The only thing in 2024 Your Real Estate Investing Should Be Based On

How to know what strategy to use in the coming months

There’s so many types of real estate investing to consider, it can be overwhelming to pick which one is the best. And then by the time you’ve finally decided, another meetup, video or blog post will convince you otherwise. Even the experienced investors aren’t immune to this, so let’s cover the main doctrine that should be driving your real estate investing for the rest of 2024.

Why do I propose your baseline as the leading consideration versus a specific strategy? Because it’s often a trailing thought that gets forgotten in hype, which is a dangerous game to play with the environment we’re now in. Ask yourself:

1. Would you be spending all of your savings for a down payment on an investment property?
2. Are you fine just breaking even because you were told that’s OK?
3. Have you bought into the “date the rate and marry the house” fairytale?
4. Does your investing strategy actually apply to your market, finances and risk, or is it just trendy and appealing?
5. What do you actually need to produce to move the needle? A chunk of cash? Appreciation to build wealth over the long term? Depreciation to offset taxes?
6. Is there anything about your personal spending that is causing you to be in a spot where this could financially devastate you, or are you truly at a point where you can take advantage of a good opportunity?

The reason I propose these ‘gloomy’ questions are, how the market is now may very well be how it remains for awhile, and if that is the case, can you sustain yourself successfully based on todays assumptions? The Federal Reserve has had the difficult job of balancing unemployment levels and calming inflation, by which our economy keeps chugging along despite cost of living continuing to impede in nearly every segment of life. So if you’re thinking rates may come down, that prices will only ever continue to rise, that you’ll miss out if you don’t just buy something, or you should dive into a creative new strategy with little personal cushion, let me be the one to caution you.

This leads us back to the idea of buying on pure fundamentals to buffer an unknown future. Boring, basic, fundamentals, which were arguably thrown out the window with cheap financing, continually rising prices, constrained supply, and unabated demand.

If we have rising supply, high interest rates, slowing demand and uncertainty about the status of mortgage rates, what are the ways to continue to invest in housing?

What this looks like is: buying at steep discounts if you’re considering renovating a property to flip or rent and actually understanding all the costs involved instead of hoping the market will float mistakes. This also looks at having an experienced lender take a second glance at any type of deal you’re considering to get a second opinion from a conservative standpoint. Afterall, they are concerned with recovering their funds, with interest, in the agreed amount of time and also have a pulse on the market; use their insight to your benefit. This also looks like paying for cash if you can, considering seller financing, looking at new markets for opportunity, and you being as ‘bankable’ as possible.

Here’s my advise on what should be driving your real estate investing in 2024:

1. The down payment funds are extra outside of your personal savings, and if you’re doing a live in flip, you’ve taken advantage of any down payment assistance programs and/or owner occupied financing.
2. If it’s a rental property, the rental rate covers the debt service and at least enough to save for repairs, vacancy, increases in insurance, property management, etc. Personally I like to have less than 10% into the deal after everything is said and done and make at least $100/month per room (Meaning, if it’s a 3 bedroom house, I’m netting $300/month)
3. The “date the rate and marry the house” is realtor fodder for the masses, sorry. If you buy a shit box with a long prepayment penalty, no cash flow and little equity, paying for a refinance will not fix the underlying problem of having purchased a bad deal. Keep in mind, refinancing can cost thousands and take years to make up in cash flow. I’d encourage you to purchase a deal that makes sense even at a higher rate, and assume it will be years before it makes even more sense to refinance, along with accounting for the cost of that transaction.
4. Look at the strategy which you are considering and ask yourself if it makes sense for the market you’re investing in, your goals and risk. It’s incredibly easy to see an influencer post about THEIR winning strategy, but you have to compare and contrast it against the probability it’s going to work well for you, too.
5. When it comes to deciding between cash flow, chunks of cash, etc, it’s hauntingly easy to want to retain a property for vanity sake. “I just bought another rental” will earn you Ohhs, Ahhs, and Likes, regardless of it’s actually a financial sound deal. The investor community (ESPECIALLY online) tends to like these vanity metrics of “how many doors do you have” for bragging rights, whereas some of the most successful investors I know rarely feel the need to discuss their volume. If you’re purchasing properties at a steep discount, the decision is a good problem to have, so I encourage you to choose based on what will make the biggest difference to *you*. It’s also another opportunity to talk to your lender and get their insight, since they most likely will have knowledge of your personal situation, goals and other investments. Again, get some professional perspective.
6. Lastly, consider if your personal finances are as sound as they could be before buying that next/first investment property. If you’re trying to get big chunks of cash because you’re overextending yourself all the time or heavily in bad debt, creating more cash will only worsen the problem until you’ve faced it head on. The benefit of knowing where you stand financially leads to much clearer and better decision making when it comes to investing. You may very well find you can make hundreds of dollars more a month just by virtue of cleaning up your expenditures, earn more at your job simply by asking for a raise, or job hopping to a more lucrative opportunity.

I’ll balance all this feedback with saying again, there’s never a perfect time with perfect conditions and perfect personal situations all being lined up so that real estate investing is risk free. Certainly, many of us have dug our way out of under-earning and getting ahead through hustling nights, weekends, taking risks and gaining momentum. But, as smart investors, the wisest foundation to launch or grow from is one which you’ve created more certainty through your own personal finances, opportunistic strategies and weighed any deal against the fundamentals, especially in a high interest rate/high price environment.

What do you think?