Who is doubling down, who is backing off?
Rental Property Investor · Huntsville, AL · Member since 2015 · 401 posts · 309 votes
Who is doubling down, who is backing off?
Most Popular Reply
Joseph CacciapagliaBusiness Member
Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes1. I'll be making offers through this entire time. Whether or not I buy will depend on what sellers have to think about those offers.
2. I don't believe San Antonio will have large price declines, if any at all. Sales and rent collections are still pretty strong, and we only have 3+- months of inventory at the moment. Even if we do see some dip, I think I'll negotiate better deals during this time of uncertainty than I would be able to otherwise.
3. I'm buying vacant lots for future infill development. As a non-cash producing asset, it's often one of the first things people look to get rid of. So, I expect to find some real value. It also allows me to change strategies as the pandemic progresses, because I can always wait to develop later, bring in a partner, or change the product I'm building.
4. No. I used to buy and hold SFR and small multis, but my personal investing was on hold the last couple of years. This was primarily due to personal issues, so I got lucky with the timing. I'm sure there is still plenty of money to be made buying and holding existing units, but I've had a long range goal of getting into affordable housing development, and this seems like the perfect time to get started.
76 Replies
- Specialist · Plano, TX · Member since 2020 · 2k+ posts · 861 votes6y
Great questions to be asking during these times. It's very interesting to see all different perspectives depending on markets and situations. Stay safe everyone.
- 6yShea SpinelliPro MemberRental Property Investor · Tyler, TX · Member since 2016 · 198 posts · 89 votes
@Caleb Bryant
Yes we are. We're a little cautious. We're really focusing on tightening up our processes and systems, making sure we have our business operations where they need to be. We will continue to focus on SFH and small multi.
I'm really trying to understand if we sign up a new tenant and we can't evict, is my vetting process strong enough? - Rental Property Investor · Huntsville, AL · Member since 2015 · 401 posts · 309 votes6y
@Robert Schulmeisters that’s excellent. Huntsville needs more product, wishing him success!
- Financial Advisor · Issaquah, WA · Member since 2017 · 241 posts · 141 votes6y
Originally posted by @Jay Hinrichs:
I think we have to be realistic here.. 07 to 2011 it took years for prices to crash.. there was no rescue from the fed like now.. there was not instant mortgage forbearance and moratoriums on evictions. this could all be over before it really gets started.. you dont see distressed assets from failed mortgages for years after the fact.. Now burnt out landlords or neighborhoods that are changing to renters and owners are moving out as fast as they can ( which happens in the mid west rust belt) that is an on going event never stops. So will see.. but it wont be next week or next month.Mostly playing devil's advocate here, but this crash is also exceedingly different from the 2007-2008 crash. We've seen the longest run-up in the US economy leading to this, coupled with the largest single-day losses on Wall Street, plus the skyrocketing unemployment that never happened (to near this extent) during the last crash due to stay-at-home orders across the nation (also not part of last crash). The hysteria and fear around this recession feels dramatically different as well. There are also banking regulations in place that weren't there before, forbearance options for conventional loans, and checks being cut to individual families (though those amounts won't last many very long), so who knows.
I'm not saying you're wrong, the true effects (and therefore opportunities) will take time to manifest (especially around foreclosures), but I'd not depend too much on what happened roughly a decade ago to tell us exactly how this one will play out. I certainly won't claim to know, but with any interruption to the norm, opportunity will arise.
