapses. All RE is local.

Account Closed · Answer

I've been pretty nervous about another housing crash since the beginning of 2016 (especially in the hot Portland, Oregon market).

However, the prices just keep going up. I feel like it's too hard to say whether we are in an actual bubble or not.

Things to consider:

* zero and near zero interest rates definitely helped fuel housing appreciation, if interest rates rise too quickly, that could have an impact on housing prices. But if they steadily rise, that may only slow the rate of appreciation but not squeeze it off totally.

* On the other hand, lending standards are currently still very strict - so it's not like the banks are just letting anyone who wants a house buy one...you have to meet income requirements, have a good downpayment, and good credit.

My thoughts are that these bubbly feelings we have are perhaps just the start of the actual bubble lead mostly by people with money and investors. If the president elect manages to cut regulation (Dodd-Frank) or makes it easier for banks to make money (loosen lending standards) then we could see another few years of house appreciation (more Americans have the means to enter the housing market) before the actual bubble pops.

I think a couple interesting data points to keep an eye on are:

tradingeconomics.com : home ownership rate + New Home Sales data show that we are far from a normal situation compared to the previous decades. Right now, supply and demand rules and the reason for dramatic housing price increases are typically because of a housing shortage coupled with very high demand.

That's my two cents about the whole thing.

Account Closed · Answer

It's never too late to invest in real estate and it always depends on your expectations.  I love many of these comments above and agree!  The real estate and economical market is ever evolving. You have to learn to ride the wave and know of "exit strategies" as well as the next best thing... Becoming well versed and well rounded in every part of real estate has it's benefits.  There's always a deal out there.

To invest or not Invest? Another bubble?

Most Popular Reply