Anyone have an idea where the market is headed?
Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votesAnyone have an idea where the market is headed?
Most Popular Reply
Scott TrenchPro Member
Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votesThe first high level point, for me, is that I think that the housing market is about to see a huge regional variance. Over the next few years, some markets will see appreciation and rent growth, and others will see severe corrections. If I had to guess, on a national basis, I'd expect to see deep correction/crash declines in multifamily real estate (5+ units) and more muted declines or close to flat prices in single family housing in 2024 and beyond, with 2-4 unit properties somewhere in between.
The second high level point is that I personally do not believe interest rates are coming down. I think we are nearing the top in terms of raises from the Fed, but I expect the federal funds rate to remain north of 5% for the next several years, and personally believe that the yield curve will uninvert, seeing mortgage rates and interest rates on commercial real estate investments continue to increase from here. I understand the counterpoints here, but feel that the bet on rates coming down is a bet on the Fed suddenly and dramatically reversing course - something I think unlikely until Jay Powell's term expires and a new chairman is installed.
Diving a bit deeper:
5+ unit multifamily: I'm deeply, deeply bearish. Cap rates are already rising nationwide, and we have 700K+ units currently under construction (multifamily alone) nationwide. Mostly concentrated in the South and West. I think it's really hard to believe in interest rates saving the space from general cap rate expansion, and the glut of supply coming online in the next 16 months is going to continue to crank the vise on operators already struggling by and large to achieve their NOI targets. I think this is going to get worse before it gets better, and 2024 is going to be a part of the "getting worse" phase. I'll be really surprised if any major market in this country sees Cap Rates decline or even stay totally flat in the next 2-3 years. Thus, I believe that only the true value-add plays are viable at this time, and investors need to have a really long time horizon.
Fundamentally, investors have to believe in interest rates coming down, or believe rents will rise rapidly in the commercial space to justify buying property at cap rates below interest rates. I don't believe either, and I bet the market will be painfully forced to agree in a process that will get more excruciating with each passing month for the next 18.
Now, sometime in 2025 and beyond, the bottom hits, and a new dawn will emerge for the multifamily space. All that new construction will cease coming online, and there will be very few new projects hitting the market, and a lot of painful exits may mean less competition for entrants.
In the residential space, I'm cautiously optimistic that a "Crash" (nationwide) will be avoided. however, note that supply is even bigger here with some 900,000 single family units under construction (also concentrated in the south and west). Some markets, like Florida and big chunks of Texas, unfortunately, are unlikely to be spared. These markets, and their neighbors, have a ton working against them. Huge supply growth, huge anticipation of inbound migration that I think, frankly, is overly optimistic), and rising costs, due in part to climate change, do not bode well for these areas. I'd lump cities like Phoenix, Denver, Boise, and Nashville into this category as well, but I'd bet that they will feel a "secondary pain" to many Texas and Florida markets.
Markets that have already taken hits in 2022 and didn't see a big run up in the aftermath of COVID, like California, might actually not see the same pain. I'm not bullish on California, I'm just less bearish on big parts of the state, including Southern California, than the South and other parts of the West.
Markets that didn't change or have been steady for years are likely to be the best friend for investors over the next few years. Upstate New York, big chunks of the midwest, and less urban parts of the West and NorthEast are likely to do great. Chunks of the South as well, but in places that didn't see the big booms of the last few years.
I think that vacation rental operators will feel a ton of pain, relatively speaking, over the next 2-3 years. Prices in these markets can swing by 50-100% in a matter of a few short years, and the party's over in terms of "moderately wealthy" Americans being able to afford vacation homes for the forseeable future. I'll be surprised, frankly, if we do not see a couple of notable vacation rental markets decline precipitously from a pricing standpoint in the next few years. Further, even though demand for buying these properties puts downward pressure on rates, even the well-off investors and homeowners are likely to try to find extra ways of generating cash, and a personal home or vacation home in a vacation rental market, even at lower Average Daily Rates, generates cash for the owner. Expect to see even more competition in markets that allow short term rentals over the next few years, even as the profitability in the sector per unit declines. I think this is going to be really hard.
I think that by end 2026, investors will be feeling very differently about real estate depending on their strategy and market, but very few will have created massive amounts of wealth through market forces.
Investors with a long-term, traditional outlook on investing will see their properties slowly amortize and rents go up over the next 5-10 years, and are still likely to do better than alternatives like the stock market or a conservative bond portfolio. I personally have this viewpoint, and even though I am in Denver with my portfolio (a market I expect to underperform the nation over the next few years), I am holding and will continue to buy (1-2 in the next 2 years).
But, investors chasing great returns in a 2-3 year timeframe may be disappointed in some of the recently hot markets, and those depending on big rent growth and appreciation in any form may be devastated.
As usual, the well-capitalized, long-term investors will soak up inventory, buy when their financial positions are ready, and do so on solid properties that they can and intend to hold for decades. A few will place bets and try to time it, and inevitably, there will be some really smart but unlucky losers, and the same in reverse on the upswing.
Lastly, some real estate entrepreneurs (I use this term to describe wholesalers, flippers, large-scale operators, turnkey providers, etc.) will likely be "business as usual". The spread on deals, flips, etc. is likely to normalize quickly, and these activities will likely be as profitable as ever for the select few who perform them professionally, quickly, and at reasonable scale.
83 Replies
- Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes3yDang, I must be in trouble then. I actually understood what Carlos was saying! 😂
Quote from @Travis Timmons:
Quote from @Carlos Ptriawan:
If the Fed has failed miserably to do their job than their analysis is not super accurate as well, although they're able to lower inflation to three percent.
In bond market we have hedge fund shorting the bond but majority of the funds is long the bond LOL Everyone confused.
So I do have crystal ball for the future , and it says the fed has no crystal ball.
I would say this decade of how the Fed manage the economy is like what the San Francisco local gov doing to their city, they intentionally trying to increase the crime in the city by defunding the police, the Federal gov. is so keen to laying off people LOL these are so weird time in America, they want to create more criminal, homelessness and joblessness in the society. Market say no no no LOLAt no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Bruce Woodruff:
Dang, I must be in trouble then. I actually understood what Carlos was saying! 😂Quote from @Travis Timmons:
Quote from @Carlos Ptriawan:
If the Fed has failed miserably to do their job than their analysis is not super accurate as well, although they're able to lower inflation to three percent.
In bond market we have hedge fund shorting the bond but majority of the funds is long the bond LOL Everyone confused.
So I do have crystal ball for the future , and it says the fed has no crystal ball.
I would say this decade of how the Fed manage the economy is like what the San Francisco local gov doing to their city, they intentionally trying to increase the crime in the city by defunding the police, the Federal gov. is so keen to laying off people LOL these are so weird time in America, they want to create more criminal, homelessness and joblessness in the society. Market say no no no LOLAt no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.
Different IQ level obviously lol
- 3yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
Quote from @Travis Timmons:
Quote from @Carlos Ptriawan:
Quote from @Peter W.:
Powell tends to mention he wants housing costs to go down. In the stock market they say don’t bet against the fed. I expect interest rates to remain high unless housing seems a substantial decline. With that said labor and materials costs suggest new housing can’t go down in price (and old housing as well)
With that said I expected a recession between now to q1 2025 and that doesn’t seem to be shaping up.In my market (Rochester, ny) the economy is primarily driven by defense and healthcare so I expect to be largely unaffected by the broader economy. (We didn’t feel as much of a pinch in 2008 as the rest of the country).