- Rental Property Investor · Huntsville, AL · Member since 2015 · 401 posts · 309 votes6y
@Shea Spinelli yes that make sense. We’ve adjusted our criteria to make sure if there was a drop we’d still have equity. With the limited available inventory on the market retail is staying strong but we are getting discounts on entry most likely due to the fear of the situation. I agree 100% on the screening needing to be something that is double checked
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Pete M.:
Originally posted by @Jay Hinrichs:
I think we have to be realistic here.. 07 to 2011 it took years for prices to crash.. there was no rescue from the fed like now.. there was not instant mortgage forbearance and moratoriums on evictions. this could all be over before it really gets started.. you dont see distressed assets from failed mortgages for years after the fact.. Now burnt out landlords or neighborhoods that are changing to renters and owners are moving out as fast as they can ( which happens in the mid west rust belt) that is an on going event never stops. So will see.. but it wont be next week or next month.Mostly playing devil's advocate here, but this crash is also exceedingly different from the 2007-2008 crash. We've seen the longest run-up in the US economy leading to this, coupled with the largest single-day losses on Wall Street, plus the skyrocketing unemployment that never happened (to near this extent) during the last crash due to stay-at-home orders across the nation (also not part of last crash). The hysteria and fear around this recession feels dramatically different as well. There are also banking regulations in place that weren't there before, forbearance options for conventional loans, and checks being cut to individual families (though those amounts won't last many very long), so who knows.
I'm not saying you're wrong, the true effects (and therefore opportunities) will take time to manifest (especially around foreclosures), but I'd not depend too much on what happened roughly a decade ago to tell us exactly how this one will play out. I certainly won't claim to know, but with any interruption to the norm, opportunity will arise.
Totally agree.. this will be different in some manner.. my main point is you could have a little bit of panic selling.. but as for a real estate crash 45 days after the event I don't see it or am not seeing it.. what I do see is a ton of inventory taken off the market.
plus keep in mind many folks drank the refi till you die cool laid they don't really have any or much equity. so it will take them either bringing checks to closing if they want to exit or banks getting back into the short sale business.. which again takes time to ramp up..
then the fact that investor credit has really dried up.. so a lot of these cant wait for the crash investors we see on BP wont have the capacity to buy anything any way.. CASH will be the story
- Financial Advisor · Issaquah, WA · Member since 2017 · 241 posts · 141 votes6y
Originally posted by @Jay Hinrichs:
plus keep in mind many folks drank the refi till you die cool laid they don't really have any or much equity. so it will take them either bringing checks to closing if they want to exit or banks getting back into the short sale business.. which again takes time to ramp up..
then the fact that investor credit has really dried up.. so a lot of these cant wait for the crash investors we see on BP wont have the capacity to buy anything any way.. CASH will be the story
All valid points, and I think you're right. We're seeing some initial panic-selling (and capitalizing on that), but mostly in the SFR and small multi space. Some from the smaller space and most from the larger commercial MFR are going off-market or waiting to see if we have a "V-shaped" recession, where things ramp up again quickly.
We're highly leveraged (between 75-80% average across our portfolio), but we also kept healthy reserves and seed our reserve accounts from the start. You can be highly-leveraged if you have the cash to back it up, but many ignore that part, and may be in for a hurting (call it capitalist Darwinism, perhaps).
And you're definitely right about the private capital drying up, no doubt there! I've been talking to more lenders in the last few weeks than in the last couple years combined... but we have found a few with not-too-unreasonable terms, and we're exploring ways to use private capital for short-term bridge loans and then refi those into conventional loans.
- Rental Property Investor · CA · Member since 2019 · 27 posts · 13 votes6y
Very interesting comments. In my opinion, it’s still too early to tell what’s going to happen. I side with @Jay Hinrichs that if some real estate crash were to occur, it won’t happen in a matter of weeks. Due to many investors/homeowners taking forbearance, it’s likely to be a while before the impact is shown on the market.
As investors we should be in it for the long term and if anything, this reminds us to have sufficient cash reserves (6 months+) and not be over leveraged. Some opportunities surely will present themselves with less competition but I am personally hesitant. I’d rather take this time to learn, retool, and build up cash reserves as too much is in flux currently, but everyone’s different. Stay safe!
- 6yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Originally posted by @Caleb Bryant:
What's up everyone!?
1. Are you still investing in real estate through the Covid-19 crisis?
2. Why or why not?
3. What niches are you most focused on and why?
4. Is that the same focus you had before Covid-19 or not?
I'll post my answers in the comments!
>1. Are you still investing in real estate through the Covid-19 crisis?
