Well this question gets asked all the time and the answer is……
The BEST time to buy a short-term rental was yesterday…. (with the exception of 2007)
The real estate market is on fire and many people entering the market are concerned about the rapid appreciation and are skeptical about investing at this time. Honestly, I understand this concern…. It is a limiting belief that I continue to battle.
To give a little back story…. I purchased my first property in 2007 right before the great recession. Flash forward and that sad story ended in a short sale but in the end it all worked out… The process felt devastating at the time but in reality real estate can be quite forgiving. Click Here to read more about that story 😉
The real problem is the permanent scar on my psyche that the market is going crash, at any moment. The truth is that I have dealt with that fear intermittently ever since that experience in 2007. Now that is an understandable fear but luckily one I have been able to handle even during this most recent severe crisis.
All rational thought would have said that Covid would have crushed the market. Due to government intervention, supply chain disruptions, increased savings, and low interest rates the exact opposite result has happened.
We bought a triplex in 2020 that has appreciated greatly in the last year… The rational play would have been to avoid it because of the eviction moratorium but it has worked out.
We also bought a Short-term rental during the middle of uncertain short-term rental shut downs. It is true that we needed to handle some transient decreased rental income but those decreases were offset by rapid property appreciation. In the long run this property will be a great investment.
If we had allowed our limiting beliefs and fear about the market hold us back, we would have sat last year out. As a result we would have missed out on great opportunities to grow our portfolio and long term wealth.
The same principle can be applied to the current red-hot market… Your mind is probably whispering… Maybe shouting… DON’T INVEST RIGHT NOW THE MARKET IS TOO HIGH!!!!… That may be true until it is higher next month.
There may be a correction soon but it does not feel like 2007….
Now I am not an economist but I am actively investing in real estate and I am seeing properties listed for 1.1 million going for 1.3 million in cash.
In 2007, I bought a 200k property with 0% on a 35k salary and so did everyone else. In this market you need to fight hard to get you offer accepted over cash offers. With that said, there are still deals to be found but the environment is tough. It might feel like a bubble but with that much cash being pumped out there I don’t believe we are looking at a 2007 correction…. At least not yet.
SO what should you do?
That is a personal risk tolerance question. But I can share our plan.
First, we are planning for a correction…. Even though we don’t buy the bubble theory.
Second, we are placing offers on properties that still cash flow.
Three, Short term appreciation is irrelevant.
We practice a buy and hold strategy. If a property cash flows then we do not focus on appreciation for the first year or even 5 years.
WE ask ourselves two questions?
Does the property cash flow?
Will the property be worth more in 30 days than today?
If we answer yes to both then it is worth buying.
How much cashflow?
That depends on your risk tolerance and growth goals. In high appreciation markets you may be willing to accept low or NO cashflow. ON the flip side you may be willing accept low appreciation for high cashflow.
Lauren and I have found a nice mix of both with short-term rental investing. We accept the high rent volatility for increased yearly cashflow and appreciation potential. IN addition, we enjoy the lifestyle investment perk of being able to use these properties.
The best time to purchase real estate was yesterday.
The second best time is right now… if you find a property that cashflows.
You can dive further into your market specifics. If you are looking at winter resorts then May, Summer and October are great times to find property…
IN summer locations you may find more inventory in the Winter season.
Good luck out there. Keep analyzing your numbers and don’t get discouraged. You will find something that works for you.
“Enjoy your Journey to Financial Freedom”