We're back with an all new #InvestingTipTuesday here on the blog. Today, I want to talk about the conversation that many realtors have probably had, whether it comes up in casual conversations or at social gatherings and parties, and that conversation is: "How's the market doing?"
The answer to that question is often: "It depends." It depends on if you're buying or if you're selling, it depends on where you're at, and what you're looking to do. Often times when I get asked this question, it gets followed up with: "Is it a good time to buy an investment property?"
Once again, the answer is: "That depends," which makes it much more complicated to have a casual conversation about the real estate market, but let me explain why.
The reason why I got into real estate was because I wanted to work with real estate investors. I wanted to work with people who want to make money through the means of real estate ownership, build wealth, build a retirement portfolio, get passive income, get college tuition for their children--whatever the reason might be. That's what gets me out of bed in the morning and that's what I enjoy doing the most. To answer the question, "is it a good time to buy an investment property?", particularly for those who I'm having a conversation with who are just getting started in real estate investing, can be very complicated because it depends, and it depends largely on what those goals are for your real estate investing and your portfolio.
For example, if you take a snapshot in the real estate market (we're gonna say in New Hampshire, which is where I'm located), and say we're looking at multifamily properties under $1M... the amount of inventory available is very, very low, and properties that are going up for sale are typically trading with multiple offers and selling in a very quick fashion. Those that aren't are typically overpriced, and that has been leading it to be more of a seller's market. Now, does it make sense to buy in a seller's market? Yes, absolutely it can make sense to buy in a seller's market, but it's all about being smart, and making sure that when you're underwriting these deals, that you really go through and dig into the financials behind it and figure out what your long-term plan is.
Some folks that I work with want cash flow on day 1, and they want consistent cash flow throughout their property ownership. If they're planning on hanging onto the property for 15-20 years, their goals are going to be a whole lot different than somebody who is okay not making a whole lot up front, but plans on improving the property, and increasing their profitability within 6-12 months with the intent of maybe selling it in a couple of years. Those two scenarios are completely different, but if you're purchasing in the same market, then the answer to if you should buy, depends on which one of those scenarios you're doing and what properties are available.
These questions are not easy to answer, and unfortunately, I can't really share the answer concisely (as you can see), right here in this post. I'll say yes, you should. Is right now the time? Maybe, it depends on what you're looking to do, it depends on how much money you have, and it depends on where that money is currently sitting (whether it's in a bank account somewhere, in an IRA, etc.).
There are a lot of different considerations that really go into whether or not real estate investing makes sense right now. Step #1 should be setting the goals that you want to do and what you want to gain out of investing in real estate. Once you have identified those goals, that's when you can start answering the question, "does it make sense to start buying investment properties right now?"
And, as always, if you ever want to ask that question of me, be prepared for a whole lot more follow-up questions.