Yes, If the price is priced to where it is a good deal with the current risk level.
>2. Why or why not?A property that had multiple offers before Corona but fell out of escrow due to Corona, just lowered the price $50k. They were already under market for the location. Many sellers have pulled their listings but desperate sellers are lowing their prices. Question is, is it enough lower to take on the risk associated with Corona? I have changed my buy criteria in an attempt to account for the increased risk, but did I change it enough? If this RE was on sewer, I would be making an offer. It is literally $200K below the other RE in the development. That justifies the addition risk to me. If it was on sewer for $1.1M I could achieve an ARV of ~$1.5M (at today's valuation. If the price drops 20%, $1.2M.
>3. What niches are you most focused on and why?Value add buy n hold (basically BRRRR but the value add is not always a rehab). In my market the initial cash flow is poor. BRRRR provides a means to get early return and reduce the capital in the RE. With the reduced capital invested, each rent increase provides a better return. Market appreciation provides a better return. In addition, we have been using this process since before I ever heard the term BRRRR. We have the knowledge and experience.
>4. Is that the same focus you had before Covid-19 or not?
Same focus but different buying criteria. Need to factor the increased risk into the offers. My view is investors should only be purchasing if the price justifies the increased risk. Otherwise, wait to the risk is more in the historical range. No San Diego RE investor should be using same buy criteria that they were using last year.
Good luck
- Real Estate Agent · Birmingham, AL · Member since 2017 · 12 posts · 7 votes6y
@Vincent Burr
This will not be a recession like last time. This is not a “housing” crisis. The country is about to open back up and this will be blown over soon. Welcome to real estate.
- Rental Property Investor · Los Angeles · Member since 2018 · 844 posts · 1k+ votes6y
Originally posted by @Caleb Bryant:
What's up everyone!?
I'm an investor and wholesaler out of Huntsville, Alabama. I'm writing this to check in on what everyone is doing through these uncertain times. Ultimately I want to learn as much as I can through this situation. I've been involved in Real estate investing for over 5 years, but have never truly lived or invested through a pullback/recession/depression, so input from heavily experienced investors is appreciated. I will answer my own questions for you all as well.
1. Are you still investing in real estate through the Covid-19 crisis?
2. Why or why not?
3. What niches are you most focused on and why?
4. Is that the same focus you had before Covid-19 or not?
I'll post my answers in the comments!
Currently in escrow right now on a 4 unit property in Los Angeles with Section 8 tenants. I used to think values will go down a lot in the next year or so, but now I'm not so sure. In speaking with other investors in the area, there are lot of cash investors or folks with a lot of dry powder eager to invest in local multi-units but simply can't because there aren't that many properties out there. And even amongst many of the worn down properties, there is still plenty of activity from developers and flippers. Once the COVID situation settles down and people start listing their properties, I think we will see a flurry of activity here. If my impression is wrong and property values go down, still not a big deal for me as as a buy and holder investor. I'm putting 35% down and this property with Section 8 tenants cash flows well.
In a scenario where property values do noticeably go down, it will take at least a year or two to reach the trough. I'm not going to pass on good deals that cash flow well so I can wait two years on something that may or may not happen.
- Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes6y
Originally posted by @Jay Hinrichs:
Originally posted by @Pete M.:
Originally posted by @Jay Hinrichs:
I think we have to be realistic here.. 07 to 2011 it took years for prices to crash.. there was no rescue from the fed like now.. there was not instant mortgage forbearance and moratoriums on evictions. this could all be over before it really gets started.. you dont see distressed assets from failed mortgages for years after the fact.. Now burnt out landlords or neighborhoods that are changing to renters and owners are moving out as fast as they can ( which happens in the mid west rust belt) that is an on going event never stops. So will see.. but it wont be next week or next month.Mostly playing devil's advocate here, but this crash is also exceedingly different from the 2007-2008 crash. We've seen the longest run-up in the US economy leading to this, coupled with the largest single-day losses on Wall Street, plus the skyrocketing unemployment that never happened (to near this extent) during the last crash due to stay-at-home orders across the nation (also not part of last crash). The hysteria and fear around this recession feels dramatically different as well. There are also banking regulations in place that weren't there before, forbearance options for conventional loans, and checks being cut to individual families (though those amounts won't last many very long), so who knows.
