It’s always an exciting time in the real estate market, right now even more so. If you’re thinking of buying a home now, I want to talk about 3 reasons, that if any one of them is the sole reason you’re looking to buy, you should think again. Let’s begin:
#1 Interest Rates are So LOW
Yes, it is true that interest rates are at record lows right now, but that definitely should not be the sole reason you are looking to buy a home. Low interest rate AKA “Cheap Money” can be great for owner occupants and investors alike however as we are seeing here in Hawaii and all over the mainland, the low rates coupled with the pent-up demand and lower than normal inventory is creating almost a “frenzy” in the real estate market, especially for single family homes. Another thing to point out is that there is a good chance that these low rates will be around for a while. Check out my other blog, “Inflation and Real Estate” where I discuss why I’m saying this and about inflation and its relationship to interest rates. Here’s the link (CLICK HERE)
#2 Trying to Time the Market
In my opinion, this is a really bad reason to try to buy real estate right now. I had a newbie investor reach out to me. He had just refinanced his home and took out a home equity line of credit so he now had access to some of that “cheap money” I mentioned earlier. He wanted to try to do a quick rehab flip before the market “turns”. If you are thinking the market is going to turn, not sure when that correction is coming, and haven’t flipped a home yet, I would say, “DON’T DO IT!” If you’re a veteran flipper and have some kind of competitive advantage, for example you’re going to do most of the rehab yourself or you’re getting off-market deals with baked in equity, then that is another story but, but a newbie flipper, NO. My advice would be to save up that money, continue to look for opportunities, but save that dry powder until you’re are truly ready.
#3 Buying for Appreciation
In general, real estate investors are buying real estate for either for cash flow or appreciation. If your sole purpose for buying real estate now if for appreciation, I don’t think that’s a wise thing to do. Keep in mind, I mainly invest for cash flow and consider appreciation just the gravy on top. I also don’t have a huge enough net worth where I can devote a sizeable portion to invest for just appreciation, so that’s my bias. Even cash flow investors need to be underwriting their deals more conservatively in the current times. Don’t get me wrong, I’m still looking for deals these days, I’m just a lot more cautious and there are a lot more considerations especially when it comes to vacancies, evictions and Section 8 tenants.
So those are 3 reasons why you should not buy a home right now. In the words of Criss Jami, “To be heroic is to be courageous enough to die for something; to be inspirational is to be crazy enough to live a little.”
