How To Invest When You're Chasing the Market Up

[Bob Crane]

What a time to get the first deals locked in, Oy!

Short question - do you chase the bubble up at the beginning to keep investing or work harder for rare opportunities?

My plan was originally to acquire 3 single families per year for my first five year.  This year I've completed 1.  3 other deals looked great at first glance but the numbers didn't pass analysis.  The market went CRAZY in the last six months and each one of those either sold fast or is worth way more now.  Feeling like if I don't increase my risk I'm going to be sidelined for the next few years.  I'd love to hear from those who've been through hot markets - what have you done in the past and what's your plan today?

Deal 1 - 5 BR 2600 sq ft for $230k.  Needed lipstick.  Sold in March after 60 days on market.  Similar house same neighborhood with less SqFt just sold for $330k.

Deal 2 - 1/2 of a duplex (4br). Needed rehab. - 14 months on market FSBO $159k, seller wouldn't drop below $150k. Listed with realtor and sold for $168k in 3 days.

Deal 3 - 3/2 1200 sq ft SF - Need rehab.  $150k.  Couldn't make numbers work for more than $130k (which they wouldn't take).  Sold in 4 days.

[Anthony Vann]

I'm conservative and pretty new to the investing side of things but I'll give you a couple of things to think about. But this advice is probably only worth what you paid for it :)

The market in my area is heating up. The more experienced flippers are making a killing. They're confident in their numbers, they're finding great deals, and they are doing very well. But I am seeing more and more unfinished flips on our MLS. Another one just came on the market today as a matter of fact.

I wouldn't chase anything. If the numbers work, they work. If they don't, they don't. Make sure you've got accurate ARVs. That might be the only thing you need to adjust. All of the properties you just mentioned I would keep on my radar and see what they actually sell for once rehabbed. If they're being picked up by people who don't really know what they're doing then they might not be making that much on them at the end of the day. You can't compete with people who'll work for free.

In my area the flips where you can make 50k are snatched up by the pros before anyone else. The semipros are looking for the 20-30k range, and if you're just starting out than all that's left is something where you can make 10-15k. Everyone here has HGTV fever and people are coming out of the woodwork so the competition is fierce. 

But the people who have been in the game much longer than I have tell me that real estate is a marathon not a sprint. So just keep trying and you'll find the right properties.