The thing is Fed has failed to crash the stock market , to crash the job market , and to crash the housing market. So far.
If the Fed has failed miserably to do their job than their analysis is not super accurate as well, although they're able to lower inflation to three percent.
In bond market we have hedge fund shorting the bond but majority of the funds is long the bond LOL Everyone confused.
So I do have crystal ball for the future , and it says the fed has no crystal ball.
I would say this decade of how the Fed manage the economy is like what the San Francisco local gov doing to their city, they intentionally trying to increase the crime in the city by defunding the police, the Federal gov. is so keen to laying off people LOL these are so weird time in America, they want to create more criminal, homelessness and joblessness in the society. Market say no no no LOLAt no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.
I agree with @Carlos Ptriawan. Not because the fed doesn’t know what they’re doing, but because they aren’t calling the Legislative and Executive branches out. No matter what party. The feds have no where to go. They have no tools to fight inflation.
As @Carlos Ptriawan has mentioned they can’t keep increasing the rate or the banking system will go bankrupt.
They can’t use the labor market as a tool to fight inflation since unemployment is so low, baby boomers are exiting, Social Security Medicare Medicaid will start to rise and illegal work force won’t show up.
If the feds back off an inch on rates, inflation will skyrocket immediately.
The only solution to inflation is the executive and legislative branches. Stop spending, turn on keystone pipeline/coal/nuclear, cut off illegal immigration, tune up immigrant work visas, tune up white collar immigration.
The other solution is for the world to keep chasing cheap labor and poor environmental practices in India and Malaysia. China has timed out and is no longer a cheap labor source. But India and Malaysia are not chasing the Western dollar so they won’t convert like China. - Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes3y
Quote from @Henry Clark:
Brilliant, my man.....if you decide to throw your hat in, I'm in...
- 3yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votesUnfortunately I want inflation to go extremely high. Just a question of where you are investment wise.
Quote from @Bruce Woodruff:
Quote from @Henry Clark:
Brilliant, my man.....if you decide to throw your hat in, I'm in...
Existing properties become worth more relatively speaking. Get to pay debt off with cheaper dollars.
On our 20 year amorts if inflation is around 7% The principal we pay the last 5 to 7 years will be 10cents in the dollar.
Plus our Belize Teak plantations works around inflation. So inflation is good for us. Just have to sit back and let time go by.
- Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes3y
@Scott Trench couldn't have said it better!
I had coffee with a prominent local investor and realtor last week. He believes that values will decline about 10% during the winter season here in central CA.
It is a great time to get owner finance deals where you can negotiate your debt structure more favorably.
Where there's a will there's a way!
Quote from @Sam Yin:
@Bruce Woodruff
Good morning Bruce. Lots of great points and opinions already. But I'll chime in... from a SoCal perspective...
I think the market is still hot! It's predominately a sellers market still. Although I mainly concentrate on small multifamily, I can tell you that it is HOT!!! It flies off the shelf if it gets listed at any reasonable price. However, most times it never gets listed because the demand is so hot that the agents get it sold with only a few calls.
The last 5 out of 7 deals I closed were all off market. And I had to jump on it because I knew if people got wind, I would lose them. They were all small multifamily, 6 to 20 unit buildings.
My most recent deal, to be closed next week, is also off market. It has a blended COC of 7.5, CAP of about 7.5, and GRM of about 8. Total price was originally about 2M, but I negotiated to 1.85M with a promise of no trades. Its 14 homes and one vacant lot, spans 1.5 blocks, and unit mix from studios to 4 bedrooms.
I am always looking and negotiating and I can tell you that the market here is so competitive that you better have funding at a moments notice. There is no sign os slowing down, only limited inventory. I was negotiating a 32 unit and was almost there when the word got out. Suddenly all kinds of investors jumped it to snatch it up.
I feel that the market will vary from region to region. However, the major markets might have seen their bottom, or close to bottom... with the stagnant prices. Now, there may be a good possibility that it will begin another in up in 2024. I do not have any concrete evidence, just a gutt feeling based on experience.
Sam, I'm in Southern California too and invest mostly small multi family 1-4 units. Recently try to bid a triplex off MLS that was priced about 100k under value. I made an offer with the listing agent but still got beat by 2 cash offers at 1.2 mil. Curious though...how are you cash flowing with these high interest rates? I'm currently working a deal on a offmarket duplex in long beach but the numbers look terrible..almost negative 4k/month cash flow after all expenses with the rate and low rents. Both factors can be corrected over time but itll be a painful slow process. The rate portion we can't control. The deal itself is awesome at 360/sqft where the area goes for 450-500/sqft so that's the main reason I still want to pursue.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
Quote from @Henry Clark:
Quote from @Travis Timmons:
Quote from @Carlos Ptriawan:
Quote from @Peter W.:
Powell tends to mention he wants housing costs to go down. In the stock market they say don’t bet against the fed. I expect interest rates to remain high unless housing seems a substantial decline. With that said labor and materials costs suggest new housing can’t go down in price (and old housing as well)
With that said I expected a recession between now to q1 2025 and that doesn’t seem to be shaping up.In my market (Rochester, ny) the economy is primarily driven by defense and healthcare so I expect to be largely unaffected by the broader economy. (We didn’t feel as much of a pinch in 2008 as the rest of the country).
The thing is Fed has failed to crash the stock market , to crash the job market , and to crash the housing market. So far.
If the Fed has failed miserably to do their job than their analysis is not super accurate as well, although they're able to lower inflation to three percent.
In bond market we have hedge fund shorting the bond but majority of the funds is long the bond LOL Everyone confused.
So I do have crystal ball for the future , and it says the fed has no crystal ball.
I would say this decade of how the Fed manage the economy is like what the San Francisco local gov doing to their city, they intentionally trying to increase the crime in the city by defunding the police, the Federal gov. is so keen to laying off people LOL these are so weird time in America, they want to create more criminal, homelessness and joblessness in the society. Market say no no no LOLAt no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.
I agree with @Carlos Ptriawan. Not because the fed doesn’t know what they’re doing, but because they aren’t calling the Legislative and Executive branches out. No matter what party. The feds have no where to go. They have no tools to fight inflation.
As @Carlos Ptriawan has mentioned they can’t keep increasing the rate or the banking system will go bankrupt.
They can’t use the labor market as a tool to fight inflation since unemployment is so low, baby boomers are exiting, Social Security Medicare Medicaid will start to rise and illegal work force won’t show up.
If the feds back off an inch on rates, inflation will skyrocket immediately.
The only solution to inflation is the executive and legislative branches. Stop spending, turn on keystone pipeline/coal/nuclear, cut off illegal immigration, tune up immigrant work visas, tune up white collar immigration.
The other solution is for the world to keep chasing cheap labor and poor environmental practices in India and Malaysia. China has timed out and is no longer a cheap labor source. But India and Malaysia are not chasing the Western dollar so they won’t convert like China.Ah, but that's where your wrong. See, your thinking like a normal intelligent human being, remember, politicians rule the hill, so you have to answer to such in a way a politician would think.
Now, what is the universal #1 un-matched talent of all politicians, regardless of party lines? They are Gold Medalist's in Can-Kicking. A common ethos on the hill is "never let a crisis go to waste". I have no doubt they will employ these skills, why, because actually solving the problem is too dang difficult. Look, name a problem they have actually solved in last 20 years of any complexity, just 1.