I'm not saying you're wrong, the true effects (and therefore opportunities) will take time to manifest (especially around foreclosures), but I'd not depend too much on what happened roughly a decade ago to tell us exactly how this one will play out. I certainly won't claim to know, but with any interruption to the norm, opportunity will arise.
Totally agree.. this will be different in some manner.. my main point is you could have a little bit of panic selling.. but as for a real estate crash 45 days after the event I don't see it or am not seeing it.. what I do see is a ton of inventory taken off the market.
plus keep in mind many folks drank the refi till you die cool laid they don't really have any or much equity. so it will take them either bringing checks to closing if they want to exit or banks getting back into the short sale business.. which again takes time to ramp up..
then the fact that investor credit has really dried up.. so a lot of these cant wait for the crash investors we see on BP wont have the capacity to buy anything any way.. CASH will be the story
Are you guys still lending Jay? This is when relationships are so damn important. Thankfully, my HML is still lending to us (less leverage but slightly lower rate). These are the times it pays to be loyal.
I have been putting out select low ball offers in cash and have been doing decently well. Just renegotiated a REO SFH flip for 15% less than my previous contract price. Apartments are actually renting faster than before in my markets since a lot of listings got pulled. - Investor · Minneapolis, MN · Member since 2017 · 95 posts · 130 votes6y
Originally posted by @Caleb Bryant:
1. Are you still investing in real estate through the Covid-19 crisis?
2. Why or why not?
3. What niches are you most focused on and why?
4. Is that the same focus you had before Covid-19 or not?
1) If the right opportunity comes across the plate, we'll swing. The big question mark at the moment is bank lending. I've heard from other operators with deals in the pipeline that the banks have come back in the 11th hour recently asking for more reserves or more down payment. These sorts of last minute shenanigans can really sink a deal.
3) 50-150 unit apartments in Minneapolis.
4) Sure is!
- Member since 2020 · 11 posts · 15 votes6y
@Joseph Tineo - I don't expect it to be a recession like last time, after all that's why they call it the Great Recession! But it's hard to ignore the largest unemployment spike in recorded history. We are already in a recession now, and we don't really know what the long term effects will be. Many small businesses will probably never reopen and many jobs won't be there as we start to reopen the economy. Some things aren't meant to be turned off.
I don't pretend to know what that will mean for the real estate market, I am thinking there will be downward pressure on prices, albeit not like in 2008. But I also keep thinking the Lions might win the Super Bowl one day so take that with a grain of salt. - Rental Property Investor · Huntsville, AL · Member since 2015 · 401 posts · 309 votes6y
@Vincent Burr haha I’d pull for the Lions in the Super Bowl
- Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes6y
Our market here in Redding CA is still going strong, even with the Stay at Home order in place. It didn't take long for everyone to jump on board and figure out best practices for showing. On occupied homes sellers aren't allowed to be in the house at time of showing. Limit of 2 people in the house at a time. Of course CA was quick with new disclosures for the virus, 4 to be exact, and every time someone goes into a property they have to sign PEAD Property Entry Advisory Disclosure.
The State of CA at first required shut down, then declared realtors as "essential" business, due to the housing crisis in CA. Redding has a very tight market as there were thousands of homes destroyed in the fires in Shasta and neighboring counties a few years back. Great rental market too. Plus now we're seeing an influx of people coming from the bay area wanting to be in less crowded areas. (I'm getting the same interest on the house in Sunriver, and will leasing for a year to tenant from so cal) and try to sell the house to an investor.
