Buy a REI now or hold?

Question

Good day folks,

I understand no one has a crystal ball but wanted to start a discussion on this.

I would like to buy another rental property in Austin (Leander, Pflug, G'town, etc.) and wondering if I should wait  a few more months? I am currently looking at new constructions that could get me a $150 monthly cash flow (after removing PITI + listing fees), but wondering if prices may dip further.

To those posters here whobought REI in Austin during the last downturn (2009'ish), how long after the "crash" did the new reality prices start to reflect? 3 mo? 12 mo?

Joe Scaparra · Answer

@Vikram Jayaram, Hi, I may not be the best person to ask based on new construction. I do own a total of 19 units, 10 of which are located in the Austin MSA.  The question should I wait or not is a very subjective question, so I will give you my thoughts.  If this crisis is over in 6 to 8 weeks, I think it will have very little short term impact on real estate in Austin.  If on the other hand it continues 6 more months or more then, new construction will be hit the hardest first.  Better prices will be had in the short term should this crisis persist.

Austin, is poised to weather this storm better than most other areas.  I think regardless of how long this crisis go, the real estate market in Austin, will recovery quickly.  As an investor, run your numbers and if you can find a deal that meets or exceed your projections needed then go for it.  Timing the exact bottom or top is damm near impossible and probably not necessary for you to succeed.  Deals abound in all market conditions, you just gotta keep searching for a good deal.......they are out there now!

Good luck and cheers.

Dan Burstain · Answer

Now is a great time to buy new construction and here is why.  The incentives are out there as builders are willing to make a deal.  Second, they have lowered their deposit requests.  Third, you could get a property that has just broken ground and is 6 months from being finished.  You put $1000 down and watch as this craziness ends in a month or four and Austin will, as many have stated, bounce back very quickly if it dips at all.  Then you will be seeing tens of thousands in equity already with your $1000 investment.  Lots of great new construction out there.  PM me if you would like me to send you some great opportunities.

Joe Scaparra · Answer

@Vikram Jayaram Again not the guy to talk new construction.  All my investment property buys have been existing, usually built in the 80s.  I find better value than buying new.  Most new construction exist from development of subdivisions.  IF this crisis is effectively over in 6-8 weeks then I don't see much of an advantage buying new construction.  However if it is going longer 6 months to a year then developers will begin to feel the pinch of cash flow.  If three months from now, the end is not in sight (still relative short term) then you might be able to get better deals on new construction.

Where I think you might find better value is in existing properties.  Far more likely to find individuals who are not prepared for this strain on cash flow and those individuals that over-stretch financially and are beginning to feel the pangs of being a landlord.  But you seem to be not have the desire to invest in older properties.  To each their own.  How you find new construction, with the cost of property management  and expect to cash flow $100 positive in Austin might be possible, its just to razor thin for me, if it can be found.   Even new construction can have maintenance issues, tenant vacancy, unexpected tenant issues.  Again, my eyes might be opened, but I have not concentrated on buying new properties.   Good luck.

Jordan Moorhead · Answer

@Joe Scaparrai I agree with Joe. It really depends how long the crisis lasts. That being said I am looking for a duplex in Austin right now and a MHP in Texas at the moment and will buy.

Vik J. · Answer

Thanks Joe! I have 2 follow-up questions to your post:

1. What did you mean by "Better prices will be had in the short term should this crisis persist" - I thought better deals (for new constructions) would be had in the longer term if the crisis continues (consumer confidence falls) as they have several constructed houses on the lots and need to sell quickly?

2. "As an investor, run your numbers and if you can find a deal that meets or exceed your projections needed then go for it." - Given that it's Austin - an area that poised to grow, a good investment for me is something where cash flow is $100+ after PITI + listing fees + 1mo vacancy. Does that sound fair? I like to buy new constructions as I don't have the bandwidth for BRRR projects.

Vik J. · Answer

Title of this thread may have been confusing - I meant to say "buy an REI now or hold off till later" (*wait for a few more months)

Buy a REI now or hold?

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