By Thomas Carroll, REALTOR®
There is a lot of noise out there surrounding the real estate market. Prices and interest rates are up, and cap rates are down. Despite the significant price appreciation and the rise in interest rates we’ve seen recently, when it comes to investing in real estate my belief remains the same: buy real estate and wait, do not wait to buy real estate. The answer is not to time the market but continuously buy over your lifetime through good and bad times.
This does not mean to be foolish. You want to pick a rental property that will at least pay for itself. You should not be coming out of pocket for expenses. That is not a scalable strategy and if your personal financial situation takes a turn, it is not a sustainable strategy. Maintain high cash reserves (somewhere in the ballpark of 4-6 months of expenses per property so you can withstand extended periods of vacancy and maintenance) and use loan instruments with fixed interest rates spread out over 15 to 30 years. If you buy real estate safely by focusing on what you can control, you should not worry about timing the market. The benefits to real estate investment are too great to sit on the sidelines trying to predict the next crash your whole life. If the cash flow is positive, it is in a location you like, and your financial situation allows for it then buy your next investment property. When times in real estate are good, you have appreciation, debt pay down, cash flow, depreciation and mortgage interest tax deductions all working in your favor. When times are bad, your cash flow and appreciation may take a hit, but you will still have depreciation, debt paydown and interest tax deductions working for you at full steam.
So, for investors asking if now is a good time to buy residential real estate, my answer will remain yes through good and bad times as long as the financing and tax laws continue to provide such incredible benefits. If you are ready to look for your next investment property, reach out to me today and let’s get started.