What I expect, is the Fed to do exactly as it has continuously said it's going to do, why any think a reverse is even a potential is beyond me, it's the Fed, there "THE" bank, they think like a bank, there out for their interest's first and foremost, and really how can anyone fault them for it, if your expect a cat to fetch, it ain't the cat's issue why it doesn't work out.
I am betting we will see "TARP 2.0" come into existence, just about time things start to hit unbearable, and doom seems certain, remember "never let a crisis go to waste". Oh, and "TARP 2.0", yeah, the oldest play in the politicians book, why fix a problem when you can borrow your way out of it. Oh, short term you say, well aparently you forgot our Gold Medalist Can-kicking All-Stars, because don't worry there will be a fairy tale of growing GDP out of it or blah-blah-blah, or, heck we'll just borrow MORE....
Via some "special" funding actions, they can argue BOTH directions simultaneously; providing liquidity for those in need, maybe some bridge financing offset for commercial finance, 1% down mortgages for first time home buyers, etc etc, all while allowing the Fed to SQUEEEEEze to "fight inflation", even though there "help" is making more inflation, that then requires more "help" and hey, wouldn't ya-know it there happy to "help" all ya-gotta do is vote for them because "booo" look at that other "meanie" saying ugly things like fiscal responsibility, reign in spending, man what a kill-joy that guy is right.......
Were rocketing into election year. Never in history has an incumbent POTUS been re-elected with a failing economy, I know it, history knows it, and they dang-sure know it. The problem, it's not easy to fix and any real fix would probably take a lot of time and be rather sucky to go through, not electable things. So yeah, my bet is on politicians doing exactly what they do, for exactly why they always do it, how they've always done it before. Status quo, use a crisis to become the "hero" via can-kicking with the "fairy dust" of DC, borrowed money.
- 3yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
Agree 99% with your statement on politicians. Luckily I’m gullible about the 1%.
Great people rise to the occasion or difficult times create great people. The US system is built to be awkward and imperfect with the three legs of government. Luckily the people are the deciding factor. They are 99% wrong and deserve what we get. But during war or the Great Depression we always come together.
.
As far as I am concerned we are at war right now with change. What is abnormal at this moment in time there is not one enemy but several critical changes.
.
1. Our stated national debt versus our gdp has reached critical mass. On top of that social security, Medicare and Medicaid will triple that over the next 30 years.2. Baby boomers timing out.
3. China has timed out as a cheap labor source. It will take 10 years to transition.
4. World population is growing to big. With a petroleum based agricultural system, man made water shortages, no next great Agricultural yield technology, won’t be sustainable. Luckily throughout history China has used famine to control its population.
For the US food is not a foreseeable problem for centuries.
People are pushing climate change. Whether you agree with it or not it can be solved in 2 to 3 years world wide. So if people believe in it they can fix it in 2 to 3 years. Plus make it an REI strategy.
5. We are moving into the Entertainment age. Bronze, iron, agricultural, manufacturing, technology, medical and now Entertainment age. Problem with the entertainment age is you don’t need a lot of workers. We have to figure out how to “give” for free the basics to people.6. That leads to the item I intentionally did not include as my third item in my previous post. Pressure to mov to socialism and communism. We are an REI forum and I did not want to bring that up.
7. All. All great nations have failed when their military cost grew too large and there were no more countries to conquer. The US is fortunate that due to the various ages noted above, plus the Nuclear age you don’t need as large of a military as in the past.
Back to real estate.
A. The US will self correct. It’s built to.
B. Personally we have trimmed our investment portfolio and positioned to take advantage of high inflation.Forget the politicians.
Start small and Make Your Big Mistakes Early.
Worst case my wife, dog and I move to Belize.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @James Hamling:
Quote from @Henry Clark:
Quote from @Travis Timmons:
Quote from @Carlos Ptriawan:
Quote from @Peter W.:
Powell tends to mention he wants housing costs to go down. In the stock market they say don’t bet against the fed. I expect interest rates to remain high unless housing seems a substantial decline. With that said labor and materials costs suggest new housing can’t go down in price (and old housing as well)
With that said I expected a recession between now to q1 2025 and that doesn’t seem to be shaping up.In my market (Rochester, ny) the economy is primarily driven by defense and healthcare so I expect to be largely unaffected by the broader economy. (We didn’t feel as much of a pinch in 2008 as the rest of the country).
The thing is Fed has failed to crash the stock market , to crash the job market , and to crash the housing market. So far.
If the Fed has failed miserably to do their job than their analysis is not super accurate as well, although they're able to lower inflation to three percent.
In bond market we have hedge fund shorting the bond but majority of the funds is long the bond LOL Everyone confused.
So I do have crystal ball for the future , and it says the fed has no crystal ball.
I would say this decade of how the Fed manage the economy is like what the San Francisco local gov doing to their city, they intentionally trying to increase the crime in the city by defunding the police, the Federal gov. is so keen to laying off people LOL these are so weird time in America, they want to create more criminal, homelessness and joblessness in the society. Market say no no no LOLAt no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.
I agree with @Carlos Ptriawan. Not because the fed doesn’t know what they’re doing, but because they aren’t calling the Legislative and Executive branches out. No matter what party. The feds have no where to go. They have no tools to fight inflation.
As @Carlos Ptriawan has mentioned they can’t keep increasing the rate or the banking system will go bankrupt.
They can’t use the labor market as a tool to fight inflation since unemployment is so low, baby boomers are exiting, Social Security Medicare Medicaid will start to rise and illegal work force won’t show up.
If the feds back off an inch on rates, inflation will skyrocket immediately.
The only solution to inflation is the executive and legislative branches. Stop spending, turn on keystone pipeline/coal/nuclear, cut off illegal immigration, tune up immigrant work visas, tune up white collar immigration.
The other solution is for the world to keep chasing cheap labor and poor environmental practices in India and Malaysia. China has timed out and is no longer a cheap labor source. But India and Malaysia are not chasing the Western dollar so they won’t convert like China.Ah, but that's where your wrong. See, your thinking like a normal intelligent human being, remember, politicians rule the hill, so you have to answer to such in a way a politician would think.
Now, what is the universal #1 un-matched talent of all politicians, regardless of party lines? They are Gold Medalist's in Can-Kicking. A common ethos on the hill is "never let a crisis go to waste". I have no doubt they will employ these skills, why, because actually solving the problem is too dang difficult. Look, name a problem they have actually solved in last 20 years of any complexity, just 1.
What I expect, is the Fed to do exactly as it has continuously said it's going to do, why any think a reverse is even a potential is beyond me, it's the Fed, there "THE" bank, they think like a bank, there out for their interest's first and foremost, and really how can anyone fault them for it, if your expect a cat to fetch, it ain't the cat's issue why it doesn't work out.
I am betting we will see "TARP 2.0" come into existence, just about time things start to hit unbearable, and doom seems certain, remember "never let a crisis go to waste". Oh, and "TARP 2.0", yeah, the oldest play in the politicians book, why fix a problem when you can borrow your way out of it. Oh, short term you say, well aparently you forgot our Gold Medalist Can-kicking All-Stars, because don't worry there will be a fairy tale of growing GDP out of it or blah-blah-blah, or, heck we'll just borrow MORE....
