Is Now a Good Time to Get Into Property Investing?

Question

Is timing really everything with real estate investment deals?

Sales of single-family homes are up from last year and prices are reaching new highs. With inventory depleting month after month & unable to keep up with demand, what does this mean for real estate investing?

While first-time buyers face difficulties entering the market, seasoned owners are snapping up second homes. When it comes to the importance of timing and making money, property investment is similar to other kinds of investing, however investing in real estate over stocks has different advantages.

The year 2021 holds its share of uncertainties, with the country and world grappling with what a post-COVID world might look like. It’s natural to ask how this particular time affects real estate investment. National rents are rising fast and that has has sparked a buying frenzy among investors, I would consider these four factors when deciding if now is a good time to get into property investing.

1) The health of the economy and how it relates to the housing market

The terrain looks promising for the real estate market in general. The one downside for investors is that with relatively low inventory, home sale prices are up. This puts a strain on affordability for investors looking to buy and create income either through renting or fixing and flipping. That said, with today’s low interest rates, it’s important to consider that your overall monthly debt payments may still allow you to make money on your real estate property investment.

2) Your personal financial situation and interest rates

If you’ll be using financing, take a look at interest rates when thinking about timing on property investment purchases. No matter which type of financing you choose, the lower your interest rate, the higher your potential return.

3) Property investing = location, location, location

There is no escaping the one ruling tenet of real estate — location :) Even with many U.S. jobs going remote, renters still want to live in homes that offer access to the things they find important and make their work and play lives easier. Among the considerations are (a) the accessibility of public transportation (b) the access to freeways for commuters (c) the walkability of the area and its nearness to cafes, restaurants, parks, and grocery stores.

4) Cash flow is king

Make sure you figure out the prospective property’s projected cash flow. Its not as simple as finding the difference between your mortgage or lender payment and the project rent. Run all the numbers, from property taxes to expected maintenance to know exactly how much you’ll make each month off the property.

That was my take, what factors would you consider before taking the plunge in the current market conditions ?

Alecia Loveless · Answer

@Polina Ryshakov I had a great time during y 20s and 30s. Unfortunately BiggerPockets wasn’t around then and now I’m trying to structure my retirement so I can have just as much fun later in life.

I’ve been investing in real estate this time around seriously and for the long term for 2 years. I got some great deals when I started 2 years ago. I’ve gotten some beautiful properties during the pandemic, I’ve just had to move quicker, be smarter, and be more patient since Covid started. I’ve still gotten some great deals.

I think it comes down to what your goals are and where you see yourself being in the next 1 year, 3 years, 5 years, 10 years.

My father saw great commercial opportunities in my home town and over a 20 year period bought about 25 pieces of property around the local university. As a high wage earner he paid off the mortgages and made great income from these properties. About 15 years ago his investment paid off when a large commercial endeavor came in and offered 10s of millions for his and other properties in the area. He had probably spent $600,000 total in 40 years on his property.

The best time to invest is now. I know I won’t make 10s of millions but my advice is to make a list of your goals and what you want to accomplish in life. It’s a flexible list, it grows and changes as you grow and change. Think of how you want your life to look and if it’s not unattainable you’ve probably set the bar too low. The sky’s the limit!

Then decide how to deploy your time, money, and resources to achieve these goals in a methodical manner. Make a plan, research and go start the steps to make your dreams real. Whether it’s stocks, real estate, or your own business you never know what the opportunity cost of starting 1,2,3 years in the future will be.

Joe Archbold · Answer

Polina,

That's a great question. perhaps the answer is yes and no for a lot of reasons. First of all, timing the market is pretty hard for sure. I think having resources or funds available for a timing play for the perfect property, (great location, clean, rentable, good access,etc) is always great if it works out. However, unless you are house-flipping, playing the long game will weather the ups and downs of the market. I certainly did not buy on the dip yet the market has been good. I also feel the sooner you have an investment working for you the better. Delay is just a non-decision. I recently had someone ask me the question, "What if I had invested during the pandemic?" And based on the media and the news you would think it was pretty bleak.  I am in Multifamily investing and the real answer is that it was just another season.  I did have challenges as everyone did. And yes there were some conversations about the rental moratorium. But I received 99.4% of my rents and have seen rents increase and vacancies go to 0. So jump on in the waters perfect. :)

Regards,

Joe

Sasha Fukuda · Answer

When it comes to questions like this, i'd apply the Bogleheads philosophy. It's a philosophy for stocks, but i think it's equally applicable to real estate.

1) The future is largely unknowable. There's no point in waiting on the sidelines for prices to come down because you don't know how much higher they'll rise or when they'll go down or how much. And while you have your money on the sidelines, your money isn't making you more money.

2) When one asset's overpriced, usually they all are. If you don't put your money in real estate, where will you put it? Will you put it in stocks which are at historical highs themselves? Or maybe bonds, which don't give you much of a return?

3) Time in the market is more important than timing the market. The longer you own a rental property, the more you will benefit from paying down the mortgage. The longer you own a rental property, the more you will benefit from inflation which will help appreciate the value of your home and allow you to raise rents over time even as the mortgage payment on your fixed rate mortgage stays the same.

Michael Plante · Answer

Today is good

Tomorrow is worse

Yesterday is best

Mel Grenier · Answer

Right on the money Joe!

Steve Vaughan · Answer

Timing in RE always comes down to our circumstances and the specific asset itself.  Is it a good value?  Is the location or asset type primed for growth?

RE is not an index fund where everyone is buying the same thing at the same price. Value matters more than timing.

Cash-flow is not always king.  As long as I'm buying below my market value target (say $43k per SFH equity capture at the buy) I'll make up the break-even cash-flow in other ways like lease optioning it.

The biggest advantage to buying RE other than leverage is buying below market value. That's king.

Peter Shafik · Answer

Great info guys! I think you're all spot on. I'm currently in the market trying to buy my first and refinancing my parent's primary. I had always used to worry if now was a good time or later, but decided to jump in. Now got a cashout refi coming one at 3.5 (160k but the monthly is higher) and another at 3.175 (130k but the monthly is lower). Now I hear of tapering in the market by the feds and central banks to happen as soon as mid-November. Had I waited...

Is Now a Good Time to Get Into Property Investing?

Is timing really everything with real estate investment deals?

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