Some of the properties that are in the more rural areas, such as Cottonwood, Palo Cedro, etc are drawing those wanting larger parcels, ranches, homes with guest houses (ADU) etc.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Syed H.:
Originally posted by @Jay Hinrichs:
Originally posted by @Pete M.:
Originally posted by @Jay Hinrichs:
I think we have to be realistic here.. 07 to 2011 it took years for prices to crash.. there was no rescue from the fed like now.. there was not instant mortgage forbearance and moratoriums on evictions. this could all be over before it really gets started.. you dont see distressed assets from failed mortgages for years after the fact.. Now burnt out landlords or neighborhoods that are changing to renters and owners are moving out as fast as they can ( which happens in the mid west rust belt) that is an on going event never stops. So will see.. but it wont be next week or next month.Mostly playing devil's advocate here, but this crash is also exceedingly different from the 2007-2008 crash. We've seen the longest run-up in the US economy leading to this, coupled with the largest single-day losses on Wall Street, plus the skyrocketing unemployment that never happened (to near this extent) during the last crash due to stay-at-home orders across the nation (also not part of last crash). The hysteria and fear around this recession feels dramatically different as well. There are also banking regulations in place that weren't there before, forbearance options for conventional loans, and checks being cut to individual families (though those amounts won't last many very long), so who knows.
I'm not saying you're wrong, the true effects (and therefore opportunities) will take time to manifest (especially around foreclosures), but I'd not depend too much on what happened roughly a decade ago to tell us exactly how this one will play out. I certainly won't claim to know, but with any interruption to the norm, opportunity will arise.
Totally agree.. this will be different in some manner.. my main point is you could have a little bit of panic selling.. but as for a real estate crash 45 days after the event I don't see it or am not seeing it.. what I do see is a ton of inventory taken off the market.
plus keep in mind many folks drank the refi till you die cool laid they don't really have any or much equity. so it will take them either bringing checks to closing if they want to exit or banks getting back into the short sale business.. which again takes time to ramp up..
then the fact that investor credit has really dried up.. so a lot of these cant wait for the crash investors we see on BP wont have the capacity to buy anything any way.. CASH will be the story
Are you guys still lending Jay? This is when relationships are so damn important. Thankfully, my HML is still lending to us (less leverage but slightly lower rate). These are the times it pays to be loyal.
I have been putting out select low ball offers in cash and have been doing decently well. Just renegotiated a REO SFH flip for 15% less than my previous contract price. Apartments are actually renting faster than before in my markets since a lot of listings got pulled.we are but we do JV we dont lend. so different model
- Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes6y
Depends on where you are and what you are after. I am still seeing multifamily properties in Oakland, CA Richmond, CA and Antioch, CA get snapped up fast if they are priced appropriately. This includes a duplex that was listed Saturday that went pending on Monday above asking and the property still has tenants in it!
- Investor · Buffalo, NY · Member since 2019 · 160 posts · 112 votes6y
Great thread, @Caleb Bryant, thanks for starting. Very informative to see how experience, geography, and risk tolerance is effecting various member strategies.
1. Are you still investing in real estate through the Covid-19 crisis?
Yes, we had two deals under contract before the fecal matter hit the rotating blades. Had to cancel one as the lenders doing rehab loans suddenly pulled back and were lending on LTC versus LTV, so there was no way to BRRRR the property. Lenders were also telling me they'd be reducing from 80% to 70%, maybe even in the 60%s but were unable to lock anything in that would make me comfortable.
The other deal is a small SFH that is in a rapidly appreciating section of Buffalo, NY and we were going to do a mid/high end renovation and really push the sale price. Well, that changed fast. But there is still plenty of meat on the bone whether we fix'n'flip, or just clean it up and rent it for a year or two. It's a cash buy with private money than I got at 10% interest only, no profit-sharing, no points. It should at least be a BRRRR for the short-term, then re-evaluate the SFH market when things settle down with COVID.
2. Why or why not?
I tend to analyze deals conservatively to begin with, aside from one time I was up against a 1031 deadline. So, this is just a great opportunity for self-education. I've been listening to a lot of podcasts, varying from Gloom & Doom to encouraging folks that THIS is the time to make money. Have to trust myself to sort through it all!
