Buying in a post-hot Market

I know this topic has been beaten like a dead horse over and over and over again, but I would like to have some input as well as tell you guys about my market.

I live in Montreal / Canada and the market here can be described as “post-hot” like it was posthot in the united states in 2006.

Sellers still think their properties are worth the moon and agents still think the market is “hot hot hot” and will never go down :rolleyes.

On to my question:

I am beginning to think about expanding into the buy-hold area of real estate. I wanted to know, is buying in today’s post hot market at 70% LTV as well as positive cashflowing 50-100$ / unit enough to waddle through the real estate slump?

The last thing I want to do is start buying a bunch of “steals” today and then find out my bargains that I invested money to buy today end up becoming break even properties 2-4 years from now.

What do you buy and holders suggest I should do in a post hot market?

To buy and hold at 70% is not very bad, can be alittle better though. But the 50-100 PCF sucks… You have no room for expenses, major repairs or vacancies.

Tien, Are you talking LTV or market value? Paying 70% of an overpriced house is a bad investment. If you can get 70% of market value and a $100/unit PCF, that sounds decent to me. Usually, any positive cashflow should be after everything is paid. Run the numbers to be sure.

I’m talking market value.

I’m just wondering what the strategy for buy and hold is for post hot markets.

If I buy something at 70% of market value and over the course of 4-5 years the market drops 20%, now I am in the property for 90% LTV. Did I make a good decision?

How much cashflow per unit should I be expecting to achieve in a post hot market to level out a correction in markets?

The nice thing about real estate is that it’s pretty stable. One way you can get into trouble is if you pay too much in the beginning and then need to sell or cash out when the market dips. If you buy at 70% of MV in a DOWN market, you should do OK. If the property’s income is paying for everything and giving you positive cashflow, don’t worry too much about the value. The property’s financials will determine the value. For example, if a property’s MV is $150k but the income & expenses only support a $80k mortgage, would you pay $150k? Not me. The point is that that a deal needs to make sense in good times and bad. To me, that’s the most important thing.