Via some "special" funding actions, they can argue BOTH directions simultaneously; providing liquidity for those in need, maybe some bridge financing offset for commercial finance, 1% down mortgages for first time home buyers, etc etc, all while allowing the Fed to SQUEEEEEze to "fight inflation", even though there "help" is making more inflation, that then requires more "help" and hey, wouldn't ya-know it there happy to "help" all ya-gotta do is vote for them because "booo" look at that other "meanie" saying ugly things like fiscal responsibility, reign in spending, man what a kill-joy that guy is right.......
Lets divide and conquer the problem with real estate now :
- The TARP 1.0 is created after the subprime mortgage in 2008.
Now the Fed before started increased the rate, they have their own publication where they indicate, thru their indicator, they're very sure, at this time it would not create chaos in banking financial system as foreclosure now is very low and lot of homeowner owned large equity.
However , they have contrarian view as well thru inflation data, they want to see the "home price" to go down to reduce the inflation as major expense in inflation calculation is the rent/mortgage payment. This is where the Fed doesn't know what to do on how to influence the market in such a way that they expect price to go lower following interest rate hike. This surprise the Fed by a LOT.
- By increasing interest rate, the bond price is going lower obviously. And the Fed understand that the biggest owner of the (MBS) bond such as Wells Fargo and/or Bank of America would have huge losses in their book. But so far it's accounting losses only. They know if that bond doesn't need to be sold (like what SVB did), then it would not cause crisis (yet). But if somehow BAC has to sell the bond, the gov. may have to rescue the big bank as well which may cause TARP 2.0 very quickly.- Most of the troubled with real estate is on certain asset class only, in particular, office building A/B , mall and/or hotels. If you have 1980/1990 office building asset class in SF basically your money is cut by 35%. Everyone knows that. Now that asset is held mostly by Regional Banks. They have large losses due to its massive valuation mismatch. We still do not know the future about the valuation of office building, as 2023 pricing is set back as far as 2005. This is what the Fed doesn't know what would be the impact and where the leak would be.
Are they going to bring bridge financial bridging to some Regional ? may be- The TARP 2.0 is actually already happening @James Hamling, this happen in very private transaction for US to save "Credit Suisses" crises where US gov. is loaning cheaper dollar than normal to their European counterpart to save their banks. In much cheaper transaction, the TARP 2.0 is done discreetly to SVB and FRB.
So yes like you said, there are still many unknown that the Fed doesnot understand as well but it seems they would do few minor selective (and reactive) TARP 2.0 - Member since 2019 · 7k+ posts · 4k+ votes3y
There're some more minor trends related to real estate very recently :
- across the board, until very recently, the flipping activity increases.
- investors are increasing buying home again.
- migration and job creation is very visible in the south and midwest.
- from redfin data, looks like the demand in Q3 to Q4 this year would follow seasonality, a flat or minor decline market.
- based on very recent statistical data, the home price declines in 2022 only occured in top tier housing only, in select market like SF or Seattle.
- everything else is just fine, so even the trend within one zip code is very different for different type of class of Single Family. SF luxury market had huge price reduction, but average Joe house is just fine/flat. Quote from @David P.:
Quote from @Sam Yin:
@Bruce Woodruff
Good morning Bruce. Lots of great points and opinions already. But I'll chime in... from a SoCal perspective...
I think the market is still hot! It's predominately a sellers market still. Although I mainly concentrate on small multifamily, I can tell you that it is HOT!!! It flies off the shelf if it gets listed at any reasonable price. However, most times it never gets listed because the demand is so hot that the agents get it sold with only a few calls.
The last 5 out of 7 deals I closed were all off market. And I had to jump on it because I knew if people got wind, I would lose them. They were all small multifamily, 6 to 20 unit buildings.
My most recent deal, to be closed next week, is also off market. It has a blended COC of 7.5, CAP of about 7.5, and GRM of about 8. Total price was originally about 2M, but I negotiated to 1.85M with a promise of no trades. Its 14 homes and one vacant lot, spans 1.5 blocks, and unit mix from studios to 4 bedrooms.
I am always looking and negotiating and I can tell you that the market here is so competitive that you better have funding at a moments notice. There is no sign os slowing down, only limited inventory. I was negotiating a 32 unit and was almost there when the word got out. Suddenly all kinds of investors jumped it to snatch it up.
I feel that the market will vary from region to region. However, the major markets might have seen their bottom, or close to bottom... with the stagnant prices. Now, there may be a good possibility that it will begin another in up in 2024. I do not have any concrete evidence, just a gutt feeling based on experience.
Sam, I'm in Southern California too and invest mostly small multi family 1-4 units. Recently try to bid a triplex off MLS that was priced about 100k under value. I made an offer with the listing agent but still got beat by 2 cash offers at 1.2 mil. Curious though...how are you cash flowing with these high interest rates? I'm currently working a deal on a offmarket duplex in long beach but the numbers look terrible..almost negative 4k/month cash flow after all expenses with the rate and low rents. Both factors can be corrected over time but itll be a painful slow process. The rate portion we can't control. The deal itself is awesome at 360/sqft where the area goes for 450-500/sqft so that's the main reason I still want to pursue.
The simplest answer is to adjust the price until it fits your criteria. If it's not accepted, move on. Do not change your core criteria fit the price, that's a fail.
back in Feb, there was an ON MARKET deal 6-units listed for $850K. For it to work based on current rents, the best I can do would be 770K. To the seller, that was absurd. Remember, to other investors, they would chase it at 700 to 780, but NOT at 850. Price dropped to 825K and it sat on Zillow for 177 days. So I made an offer for 770K. Seller scoffed. Seller came back a few weeks later at 790K. I said NO and moved on. About a month later, Seller asked if I was willing to put 770k in writing. I did, but I also asked the Seller to raise the rent on half if the units during escrow. And before we closed, I got another 5k credit. In April, it closed escrow, cash flowed, and I was able to get fixed debt of about 75% LTV at 5.85%.
Fast forward a few months, there was an OFF MARKET deal of 10 units, consisting of a 6plex, 2plex, and 2 SFRs next to each other on separate lots. The owner wanted out of the business and the numbers were decent. Rates had crept to almost 7%. As I walked the property, I noticed a vacant lot next to them, which would cover the entire block. So I made a deal on that. As I was a bout to leave, I got wind that there was a 4 plex on the next block for sale too, but the numbers were not quit there... because it was a 4plex obviously. I had just about enough in my savings and if I 1031x to purchase all of them as they were. But it would be tight and I was not about to put that kinda stress on me. To combine total was 2M. It could still work, but numbers were tight. I negotiated all of them to a combined 1.85M, with a verbal promise of no trades. Then I shopped Freddy Mac for a 6.81% loan at 80%LTV. In this case, Freddie Mac got stretchy due to the vacant lot. Long story short, I ended up with a local credit union with 75%LTV at 6.61% for 10 year, amortized 30 years, due in 20 years, with a rate cap of about 9% and a PPP of 3, 2, 1. It should close in 6 days.
Biggest hurdle for both was insurance!!!
Easiest hurdle for both was making them cash flow at COE. Stick to your criteria. If it doesnt fit, move on. No deal is better than a bad deal. Do not bank on appreciation... account for it, but it's no guarantee.
Final thoughts, the 1 to 4 units are generally going to be much more inefficient for pricing because they are so accessible to people. In the about case, I combined all to blend the income in order to make the deal worth while.There are still deals to be had in SoCal. I have seen it. I just do not have the capital to take them all down, nor do I have the time since I'm a solo operator. It's ok to send in a low ball offer, they the seller can just say No. Do not change your underwriting, if anything, increase your expenses. For the above deal, I underwrote $6K for my insurance. Best I could get was $11K. Luckily, I'm still at 1.34 DCR, so there is plenty of room.
