Real Estate GONE WILD - BUY NOW or WAIT for the CRASH?
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- Опубликовано: 26 окт 2024
- Real estate prices are sky high... Should you invest or wait til a crash?
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Why has the real estate market been so hot the past few years? Why is real estate so inflated... or is it inflated? Will the real estate market crash soon? Let's discuss...
Why real estate prices have skyrocketed in 2020 and 2021...
Inflation... The fed continues to print trillions of dollars. Did you know that over 40% of the current money supply has literally been printed in the past 16 months? This is INSANE! Injecting new fiat currency into an economy devalues the currency itself - this literally means that as things become more expensive around you, your money has less purchasing power than it used to. The cost to build new houses has gone up dramatically, partially do to the cost of materials going up.
Not enough supply to keep up with demand. Supply has been severely bottlenecked - there are not enough homes to keep up with demand. Not enough current homes and not enough new homes being built. This could take years to catch up to the level of demand.
Supply & Demand... With more demand than supply, there are multiple offers on nearly every property listed for sale. The winning bid typically goes to the highest offer price. As more homes get sold in a neighborhood at a higher price, they become the new comps for future appraisers. This also help justify higher purchase prices in the future.
Low Interest Rates... The fed has kept interest rates at record or near record lows for over a year now. This helps stimulate and encourage borrowing. With inflation pushing 6% according to CPI data over the past 12 months, locking in a 2.5-4% interest rate for a primary residence or an investment property is like borrowing free money. It's a no brainer! Not only do you have individual buying homes, but you have large investing groups and some massive companies like Blackrock buying up billions of dollars worth of real estate. This plays into the demand. With lower interest rates, that means a lower monthly payment, which encourages people to buy more expensive homes because they can now afford the monthly payment.
With all this being said, where does this leave us? In a tricky spot right? A lot of people continue to tout we will have a massive housing market crash. The data tells us otherwise. In fact, the data tells us housing will continue to get more expensive in the next 1-2 years. Time will tell, of course. I don't have a crystal ball. However I do know that 2 years ago when I started buying and investing in real estate, people were talking about how expensive housing was then! My fear as an investor is to pass up on 2 years worth of cash flow and appreciation, waiting for a housing market crash that may never come...
So what am I doing? I am proceeding with caution - and certainly stripping the emotion out of EVERY investment decision. I always rely on a conservative investment analysis. If I am achieving the desired level of return, the investment is a go for me. For short term rentals (Airbnb), my min cash on cash return requirement is 25%! This is 2-3x what traditional real estate investors are seeking. There is more wiggle room and margin for error with short term rentals, and the upside simply cannot be matched with other forms of investment that are relatively passive.
I just purchases a new short term rental in Fort Lauderdale, Florida. We are extremely excited about it. I'll post the full investment analysis here in a few weeks so you can all see how we are investing and evaluating these properties. The cash flow is insane and the coc return and total return on investment is also insane. I'm excited to share those details with you!
If you are a beginner investor looking to invest in real estate, make sure to subscribe to my channel, follow me on IG and Tik Tok: @melefante6 and check my link for all my resources to help you and others learn!
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Drop your comments and questions below. What do you think about the state of the real estate market?
Great video brother! We sound like the same person haha. Except i won't start for a few months.
Thank you for this! I really needed this video, ill be coming close to my first purchase around the beginning of the year all thanks to you
Excited for you!!
What do you think about the Tampa market for short term rentals?
Pretty solid. Greater Tampa area, Clearwater and st Pete all would do well. I looked at them on AirDNA recently
Best places in Flordia to get a STR in?
IMO - Fort Lauderdale, pompano beach and Hollywood beach. Also: St Augustine, FL panhandle, Kissimmee, FL keys
@@melefante6 What about Orlando with all the tourism and business travel traffic?
Are you concerned about government regulation on short term rentals? It’s clear that rentals are affecting the market. I live in the Portland, OR market and there is a lot of push back on hikes from investors in our area.
Thanks, Justin
Understanding local laws and trends is important you are correct. Many cities seem to be grandfathering in old permits of rules do change. I avoids markets with heavy regulation. Many traditional vacation markets will be safe as vacation rentals have been around forever there.