Advice from a real estate lover who got rich on this market.
In 2018, I bought my first house.
It was a quick and inexperienced decision that I made without even researching the market well, but the results were surprisingly positive: The house is worth double today, and I haven’t sold it yet.
Since then, I have bought three more houses.
They’ve all gone up 20-50% since I bought them, and I feel like it was one of the best financial decisions of my life, even with the experience I have now.
However, although this market has allowed me to get rich, and I am one of the biggest preachers that you should invest in real estate, I consider that 2023 is not a good year to buy a house , and doing so without the correct analysis can cost you dearly.
In November 2022, housing the market in the United States fell by 35.1%which the data shows is the biggest decline on record since 2012. Other items also show that in October house prices fell for the fourth time in the last year alone.
You might think now is probably a good time because prices are “going down”. However several economists expect prices will continue to fall in 2023. And many factors that have occurred over the past two years will make this situation worse:
- Mortgage interest rates are extremely high because of inflation. This will entice fewer people to buy houses now, because even if they find a good house, it wouldn’t be a good deal.
- There is a shortage of natural materials (like silicon), which makes even the basics that people regularly buy more expensive than expected, so that more and more people will refrain from buying anything in general.
- The effects of COVID-19 and the war in Ukraine will impact people now. The government used to subsidize many things to avoid a global crisis (like giving money and lowering interest rates to incentivize people to keep the economy going). But they stopped because of the great inflation.
Another important factor that will affect the housing market is the return from hotels. In 2020, due to high prices as they could only accommodate a few people and distancing laws in general, Airbnb has become hugely popular and the number one option for vacationers for two years.
This has made short-term rentals a good investment opportunity for ordinary people, allowing them to buy many homes in attractive locations for short-term rentals.
However, hotels have once again become the main option for people due to little regulation, hygiene and complications. that Airbnb hasand this platform receives more and more complaints from users daily.
Shelby Church, for example, lost money with her Airbnb in 2022 (she earned $0 cash all year). One of the reasons this happened is that Airbnb no longer had the hype it had at the start of the pandemic and the summer months were not in high demand.
These facts will cause fewer people to buy homes for short-term investments and evaluate other popular options.
So as long as you want to lose your capital, you should wait and better analyze your objectives before investing because a bad decision now can ruin you financially.
As I always say, a house to live in is not specifically an investment (although it could eventually be) because your plan with this house is to use it, not make money from it.
So if you’re not planning to sell in the short term, mortgage prices don’t affect you, and if you think it’s time to buy a house, then go for it.
Another thing that might entice you to buy a house now might be finding a great deal that you can pay cash for.
Last year my cousin found a studio in a good part of New York for less than $100,000 which was the perfect deal for him because he wanted to move out of his parents’ house and the guys were only accepting cash payments.
But if you plan to use it as an investment, I recommend you hold off. Even if you think you are missing a big opportunity, there will always be chances and corrections in every market, so you will always be in time to buy if you have the money.
One of the reasons I bought my first home is that I thought there would be no other time to make this investment, and this was the best opportunity I could find.
However, in 2021 I was able to purchase two more.
Although I don’t regret the decisions I made in real estate, I know that if I had waited until I was more stable instead of buying my first home, I would have achieved something much better for the moment as if I had been ready.
Another example was that of Rocco Pendola in his article “Stop telling me to buy a house,” where he explains how he pays $1,343 a month for a house in Los Angeles, where houses cost $1,000,000.
A ten percent down payment equals $100,000 that I need to have in cash. A mortgage of $900,000 at 3.2% over 30 years produces a monthly payment of $3,892. That’s $2,549 more than my rent payment.
If he continued to rent and invest that extra $2,500 per month, with 7% compound interest, in 20 years he would have $1,700,000.00.
With that amount of money, I don’t think he missed an opportunity. So the moral of the story is that you will always be ready to buy a house if you use your money correctly and analyze the decision that is best for you.
Comments are closed.