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
- Real Estate Broker · St. Louis, MO · Member since 2014 · 206 posts · 194 votes6y
I was acquiring up until mid 2017. Since then I've been in a holding pattern, not because I won't or can't do a deal, but because I can't find anything that makes sense for my investment criteria.
In my opinion, this shutdown is going to have a major negative effect on our economy that will take time to infiltrate the real estate market. I'm in the Midwest, which is typically a year or so behind the coasts so I am watching those areas carefully to see what is coming my way.
I've only seen two downturns in my adult life, 1999 and 2008. What I remember about both in hindsight, is that the time to buy was when things seemed utterly hopeless. I don't sense that at all right now, but that feeling takes time to root in a market.
I think the prudent thing to do at this point is to focus on liquidity. You will need cash to weather the storm (especially if leveraged), and cash to buy deals if/when they become available. Important point to remember...... If we see something similar to 2008 traditional financing will get shut down (already starting to see it). Don't expect to go picking up the wreckage with low LTV bank financing or HELOCs.
- Investor · San Bernardino, CA · Member since 2015 · 3 posts · 1 vote6y
1. Are you still investing in real estate through the Covid-19 crisis?
YES I am trying to!
2. Why or why not?
I just purchased a rental property in December that has good returns but I can't find a lender that will loan without 6 months cash reserves.
3. What niches are you most focused on and why?
I'm focused on long term Section 8 rentals, because of the rent security.4. Is that the same focus you had before Covid-19 or not?
Yes, it is. This is what I have the most experience in and will continue in this niche until this Covid-19 situation gets better.
- Rental Property Investor · Oklahoma City, OK · Member since 2017 · 1k+ posts · 694 votes6y
Originally posted by @Aaron Burns:
1- I have must less interest right now than I did before due to the unknown about how landlord will be treated and how they are being regarding in the media due to the virus et al
2- oops answered in # 1 but another reason is that the current prices aren't representative of what I believe the increased risk is at this point.
3- I've got one property coming open at the beginning of the month and am moving it to S8 property for the guaranteed income.
4- I only have one other S8 property and it has been awesome for me so far. Love getting 90% of my money wired to my account on the first. My S8 tenant is awesome. Maybe I've just been lucky.
We're on the same page. SO much comfort in section 8 right now! Providers that typically sell properties with tenants in place and that can show recent rental history provide some security as well especially if the pay in May and June.
- Rental Property Investor · Oklahoma City, OK · Member since 2017 · 1k+ posts · 694 votes6y
Originally posted by @Alex G.:
I am not touching this market with a 10-foot pole. It's too late to sell and way too early to buy. Watch out for an exodus from densely-populated cities to suburbs.
I don't think it's too late to sell at least in OKC. I've seen sellers send out their deals at what they planned on selling them at pre-covid. They're being a bit more giving during the repair process, but especially with section 8 tenants, returns are staying the same for buyers.
- Rental Property Investor · Huntsville, AL · Member since 2015 · 401 posts · 309 votes6y
@William Jenkins great insight, thanks for sharing!
I'm still looking as well. 2 came close but 1 didn't want to deal and the other one we were very close on but after a walk through I passed, needed more work than I wanted and 1 tenant was very hesitant to allow a walk through in her side. We could have forced the issue but decided to walk based on other criteria.
MLS deals are still hard to come by, lots of people jumping on them when they pop up.
- Olathe, KS · Member since 2018 · 148 posts · 207 votes6y
I feel like right now, there's really no reason to buy unless you're getting a really good deal. Most of the people that are saying it's going to blow over in this thread are realtors. :)
8% of FHA loans are now in forbearance
The average number of loans in forbearance is 5.95%
At the beginning of March, only .25% were. It doubled week over week.
Lending standards have gone way up. Minimums and credit scores have gone way up. Jumbo loans are getting harder to get.
So you have less buyers and sellers who are increasingly in trouble. And historically this has taken quite a while to play out. Nobody is going into foreclosure now. But they might next year or the year after.
