Should we wait for prices to cool off before buying more rentals?

Question

I have been putting money away for when more inventory comes available. High prices and/or low inventory can't last forever, right?

What is your strategy to invest when the market is at a possible peak?

Will Gaston · Answer

Adding value and getting yield is possible in any market. It usually involves creativity and/or more management.

-STR instead of a LTR

-Student rentals instead of renting to families, professionals etc

-Section 8 or mobile homes instead of market rate

-Rent by the room instead of renting the entire house

Buy good deals in every market and you’ll be fine.

Russell Brazil · Answer

Months? 156 homes are 3 months on the market or more. Thats out of 3,392 home sales this year (SFH and Rowhouses). Even in hot markets, some people over price their homes.

And for perspective, in the last week 214 properties closed, and 215 went under contract, and 210 new active ones came to market. Absorption rate is pacing evenly with new inventory coming to market....which is still being measured in weeks, instead of months.

(Stats are for Washington DC proper)

Maxwell Ventura · Answer

@Jesse Whitacre

Over here in SD things are slowing down just a bit, but we're still in a majority sellers market. Supply & Demand usually tells the story. We're at 1.0 months supply of inventory, the rates are still low and move are still flocking to SD that are younger, richer, and more educated. 2/3rds of everyone coming here has a bachelors degree or higher now.

There is a ton of tech & life sciences that are making their way here because of the tens of thousands of jobs in these sectors we're creating over the next decade.

Jesse Whitacre · Answer

Andy,

Thanks for the perspective from the San Diego market!

Although we can't predict the market perfectly, we can use historical data and science to make educated guesses about the future of the market. According to the case shiller housing index, historically, markets in large cities, especially the west coast and NY have peak every 18 years on average. The last peak was 2007 which means that we are due for a correction between now and 2025. All the fed needs to do is start raising interest rates to slow the market down at this point.

Many realtors I know, especially in the Washington DC area say that the prices have peaked. I see local homes sitting on the market for months now as well.

One market in the US that seems to still be rising is Flordia such as Tampa Bay, Orlando and Miami.

Only time will tell the real story and as you said, good deals can be found in any market depending on the skill of the investor and agent.

Overall, I think most markets have peaked though.

Thanks again.

Chris Ehlert · Answer

No comment just read this article... https://www.bloomberg.com/grap...

Kris L. · Answer

@Jesse Whitacre

Tampa hasn’t exactly gotten cool, but it does seem to be losing a bit of momentum.  More price drops, more falling out of contract (I suspect because they don’t appraise at contract price).  It’s still hot, but not blast furnace hot now.

Heath Shepard · Answer

@Will Gaston great advice!  Thanks for the ideas.

Andy Eakes · Answer

@Jesse Whitacre

It will depend on your goals and strategy of choice. And while we can make assumptions and analyze data, there is no way to actually predict the future of the market. Anytime you try and predict the market to invest, rarely does it work out. I live in San Diego which has been one of America's hottest markets. We haven't seen any down turn at all for years until this last month. Is that a sign of something? No one knows. We do know though that the Fed is keeping rates low, and the inventory (at least in my market) remains low in comparison to the demand. This is why I always think it's best to hunt down good deals in any market. Don't get swooped up by the noise.

Kristina Kuba · Answer

Yes, the market is cooling.  Like others have said, it depends on the area and strategy.  Perhaps you could save 5% by waiting? but I always encourage people to look for add value properties.  Turning an LTR into a STR, making a larger 2 bedroom into a 3 bedroom or buying in an up and coming area.

Here in Tampa, the properties that I personally own and the ones I've helped investors around the Tampa core are doing insanely well as short term rentals. The delta variant and other states potentially locking down coupled with the midtown and water street development will further propel STR travel and keep prices robust.

Kristina Kuba

Keller Williams Tampa Central

Bruce Woodruff · Answer

Some (Mostly RE agents) will tell you that there is no bad time to buy, just look for deals....

But we are at a peak market now and it will surely go back to some semblance of sanity in the near future.. It almost has to. Ans sure there are always deals to be had, but you're leaving money on the table by buying now. Will the property appreciate eventually? Of course....but you still left money on the table.

Ultimately it depends on you and your comfort level....

Should we wait for prices to cool off before buying more rentals?

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