Analysis paralysis or smart?

[Tim Jones]

Hi, I'm looking to get some feedback from some experienced investors that have been working in the industry for at least a few market cycles.
I'm properly positioned to start investing. I have some cash, credit(HELOC), and financial education. I live in a tertiary market in California and prefer to invest locally.
My RE strategy would be buy-and-hold. I'm not against flipping but I feel the margins are very thin right now.
Everything I'm coming in contact with seems to point towards an impending recession. I read John Mauldin and listen to the BP podcasts. I'm hearing rumblings of downward price corrections in the South Bay Area.  The California State Controller, Betty Yee, spoke at a function recently. The State of Ca is anticipating a recession.
As much as I want to buy a property, I feel like we're near the top of a market cycle. I would really like to get myself in mortgage debt at these low rates before Quantitative Easing forces a run up in inflation.
The multi-year run-up in prices following the Great Recession has me thinking it might be a good time to offload my primary residence( bought in 09). That's what I did in 2005 and that seemed to work out well.
I know there's not a crystal ball out there but I'm curious as to what is a good strategy right now. Am I smart to wait for a recessionary period? California is already tough to even approach a 1% rule let alone the 2% rule.
Thank you for any and all input!
TJ

[Arlen Chou]

@Tim Jones the fear of investing exists at every point in the cycle, they are just different types of fear.  You just have to decide if you are capable of dealing with those fears and the worst case scenario in each part of the cycle.  I am personally a "generational investor" looking past the remainder of my life, so stabilization and appreciation are large parts of my strategy.  So I use the same strategy in acquisition of stocks, called "dollar cost averaging".  I don't believe that I ability to predict peaks and troughs in the market.  Frankly I am just not that smart!  I look for good products that I want to hold for a very long time and evaluate each for its intrinsic value.  If my evaluations are correct for each deal, I will have some deals that will turn into home runs, but others that will be singles or doubles. But as a total portfolio I should come out ahead.  There are deals still out there, they just have to be dug up.  You have taken the first critical steps of getting your finances inline.  That is the most important action you could have taken.  Now you are in a position to jump if you find a true deal.  I personally do not let macroeconomics out shadow my microeconomics analysis of a deal. Don't get me wrong, macroeconomics is very important, but the fact that we are near or at peak of the market does not stop me from looking or moving.

Regarding your question about off loading your primary residence, I don't know your market so it would be foolish of me to make any type of comment on a strategy for you. However, I can tell you that for my primary residence I pulled a first position HELOC and used those funds to buy a 6 plex in Oakland last year. My new rate is prime minus 1%! The property I purchased covers all of the costs for it AND my primary residence. Take it for a grain of salt, but Zillow is showing that my house has tripled in "potential" value since I bought it 14 years ago. Last year people were saying the same thing about being near or at the peak of the market, but I made the move because the deal made sense.

There are many who would say what it is crazy to put my primary under a HELOC to buy a rental. There are others who think it was brilliant to leverage my primary home to generate cash flow. At the end of the day, I made the move because I was comfortable with my macro and micro economic analysis along with my analysis of the deal itself and my overall cash flow.

I guess the point to my ramblings is that don't let the "sky is falling" herd mentality keep you hiding inside.  Get out there and look for the deals, and when you find it analyze the crap out of it and then make your decision.

Good hunting to you

-Arlen