These are exactly the questions that everyone has on their minds as we all watch and listen to the news. But let’s pause for a moment…. See? Nothing happened. You are still working every day and making good choices. The world is not on fire. Not for you. You have been disciplined, you have been cautious, you have been waiting, and now those that were reckless are dumping properties onto the market.
That’s right. Take a look at the inventory popping up on the market. There is more inventory today than there was one, two and three months ago. Those that overbought, overpaid, and have not managed their properties are dumping those properties. This is a great time to buy. This is a great time to haggle, deal, and negotiate your deal.
This is not a repeat of the 2008 housing crisis
But more importantly, this is not the housing and mortgage crisis of 2007-2008. Data shows that Adjustable Rate Mortgages that were rising in those years accounted for about 13 million loans to consumers, whereas they account for about 2.5 million outstanding loans now. Additionally, more investors and consumers have far more equity in their properties today than they did in the early 2000s. This last fact is due in large part to the banking reforms that eliminated “liar loans” and stressed better underwriting. Further, with the supply chain issues and lockdowns of 2020-2021, supply is still desperately needed just to keep pace with the average homebuyer needs – not the investor. Thus, as an investor buying and holding during this period of time, you are in a position to see your asset appreciate.
What about the rising interest rates?
My response to that is “what about them?” Rates go up and down. We have enjoyed historically low rates over the last decade and now the Fed is raising rates to fight inflation. The rates will come down, but not investing because of rising interest rates is like hoping Berkshire Hathaway stock will drop to $100 a share. It won’t, and the real estate world will not drop to such lower points that you will get “a deal.” That is not the reality of what is going on out there. Do not be afraid to invest.
My wife and I just put a significant sum of money into our portfolio to shore up repairs and maintenance. We purchased appliances, rebuilt roofs, put on new siding, replaced floors, cut back overhanging trees and replaced windows. Why? Because we are leaning into this market to increase the value of our portfolio, raise rents, and come out on the other side with properties that are running on all cylinders. Moreover, we are going to do a cash out refinance to buy more properties.
Do not forget that people need affordable housing to live in. Buy those properties, invest in those properties, and keep investing. Do not be spooked by interest rates and inflation. Keep the course. Work your plan.
