Invest in real estate now or is pullback imminent?

[Atone]

I own and operate two little businesses and my partner in the newer venture and I decided to use our profits from the past year to invest in real estate. We had thought of commercial initially but now leaning towards a duplex or triplex in west Los Angeles (although I suspect there will be some insane commercial deals soon). What is the general wisdom of how this recession may play out and, more specifically, in residential real estate pricing. Of course no one can “know” but curious about the general sentiment. This year has been an insane market out here and gives me some pause to jump into anything frenzied. Lots of smarter folks than me on here. It’s a long term buy and money is cheap right now. Is it insane to grab something in early 2021?

[aczaja10]

Wait. Crash is coming.

[illiguy]

Originally Posted by Atone

I own and operate two little businesses and my partner in the newer venture and I decided to use our profits from the past year to invest in real estate. We had thought of commercial initially but now leaning towards a duplex or triplex in west Los Angeles (although I suspect there will be some insane commercial deals soon). What is the general wisdom of how this recession may play out and, more specifically, in residential real estate pricing. Of course no one can “know” but curious about the general sentiment. This year has been an insane market out here and gives me some pause to jump into anything frenzied. Lots of smarter folks than me on here. It’s a long term buy and money is cheap right now. Is it insane to grab something in early 2021?

I feel like the answer is so dependent on location. California already seems to be facing a reckoning. With low rates (with more credible lending qualifications than in 2007), continued pent up housing demand for cost-friendly, good schools, low crime suburban areas, I’d not hesitate to invest in the latter. West LA? Not for me.

[Atone]

Originally Posted by illiguy

I feel like the answer is so dependent on location. California already seems to be facing a reckoning. With low rates (with more credible lending qualifications than in 2007), continued pent up housing demand for cost-friendly, good schools, low crime suburban areas, I’d not hesitate to invest in the latter. West LA? Not for me.

I guess it’s just been so impervious to market fluctuations that I see it as a safe bet but I hear you. It’s gone parabolic the last few decades.

[EEpro]

Most of my neighbors in Nevada are upper middle class CA transplants. All have cited taxes and cost of living as the reason for leaving. That would make me nervous. You should buy single family in Henderson / Vegas and rent to CA transplants.

[Atone]

Originally Posted by EEpro

Most of my neighbors in Nevada are upper middle class CA transplants. All have cited taxes and cost of living as the reason for leaving. That would make me nervous. You should buy single family in Henderson / Vegas and rent to CA transplants.

I had a buddy that did that years ago and he got pretty beat up in what he reported to be a rather stagnant market. Said it was hard to find renters and prices (per his reports) weren’t stable. In all fairness he’s a bit of a spaz and not the sharpest tool in the shed so I took it all with a grain of salt.

[EEpro]

Originally Posted by Atone

I had a buddy that did that years ago and he got pretty beat up in what he reported to be a rather stagnant market. Said it was hard to find renters and prices (per his reports) weren’t stable. In all fairness he’s a bit of a spaz and not the sharpest tool in the shed so I took it all with a grain of salt.

There's a housing shortage here at the moment. It's a bit crazy.

[asloper6001]

Id let things play out a little more before making your move. We are not out of this yet. Id line up things you like but wait till spring/summerish. Too many things still going on.. id bet you can find better deal here soon.

[asloper6001]

Originally Posted by EEpro

There's a housing shortage here at the moment. It's a bit crazy.

Ive been looking for properties in lake las vegas. Looks like builders are running rampant putting up new blocks?

[EEpro]

Originally Posted by asloper6001

Ive been looking for properties in lake las vegas. Looks like builders are running rampant putting up new blocks?

I don't follow that area at all. That's always been a bubbly place for out of towners to buy up at California prices. Summerlin or West Henderson is where I keep tabs. Best schools, low crime etc.

[GB-man]

If I knew the answer I’d be rich

Looking for a lake house myself. Given up on timing the market.

[Thrasher36]

Real estate is always a good place to put your money. ALWAYS

[ELLimon]

You never know, but Suburban areas are getting lot of demand and cities are loosing value, it might be wise to invest in a city and wait for property values to pickup once COVID is over. Cities like San Francisco will come backup.

