16 Nov Should I Wait for Prices to Come Down Before I Buy an Investment Property?
What you focus on expands. If you believe that buying real estate now is foolish, you’ll look for reasons to support that belief. If you perceive that money and great deals are easy to find, you’ll keep looking and be pleasantly surprised at what comes across your desk.
There are people saying that a real estate crash is coming and you should wait to buy. After all, housing values went up fast, and now that mortgage interest rates have gone up throughout most of 2022 housing prices are falling in some markets. The reasoning is that you could time the market and buy real estate from a distressed seller for pennies on the dollar.
Others state that housing values are going to continue to go up, albeit more slowly than the past two years. If you buy something now and allow some time to pass, the value of your property will only go up. If you play the long game, you’re going to win.
There are other people saying that deals are everywhere if you would only look hard enough. They say that you can find a deal in any market. Furthermore, how you structure a deal matters. For example, the price a seller is willing to take on a property might not work out for a house flipper, but it might be just right for a landlord looking to rent the place.
What’s the truth? The truth is that you can indeed prosper in real estate in any market. The truth is that it is difficult to time the market consistently, if at all. The truth is that the most successful real estate investors are versatile and creative with their deal-making. The truth is that top investors adjust their strategies as needed. For example, a successful house flipper in a rising market may shift to acquiring rental properties in a declining market.
Many markets are highly efficient. The stock market is efficient in that three buyers in three separate parts of the country can purchase Apple stock at the exact same second and pay the same price per share. The commodity markets, the currency exchanges, the bond markets, and the cryptocurrency markets are all highly efficient.
Real estate is far from being an efficient market. You can have three houses with the same layout and square footage on the same block sell for vastly different prices. One could be a pristine, modern home that sells for top dollar. One could be an estate that sells for 20% less. One could be a foreclosure and sell 40% below the modern home’s price. If you’re persistent and resourceful, you can find great deals.
Some investors state that interest rates are too high, so they don’t want to invest at this time. Yet here are reasons how an investor can prosper in a higher-rate environment:
- More sellers will be open to negotiating a reduced price. You can buy something for less than you might have paid earlier this year.
- Subject-to transactions mean that you can take over the payments for a seller’s lower-interest rate mortgage. If a seller has a fixed loan at 4% and your bank tells you that your interest rate would be 8%, then perhaps you could craft a subject=to deal. Read our blog on subject-to transactions.
- Fewer buyers and investors means less competition. You’ll have more time to evaluate properties, as there will be far fewer multiple-offer scenarios the day a house is listed. You won’t have to bid up your purchase price to have a chance of your offer being accepted.
- You won’t have to waive a home inspection. In a competitive market, many buyers choose to forego inspections, which increases the risk for the buyer and reduces the ability to negotiate further. With less competition, you can elect inspections in your offer, giving you the ability to know more about what you’re buying and perhaps negotiate an even better deal.
- More renters in the market. As some well-qualified buyers drop out of the market because of higher interest rates, they choose to rent. That means landlords will have more potential tenants to choose from.
Questions are the answer. You can certainly ask yourself, “Should I wait to buy real estate? (In the hopes that prices and interest rates come down even more.)” A better question is, “How can I find a great deal now?”
Here are some other great questions:
“Who do I need to know?”
“Where can I find the money I need at the lowest possible cost?”
“How can I structure a deal to maximize the profit?”
“How can I afford to buy this great deal I found?”
“What value can I offer others to get them to engage in win-win business relationships with me?”
“What is the hidden opportunity in front of me?”
“What training do I need to improve my skills?”
“I can see the cost of buying an investment property now. What is the cost in 5 years of not buying any investment properties at all?”
I know someone who came to me five years ago and said they wanted to invest in real estate. They asked lots of questions and asked me to help them find a deal. Despite introducing them to a variety of properties that I thought were a deal for a new landlord, they wanted to wait for a better deal and a lower interest rate. They said they preferred to continue investing in cryptocurrency because that’s where they felt safe and knowledgeable. All that is fine. You’re free to do what you want with your hard-earned money. However, had they bought just one 3-unit building for $200,000, today that property would have been worth around $300,000. Also, they would have enjoyed five years of rental income and five years of the tenants paying down their low interest mortgage. As for their forays in crypto investing, I hope they made a lot of money and cashed out a good chunk of it.
The money, the knowledge, the skills, the people, the resources, and the deals are out there. Go find them!
Tai DeSa is a graduate of The Wharton School of the University of Pennsylvania. He became a full-time real estate investor in 2004 after serving in the U.S. Navy. Tai has made colossal mistakes in investing (and learned some things along the way). He has helped hundreds of homeowners avoid foreclosure through successful short sales. Check out Tai’s books on Amazon.com. Tai may be available for coaching and speaking engagements on a variety of real estate topics. Send an email to tai@investandtransform.com.
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