This is Not the Real Estate Environment for Rookie Investors

[Kevin Hill]

I don't want to announce the sky is falling and be a Debbie Downer, but in my opinion, now is NOT the time to be investing in real estate for rookie investors, especially flips. I keep seeing a lot of posts from newbie investors about investing in their first deal and I'm worried for them. I am in North Jersey (Bergen County) and this is what I am seeing in my area.

COVID-19 has only decreased available housing inventory during the pandemic causing a spike to home prices and demand. I keep reading about the residents who want to escape from New York City and New Jersey is one destination for them. Houses are routinely gone within a week now with multiple offers at full or over the list price. This is not a good time for an investor (especially one without experiences in different economic cycles). This is not sustainable with the high rate of unemployment, mortgage delinquencies, homeowners going into forbearance, Sheriff foreclosure sales currently on hold to at least October now, increased requirements for mortgage qualifications, small businesses going out of business, and a likelihood that children will be at home again in the fall for distance learning, restricting parents' ability to work.

Overpaying for the property, delays in securing contractors/finishing the renovation, towns slow in completing Certificate of Occupancy/permit inspections, delays on getting the title work done, etc in a market that could turn on a dime is a recipe for disaster. Yout can't do a BRRR strategy if you don't have any equity after the flip is complete.

Be very careful out there. Get a mentor, hire an agent who is really looking out for you and not just trying to close a sale, and be patient. The great deals will be coming once we enter into a down cycle. Real estate is cyclical and cycles typically run 7-10 years and we are at about year 9 in North Jersey. Down cycles don't last as long, so pile your cash and be ready to strike when the good buying opportunities are here again!

[James Hamling]

@Kevin Hill I completely agree with and appreciate where your coming from in your message, but I disagree completely with your summary. 

I was investing in 2009,10,11... Now people say "oh man those were the days, wow that was a great time to invest" yeah NOW people say that but in 2010-12 all I heard from people was how horrible it was to be investing, the worst time ever, that I needed to wait for the market to "get back to normal" and all the fear speak that your saying and so many others are saying right now just like back then. 

Fact is a shifting market is the magic hour for innovators, it's when we bloom and success is like a rocket ship. For those who got used to how things were, dare I say a bit lazy on things, yeah this would be a rather big disruption and I wouldn't like that either. 

And just like back then, their is no "getting back to normal", there will be a new normal, and new market leaders. It's what happens when paradigms shift, and they are shifting. 

Working with Pro's is a good hedge BUT those "Pro's"(myself included) can only preach from what we know which comes from what we did, as in past tense, market past tense, and our best advice may be the wrong thing for the future market. When I started flipping, doing redemption's, doing various strategies, I was coloring outside the lines, there was no check list, I was writing the map as I went, it took a lot of guts and some smart's. 

So yeah, not easy for people to start but let's be honest it never is easy, but now it's a bit easier for that innovator and harder for the "franchisee" mindset.