I’m all invested in Central Valley, since before pandemic hit, I have been remodeling, no money to get anything else.

[austinp]

I have some rental property. I hated it at first because I went through some terrible tenants at first and lost some money because of it. Ive gotten better at being a landlord and have had great tenants for the last 10 years. It took a few years to have positive cash flow and now it’s pretty minimal. The property value has gone up about 35% in 12 years.

So I guess my point is I wish I had just put the money in a growth mutual fund. Returns would have been better and a lot less headaches.

Most of the rental laws in California put the owner at risk in most cases.


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[brandrea]

IMHO, real estate as an investment is a long term play. If you have a long term time horizon it really doesn’t matter as it always ends up being worth more 20 -30+ years later.

Next, it’s all about location. I’d buy the absolute best location you can afford.

[RaZCaL]

I am speaking from the real estate perspective in New York City (five boroughs), which has pretty much collapsed. I have had tenants break leases, leaving apartments vacant for months, and rental prices have declined as much as 15%-25%, some locations even more. The market is over saturated at the moment as new construction continues with thousands of apartments, resulting in more inventory, further driving down prices. Doesn’t help when tenant/landlord laws in NYC do not favor the landlord at all. The eviction moratorium has permitted tenants to withhold rent without consequences.

Professionals are moving out of New York City seeking for more spaces when they can WFH. NYC based companies are also moving out and small businesses are shutting down left and right. Residential apartments configured for roommates with 3-4 bedrooms are being rented as 1 or 2 bedrooms and offices because everyone is WFH. This pandemic has forever changed the state of NYC, and I do not foresee NYC recovering in the near future. I would definitely not touch real estate in NYC for a long time.

[Pw92676]

In my no expert but here’s my take:
I, by way of investment diversification not by profession, am part of two large private groups, one that focuses on commercial real estate in the SE and one that focuses on housing in the SW. Both groups in the past several months have offered all investors to recoup their investments with the final dividend of the year. Usually they offer folks to up the ante. So to me this was a sign to take my chips off this table and to play at another table.

[Etschell]

Originally Posted by Atone

I own and operate two little businesses and my partner in the newer venture and I decided to use our profits from the past year to invest in real estate. We had thought of commercial initially but now leaning towards a duplex or triplex in west Los Angeles (although I suspect there will be some insane commercial deals soon). What is the general wisdom of how this recession may play out and, more specifically, in residential real estate pricing. Of course no one can “know” but curious about the general sentiment. This year has been an insane market out here and gives me some pause to jump into anything frenzied. Lots of smarter folks than me on here. It’s a long term buy and money is cheap right now. Is it insane to grab something in early 2021?

i would not be a buyer of commercial real estate in LA, NY or Chicago. a duplex or triplex to me is a better bet.

[DLRIDES]

Using “real estate investment” and “Los Angeles” in the same paragraph during a mass exodus of individuals and companies ....................

[GB-man]

Originally Posted by DLRIDES

Using “real estate investment” and “Los Angeles” in the same paragraph during a mass exodus of individuals and companies ....................

Blood in the streets. Would take stones though these investments always do. Timing the bottom near impossible.

[DLRIDES]

Originally Posted by GB-man

Timing the bottom near impossible.

There is no bottom for many places now, just a continuation.


When citizens learn to vote themselves the treasury, they place limits on prosperity and set a path of decline.

[jltait]

Buy BX or VNQ, collect the dividends, and let someone else deal with the 3am phone call that the plumbing doesn’t work

[vman]

Buy when there is blood on the streets. We are predictably irrational and risk averse. On average, we would rather not lose $1 than win $1.5. We are also prone to knee-jerk reaction and the exodus from cities as seen today in the US is a symptom of that. In the long-term, real estate and market returns are about the same, and given the current state of the market, real estate does not look that bad. You should also consider the following points.

Gov’t printed a lot of money and we may see inflation in the near future. If you’re sitting on a bunch of cash, real estate diversification would not hurt.