It's area by area, but you'd have to have a smoking deal right now as an investment to protect to the downside. Sure, it could blow over and everything goes back to normal in 3 months. But what about the flip side, an 18 month slog of distancing and closures? You've got to account for that.
For context, the foreclosure rate in like 2009 and 2010 was around 2% when it peaked.
- Rental Property Investor · Huntsville, AL · Member since 2015 · 401 posts · 309 votes6y
@Aaron Taylor you're thinking a lot like me, I'm expecting there to be more opportunities later than now. Also adjusting criteria to help with the added risk of not knowing when the heck things will be somewhat "normal" again. Thanks for the stats on FHA forbearance, I actually mentioned to my partner a couple weeks ago that FHA's would be some of the first to go, we will have to see how all this plays out.
- 6yScott KronePro MemberInvestor · Northbrook, IL · Member since 2017 · 352 posts · 295 votes
@Caleb Bryant We just hosted a webinar last Wednesday on the market as well as our product type - self storage, and how it has historically performed in recessionary markets. More importantly, the "why" behind the reason for its performance. In addition, we review where the market currently, and which direction it appears to be heading. If this is of interest to you, PM me, and I can forward you a recording of the webinar.
Hi Caleb - good thread / questions. First let me reply
1. Are you still investing in real estate through the Covid-19 crisis?
Not at the moment
2. Why or why not?
Primary reason is that I'm extremely busy with work and projects, so don't really have much time to look, but I also have many concerns about what is currently happening and what may happen
3. What niches are you most focused on and why?
If I were looking, the main question I would ask myself is whether I want to take on more leverage, and then how much. Then I would have to ask myself which markets (I am invested in several) would make sense moving forward or whether I need to look into other markets
4. Is that the same focus you had before Covid-19 or not?
I own MFRs and SFRs. I don't think my focus would change if I were to look for something new. There may be something to be said about investing in warehouses, since that could get a boost due to increase in e-commerce and shipping / logistics activities, but I am not educated on that segment. However, I would consider joining a DST type investment, possibly debt-free. I was really into leverage before. Not anymore.
To broaden this up, I read most of the replies. There seem to be 2 main sides - those who think this is a relatively minor event, and those who decide to be careful. I probably belong to the latter camp, but let's pretend I was in the not overly concerned camp. Coming from that perspective I wouldn't expect prices to go down by much, so I would assume finding the vaunted "good deals" would require time and effort. And in that case there will be no need to do anything different or immediate. Ok, now since I don't really belong to that camp, my take is that I much rather be prepared for a long downturn. It doesn't have to be a large crash like 2008. It just has to be long. Under that scenario, I really don't want to add any more leverage.My concern is not so much whether prices would go up or down (some people on this post as well as others don't seem to think they would go down that much), but whether tenants will be able to pay. Yes, people are getting unemployment for now, so perhaps the short term is not of immediate concern to some, but what about a long running recession, massive job losses that may take a very long time to return, smaller tenant pool and even downward pressure on rent to name a few. The government is now getting involved, placing eviction moratoriums. It's yet to be seen how large of a role it will continue to play. There have been times where adverse government and municipalities actions deteriorated property values.
My reply is getting a bit long, so let me qualify by saying that I already own 26 units, which is not a lot to some, but still carries a lot of leverage. I bought them all coming out of the last recession, so got them all at great prices. I'm not as aggressive on buying as I used to be. And at this point I definitely prefer less leverage and more liquidity. I really liked what Aaron Taylor, William Jenkins and Michael Robbins had to say. All had some very valid points.
Last, I sort of noticed that the people who tend to be the most bullish also seem to be agents or somehow involved in real estate as a trade. I don't know what to say about this. Wasn't there a saying you don't ask insurance salesperson if you need more insurance. Regardless was interesting reading different people opinions.
