Is anyone buying right now?

[Hunter Janes]

I am a new investor looking to get into the RE market. I am having a hard time finding properties where the numbers make sense. I am qualified for $250k for an investment property. I have found a few nice homes but the monthly cost on these homes is higher then what I am being told I can rent them for with a long term lease. For example, I found a 2/2 home for $250k, with 15% down and an interest rate of 7.62% the total monthly payment is around $1850. After speaking with my broker and realtor, they both informed me that I could rent this property for $1500-$1600 / month. With these numbers, this just does not seem to make sense to buy. I have had a few others homes that I have looked at with the same situation. I have considered doing airbnb for these properties as that would seem to be the only way I would have a chance at making my money back, or at least covering the cost. Is anyone else running into this situation? or should I approach things from a different angle. Any help/guidance is greatly appreciated. 

[Wendy Patton]

@Hunter Janes  this is the time to really learn about lease options and subject-to deals.... or seller financing with lower interest rates, however, the homes on the market are still getting a lot of competition with first time home buyers.  So you will want to chat with wholesalers and find out what they have coming up that would be a better deal or seller financing.  I personally am buying VERY strategically, but holding back cash and doing other things during this time.  I think we are in for some tough times coming soon.  What does that mean?  Better deals for investors should be coming

[Ronald Ty]

I have been reading about a correction here on BP since 2012. It hasn't happened. Could it? Sure. But I'm learning the market goes up, rather than down, more often than not.

[Becca F.]

@Hunter Janes

I'm still looking to buy maybe pivoting to fix and flip instead of long term rentals. I closed on a SFH in Indianapolis recently, tenant is moving in next month. It's Class C potentially moving up to Class B. This was a move in ready house. Projected cash flow $176 a month (rent - mortgage PITI and 10% monthly property management fees). The roof, HVAC and water heater are a few years old so I don't anticipate major capital expenses. For me $150 to $200 cash flow is good in this market. I may decided to do a BRRRR instead of fix and flip, depending on the property, neighborhood and what the contractor says with rehab estimate. With fix and flip, my exit strategy is if it doesn't sell, keep as a rental for a year or two then sell or keep it longer. I'm flying out there to look around.

My other properties are Class A, can't find any Class A or appreciation markets without being in a negative cash flow now. I was looking in Florida Panhandle (Fort Walton Beach, Navarre, West Panama City Beach), Nashville Tennessee, Las Vegas suburbs, Phoenix areas, which have had much higher appreciation than Indiana. The numbers don't work for me - mortgage payment is much higher than long term rents. I don't want to do STR, may consider MTR to travel nurses/business people but I doubt I'll buy in those areas right now. The California investors I know are doing fix and flip here, not long term rentals.

I haven't done any creative financing or bought from wholesalers, tax liens, etc. My last deal was through a real estate agent with a property on the MLS.

Have you looked outside of Florida? The Midwest has low barrier of entry and has usually been thought of as cash flow markets.

[Matt Marcus]

I think buying right now - is a bit of a coin toss on what you’re gonna get due to inventory issues across the nation.

that said. You are doing everything correct. As much as you’re hungry - you never regret deals you don’t buy , you usually regret deals you talked yourself into just so you could do a deal-

I’m sure BT or DG would say the same- store up cash and take only the deals that make sense for your budget/ and your KPI’s and nothing else.

[Jim Hartmann]

I agree with @Wendy Patton.  Take time to learn all the ways you can creatively finance a property without using a bank.  There are many more ways to structure a deal to where it will work if you can just step back and look at how you can solve the seller's problem of wanting to sell.  Do they really need the cash right now?  Would they be willing to take all or part of the balance as a note over time?  For you to make it through this time, you need to maintain cash flow.  What if you amortize the loan over 40 year or 50 years, does that help your cash flow?  Values will go up and down, but if you have cash flow and hold the property long term then you will get through this time.  Don't be greedy, but be choosy and find something that works for your needs and solves the seller's problem as well.  

[Bob Stevens]

Quote from @Hunter Janes:

I am a new investor looking to get into the RE market. I am having a hard time finding properties where the numbers make sense. I am qualified for $250k for an investment property. I have found a few nice homes but the monthly cost on these homes is higher then what I am being told I can rent them for with a long term lease. For example, I found a 2/2 home for $250k, with 15% down and an interest rate of 7.62% the total monthly payment is around $1850. After speaking with my broker and realtor, they both informed me that I could rent this property for $1500-$1600 / month. With these numbers, this just does not seem to make sense to buy. I have had a few others homes that I have looked at with the same situation. I have considered doing airbnb for these properties as that would seem to be the only way I would have a chance at making my money back, or at least covering the cost. Is anyone else running into this situation? or should I approach things from a different angle. Any help/guidance is greatly appreciated. 

 Buy and keep and flip almost weekly. Just last week closed on a 7 UNIT, all in 200k, net rent about 40k,,,, Closing on 2 more this week, All with 15- 20% net caps,,,,,, cash purchases. 

