How to Time Your Purchase of a New Investment Property
Most New Investors Agonize Over Timing a Purchase....Should They??
When is the RIGHT time to buy an investment property?
Perhaps you've heard the old proverb regarding when is the best time to plant a tree?
A tree is an investment of sorts. You buy a sapling. You dig a hole. You fertilize. You water. You trim. You rake leaves. And after a couple years, that tree simple grows and takes care of itself. Several years later, you have a healthy harvest of apples. You haven't thought about that tree for a few years other than occasionally enjoying the shade it provides, but suddenly, that tree is literally producing the fruits of your labor from eight years ago.
Think of an investment in that same way. The work, stress and effort come up front- in the first few years. You buy a property and it's stressful, maybe scary. You work to stabilize it, rehab, clean it up and prepare it for tenants. You show the property to prospective tenants, screen them, perform your move in inspection and help the tenants get settled. Then you wait.
We have many investors come to us asking about timing- did they miss their opportunity? Is there a neighborhood that is undiscovered yet? Do we know about a secret, off market deal that will change their lives? The answer to all of those questions is a resounding "no," (except sometimes the off market deals....)
In 2015, people didn't want to invest because they felt real estate in Boise was overpriced. Coming out of the recession, our market was in recovery mode and many thought we'd return to those 2012, bottom of the market prices soon. The average SFH price in 2015 was $230K in Ada County.
In 2020 when the covid boom came around, people didn't want to "overpay" for a property or get caught up in a bidding war. Interest rates were 3% and the average SFH in Ada County was around $390K.
In 2023 interest rates shot up and buyers got scared. The didn't want to buy when values were presumably going to tank. The average purchase price in Ada County was $520K.
Today, many still are waiting for that market crash, or for interest rates to get back down under 5%. In June of 2024, the average SFH price in Ada County was $570K.
The people waiting for that opportunity back in 2015 are still waiting and they missed out on an average of $340K in passive appreciation. As a matter of fact, prices are UP 10% just since January of this year. Think about that. Had you purchased 3 average homes in 2015 and rented them out, you'd literally be a millionaire now with little to no effort on your part.
So- when is the best time to plant that tree? Well, of course the correct answer is eight years ago, all of the work and stress would be over by now, and you'd be enjoying those apples. But if you didn't plant a tree eight years ago, the second best time to do that would be today.
Happy Investing!
