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Now a good time to invest in rental investment properties?
I've finally put aside the capital to invest in my first property rental investment property. With interest rate hikes and inflation on the rise, I question if it even makes sense to make this kind of investment at this time. How will the direction of the real estate market coincide with renters? What am I thinking too much about and/or not enough about? Will rental income go down as the real estate market goes down? I know these are somewhat loaded questions, however this is what has had me scratching my head the past few months.
Thanks advance for any pointers/advice
Dollar cost averaging
Dollar real estate purchase averaging
I made that 2nd part up...but do you see where I'm going here?
Don’t wait to buy real estate. Buy real estate and wait.
If you’re looking to hold real estate for the long run then you should definitely jump in. In my market there are buying opportunities for fixer upper properties. The nice turn key homes that are remodeled are still selling relatively quickly and for good prices. Conversely the fixer uppers are being forced to cut their prices and in some cases drastically. These present you with great value add opportunities for you. You can buy the homes under value and rehab them to achieve higher values.
I’m in Metro Detroit.
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#4 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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#4 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Investor
- Austin, TX
Invest now, you will be kicking yourself in a few years. This is the greatest opportunity in years to buy under market value.
Doesn't matter about the direction of the real estate market as long as you are in a good deal!! A good deal means a growing area, paying a fair or lower price, good house condition, net positive deal, etc.
Interest rates have been stabilizing in the past month and we just got a better than we could ask for CPI print - will be interesting to hear what the FED has to say
I do not believe you can time the market but if you look at home prices in general for any given home or area of interest, over time, home value has appreciated. Real Estate is about being patient and you may have to buy and hold. I have been buying investment homes with the long term goal in mind and that is building equity over time and becoming financially independent within the next 10 years.
@Spencer Herrick - I think you live in Pittsburgh based on your location provided and if that is the case, there are some nice properties for rentals which I have found in my search near Pittsburgh, PA and Ohio boarder.
I am an out of state investor who started in Milwaukee Wisconsin and currently looking to grow to PA, OH, TX and NJ.
Can't really time the market. I believe now is the best time to invest.
Quote from @Spencer Herrick:
I've finally put aside the capital to invest in my first property rental investment property. With interest rate hikes and inflation on the rise, I question if it even makes sense to make this kind of investment at this time. How will the direction of the real estate market coincide with renters? What am I thinking too much about and/or not enough about? Will rental income go down as the real estate market goes down? I know these are somewhat loaded questions, however this is what has had me scratching my head the past few months.
Thanks advance for any pointers/advice
The rental market in Charlotte is fantastic. I'm a realtor and fellow investor. It's so great in fact when it comes time to move to a lake house on Lake Norman in Mooresville I will rent out my current home. I have a ton of equity from the market increase and years of owning and will just continue to get more equity while someone else pays my mortgage. Of course, the numbers need to make sense. What better way to invest in real estate than to have someone else pay your mortgage while your property continues to appreciate. If you can find something that needs some work than added bonus. I am also a realtor in the Charlotte metro area so if you plan to invest in Charlotte I can help. Just let me know. I hope this helps.
The best time was yesterday, the second best time is today.
Time in the market beats trying to time the market.
People will always need a place to live. The fact that buying is less appealing right now means more renters.
Who cares if the margins are slimmer? As long as it's a good deal and the numbers work out with appropriate cushion, don't overthink things.
Quote from @Spencer Herrick:
I've finally put aside the capital to invest in my first property rental investment property. With interest rate hikes and inflation on the rise, I question if it even makes sense to make this kind of investment at this time. How will the direction of the real estate market coincide with renters? What am I thinking too much about and/or not enough about? Will rental income go down as the real estate market goes down? I know these are somewhat loaded questions, however this is what has had me scratching my head the past few months.
Thanks advance for any pointers/advice
Normally when people think of inflation on the rise they think of having rentals as a good thing because they pace with inflation.
Rates are going up yes, but people have been buying for decades, centuries even, and I’d say that 3% interest rates were an aberration that contributed to sky high prices among other factors.
As they go up prices might eventually start to come down. You can’t time that, you won’t know, and if you do know you won’t tell. But you still don’t know, cause if you say you do, you’re lying to yourself and us.
People bought rentals when rates were way higher than they are now, and they still built wealth with them.
Why? How?
Because you don’t wait to buy real estate, you buy real estate and wait. Will Rogers said that. Ya boi.
anyway. These conversations miss the point. Never be in a state where you just are head in the sand not buying.
just always buy decent deals and run numbers for different scenarios in the future if they happen to you. If you have an adjustable rate, look at the numbers when it adjusts up. If you have a fixed look at the numbers if rents take a reasonable dip.
This is a math problem. Everything else is just getting out of your own way and trusting the process.
When the numbers don’t make sense you won’t be buying. When they do you will be. Right now they work less often and it’s harder to find a deal. Eventually (probably in the near future) they will work out more often. Tis the nature of a cyclical market my friend.
Hello @Spencer Herrick This business, like many others, always seems to lead us to think we missed the best opportunity ("if only I'd have bought something x months ago when the interest rates were lower"). I personally think that today is better than 6 months from now and would urge you to get involved now. If you are thinking interest rates will be lower in the future, get a loan with a without an early payoff penalty or with a shorter balloon period. You can refinance later at lower rates. All the best to you in your investing future!
#5 Market Trends & Data Contributor
- Investor
If you got X amount of funds to invest annually, outside of reserves/holds.
