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hey everyone me kevin here today i'm going to review whether or not you should buy a home now or wait until after the stimulus era this market madness and the pandemic and all that stuff is over and the dust has settled after all housing inventory is terribly low houses are facing bidding wars across the country and times are just overall really uncertain right now in this video my goal is to answer whether or not you should buy right now and to do that i'm going to go through what we should watch out for what's going on with interest rates and does it matter and what to buy if you're actually going to buy and just to get it out of the way yeah by the link down below and just 100 link down below first there are two primary things to pay attention to right now one is you're in your control and one is not what's not in your control is congress if congress fails to properly extend the unemployment benefits through at least the end of this year and if congress does not extend the eviction ban through at least the end of this year or into next year buying right now is probably not the best idea the reason for that is if congress mediocrely extends these things like barely extends the unemployment boost or barely extends the eviction ban and doesn't help tenants out of the backlog of debt that they now owe for months of money or months of rent that they've missed then all we're going to see in this market is significantly more uncertainty which right now it seems like real estate's one of those get losing real estate no you can and things will get even more uncertain we'll see more weakness as tenants have more trouble paying rent we'll see more evictions and ultimately more evictions generally leads to more housing inventory on the market as landlords decide you know what i'm done dealing with tenants and toilets or as rent prices start falling and when rent prices start falling we start seeing real estate values fall which these are all really bad things that could happen over the next few years and there are very real risks that we have to be aware of so we can't just blindly say yo it's always a good time to buy real estate and don't get me wrong i love the same don't wait to buy real estate buy real estate and wait and i'm a real estate dude but i'm telling you you've got to be careful because we are facing a terribly slippery slope the second thing to pay attention to is obviously your finances we've got to make sure that you have stable finances because it's one thing if you can afford a place today but how about you and your partner what are your jobs looking like is there a chance that your income's going to go down over the next year as businesses start cutting back what if this recession lasts for the next 10 years and we really do enter this era of frugality which the 20s might be that is rather than having a roaring 20s we might see a frugal 20s well if that happens you don't necessarily want to sign yourself up for a housing payment now that you can't easily adjust out of which you could do if you were renting because you could just move now obviously you can just move in real estate as well but things get a little bit more complicated when you own a home so a good rule of thumb when it comes to your finances is generally to keep your housing payment at no more than 30 of your gross pay so if you and your family member bring home about ten thousand dollars per month you really don't want to exceed at max 30 of that gross pay because once you factor in taxes and living expenses you go beyond that number and and you start becoming payment poor and many would say even that figure is high and this would be based on a 30-year mortgage so again if you have a spouse and you and collectively you can make about ten thousand dollars per month combined that's about 120 000 per year so just write about the average median income everyone's individual median income in the united states is about 55k then you really don't want your payment to be more than around 2500 per month that would be for principal interest taxes insurance and other fees and even uh you know things like repairs having a couple hundred bucks set them on aside every single month for repairs that might come up so this may not be realistic in all cases but in my opinion it's a good rule of thumb ideally you want to stay below it sometimes you have to go above it but that gets risky especially if you put less money down which we'll talk about less money down we'll talk about five percent down in mortgage insurance towards the end of the video for now though let's say your finances are set you're good with your finances and let's go with the optimistic approach that congress does agree to extend the eviction ban and does extend unemployment benefits by let's say at least four hundred dollars per week great then let's talk about issue number two and we're only going to graduate to talking to issue number two if congress actually does these things because if congress doesn't do these things or your finances aren't good stop don't go any further past number one and just i guess you could go watch a different video hopefully it's a video of mine but for now let's talk about issue number two interest rates and do they matter interest rates interest rates are currently expected to remain low through 2023 however they might actually trend down more as lenders catch up with all of the ridiculous demand that exists right now this might mean if you financed a place a month ago you might end up having cheaper rates now and you might end up having cheaper rates in six months from now no guarantees because right now lenders are overwhelmed with how many people are trying to get loans like right now it's literally like everybody's coming out going i gotta buy and then you look and go oh my gosh there's nothing to buy it sucks and so it is possible that as lenders catch up interest rates may fall fortunately if you were to buy now and then interest rates fell know that you always have this sort of insulation that you could refinance so if you buy now and get an interest rate of i don't know three percent and interest rates fall to say 2.25 which would be crazy now but honestly even 3 sounded crazy a couple years ago if that happens well you can always refinance so really there isn't so much of a worry about rates going down because if you own now you could always refinance i think the bigger worry people have is that okay but what if rates don't stay this low and then they go up again well that at least for right now isn't really expected to happen until at least 2023 that's when the fed thinks that rates might start going up to combat inflation that's when they might increase their rates which generally pushes up mortgage interest rates as well we're probably going to be in this low interest rate environment until 2023 so realistically looking at interest rates right now doesn't make a difference interest rates should not be the reason you buy right now congress and their capacity to actually get things done and your finances are much more important than worrying about our interest rates going to go up at least for the time being because it seems so far-fetched that interest rates are going to go up in the short term and again the short term would be 2020 2021 and 2022.
