I’m new and haven’t bought any properties yet. Probably ready to beginning of 2007. Question is in regards to the real estate market. It’s slow and a buyers market right now… but will it actually get slower for a while? What are your predictions.
A few people I have talked to have said wait until 2007 and early 2008. That will be the time to buy.
Do most of you agree, why or why not?
Obviously, if there’s a deal good enough to jump on right, now it’s good to do so. One thing I’ve noticed so far is that in the Mpls market, Cap rates (when including a realistic expense of 40-45%) are closer to 3-5% rather than 10-12%.
It seems like most people who advertise CASHFLOW CASHFLOW CASHFLOW, seem to think if the rent is more than the mortgage payment, it cashflows. (At the same time reporting expenses of 5-10%).
For someone who has yet to do a deal, you seem to have broken the code. You understand the expenses and you understand the macro market.
I wholeheartedly agree that the market will not hit bottom until early 2008. I have been saying this for about 2 years. This was and is entirely predictable and history is repeating itself once again. Once the market bottoms out in early 2008, it will take another 8 to 10 years to reach the previous highs (adjusted for inflation).
I think that this is a TERRIBLE time to be flipping in most markets. This is a good and improving market for rentals.
Are you basing the trends off the historical swings, or are you also expecting additional foreclosures, etc., due to the over-extension of equity through loans the last 5 years?
By the way, I’ve read about 100 of your posts. You’ve got a real world look at real estate which is refreshing. I imagine you’ve read a book or two by Thomas Lucier. You seem to come from the same perspective.
Yes, I am basing my prediction entirely on historical trends, and yes I am expecting a LOT of additional foreclosures due to the loose lending practices and abuse of ARMS, negative amortization loans, etc.
I have never heard of Thomas Lucier. My perspective comes from actually being in business for many years.
Our market here in Michigan is terrible, we have the 2nd or 3rd highest incidence in all of the US for people leaving to other states for jobs. Our prices are declining daily it seems. I remember when our market was hot we had roughly 130 multifamilies on the market, now we have over 600. I think we have over 26,000 foreclosures (I heard this on a governor commercial).
I dont think it is necessarily a bad time to buy though, you can still flip, wholesale and assign fairly well here if you buy right. From what I have experienced if the market is down 15% here, then I can buy for 15% or more under where homes would be if the market was great, and later I can afford to sell for 15% under market value. Just 2 days ago I picked up a home that during our good market was selling for around $70k, I got it for $30,500, and put it under contract yesterday for $41k. If your market is declining really fast it may be a better time to stick with wholesale deals like the one above, simply because you dont hold the property long enough to experience the market decline.
When are market here was great the problem that I was seeing is that too many uneducated investors came out of the woodwork, and bid the homes up so high that the profits were barely there. If your market is fairly small it only take 2-5 idiots with money to screw up a substantial amount of what could have been good deals.
Meanwhile all of those investors as well as the investors that I used to look up to and learn from, are saying that they are waiting until the market straightens out to buy. I believe if you buy low, you can sell low, it is no different then when the market straightens out, then you will be buying higher, and selling higher, and you will have alot more competition. The way I see it, if there is still just one investor in my market making money in real estate then I can too. Until I hear that the last investor in my market has stopped making money in real estate I am going to keep rolling whether the market is good or bad.
Eric Medemar
p.s. I think everybodies points on the market are correct. I would just hate to see some new people get scared of because the market is “bad”.
“Whether you think you can or can’t make money, you’re right”
If this is a good time to rent, what about lease options? I am just looking to get into real estate, problem is little money, and poor credit. I have been looking at lease options as an entry into the market. With the market taking a turn for the worse, would you guys say this is a good time to take advantage of those or not?