And you're capable of buying saying 3 houses a years. Always be looking because it's really illiquid and takes time to close. 1 house every 4 months, of course RE is hard to do that in exactly like an equity or a reit, but more or less you do that. That's not say if you buy 3 houses in 2 weeks the world is over, just make sure it's priced accordingly. If you bought all 3 intrinsically, and the house market crashes in the next 12 months who cares? You're still ITM. This purchase period every 4 months is more so a risk measure.
Love that mentality. At the end of the day it comes down to the numbers.
If we ask any RE Investor who has been in the game for 20+ years if they could buy houses right now at 2008 prices would they? The answer is yes. Hindsight is 20/20 of course, but fear of getting started, for fear of failure, will never allow an investor to flourish properly. Risk management is important, and there are many way to mitigate the risks, yet no way to eliminate it. Worry about what you can control, and don't emotionally invest yourself, be passionate but not fearful. The numbers never lie.
@V.G Jason
There is a very valid risk management point made here, and I find that to be a great idea. Instead of trying to time the market trend, time the market by investing in it at consistent intervals, giving you the largest spread, and the most protection. Interesting idea, thank you for sharing!
Spencer,
It's always time to buy a deal that makes money. If it makes dollars, it makes sense. The key is time IN the market, not TIMING the market. You'll be well ahead two years from now if you buy a money-maker today.
Start looking for deals. A big reason why I invest out of state is because there's markets that are still making money with the high rates.
Quote from @Anthony Angotti:
Quote from @Spencer Herrick:
I've finally put aside the capital to invest in my first property rental investment property. With interest rate hikes and inflation on the rise, I question if it even makes sense to make this kind of investment at this time. How will the direction of the real estate market coincide with renters? What am I thinking too much about and/or not enough about? Will rental income go down as the real estate market goes down? I know these are somewhat loaded questions, however this is what has had me scratching my head the past few months.
Thanks advance for any pointers/advice
Normally when people think of inflation on the rise they think of having rentals as a good thing because they pace with inflation.
Rates are going up yes, but people have been buying for decades, centuries even, and I’d say that 3% interest rates were an aberration that contributed to sky high prices among other factors.
As they go up prices might eventually start to come down. You can’t time that, you won’t know, and if you do know you won’t tell. But you still don’t know, cause if you say you do, you’re lying to yourself and us.
People bought rentals when rates were way higher than they are now, and they still built wealth with them.
Why? How?
Because you don’t wait to buy real estate, you buy real estate and wait. Will Rogers said that. Ya boi.
anyway. These conversations miss the point. Never be in a state where you just are head in the sand not buying.
just always buy decent deals and run numbers for different scenarios in the future if they happen to you. If you have an adjustable rate, look at the numbers when it adjusts up. If you have a fixed look at the numbers if rents take a reasonable dip.
This is a math problem. Everything else is just getting out of your own way and trusting the process.
When the numbers don’t make sense you won’t be buying. When they do you will be. Right now they work less often and it’s harder to find a deal. Eventually (probably in the near future) they will work out more often. Tis the nature of a cyclical market my friend.
Thanks for the info and words of encouragement!
Quote from @Jared Trindade:
Love that mentality. At the end of the day it comes down to the numbers.
If we ask any RE Investor who has been in the game for 20+ years if they could buy houses right now at 2008 prices would they? The answer is yes. Hindsight is 20/20 of course, but fear of getting started, for fear of failure, will never allow an investor to flourish properly. Risk management is important, and there are many way to mitigate the risks, yet no way to eliminate it. Worry about what you can control, and don't emotionally invest yourself, be passionate but not fearful. The numbers never lie.
@V.G Jason
There is a very valid risk management point made here, and I find that to be a great idea. Instead of trying to time the market trend, time the market by investing in it at consistent intervals, giving you the largest spread, and the most protection. Interesting idea, thank you for sharing!
VG Jason's method comes from dollar cost averaging for investing in the stock market, but I've also been seeing dollar cost purchasing being used as a term around here for buying properties. Interesting indeed!
Quote from @Spencer Herrick:
I've finally put aside the capital to invest in my first property rental investment property. With interest rate hikes and inflation on the rise, I question if it even makes sense to make this kind of investment at this time. How will the direction of the real estate market coincide with renters? What am I thinking too much about and/or not enough about? Will rental income go down as the real estate market goes down? I know these are somewhat loaded questions, however this is what has had me scratching my head the past few months.
Thanks advance for any pointers/advice
If you buy right, all the time is a good time to invest in real estate : )
The interest rates will have an effect on the price of the building. The bigger the MF the more the interest rates will affect this. Banks loan on DSCR which is directly linked to the NOI of the building.
As for your tenant base and whether the rents will go up and down. Are you buying A-class units in a tech-heavy district? I’d be more concerned with my residents being able to pay rent compared to a B class full of nurses.
Look around in your market but be in no hurry. But in your lowball offers, look for motivated sellers, use the market conditions to leverage your way into the best deal possible.
It's definitely a long way down from here.
The rental market is still fantastic in Charlotte NC. Right now is actually an excellent time to buy, Why? Because during the frenzy with low interest rates a lot of people bought over asking and got out bid constantly. The market has slowed down with somewhat higher rates (still historically low) and a lot of people are waiting. Take advantage while those people are waiting. Waiting for what? Rates will probably never be that low again. It's much easier to buy now. Your not out there clawing your way to see a house and running over a bunch of other buyers on the way only to be outbid and putting down outrageous amounts of due diligence. Now is the time to buy while sellers are more desperate and then go refinance once rates go back down. You can have your pick of anything out there now at a better price. No more bidding wars and crazy caos. Take advantage of the situation. I know I will.