obviously we'll keep an eye on this this video is being recorded in august of 2020 so things could be different a year from now which i imagine i'll have an update video out by then but that brings us up to issue number three so so far we already know that we've got to be careful with what congress is doing we've got to really keep an eye on that the eviction crisis and foreclosure crisis those could be really big issues for us so keep an eye on that you know we're not out of the woods this isn't goldilocks where oh real estate can only go up it's not true we could definitely see some hurt so keeping an eye on your finances in congress very very important interest rates not really so important right now this does though bring up issue number three which in my opinion is much more important issue number three is what i call your protection this is your insulation now many of you who already know me and uh regularly tune in for the real estate content you know i have a real estate playlist so if you want the real estate videos you just watch you click every so often you check to see what's new in the real estate playlist you already know this but in my opinion i don't recommend buying anything that's move-in ready or it's worse this is like the worst i should almost do a separate video on this turn key horrible don't do that don't buy anything turn key uh like like as if it was flipped by a flipper yeah no don't do that uh usually move in ready properties come with the risk that you're paying at the upper end of the market and you're really paying full market value again if not possibly a little bit more than full market value to get into these if you were going to buy something that was move-in ready your best case scenario is just to buy something that's new construction because if you buy new construction yeah you're paying at the top of the market just like you are with a used house that's fixed up but at least you're getting builder warranties that are actually going to be there whereas if some flipper fix up how it fixes up a house and then you buy it you don't get their warranties they sell it to you as is so they could sell you a lemon very very dangerous in my opinion to buy properties that have been fixed up by turnkey companies or flippers you know maybe if you buy a place from a homeowner that's like you know put all their money into the house and they've over improved it maybe that's an opportunity for a move-in ready property but otherwise i usually don't recommend paying at or above market value the reason for that is if let's say you put five percent down on a five hundred thousand dollar house that means you put twenty five grand down you got a loan for four hundred seventy five thousand dollars well now if property values fall ten percent you're instantly upside down by another 25 000 that sucks i would much much much rather see you try to buy that same property that needs a little bit of love a little bit of paint and carpet for 425 or 415 or 400 and then put the five percent down if you put five percent down on 400 well great now all of a sudden it's like you're putting you've got a loan for 380 000 and you're in a neighborhood where houses are selling for 475 to 500 000 great now if property values fall 10 and property values in the neighborhood are like 450 your loan's still at 380.
you've got a lot of room property values could fall 20 and you still got room you have an insulative blanket protecting yourself because you bought below market value rather than buying that perfectly moving ready property now this does mean you're probably gonna have to pick out flooring you're probably gonna have to pick out some carpet and you're gonna have to pick out some paint but you're not gonna go crazy and do something like the fixer-upper tv show where they spend 200 grand fixing up a place and moving walls that generally does not make sense there are rare circumstances where that makes sense and the concept i just described to you is buying in the wedge the beautiful thing about that as well is it lets you refinance easily or get rid of your mortgage insurance easily because your debt is so much less than what the market values are in the neighborhood this is why it's so important if you're going to buy now in my opinion make sure you're getting a good deal try to buy below market value because maybe you found something off market or needed a little bit of work but be careful not to buy something that has massive abnormalities we call these yeah buts in case you want more information on how this all works or all my recommendations i do have a real estate investing course that walks you through exactly how to identify wedge deals i also have a hat will show you how to make cost-effective improvements and we've even partnered with large retail box stores that can help you get massive discounts on your home improvements so these programs are really really good i always recommend starting with the zero-to-millionaire investing course and then the do-it-yourself rental you know management and rental renovations program next but for the time being realize nothing's a certain deal in real estate unless you're getting it below market value that's the only certainty you can get and we've got to be really really careful as to what congress does if congress can't get their head out of the sand and we end up seeing an eviction crisis we'll end up with a foreclosure crisis and the same thing goes with the lapse of the unemployment benefits so congress has a big big stake in this game as to whether or not i feel comfortable blanket recommending that now is a good time to buy and that's why i made this video because i can't just blanket say yep it's always a good time to buy i think that would be a big mistake and it's not even though i'm a real estate investor i just want to be transparent with you now i'm buying properties right now but i'm only buying properties that are substantially under market value to where i know i'm getting an insulative blanket if i needed to turn around and sell them or the market fell i had some kind of protection that protection is so key to making sure you don't end up having massive issues and regrets from buying real estate hopefully you appreciated this video if you like this kind of content it doesn't get as many views as the other kind of stuff so consider sharing this with somebody who's thinking about buying or you know anybody you want to help share some perspective with i think it'd be really helpful for everybody to get sort of a catch up on my thoughts on the real estate market and some recommendations and uh yeah
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