Why Buy Before the Bottom?

This has been a question floating around for the last few days.

First of all, nobody knows where the bottom is.  Some say it is 6 months.  I doubt it after speaking to my banker clients.  Some say 18 months to two years.  Some areas may be trending downward for the next 8-10 years if you believe everything you read.

So why buy now if now is not the bottom?

How about this answer.....Cost averaging.

This is where you might buy one unit at $47,000 and another one at $53,000.  Your average cost per unit is $50,000.  As you continue to buy on the way down, assuming you are buying similar property in similar neighborhoods, your cost average goes down.

Assuming again that rents are consistent, your cost is going down and by extension your monthly profit is going up.

Average cost down.  Average profit up.

This is a practice that can't really be employed if you are only planning to buy one property, but if you plan to get into the market and stay in, then there is no reason to wait for the perfect time.

It is likely that you will even continue to buy as prices start to rise again if you are continuing to create a reasonable margin on your rental income.    

As lending continues to tighten, less and less people will be able to obtain loans.  This means that the rental market will continue to strengthen.