Respect the Covid Premium Price?

Question

In my area due to demand of people relocating out of NYC at least part time, homes in rural mountain areas are listing for about 30% over the market rate used in their last appraisal. Then getting multiple offers. Should I respect that Covid listing price or offer over market value just respecting the ranges of my investment math? I’m buying in the low end of the market so there is a bit of an inventory crunch in the areas I’m looking.

Any advice?

Steven Bowdich · Answer

@Arsen Atanasovski These properties from what I can tell do appreciate. I am in Wichita Kansas, so a property under 50k is quite normal for a middle class home. A lot of the home I am looking at sold for 20k not long ago and are now selling for 40-50. There are also some nice duplexes for under 100k. It also looks like a buyer market in this range as most of them have beed reducing their prices to try and sell while the 100K+ are selling almost immediately once on the market. I did just get my LLC started and it was much easier than I thought as it took less than a day to file and get my EIN. I just need to look for a bank, start an account and get my investors and my money deposited in and then start looking at properties

Jonathan R. · Answer

I think Wichita is by and large pretty darn good. No where near Chicago. I primarily by in what I would call D class and have had a good experience. We try to do everything through Section 8 housing. Credit Union of America does some sub 50k loans but yeah, 10 years is as good as it gets for a commercial loan. I buy in cash, so no mortgages for me. In the beginning I got a 10k unsecured loan from Credit Union of America, 5k interest free for 6-12 months from Home Depot and borrowed against my 401k. Now if I need money I just partner with someone and we both put up half the cash.

Arsen Atanasovski · Answer

Hey Louis, I just wanted to comment on this because I find it amusing to me. The fact that I had a lot of comments on what I said earlier this year this is not a Financial crisis it’s a health crisis.... people were all over me and telling me it’s the end and the economy will be like 2008 all over again. I’m still waiting....... and waiting........ and the funny thing prices in my area are skyrocketing, I purchased a brrrr deal here and 2 months into the process my agent buddy calls me and says according to the comps in my area if you did past comps of 365 day / 180 days / 90 days it has been going up a solid 7%! So my ARV was $100,000 by the time I’m done it should be $105k to $110k. To me that’s not a Financial crisis. For you Louis I would say if the numbers work go for it!

Steven Bowdich · Answer

I think its quite possible for homes to tank but we wont see that until we see what happens when all these moratoriums end. I am looking at buying my first rental property but I am concerned about non paying tenants so I am holding out until next year and stockpiling cash to buy up property if they do tank but it could be that they shoot up as well.

Forrest Faulconer · Answer

Hey Louis, I would actually like to see this post get some response, my market in OKC is seeing the same thing, homes going to multiple offers and above asking, buyers taking advantage of low interest interest rates and not caring that they offered 10-20k above asking because their monthly payment is still within their range of affordability. I have had a couple of wise investors/business owners recommend holding onto the cash I have and observing the market rather than playing in the ball pit with all the other stinky kids. Of course, there is an opportunity cost to this strategy.

Forrest Faulconer

Steven Bowdich · Answer

@Jonathan R. I will keep that in mind. What do you think of the properties in the "higher" crime areas in Wichita. I know that I see mention of class C vs class D but Wichita does not seem to be as bad as you can see in bigger cities like Chicago. I am planning on going to the REI meeting coming up as well to talk with other investors to try and build up my contacts. Are there any good banks/credit unions around here for getting loans sub 50k longer than 10 years. The few I have talked to make it seem quite difficult.

Jonathan R. · Answer

I have a handful of 30k properties that rent for $695-$795 a month range. No need to think they can only bring $500-$600. The rental demand is strong here. Keep those rents high. I also am seeing the appreciation in the lower end properties. Some might not be selling because they are 15k more expensive than they were two years ago. I used to be able to buy a property for 18k and put about 12k into it, now those deals are much harder to find.

Arsen Atanasovski · Answer

@Steven Bowdich I see in your post “your 1st” investment property. I would recommend looking at the higher priced properties that do appreciate. I was like you years back and thought lower price were the way and didn’t make sense buying  higher priced properties. But in the long run the banks will be more open with you and your deals with higher priced properties. And again time doesn’t make the decision on buying investment properties, it’s the numbers. Have you ever heard of someone say “ok once I get $100k cash under my mattress and the time is right where the bank will offer me a great return I’ll open an account.? If your finding deals that the numbers are looking good you should look into it further. Stop watching dancing with the stars and start investing.....:). Smart Investing....

Steven Bowdich · Answer

I have been looking at there are some perfect properties coming on the market right now. I have started my LLC and will see about buying my first soon if the time is right. Some homes that look recently remodeled going for 30k that could easily rent for $500-600 here. It may because I am in a market that really has not seen the massive appreciation that the 100k+ homes have seen. With loans so cheap, these cheaper homes are not selling quickly.

Arsen Atanasovski · Answer

@Steven Bowdich you wait, I’m buying always always buy with no tenant rights and have the current owner either evict or terminate lease. Anyways your buying to get market rents. One of many reasons why the current investor landlord is selling.

Respect the Covid Premium Price?

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