[Jay Hinrichs]

Quote from @Wendy Patton:

@Hunter Janes  this is the time to really learn about lease options and subject-to deals.... or seller financing with lower interest rates, however, the homes on the market are still getting a lot of competition with first time home buyers.  So you will want to chat with wholesalers and find out what they have coming up that would be a better deal or seller financing.  I personally am buying VERY strategically, but holding back cash and doing other things during this time.  I think we are in for some tough times coming soon.  What does that mean?  Better deals for investors should be coming

Wendy,  Good morning, I am curious about your comment that we are in for some tough times coming soon.  Why do you think that ?  And is that just specific to your neck of the woods ?  Seems to me ( and I am no expert on predicting interest rates) but it seams we may have peaked on rates. For instance for us last July to this January sales of new builds was anemic at best.. Since end of Jan we have sold 14 homes and closed 6 of those in last 45 days.. Total sales since mid Jan 23 right at 8 million.  I was in the camp last November of ut OH here we go again.. But market at least in our sand box seems to have gotten life again. And keep in mind virtually everyone who bought from me had to sell a home to buy mine.  I was in Cleveland last week and my Vendor there has sold or refied 10 plus deals in the last 45 days so money is still moving in that market  Same with the other markets I am in KC and Baltimore lots of activity No major price concessions etc. I actually started my OUT of state Hard Money Lending business back in 02 in Detroit :)  so have fond memories of that city.  So was just curious about your comment was all..

[Ronald Ty]

There is a shortage of inventory (especially for new construction). Until that ends, prices should not go down. 

remember last year when the experts were predicting a 10-15% drop this year? Fear mongering

[Account Closed]

The market where I live is very tough, properties on the MLS sell very fast but I was fortunate to find a FSBO deal on Zillow. These homes typically get far less views so there is less competition.

Even in a red hot market the best advice is avoid reaching for a property, if it doesn't seem to be a great deal on paper then walk away.

[John McKee]

It's hard to buy.  I have broken many pencils this year.

[Henry Clark]

Hold your money for the next 6 months. Identify an area and type of asset.   Identify one realtor in that market.  Don’t rely on just them to identify deals.  Take them some to look at.  

There are a lot of issues we need to work thru in the next 3 to 6 months.  Although people say don’t time.  In this instance I would.  Be prepared to jump in the deal.  Then you need to move into the property until things settle. 

[Bob Stevens]

Quote from @Hunter Janes:

I am a new investor looking to get into the RE market. I am having a hard time finding properties where the numbers make sense. I am qualified for $250k for an investment property. I have found a few nice homes but the monthly cost on these homes is higher then what I am being told I can rent them for with a long term lease. For example, I found a 2/2 home for $250k, with 15% down and an interest rate of 7.62% the total monthly payment is around $1850. After speaking with my broker and realtor, they both informed me that I could rent this property for $1500-$1600 / month. With these numbers, this just does not seem to make sense to buy. I have had a few others homes that I have looked at with the same situation. I have considered doing airbnb for these properties as that would seem to be the only way I would have a chance at making my money back, or at least covering the cost. Is anyone else running into this situation? or should I approach things from a different angle. Any help/guidance is greatly appreciated. 

 YES, just this past Friday,  I purchased an 7 unit, two more closing this week, All with about 16- 20% NET caps,,,,, cash buys 

[Wendy Patton]

@Jay Hinrichs To start here is what Google says on this question:  is the economy getting worse?

The consensus estimate on the probability of a meaningful downturn in the American
economy in the next 12 months is at 65%, according to Goldman Sachs
Research. But our own economic analysis rates that probability much
lower, at 35%

Economic momentum is slowing, amid higher interest rates and a banking crisis, new gross domestic product report shows. The U.S. economy wobbled in the first months of 2023, growing at an annual rate of 1.1 percent, as higher interest rates and a banking crisis dragged down activity across sectors

The US economy is likely to get worse before it gets better, according to forecasting by EY. The combination of persistently elevated prices, high interest rates and now tightening credit conditions will weigh on business investment, consumer spending and the transactions markets in the coming months

Almost two-thirds of chief economists believe a global recession is likely in 2023; of which 18% consider it extremely likely – more than twice as many as in the previous survey conducted in September 2022. A third of respondents consider a global recession to be unlikely this year.

And there are so many more - however, I am stating this from my own view of the world around me.  1)  Rising housing prices without the same increase in incomes will eventually price too many people out of the housing market - which will slow down the real estate market.  The reason it's still hot in SOME price ranges is there is still a shortage of inventory but increase pricing and interest rates will slow that down as it prices people out of the market.   2) our country continues to increase it's national debt - in 2022 30 Trillion now it's 31.5 trillion  3)  US Inflation Rate is at 4.93%, compared to 4.98% last month and 8.26% last year. This is higher than the long term average of 3.28%.   4)  US News on stock market:  It's not just Wall Street that's concerned. Sentiment among U.S. consumers is tumbling, according to a preliminary survey by the University of Michigan. That's a worry because strong spending by consumers has been one of the main forces preventing a recession as the economy slows.