3. What niches are you most focused on and why?
We're primarily in small multi-family, but I'm wondering if there will be more demand for BRRRRLO (lease option) rentals moving forward as people economically effected by shut downs will struggle getting mortgages once they are back on their feet. Just a thought that I'm exploring....
4. Is that the same focus you had before Covid-19 or not?
Yes. Just trying to think more creatively now and scale back the level/expense of renovation we have traditionally done.
- 6yWhitney HuttenPro MemberInvestor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
1. Are you still investing in real estate through the Covid-19 crisis? Yes, but cautiously because I don't know the true asset ARV, true rents, or true vacancy. Therefore, I'm lowering all of my numbers to account for declining prices and rents (and if they don't happen great!). I'm also inflating my vacancy for now.
2. Why or why not? People still need a home to live in.
3. What niches are you most focused on and why? I invest in B-C+ class properties because the cashflow is good and because there are more people that can afford these kinds of rentals.
4. Is that the same focus you had before Covid-19 or not? It's the same strategy. SFRS in my area got overheated, but I'm may jump back in as inventory is starting to come online and others are fearful right now.
I'm also holding more reserves right now, opening my lines of credit, and lining up partnerships... I think in 3-6 months is when the real deals will start coming around.
- Property Manager · Henderson, NV · Member since 2018 · 501 posts · 317 votes6y
I am not taking any action at this time. It is uncertain what is going to happen.
In my opinion, the only way to win in real estate is to place yourself in a position to buy when the market is down and be able to weather the storm. The only way to do this is to keep large reserves and have little leverage. Some say this takes a long time but I think it takes longer to lose everything (due to high leverage) and start over again.
- Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes6y
1. Are you still investing in real estate through the Covid-19 crisis? 2. Why, why not?
There are markets that are certainly going to be more/less affected by this than others. If you pick the right asset in the right place and buy at a discounted "the world is on lockdown" price I think an intelligent investor would be well hedged from significant loss of value. So YES. I will invest in every phase of the market, with an adjusted strategy.
3. What niches are you most focused on and why?
Working class assets in select secondary markets throughout the midwest and some southern states that have high rental demand, and high cap rates. They're less volatile than the boom/bust cities that everyone uses to measure "national real estate values", less subject to increased vacancy losses during tough times, and they cash flow well regardless of the economic phase... if acquired and operated correctly.
4. Is that the same focus you had before Covid-19 or not?
Basically, yes. Covid is a recessionary event (albeit one we could not easily predict)... but I all people have been talking about on these forums for the last 5 years is "the next recession" and "we're at the peak of the market"... so it wasn't that hard to develop a strategy that would be more likely survive the current and future market conditions. All of my tenants paid rent in April before the 15th. My property managers collectively reported 85% of april rents received by the 15th... which is hardly lower than their usual collection rate by the 15th of a given month.
- Rental Property Investor · Huntsville, AL · Member since 2015 · 401 posts · 309 votes6y
@Elliott Elkhoury yep we had similar collection rates down in bama as well, which is typical for us. Like what you said about investing in every cycle, you just have to know your pivot.
- Real Estate Broker · Scottsdale AZ & Cleveland, OH · Member since 2019 · 168 posts · 109 votes6y
I am taking this time to re-evaluate my entire portfolio. I am going to do 1 refinance and another refi on my HELOC which will help with cash flows. I am still looking for deals but extremely selective. I have seen an influx of Airbnb's hit the rental market (20-25% more inventory) so in a few months I would imagine there will be a lot of new listings in AZ.
If you are an out of town investor looking in Cleveland, OH - PLEASE BE CAREFUL, the tenant base in the city is much harder to navigate than people realize and I am seeing investors in my network shedding/dumping their worst performing properties now in hopes that there is an out of town investor looking to capitalize****
Lastly, small contractors are hit hard. This is the time to look at all CAP EX and do the necessary repairs. You can leverage great relationships or find new trades which will be very thankful. You could get a better cost and a new long term partner.
Hope this helps!
-Jared
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