Timing the market isn’t usually a fruitful endeavor…it’s certainly not rewarding. The decision to invest in rental property should be driven by objective data, not “timing”.
Some things you may want to consider:
- Are you personally prepared to be a landlord? “Landlording” isn’t always easy, and it isn’t usually fun. Unlike owning mutual funds, stocks and bonds, it is an active investment. You need to be engaged and committed to being a good Landlord. Unlike the aforementioned, you CAN buy an investment worth five times the amount of money you are committing to the investment by leveraging your investment with a mortgage.
- How much money do you have to invest? You need to have enough for a down payment and some reserves for repairs, maintenance, and vacancies.
- Will you live in the investment property? This can be a great way to get started if you buy a multi-family.
- Will you qualify for a mortgage? Mortgage products for investment properties have different guidelines than mortgages for single family properties.
- What are the rental rates in the neighborhoods where you would be looking to invest? Rental rates have been increasing much faster than the cost of ownership nationwide. For example: three rental units generating $3,600/month can support a lot of debt-service, taxes, insurance, and vacancy ratio of 5%. (A $375,000 mortgage with 20% down would have a PITI payment of under $3,000/month at 6.5%.)
While I can’t predict when the next “Crash” is going to occur, it doesn’t appear to be on the horizon based on the empirical data. If it is, and you buy a good property in a good neighborhood, in a desirable town, you will be shielded from the downturn much better than if you bought a property in a not-so-good neighborhood. You will be shielded even more if you are uber-selective with your tenants. Good tenants are almost worth their weight in gold if you compare them to the cost of bad tenants.
Knowledge is power so your best first step may be to have a conversation with an experienced, full-time REALTOR® to assess if investing in real estate is the right “move” for you.