Unemployment is a little better then it was but most other indicators are not good. 

I hope that helps with my perspective

[Mario I Fernandez]

Hey @Hunter Janes if long-term rentals do not make sense(numbers) you might consider other options:

1-STRs in markets that are desirable and allowed.

2-MTR near hospitals or colleges.

3-Sober Homes 

4-Homesplit 

These are some options where the long term rentals don't make sense.

[Ronald Ty]

Quote from @Wendy Patton:

@Jay Hinrichs To start here is what Google says on this question:  is the economy getting worse?

The consensus estimate on the probability of a meaningful downturn in the American
economy in the next 12 months is at 65%, according to Goldman Sachs
Research. But our own economic analysis rates that probability much
lower, at 35%

Economic momentum is slowing, amid higher interest rates and a banking crisis, new gross domestic product report shows. The U.S. economy wobbled in the first months of 2023, growing at an annual rate of 1.1 percent, as higher interest rates and a banking crisis dragged down activity across sectors

The US economy is likely to get worse before it gets better, according to forecasting by EY. The combination of persistently elevated prices, high interest rates and now tightening credit conditions will weigh on business investment, consumer spending and the transactions markets in the coming months

Almost two-thirds of chief economists believe a global recession is likely in 2023; of which 18% consider it extremely likely – more than twice as many as in the previous survey conducted in September 2022. A third of respondents consider a global recession to be unlikely this year.

And there are so many more - however, I am stating this from my own view of the world around me.  1)  Rising housing prices without the same increase in incomes will eventually price too many people out of the housing market - which will slow down the real estate market.  The reason it's still hot in SOME price ranges is there is still a shortage of inventory but increase pricing and interest rates will slow that down as it prices people out of the market.   2) our country continues to increase it's national debt - in 2022 30 Trillion now it's 31.5 trillion  3)  US Inflation Rate is at 4.93%, compared to 4.98% last month and 8.26% last year. This is higher than the long term average of 3.28%.   4)  US News on stock market:  It's not just Wall Street that's concerned. Sentiment among U.S. consumers is tumbling, according to a preliminary survey by the University of Michigan. That's a worry because strong spending by consumers has been one of the main forces preventing a recession as the economy slows.

Unemployment is a little better then it was but most other indicators are not good. 

I hope that helps with my perspective

Google is always correct ! Again, BP Nation has spoken about a price correction for weeks over a decade. Such drama. 

[Lauren Endres]

There are many options for sellers to contribute concessions towards a “Rate Buy down” 3-2-1 program, which lowers your rates the first 3 years until it adjusts and you’re able to refinance . It’s a good time to be creative and use negotiations to tailor the deal to your needs. People are still buying because of this! Once rates decrease the prices will increase and create more competition. Utilize those seller credits while you can! :) 

[Jay Hinrichs]

Quote from @Wendy Patton:

@Jay Hinrichs To start here is what Google says on this question:  is the economy getting worse?

The consensus estimate on the probability of a meaningful downturn in the American
economy in the next 12 months is at 65%, according to Goldman Sachs
Research. But our own economic analysis rates that probability much
lower, at 35%

Economic momentum is slowing, amid higher interest rates and a banking crisis, new gross domestic product report shows. The U.S. economy wobbled in the first months of 2023, growing at an annual rate of 1.1 percent, as higher interest rates and a banking crisis dragged down activity across sectors

The US economy is likely to get worse before it gets better, according to forecasting by EY. The combination of persistently elevated prices, high interest rates and now tightening credit conditions will weigh on business investment, consumer spending and the transactions markets in the coming months

Almost two-thirds of chief economists believe a global recession is likely in 2023; of which 18% consider it extremely likely – more than twice as many as in the previous survey conducted in September 2022. A third of respondents consider a global recession to be unlikely this year.

And there are so many more - however, I am stating this from my own view of the world around me.  1)  Rising housing prices without the same increase in incomes will eventually price too many people out of the housing market - which will slow down the real estate market.  The reason it's still hot in SOME price ranges is there is still a shortage of inventory but increase pricing and interest rates will slow that down as it prices people out of the market.   2) our country continues to increase it's national debt - in 2022 30 Trillion now it's 31.5 trillion  3)  US Inflation Rate is at 4.93%, compared to 4.98% last month and 8.26% last year. This is higher than the long term average of 3.28%.   4)  US News on stock market:  It's not just Wall Street that's concerned. Sentiment among U.S. consumers is tumbling, according to a preliminary survey by the University of Michigan. That's a worry because strong spending by consumers has been one of the main forces preventing a recession as the economy slows.

Unemployment is a little better then it was but most other indicators are not good. 

I hope that helps with my perspective

thank you for the courtesy of a reply does not always happen here on BP.. have a nice week.. 

[Wendy Patton]

also to add to my above post -

Lots of high tech companies, mortgage and title have been laying off for the last 9 months.  The ripple affect from this still hasn't hit our economy.  

I know i will think of more soon