California is not going anywhere despite the fact that many want the state to fail. It is a home base for at least two global industries—technology and entertainment—and it has experienced some softening in the market. Whether it is the best time to buy now, nobody knows. But parts of Cali are becoming less overpriced.

Cities, too, are here to stay and now it is time to get in if you have the guts and $. Many don’t, but don’t follow the crowd.

[EEpro]

Originally Posted by DLRIDES

There is no bottom for many places now, just a continuation.


When citizens learn to vote themselves the treasury, they place limits on prosperity and set a path of decline.

Speaking of that, did anyone else get their (phased) treasury deposit today?

[Atone]

Very interesting conversation. I’m not sure I agree that the areas like NYC and SoCal won’t recover especially while SoCal has only seen gains in residential markets so I think we are just talking about SF. It seems the more dense city areas are seeing the largest impact. Im not risk averse at all and am now wondering if one of these places may be ideal for us. I’d put all the money on cities rebounding in a huge way when Covid is no longer the driving force it is.

[CamSLC]

No crystal ball, but I can't help but think once we are past this current situation the flood of young aspiring people will be heading back to the cities. Just like the stock market, it's really hard to time the bottom. I own some rental properties, some are home runs, others base hits. They've all ended up making money in the long run. The folks who tell you they're waiting for the next crash will never admit how long they've been waiting.

Also keep in mind just because you live in LA you don't need to buy in LA. Depending on your goals there may be a better market for what you and your business partner want to achieve.

[Atone]

Originally Posted by CamSLC

No crystal ball, but I can't help but think once we are past this current situation the flood of young aspiring people will be heading back to the cities. Just like the stock market, it's really hard to time the bottom. I own some rental properties, some are home runs, others base hits. They've all ended up making money in the long run. The folks who tell you they're waiting for the next crash will never admit how long they've been waiting.

Also keep in mind just because you live in LA you don't need to buy in LA. Depending on your goals there may be a better market for what you and your business partner want to achieve.

That’s exactly the thing we are wrestling with. I own a duplex here and enjoy being able to check on the property, chat with the tenants and hire subs myself. However, I see how this is not the whole picture. I want to buy beachfront in Baja to have a surf/fish escape but I don’t see that being a great investment

[CamSLC]

Originally Posted by Atone

That’s exactly the thing we are wrestling with. I own a duplex here and enjoy being able to check on the property, chat with the tenants and hire subs myself. However, I see how this is not the whole picture. I want to buy beachfront in Baja to have a surf/fish escape but I don’t see that being a great investment

I have a property manager for all of them. Even the one 3 minutes from my home. I've found good property managers and some bad ones along the way, but i've been through way more tenants than managers. Worth it for me personally.

Some friends I know purchased in Puerto Vallarta at the end of last year. They have an airbnb 'superhost' manager that covers a lot of properties in the area. The bookings disappeared for a while then started to pick back up again because it's the only place American's are really traveling. They spent a month there while WFH and are now saying they will end the year with a small profit. So who knows

[SDGT3]

Having owned commercial property in Southern California for 20 years, I can tell you it's not the same as it used to be and would not buy either commercial or residential unless you have at least a 5 year window of funds to back you up.

The last couple elections have had an emphasis on overturning Prop. 13 on both residential and commercial. They haven't passed, but the govt., teachers unions etc. will not give up and we fully expect they will be on the ballot again - it's just a matter of time.

Second, look up the 2021 California laws as it relates to rental relief... if you own the property in a corporation, partnership or LLC, you will be screwed with no allowance for property tax relief. The only exception is residential property that is under 4 units but it must be owned personally and of course that exposes you to personal liability.

We are actively looking into a 1031 exchange to get out of what we see as a sinking California ship.

[JParm]

I'm more of stock market guy, my wife a real-estate girl.

The headaches we've had with tenants has made her shift her tide of thinking a bit lately...the house we rent out is paid off so the extra income is nice, but now we're most likely going to rent out our current home in a year when we move out of the state; I am not looking forward to having a 2nd rental property that we'll still have a mortgage on, even if the rent will cover + add income. Just too much of a hassle, but wife wins on this one.