Rookies Beware! We are at the top of the market cycle.

If you are new to real estate and are looking to get started, I want to offer you a word of caution.  Markets move in cycles and they fluctuate drastically from one cycle to the next.  Right now we seem to be at the top of the current cycle, so please keep in mind that the elevator doesn't go down until everyone gets on. 

I started investing in real estate in 2005 and bought a handful of deals over the following couple years, but it was difficult to find great deals at that time so it limited me in how many properties I was willing and able to buy.  I was eager to grow my business so it was frustrating that I couldn't find that many great deals.  Once the dam broke and the market collapsed, I stopped trying to buy anything and waited until the really good deals started to present themselves.  I jumped all in in 2011 when I quit my job because I was finding more great deals than I could handle while working full time.   At the time, people laughed at my move and thought I was crazy to quit a great corporate job in NYC to work from home doing real estate deals.  The big joke I heard over and over again when I told people I was a real estate investor was, "Oh, I'm sorry to hear that."   No one wanted to be in real estate at the time and that's what allowed me to purchase so many properties at 40-60 cents on the dollar.  People were being irrational, and the market dropped much more than it should have because in times of crisis, people don't always act rationally. 

Seven years and 100+ transactions later, the deals out there, once again don't seem rational to me.  As people don't act rationally during a crash, they also don't act rationally during a boom.  Everyone, right now, seems to want to get into real estate.  I was at the bank yesterday and the teller told me he just started flipping on the side.  The bar tender I was talking to this July 4th told me he was killing it flipping properties on the side as well.  This just doesn't add up.

Once again, I'm frustrated because I can't find good deals.  There are too many people bidding up the prices and there is no meat left on the bone.  About 12 months ago, I began selling most of the properties I purchased after the market crash because people are willing to pay more for them then the rent allows for.  This is a seller's market.  Do not let the "gurus" tell you that its a great time to get in.  Its not.  If you find a deal that is obviously worth doing, then go ahead and do it, but do not buy just for the sake of getting in the game right now.  You should be getting in the game when no one wants to be in it, not when it is hyped up.

I may be wrong, and I often am, but right now it appears that almost everyone is on the elevator.  Its possible that we may have a few more floors to go before everyone gets on, but when they do, its going down.  Be careful out there - safe investing.

Chris Lombardi