Keep searching. Keep making offers. Keep in your buy box. You will find it and you will score. Long Beach is a cool community. I lived there twice and owned a house in Bixby Knolls... my biggest regret was selling it. I bought it in 2002 for 250K...
Quote from @Sam Yin:
Quote from @David P.:
Quote from @Sam Yin:
@Bruce Woodruff
Good morning Bruce. Lots of great points and opinions already. But I'll chime in... from a SoCal perspective...
I think the market is still hot! It's predominately a sellers market still. Although I mainly concentrate on small multifamily, I can tell you that it is HOT!!! It flies off the shelf if it gets listed at any reasonable price. However, most times it never gets listed because the demand is so hot that the agents get it sold with only a few calls.
The last 5 out of 7 deals I closed were all off market. And I had to jump on it because I knew if people got wind, I would lose them. They were all small multifamily, 6 to 20 unit buildings.
My most recent deal, to be closed next week, is also off market. It has a blended COC of 7.5, CAP of about 7.5, and GRM of about 8. Total price was originally about 2M, but I negotiated to 1.85M with a promise of no trades. Its 14 homes and one vacant lot, spans 1.5 blocks, and unit mix from studios to 4 bedrooms.
I am always looking and negotiating and I can tell you that the market here is so competitive that you better have funding at a moments notice. There is no sign os slowing down, only limited inventory. I was negotiating a 32 unit and was almost there when the word got out. Suddenly all kinds of investors jumped it to snatch it up.
I feel that the market will vary from region to region. However, the major markets might have seen their bottom, or close to bottom... with the stagnant prices. Now, there may be a good possibility that it will begin another in up in 2024. I do not have any concrete evidence, just a gutt feeling based on experience.
Sam, I'm in Southern California too and invest mostly small multi family 1-4 units. Recently try to bid a triplex off MLS that was priced about 100k under value. I made an offer with the listing agent but still got beat by 2 cash offers at 1.2 mil. Curious though...how are you cash flowing with these high interest rates? I'm currently working a deal on a offmarket duplex in long beach but the numbers look terrible..almost negative 4k/month cash flow after all expenses with the rate and low rents. Both factors can be corrected over time but itll be a painful slow process. The rate portion we can't control. The deal itself is awesome at 360/sqft where the area goes for 450-500/sqft so that's the main reason I still want to pursue.
The simplest answer is to adjust the price until it fits your criteria. If it's not accepted, move on. Do not change your core criteria fit the price, that's a fail.
back in Feb, there was an ON MARKET deal 6-units listed for $850K. For it to work based on current rents, the best I can do would be 770K. To the seller, that was absurd. Remember, to other investors, they would chase it at 700 to 780, but NOT at 850. Price dropped to 825K and it sat on Zillow for 177 days. So I made an offer for 770K. Seller scoffed. Seller came back a few weeks later at 790K. I said NO and moved on. About a month later, Seller asked if I was willing to put 770k in writing. I did, but I also asked the Seller to raise the rent on half if the units during escrow. And before we closed, I got another 5k credit. In April, it closed escrow, cash flowed, and I was able to get fixed debt of about 75% LTV at 5.85%.
Fast forward a few months, there was an OFF MARKET deal of 10 units, consisting of a 6plex, 2plex, and 2 SFRs next to each other on separate lots. The owner wanted out of the business and the numbers were decent. Rates had crept to almost 7%. As I walked the property, I noticed a vacant lot next to them, which would cover the entire block. So I made a deal on that. As I was a bout to leave, I got wind that there was a 4 plex on the next block for sale too, but the numbers were not quit there... because it was a 4plex obviously. I had just about enough in my savings and if I 1031x to purchase all of them as they were. But it would be tight and I was not about to put that kinda stress on me. To combine total was 2M. It could still work, but numbers were tight. I negotiated all of them to a combined 1.85M, with a verbal promise of no trades. Then I shopped Freddy Mac for a 6.81% loan at 80%LTV. In this case, Freddie Mac got stretchy due to the vacant lot. Long story short, I ended up with a local credit union with 75%LTV at 6.61% for 10 year, amortized 30 years, due in 20 years, with a rate cap of about 9% and a PPP of 3, 2, 1. It should close in 6 days.
Biggest hurdle for both was insurance!!!
Easiest hurdle for both was making them cash flow at COE. Stick to your criteria. If it doesnt fit, move on. No deal is better than a bad deal. Do not bank on appreciation... account for it, but it's no guarantee.
Final thoughts, the 1 to 4 units are generally going to be much more inefficient for pricing because they are so accessible to people. In the about case, I combined all to blend the income in order to make the deal worth while.There are still deals to be had in SoCal. I have seen it. I just do not have the capital to take them all down, nor do I have the time since I'm a solo operator. It's ok to send in a low ball offer, they the seller can just say No. Do not change your underwriting, if anything, increase your expenses. For the above deal, I underwrote $6K for my insurance. Best I could get was $11K. Luckily, I'm still at 1.34 DCR, so there is plenty of room.
Keep searching. Keep making offers. Keep in your buy box. You will find it and you will score. Long Beach is a cool community. I lived there twice and owned a house in Bixby Knolls... my biggest regret was selling it. I bought it in 2002 for 250K...
Good idea bout getting the seller to raise the rents. I thought about asking the seller to deliver one unit vacant but knowing the seller there will be push back. Just for reference...i purchased a duplex from the same seller last year and that is why he is offerring it to me off market. He built 3 new construction duplex's in 2007 all next to one another on the same street. I would be purchasing the identical unit I purchased last year but next door but this time with tenants who are under market by a lot and my rate will be 2-3% higher. Last year I was able to get the owners unit vacant but that was because the tenants moved out voluntarily. He is offering me a discount of about 50k (1.28 mil last year vs 1.23 mil now). I don't think prices have changed much in a year down here in socal. The zillow zestimate says the property is worth 1.5 mil range so the price sounds good but the cash flow is not. They are 3500 sqft duplex so good size and good lay outs. Definately a great property long term in an A neighborhood...about 2 miles from Bixby knolls. Im thinking of biting the bullet few years until I can refi.
- 3yAlan AsriantsBusiness MemberReal Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
Truth is, no one knows.
But you can make certain assumptions based on the behaviour of the market today
I recently posted about this topic:
https://www.biggerpockets.com/forums/921/topics/1131239-3-ra...
Alan Asriants - New Century Real Estate 592 Reviews - Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes3y
Quote from @James Hamling:
Yep, have you noticed the renewed call for masks and vaccines already starting....?
- Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes3y
Quote from @Henry Clark:
6. That leads to the item I intentionally did not include as my third item in my previous post. Pressure to mov to socialism and communism. We are an REI forum and I did not want to bring that up.
Yes, we're an REI forum...but that point is salient to the discussion of RE and it's future in this country. Can you imagine the changes that a move in that direction would bring t our industry? Not only in Government regulations/confiscation, but just in overall mindset of new investors?
- 3yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
Great post. I have a few responses and questions for you.
1. On the debt. I share your concern about entitlement spending specifically going up over the next few decades. BUT... I just don't know how we know when we've actually hit "unsustainable" levels of debt. I don't want the US to be slow economic growth and negative population growth like Japan. But... now that we're over 100%... what level is unsustainable and why? 122%? 163%? I'm genuinely asking.
