Is Now a good time for first time investors?

Question

As things start to pick up and more properties are coming and going on the marketplace, is now a good time for new investors to jump in and get started?

Also what are some recommendations for strategies for first time investors?

Should they start with a fix & flip or a couple before buying anything Brrr or vice versa?

Any Input is appreciated!

Jaron Walling · Answer

Yes, it's always a good time. Actually it's a party. You're invited. Cheers.

Buckle up because this party is wild. Don't spend all your money.

Michael Dumler · Answer

@Christopher Wynn, specifically, it's always a good time to house hack if you are currently renting and paying for someone else's mortgage. While not an option for everyone, house hacking is by far the best strategy for newer investors to get into the real estate space.

David Ramirez · Answer

I think that for a first-time investor, as long as you're able to spot a good opportunity and make an informed decision based on your research and education, then it's always a good time to invest.

Michael Mannino II · Answer

Hi Chris! I would say yes, it is a great time for new real estate investors to get started. The market is cooling off and you can actually find better deals right now and you're not going in bidding wars on every single property. I can only speak in my experience, I started off fix and flipping. That's because I wanted quick cash and to not have a job. So I fix and flip a bunch until I saved up enough money and then I could start buying some rentals and doing the BRRRR strategy with those. That is my strategy and it really depends. If you have a ton of cash and you like your job, maybe you go straight to BRRRRing. Fix and flipping is a great way for quick cash and it's a high paying job. Let's connect and maybe I can help you more if you have other questions!

Nicholas L. · Answer

@Christopher Wynn

yes - house hack

Bjorn Ahlblad · Answer

Know your numbers! A deal is a deal and a dog is a dog. You have to know the difference or don't get involved!

Eliott Elias · Answer

Yes it is, make sure you are buying well below market value (30% under). Do not use 90 day old comps, hold more value on pending & under contract listings.

Chris Martin · Answer

Every post says yea. I am generally positive but I am also a realist.

I've only been in the real estate business for 37 years and full time for the last 22 years. So I only know what I know.

My answer is No. It is not a good time for new investors in Fayetteville. If you leverage, rates are high and carrying costs are high. Also prices are high, and there is distinct possibility that rents will be challenged (at best) in the next 24 months. And 'new' investors tend to not know what a 'deal' is vs. a dud. That's in general, not you specifically. That is reality. It's more than the PCR; it's about macroeconomics, economic viability and buyer perspective.

New home builder margins in 2022 were roughly double what they were two years ago but all national builders are seeing the same thing - new orders declining significantly. Pulte, from their last 10-K looking back on 2022 (highlight mine):

However, the strength of new home demand rapidly declined starting in the second quarter of 2022 as the Federal Reserve increased benchmark interest rates in response to inflation, which, in turn, drove national mortgage and other interest rates higher, impacting home affordability and consumer sentiment. These increases in interest rates, along with ongoing high inflation, waning consumer confidence, and other macroeconomic factors, have tempered new home demand in all of our markets. As a result, net new orders declined 27% for the year ended 2022 compared to 2021. This decline was concentrated in the back half of the year, with net new orders declining 28% and 41% in the third and fourth quarters, respectively, compared with the same periods in 2021. As a result, our order backlog in units decreased 32% from December 31, 2021 to December 31, 2022. In addition to lower new orders, our order cancellation rate also increased significantly in the second half of 2022, ending the year with a fourth quarter cancellation rate of 32% compared with 11% in the fourth quarter of 2021.

I could go on for a week. Builders are going to reduce prices by 10% to 15% at a minimum if Monthly Supply of New Houses in the United States (MSACSR) gets to decades normal. All indicators are pointing to that conclusion. And pricing for existing home sales will follow. I spent my career at the courthouse steps and will gladly wait 18 months or more to buy today's investor/buyer mistakes at significant discounts. I've done it before. For me, this is an easy call. It's all about patience. Similar to 2007 and the aftermath of the GR. Waiting costs me nothing. See also my post last week on 50% drop in housing prices possible!

My answer is wait. Research for yourself: how many hedge funds bought property in Fayetteville in the past 12 months? Let me know your answer.  It's 0.

In a parallel universe, it seems that overleveraged CRE on a regional basis is headed for a brick wall and apartment rents may retreat to keep margins positive for CRE entities. Foggy crystal ball at best, but uncertainty looms in my mind for sure. So, my answer is wait. Don't buy today.

Frank Patalano · Answer

HouseHacking is the best way to get started if you don't own a house yet.What you choose depend of your skills. If you are handy doing a flip is a great way to get started.

To say is now a good time, do you know how many people said that I was crazy to buy when I bought my first deal just over a decade ago. Someone on here said that it is always a good time. Others might say it is never a good time. Each opportunity needs to be independently review based on current data. If you are buying a rental make sure that it cashflow. If you are doing a flip make sure you have a comfortable spread between purchase and ARV minus repairs.

Dave Spooner · Answer

I'd say it's a great time right now!

Is Now a good time for first time investors?

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