Don’t Ask Me When You Should Buy Real Estate…
“Don’t ask the barber whether you need a haircut.”
(Warren Buffett)
“Hindsight is 20/20”
(Popular Idiom)
When you work in real estate for a living (especially on what could be considered the investment side in property management), you tend to get a lot of “party questions” about buying rental homes. You hear different versions of this:
Oh, you’re in property management? My cousin owns about 50 rentals in Lincroft, NJ and is making a killing. He fills them all with Section 8 tenants and just collects the guaranteed money on the first of each month. Lucky dog! Is it a good time to start buying properties and get into something like that here in Charlotte?
There are different schools of thought on how to answer that question.
The first school of thought: YES, YES, & YES!! You sell and manage rental properties for a living- duh!!
Back in the day, I worked with a woman who would look at me cross-eyed when she saw me show any hesitation when the question of when someone should be buying real estate came up. To her, the answer was always unequivocally “now!”, followed up with “I’ll pull up some listings that we can go look at!”. In her book, it was a complete rookie move to even contemplate any different type of answer. If her kids were going to eat tomorrow, she needed to sell real estate today. So it was always a good time for anyone to buy real estate (and the more the better!).
I laughed at her response and actually thought it was a bit dishonest. But, if you followed her advice at the time, you would have made an absolute killing. And her advice is still the same, in case you were wondering.
The second school of thought: I’m not sure… (The “Honest “Approach)
A friend of mine recently forwarded me an e-mail from 2018 that we had shared discussing an investment property he was contemplating buying. I wasn’t sure (at $120K it seemed a bit high for what it was…) so I encouraged him to lowball the offer and ask for some concessions. Of course, when an offer is bogged down like that, it is typically rejected unless the seller is on the desperate side and low on options. So my friend did what I suggested and the sale never went through.
On top of his recent e-mail was a link showing that the property sold this year for $210K. So in less than four years, he would have pocketed $90K; that’s not a bad day in the office for the eventual buyer! But I felt sort of badly that I helped talk my friend out of what turned out to be a great deal. Fortunately, he is a gracious guy, and hasn’t come over to break my legs (yet…).
So, don’t ask me when you should buy real estate! I want to give you the right answer, I really do. But timing the market is tough. I’m not sure if we are on the top of the market (and about to fall of a cliff) or if we are only getting started.
However, if you can make the numbers work for immediate cash flow and have plans to hold the real estate long term, it is a good time to buy now (especially in Charlotte!). I can say that with all honesty while not drawing the ire of my old co-worker.
Happy Landlording!
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