4. I think we're actually seeing conflicting population trends around the world. Europe is shrinking while some countries in Africa continue to grow rapidly. India has now passed China years earlier than was predicted as you pointed out, and the global population might actually FALL between 2050 and 2100. What happens then? I don't think we know... since it hasn't happened in 700 years. And never naturally.
6. Same response as 4 - I think we're seeing conflicting trends, both around the world and within the US.
I personally am concerned that if the US doesn't increase skilled, legal immigration significantly, we will start to look more like Europe within 25 years. And I don't want that.
Thoughts, reactions?
- 3yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
My opinions have as great or little value as anyone else. I always tell people it’s your money, you’re always right.
When it come to crystal balls and opinions I’m always right because that is how we invest our money right or wrong. That’s what I love about BP two different opinions can be right. It’s their money.
With that said 100%, 150%, 500% when have we hit the unsustainable mark? Obviously no direct answer, but I will give the approach.Yes my numbers are wrong. Make them more accurate.
National gdp is around $25T. Federal debt is around $33T. Ratio of 33/25 let’s say. Back in the 80s when the fed rate was 20% our debt to gdp rate was around 10 to 15%. The feds have no tools to work with other than scare tactics.
Let’s use that metric of debt to gdp as the canary in a coal mine metric. First the $33T debt number above is just the recognized debt. There is another $1xxT debt not documented for social, Medicare, Medicaid which is now coming due for the baby boomers. This undocumented debt was not near as high back in the 80’s. So we are talking about a factor of say 6 national debt to gdp.
Now the problem is gdp is not federal taxes. Now let’s say the $25T gets taxed at 25% across the board. And this is not all profit or net income, so this number is to high. The fed only has about $6T to cover its ongoing expenses, pay interest and pay principal.Now let’s address your question. Put everything the government spends money on a continuum of what we would give up and not spend on. Now you get into politics. At say 500% where we are now you say cut back in Farm programs. You can’t cut back in all the farm program. Something else has to give. Then let’s say at 800% we cut back on roads and transportation. Then at 1000%, then at 1500%. etc. It becomes a question of which number is small enough politically to say I tried, but I still get elected. Next it is who has the largest lobby.
.
Next you have to move to socialism and communism. Because now you have reached the point where there is not enough and you can’t politically divvy up the pie anymore. Everyone has to become “equal”. Then you spiral downward and move to a black market economy.Now have we reached “that” point? For me yes. Won’t go into details but we or I for my family have looked across the board and out steps in place. Now, I don’t care what happens, we are good.
Quote from @David P.:
Quote from @Sam Yin:
Quote from @David P.:
Quote from @Sam Yin:
@Bruce Woodruff
Good morning Bruce. Lots of great points and opinions already. But I'll chime in... from a SoCal perspective...
I think the market is still hot! It's predominately a sellers market still. Although I mainly concentrate on small multifamily, I can tell you that it is HOT!!! It flies off the shelf if it gets listed at any reasonable price. However, most times it never gets listed because the demand is so hot that the agents get it sold with only a few calls.
The last 5 out of 7 deals I closed were all off market. And I had to jump on it because I knew if people got wind, I would lose them. They were all small multifamily, 6 to 20 unit buildings.
My most recent deal, to be closed next week, is also off market. It has a blended COC of 7.5, CAP of about 7.5, and GRM of about 8. Total price was originally about 2M, but I negotiated to 1.85M with a promise of no trades. Its 14 homes and one vacant lot, spans 1.5 blocks, and unit mix from studios to 4 bedrooms.
I am always looking and negotiating and I can tell you that the market here is so competitive that you better have funding at a moments notice. There is no sign os slowing down, only limited inventory. I was negotiating a 32 unit and was almost there when the word got out. Suddenly all kinds of investors jumped it to snatch it up.
I feel that the market will vary from region to region. However, the major markets might have seen their bottom, or close to bottom... with the stagnant prices. Now, there may be a good possibility that it will begin another in up in 2024. I do not have any concrete evidence, just a gutt feeling based on experience.
Sam, I'm in Southern California too and invest mostly small multi family 1-4 units. Recently try to bid a triplex off MLS that was priced about 100k under value. I made an offer with the listing agent but still got beat by 2 cash offers at 1.2 mil. Curious though...how are you cash flowing with these high interest rates? I'm currently working a deal on a offmarket duplex in long beach but the numbers look terrible..almost negative 4k/month cash flow after all expenses with the rate and low rents. Both factors can be corrected over time but itll be a painful slow process. The rate portion we can't control. The deal itself is awesome at 360/sqft where the area goes for 450-500/sqft so that's the main reason I still want to pursue.
The simplest answer is to adjust the price until it fits your criteria. If it's not accepted, move on. Do not change your core criteria fit the price, that's a fail.
back in Feb, there was an ON MARKET deal 6-units listed for $850K. For it to work based on current rents, the best I can do would be 770K. To the seller, that was absurd. Remember, to other investors, they would chase it at 700 to 780, but NOT at 850. Price dropped to 825K and it sat on Zillow for 177 days. So I made an offer for 770K. Seller scoffed. Seller came back a few weeks later at 790K. I said NO and moved on. About a month later, Seller asked if I was willing to put 770k in writing. I did, but I also asked the Seller to raise the rent on half if the units during escrow. And before we closed, I got another 5k credit. In April, it closed escrow, cash flowed, and I was able to get fixed debt of about 75% LTV at 5.85%.
Fast forward a few months, there was an OFF MARKET deal of 10 units, consisting of a 6plex, 2plex, and 2 SFRs next to each other on separate lots. The owner wanted out of the business and the numbers were decent. Rates had crept to almost 7%. As I walked the property, I noticed a vacant lot next to them, which would cover the entire block. So I made a deal on that. As I was a bout to leave, I got wind that there was a 4 plex on the next block for sale too, but the numbers were not quit there... because it was a 4plex obviously. I had just about enough in my savings and if I 1031x to purchase all of them as they were. But it would be tight and I was not about to put that kinda stress on me. To combine total was 2M. It could still work, but numbers were tight. I negotiated all of them to a combined 1.85M, with a verbal promise of no trades. Then I shopped Freddy Mac for a 6.81% loan at 80%LTV. In this case, Freddie Mac got stretchy due to the vacant lot. Long story short, I ended up with a local credit union with 75%LTV at 6.61% for 10 year, amortized 30 years, due in 20 years, with a rate cap of about 9% and a PPP of 3, 2, 1. It should close in 6 days.
Biggest hurdle for both was insurance!!!
Easiest hurdle for both was making them cash flow at COE. Stick to your criteria. If it doesnt fit, move on. No deal is better than a bad deal. Do not bank on appreciation... account for it, but it's no guarantee.
Final thoughts, the 1 to 4 units are generally going to be much more inefficient for pricing because they are so accessible to people. In the about case, I combined all to blend the income in order to make the deal worth while.There are still deals to be had in SoCal. I have seen it. I just do not have the capital to take them all down, nor do I have the time since I'm a solo operator. It's ok to send in a low ball offer, they the seller can just say No. Do not change your underwriting, if anything, increase your expenses. For the above deal, I underwrote $6K for my insurance. Best I could get was $11K. Luckily, I'm still at 1.34 DCR, so there is plenty of room.
