Rental Property Investor · Tulsa, OK · Member since 2020 · 6 posts · 2 votes
Just curious - are people still actively purchasing rental homes in the current market? Or are you guys holding onto your cash to see how COVID-19 plays out?
We closed a portfolio on March 26. Many of our tenants are military or government employees. We'd be making offers but we'll be in a rehab refinance cycle for about three years. It got a little tight with lenders shutting down, but rent payments are coming in. We're already set to realize a slight positive cash flow this month, however there are five tenants who still need to pay, so those will just be more margin to make it through May. (Payment timing not unusual under previous ownership).
If you buy to survive all market cycles, then you should be okay to buy now. Covid impact for this deal was more favorable seller finance terms on two of the properties we lost the hard money lender on. If you are only hunting with one bullet, sure wait for your shot but if your plan is to do this over the long term and buy more than one, then you should be playing the averages and not trying to time any market.
Rental Property Investor · Fayetteville, NC · Member since 2014 · 884 posts · 670 votes
6y
I was, but there doesn't seem to be many homes coming available that meet my requirements. Its probably for the best because I think the impact on real estate from all of this is going to be delayed.
Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
6y
I went under contract just before the lockdowns started kicking in. We're proceeding as usual and also put one up for sale about a week and a half ago.
Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes
6y
It's a great time to be on the hunt for a long term hold. Make sure it hits your number targets. Factor a little extra vacancy and collection lost. Leverage the virus/uncertainty by explaining to sellers why your offer is 10k lower than usual.
The best part is the value of the property doesn't matter much because it will always come back in 5 to 10 years and probably more so. Unless you are buying in cities that are going downhill.
Rental Property Investor · MI · Member since 2008 · 34 posts · 4 votes
6y
I'm looking every day but nothing is coming up in my area that meets my criteria. I'm thinking it'll take a while for the effects of COVID to have an impact on the real estate market.
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
6y
I figure one of two things will happen with RE prices in the short term 1) NOTHING. They basically stay unchanged. 2) Prices come down a lot. What I do not see happening in the short term is appreciation far in excess of inflation. I cannot envision anything that could cause this. Because of item #2 there is more risk to most purchases.
Before the virus lockdown, we missed out on an $850K SFH (someone else beat us out on it). The potential buyer pulled out. We were offered the RE prior to it being relisted. I considered this a good deal; good enough to justify the additional risk in purchasing with a potential RE price decline. We entered our DD with hopes to purchase, but it had an issue that resulted in the value add would cost literally over $100K more than we had planned. This issue made it a deal breaker. If it did not have this issue, we were going to purchase with a total expected cost of $1.15M (after value adds).
Factor the risk into any offers and it could be a great time to purchase. There are certain properties that I may have purchased 3 months ago that no longer seem prudent with the increased risk level.
Rental Property Investor · Twin Cities, MN · Member since 2019 · 122 posts · 150 votes
6y
@Justin Kanipe We are still writing offers. There are some lenders tightening down, and things are a little goofed up with lock-downs. Some states deemed RE Pros as essential, some did not - so depending on your hunting grounds it might be a little quiet for a while.
Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes
6y
I personally think the RE market will be impacted in the latter half of this year, into 2021. I would not buy in the short term, but wait for much better deals later this year and next. I would also be staying away from SFH as long term rentals for now, and focus more on multifamily & small hotels. There is no way I would risk taking on debt & invest cash into the RE market right now given all the uncertainty (and difficulty liquidating), especially when there don't seem to be any sizable discounts.
Vancouver, Canada · Member since 2018 · 2 posts · 1 vote
6y
My personal strategy is doubling down on Lead generation. There are many people in need of extra money that are able to help with finding great deals.
In markets I am observng sales have already dropped, but prices not yet. There are good deals already coming on market but are gone in a snap of a finger.
Rental Property Investor · Saint Louis, MO · Member since 2014 · 313 posts · 326 votes
6y
For small rentals, 1-4 units, I think you'll see weak hands shaken out over the next couple of quarters. For example, folks who levered up to do AirBnb and are looking at zero revenue for several months at least and maybe through the remainder of the year, or longer if people are scared to return to travel for some time. The ones who can repurpose their units as long term rentals may be okay if they have reserves to bridge the gap in economic activity (who's moving in the next month or two?), but I think at least some likely overpaid for properties looking at the higher return % for nightly rentals. Many will have to firesale or turn in their keys. Same goes for any long-term rental portfolio short on reserves or that got caught flat-footed with vacancies.