Keep searching. Keep making offers. Keep in your buy box. You will find it and you will score. Long Beach is a cool community. I lived there twice and owned a house in Bixby Knolls... my biggest regret was selling it. I bought it in 2002 for 250K...
Good idea bout getting the seller to raise the rents. I thought about asking the seller to deliver one unit vacant but knowing the seller there will be push back. Just for reference...i purchased a duplex from the same seller last year and that is why he is offerring it to me off market. He built 3 new construction duplex's in 2007 all next to one another on the same street. I would be purchasing the identical unit I purchased last year but next door but this time with tenants who are under market by a lot and my rate will be 2-3% higher. Last year I was able to get the owners unit vacant but that was because the tenants moved out voluntarily. He is offering me a discount of about 50k (1.28 mil last year vs 1.23 mil now). I don't think prices have changed much in a year down here in socal. The zillow zestimate says the property is worth 1.5 mil range so the price sounds good but the cash flow is not. They are 3500 sqft duplex so good size and good lay outs. Definately a great property long term in an A neighborhood...about 2 miles from Bixby knolls. Im thinking of biting the bullet few years until I can refi.
That might be worth it, as long as you can afford to keep it as is until you can get to market rents. There are many factors... since this is in a very desirable area and new construction, breaking even at the start may be OK. However, unless you have some MAJOR upside, I would still NOT buy anything that is negative on the cash flow. Based on what you described, I would personally be willing to buy at a price where COE will yield at least 2% COC.
I personally do not put all my eggs in appreciation. Some people may disagree, but it's just my personal criteria.
Quote from @Henry Clark:
My opinions have as great or little value as anyone else. I always tell people it’s your money, you’re always right.
When it come to crystal balls and opinions I’m always right because that is how we invest our money right or wrong. That’s what I love about BP two different opinions can be right. It’s their money.
With that said 100%, 150%, 500% when have we hit the unsustainable mark? Obviously no direct answer, but I will give the approach.Yes my numbers are wrong. Make them more accurate.
National gdp is around $25T. Federal debt is around $33T. Ratio of 33/25 let’s say. Back in the 80s when the fed rate was 20% our debt to gdp rate was around 10 to 15%. The feds have no tools to work with other than scare tactics.
Let’s use that metric of debt to gdp as the canary in a coal mine metric. First the $33T debt number above is just the recognized debt. There is another $1xxT debt not documented for social, Medicare, Medicaid which is now coming due for the baby boomers. This undocumented debt was not near as high back in the 80’s. So we are talking about a factor of say 6 national debt to gdp.
Now the problem is gdp is not federal taxes. Now let’s say the $25T gets taxed at 25% across the board. And this is not all profit or net income, so this number is to high. The fed only has about $6T to cover its ongoing expenses, pay interest and pay principal.Now let’s address your question. Put everything the government spends money on a continuum of what we would give up and not spend on. Now you get into politics. At say 500% where we are now you say cut back in Farm programs. You can’t cut back in all the farm program. Something else has to give. Then let’s say at 800% we cut back on roads and transportation. Then at 1000%, then at 1500%. etc. It becomes a question of which number is small enough politically to say I tried, but I still get elected. Next it is who has the largest lobby.
.
Next you have to move to socialism and communism. Because now you have reached the point where there is not enough and you can’t politically divvy up the pie anymore. Everyone has to become “equal”. Then you spiral downward and move to a black market economy.Now have we reached “that” point? For me yes. Won’t go into details but we or I for my family have looked across the board and out steps in place. Now, I don’t care what happens, we are good.
I am hoping more people feel similar social/economic pressures and have the comprehension to foresee such political futures. May then there can be a break away from this trend and we vote in better leaders.
In the end, as heads of our respective households, we should always do what we can, with what we have, to keep keep our families/loved ones safe guarded from such bad possibilities.
Not everyone will agree or will have the intestinal fortitude to do so. But then again, not everyone has been exposed to the various governments. A lot of people read about such things and watch movies/documentaries about it. Believe me, it not the same as experiencing it. I lived it and got lucky enough to escape from communism and totalitarianism. It was brutal... compared to the USA. For those that want a better glimpse, try extended vacations in 3rd world countries, away from tourist hot spots. Then you may understand that there is a chance America might begin to slip into that path if things keep going the way they do.
Fight to keep Capitalism alive!!!
Just my .02.- 3yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
Item 4 above world population falls. Never happened before.
Actually it has happened throughout history.
.
Black plague. Had the dark ages for about 600 years.
.
China has had several periods of starvation over thousands of year. That’s why they have their Roads program into Africa and Brazil. China is 90% desert. They know food controls people.I’m sitting on top of a hill building a rock wall in Belize. There are about 360,000 people now. There were about 3,000,000 until Europeans brought measle. So the world population falls. We still have a problem. India, Malaysia and Africa in the internet can see how we live. They want that. The only way they get that is to go through manufacturing and an oil based economy. So you still have the same resource issues. The problem is the Transition period from third world to first world. They still need to have 10 babies. 5 to die. 1 male to be successful and carry the family name. With medical and nutrition advances that are provided to them, more of them will live.
- 3yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
@Nicholas L.. Item 6 above type of government.
When you run short of resources you must move towards socialism or communism. But it’s a death spiral. Because if you and me are equal, and I dont work hard but get the same, then you won’t work hard. Economy spirals down.
.
The only way it works is for the US to be the shining crystal ball. As an example. Also the people who are griping need to just walk the talk. If they believe in climate control they can fix it in 3 years. If they believe we owe our wealth to the rest of the world they can take their wealth and go to that country. If they think we are privileged then they should help those countries jump the technology barriers on food, health, education, etc. Education is the greatest birth control in the world. Stop talking about starving kids and arguing about birth control and abortion.
From an REI standpoint the baby boomers will need 4 to 5 times the existing retirement homes. Plus the workers. That is our item 6 impact in the US. That is an 100% crystal ball REI strategy. - 3yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
thanks for all the responses. great stuff. agree that we need more retirement homes and that for now, population in the US continues to go up. it gets murky 25+ years out...
- 3yPeter MckernanBusiness MemberResidential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
Quote from @Sam Yin:
Quote from @David P.:
Quote from @Sam Yin:
Quote from @David P.:
Quote from @Sam Yin:
@Bruce Woodruff
Good morning Bruce. Lots of great points and opinions already. But I'll chime in... from a SoCal perspective...
I think the market is still hot! It's predominately a sellers market still. Although I mainly concentrate on small multifamily, I can tell you that it is HOT!!! It flies off the shelf if it gets listed at any reasonable price. However, most times it never gets listed because the demand is so hot that the agents get it sold with only a few calls.
The last 5 out of 7 deals I closed were all off market. And I had to jump on it because I knew if people got wind, I would lose them. They were all small multifamily, 6 to 20 unit buildings.
My most recent deal, to be closed next week, is also off market. It has a blended COC of 7.5, CAP of about 7.5, and GRM of about 8. Total price was originally about 2M, but I negotiated to 1.85M with a promise of no trades. Its 14 homes and one vacant lot, spans 1.5 blocks, and unit mix from studios to 4 bedrooms.
I am always looking and negotiating and I can tell you that the market here is so competitive that you better have funding at a moments notice. There is no sign os slowing down, only limited inventory. I was negotiating a 32 unit and was almost there when the word got out. Suddenly all kinds of investors jumped it to snatch it up.