I'm sure larger multis will do fine if they can work with tenants to bridge any gaps in income. Stimulus money will filter through eventually if you can wait it out. Depending on the property type I would be nervous about what the future holds for commercial RE. There are so many unknowns right now and if the hysteria over the virus drags on for months and this really does permanently change our way of life (I'm skeptical) with more permanent levels of social distancing or rolling lockdowns or who knows what, you might never see the restaurant industry recover, many types of office space might become obsolete, retail may move almost completely online. In a world of permanently impaired/limited social gathering, commercial RE is really left holding the bag. Just my conjecture there, again I know little about the intricacies of commercial RE.
The bright spot I see is that there has been so much stimulus pumped into the system and unlike 2008, at least some of it is literal helicopter money, being given directly to consumers and businesses instead of the banking system. As the political fallout from this virus takes hold, I think there will be more and more bailouts for "main street" which should be very inflationary. Like during WWII, the Fed will cap yields at some low level, so as sovereign bondholders realize they the ones who are going to take a haircut, you could have an epic amount of capital come racing out of bonds looking for any yield and even just 0%. Some will move to stocks and some to gold, but I think a lot of that capital will flow into real estate, farmland, etc.
Rental Property Investor · Neenah, WI · Member since 2019 · 154 posts · 105 votes
6y
I have not bought anything recently. My current thinking is to make some lower offers backing up my offers with the uncertainty of rents and the market going forward. Not expecting to land a deal now but if things do get worse the sellers might have my offer on file and re-consider it.
I'm continuing to look, and if something fits with my investment criteria I wouldn't hesitate to make an offer.
The one qualifier I'd add is that there are a lot of multi-unit properties where I live that are part-residential and part-commercial, and I'm personally hesitant about investing in retail/office space right now given both macro (COVID) and local (fair amount of surplus supply) economic dynamics.
Rental Property Investor · Cleveland, OH · Member since 2019 · 51 posts · 19 votes
6y
Nope. Markets going to tank. Mortgage requirements are being raise . Less buyers out which will drive prices down. If your willing to wait it out they’ll be a lot of foreclosures too
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
Kind of, sort of. I am definitely keeping more cash on hand, rather than pumping up my Vanguard brokerage account. But, we are also looking to do a cash out refinance on a couple duplexes so we have the cash on hand if/when a deal comes up. We want to be ready. We are being very particular in our quest for an 8 plex. We don't have to or need to buy, but we are ready if the numbers look good.
Philadelphia, PA · Member since 2017 · 824 posts · 1k+ votes
6y
Someone asked me about what I thought would happen in the market, and I think the market is only as good as the supply/demand from sellers and buyers/renters.
Millions have hit unemployment over the past few weeks, and companies continue to suffer while we social distance. We also have sickness/loss-of-life which will impact every market slightly -- production, real estate, etc. If there isn't a quick rebound in this sudden recession, then in a few months we'll see homes hitting the market, likely at discounts, especially in middle-to-lower class areas where jobless claims hit hardest, nest eggs are smallest, and "emergency funds" are nil to slim. A $1200 check from the government might cover a month of rent. So, if you're an investor, it might be a great time to buy, sadly, as others are negatively impacted by this massive disruption.
At the same time, the market for rentals in these neighborhoods are likely impacted in the same manner as homeowners -- if homeowners lose their job, so do renters. So you may be dealing with a tougher rental market with a smaller tenant pool as folks are displaced and cannot afford their current neighborhoods. Maybe they move in with family, hopefully, or find some kind of fair housing, while transition occurs. All the money you put into a good buy and good rehab may sit when rubber hits the road -- so a deal is a deal is a deal, but your contingency for the deal should be padded enough. Think 2-3 months of vacancy, perhaps scaling back any major hits to your reserve (keeping rehab costs down), and re-running numbers in a not-so-bloated economy.
It could take years to recover, so make sure your deal has long term promise. If we recover sooner, then great, but plan for the worst. Personally, I am under contract for a BRRRR that was supposed to close on March 17. When quarantine lifts I plan to close. By the time we finish the close and rehab, I'm hoping for a decent summer renter market. My deal looks good either way.
Real Estate Agent · USA · Member since 2016 · 909 posts · 1k+ votes
6y
@Stipe Ba Are we in or heading for a recession? Yes/probably. But a recession does not equal a housing crash. The past shows us that most recessions do not actually affect home values. With the exception of the 2007-2009 recession and the 1990-91 Gulf War recession, no other recessions have impacted the housing market, if you look at the Hope Price Index data from 1975-2018.
I'm not saying that everyone shouldn't carefully analyze their deals right now, but we should always carefully analyze them.
Portland, ME · Member since 2012 · 616 posts · 550 votes
6y
I just made an offer on a house I could flip or rent. I assumed an ARV at 20% lower than it would have been in Feb. I'm also not depending on a hard money loan. I'm guessing that the market won't go down that much, but having a large margin for error made me feel comfortable making the offer.