I feel that the market will vary from region to region. However, the major markets might have seen their bottom, or close to bottom... with the stagnant prices. Now, there may be a good possibility that it will begin another in up in 2024. I do not have any concrete evidence, just a gutt feeling based on experience.
Sam, I'm in Southern California too and invest mostly small multi family 1-4 units. Recently try to bid a triplex off MLS that was priced about 100k under value. I made an offer with the listing agent but still got beat by 2 cash offers at 1.2 mil. Curious though...how are you cash flowing with these high interest rates? I'm currently working a deal on a offmarket duplex in long beach but the numbers look terrible..almost negative 4k/month cash flow after all expenses with the rate and low rents. Both factors can be corrected over time but itll be a painful slow process. The rate portion we can't control. The deal itself is awesome at 360/sqft where the area goes for 450-500/sqft so that's the main reason I still want to pursue.
The simplest answer is to adjust the price until it fits your criteria. If it's not accepted, move on. Do not change your core criteria fit the price, that's a fail.
back in Feb, there was an ON MARKET deal 6-units listed for $850K. For it to work based on current rents, the best I can do would be 770K. To the seller, that was absurd. Remember, to other investors, they would chase it at 700 to 780, but NOT at 850. Price dropped to 825K and it sat on Zillow for 177 days. So I made an offer for 770K. Seller scoffed. Seller came back a few weeks later at 790K. I said NO and moved on. About a month later, Seller asked if I was willing to put 770k in writing. I did, but I also asked the Seller to raise the rent on half if the units during escrow. And before we closed, I got another 5k credit. In April, it closed escrow, cash flowed, and I was able to get fixed debt of about 75% LTV at 5.85%.
Fast forward a few months, there was an OFF MARKET deal of 10 units, consisting of a 6plex, 2plex, and 2 SFRs next to each other on separate lots. The owner wanted out of the business and the numbers were decent. Rates had crept to almost 7%. As I walked the property, I noticed a vacant lot next to them, which would cover the entire block. So I made a deal on that. As I was a bout to leave, I got wind that there was a 4 plex on the next block for sale too, but the numbers were not quit there... because it was a 4plex obviously. I had just about enough in my savings and if I 1031x to purchase all of them as they were. But it would be tight and I was not about to put that kinda stress on me. To combine total was 2M. It could still work, but numbers were tight. I negotiated all of them to a combined 1.85M, with a verbal promise of no trades. Then I shopped Freddy Mac for a 6.81% loan at 80%LTV. In this case, Freddie Mac got stretchy due to the vacant lot. Long story short, I ended up with a local credit union with 75%LTV at 6.61% for 10 year, amortized 30 years, due in 20 years, with a rate cap of about 9% and a PPP of 3, 2, 1. It should close in 6 days.
Biggest hurdle for both was insurance!!!
Easiest hurdle for both was making them cash flow at COE. Stick to your criteria. If it doesnt fit, move on. No deal is better than a bad deal. Do not bank on appreciation... account for it, but it's no guarantee.
Final thoughts, the 1 to 4 units are generally going to be much more inefficient for pricing because they are so accessible to people. In the about case, I combined all to blend the income in order to make the deal worth while.There are still deals to be had in SoCal. I have seen it. I just do not have the capital to take them all down, nor do I have the time since I'm a solo operator. It's ok to send in a low ball offer, they the seller can just say No. Do not change your underwriting, if anything, increase your expenses. For the above deal, I underwrote $6K for my insurance. Best I could get was $11K. Luckily, I'm still at 1.34 DCR, so there is plenty of room.
Keep searching. Keep making offers. Keep in your buy box. You will find it and you will score. Long Beach is a cool community. I lived there twice and owned a house in Bixby Knolls... my biggest regret was selling it. I bought it in 2002 for 250K...
Good idea bout getting the seller to raise the rents. I thought about asking the seller to deliver one unit vacant but knowing the seller there will be push back. Just for reference...i purchased a duplex from the same seller last year and that is why he is offerring it to me off market. He built 3 new construction duplex's in 2007 all next to one another on the same street. I would be purchasing the identical unit I purchased last year but next door but this time with tenants who are under market by a lot and my rate will be 2-3% higher. Last year I was able to get the owners unit vacant but that was because the tenants moved out voluntarily. He is offering me a discount of about 50k (1.28 mil last year vs 1.23 mil now). I don't think prices have changed much in a year down here in socal. The zillow zestimate says the property is worth 1.5 mil range so the price sounds good but the cash flow is not. They are 3500 sqft duplex so good size and good lay outs. Definately a great property long term in an A neighborhood...about 2 miles from Bixby knolls. Im thinking of biting the bullet few years until I can refi.
That might be worth it, as long as you can afford to keep it as is until you can get to market rents. There are many factors... since this is in a very desirable area and new construction, breaking even at the start may be OK. However, unless you have some MAJOR upside, I would still NOT buy anything that is negative on the cash flow. Based on what you described, I would personally be willing to buy at a price where COE will yield at least 2% COC.
I personally do not put all my eggs in appreciation. Some people may disagree, but it's just my personal criteria.
Working on a deal right now in SoCal, which is off market and will be a 19% return once all done and listed. To your point there are deals to be had in Socal
The McKernan Group4.957 Reviews - Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
Quote from @Bruce Woodruff:
Quote from @James Hamling:
Yep, have you noticed the renewed call for masks and vaccines already starting....?
ugh.... Yeah, apparently it isn't just Hollywood who's lost it's creativity and is stuck into just doing rehashes anymore, right.
So a while back, I'm at my Dr, with COVID. Nurses all in hazmat suites, stuck to my own "special" section like I'm off-gassing aid's or something. My Dr comes in no mask, no face shield nothing, just normal. Does all the things per normal Dr visit right. At end asks if I have any questions, well hell yeah how about this giant purple poka-dotted elephant bouncing around the room!
So I ask her, "well yeah Doc, uhm, why arn't you wearing any PPP? I'm confused, aren't you worried about catching" and she cut's me off with an eye-roll "COVID, lol." She leans in toward me like to share a secret and says "it's all bull-sh#t" and sits back with a little matter of fact grin and a nod. Lol.
And she is not just any Dr., she's a one of the top doc's there.
She tells me yeah, if your diet is a pound of bacon a day and your 150lbs overweight, yeah, it can kill ya, just like ANY cold or virus can.
Told me what I should fear is whatever the hell there putting in these shots, whatever the heck they may be doing, and influenza.
Yeah, that was an interesting Dr visit.
Oh, and she said if asked she'd deny she ever said any of it because she likes her job, lol.
My cousin dies from covid, last time he was under 300lbs he was like 12. He was in 40's when died. Sucks, it does, I liked him, but who knows how many bacon sandwiches away from a coronary he was, we all knew it. Knew another guy, covid kicked his butt and he soon died, mid 80's. he was great for 80's but still, 80's, he coulda tripped and fallen down on a sidewalk and died.
At the height of covid heart disease was still the #1 killer in US, was before, still is today. In time I wrote this something like 7 people died from heart disease..... kinda bonkers to think about like that.
But-ahhhh.... so where is the bacon-patrol?
How's McD's still allowed to facilitate mass murder?
And butter, that psychotic killer, wow let's not even mention that Dr-of-death roaming the streets.
Seriously, are people not capable of the most basic self-thought anymore? We have the internet, really, how long does it take to google "#1 killer in the us"? Does nobody question a single thing the idiot-box tells them anymore?
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