- Rental Property Investor · Huntsville, AL · Member since 2015 · 401 posts · 309 votes6y
@Guy Azta thanks for the input! I definitely agree with the leverage. I was kind of a low leverage guy anyway, and when I say low leverage I mean LTV, as we usually pick properties up for 100% LTC, but heavily under market. I could definitely see the government getting involved causing problems to values, especially when it's unclear how or if landlords will get paid. Some of the bills that have been introduced whether they come close to passing or not really attach a lot of strings and take most of the control away from the property owner. I saw a proposed 10% equity stake to tenants
@Caleb Bryant for sure - was nice commenting on your thread. It's tough, because we live in a fiat currency world, and if you want to accumulate wealth, taking on self-amortizing leverage is a very good thing. Right now it's a terrible thing to have. I was trying to understand why so many people seem so gung-ho on scooping up properties right now, as we could be in month 1 out of who knows how many, and it's very likely the problems in real estate haven't started yet. If the market is crashing badly, it will probably take some time to manifest. And with news like over 50% of renters say they lost their jobs, the fact you can't evict, among so many others, it seems like trying to catch a falling jackhammer. But buying now could make sense for certain people who have a lot of money and reserves on the sidelines and who can find an opportunity that did not exist 2 months ago. But even then, the main reasoning for trying to go for it right now would be under the assumption that the overall damage will be short lived and that the opportunities will not exist for a long enough window. I just find it hard to foresee what great opportunities could emerge in such short window. And as far as government, municipalities etc, there could be a big shift to the left coming next election, which can be less real estate friendly (this is not a political statement). Also it's certainly possible property taxes may go up to offset the revenues shortfall. Not to mention crime rates can go up, destabilizing C class neighborhoods. Really having hard time justifying doing anything anytime soon. But I do admit I wasn't that motivated to buy anything at today's prices even before the virus. I may have been more motivated to jump in if I owned less properties right now.
So what about you. You looking to buy more? If so, why?
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ 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?
I will remain an opportunist investor and am building my dry powder but am wary of catching falling knives immediate term. I am utilizing and storing lines of ridiculously cheap credit now in case they get frozen later.
Normally a house and apt holder I will be looking into industrial, warehouse, retail and office niches if owners tap out after the beating they must be experiencing now.
These niches have been on my radar for the last year or so but will become more of a focus. Variety also keeps things interesting so not entirely market driven.
- Rental Property Investor · Huntsville, AL · Member since 2015 · 401 posts · 309 votes6y
@Guy Azta I’m buying but most of the stuff I’m buying is immediately going to another investor. The “hold” properties we are really picking up is sandwich lease options that way we know exactly what our downside is. I’ve got quite a few units already so I’m in no rush to pick up a long term investment, but I’m capitalizing on a lot of opportunities in the single family wholesaling side of the business as well as “whole tail” deals or extremely light flips.
- Rental Property Investor · Big Sandy, TN · Member since 2013 · 147 posts · 91 votes6y
I'm buying!I am now under contract for a 50 unit with the exact same number that were laughed at 8 months ago. They were based off of income and the operation. He didn't even remember my previous offer. Pro forma is nonsense. If rent can be raised so easily on paper the seller should raise them to prove it instead of providing it as a future option.
Stick to your guns on your numbers! Excel doesn't have emotions!
- Real Estate Agent · Houston, TX · Member since 2017 · 292 posts · 233 votes6y
Originally posted by @Nick Giulioni:
Can't hold me down! :)
Got to keep on movin' !!
There's a flurry of buying activity in Houston, both for investment properties and well-priced, attractive homes near good schools.
I'm studying the market regularly, but will most likely hold off until the Fall for an investment purchase, I'm thinking inventory will slowly and steadily shoot up.
Hi @Caleb Bryant interesting. Seems like you're mostly in the trade side of things. I'm sure there are a lot of opportunities in that space. Sounds like you know what you are doing. I'm sure there are some opportunities in the buy and hold if you look for them or have a pipeline to receive them. It stills surprises me how bullish people are these days. I know it's hard to say how bad things will get and for how long, and at the end it may not be all that bad. It's just hard for me to see why take the risk now where it's still early on. But again, anyone who has a lot of reserves and can find a very good opportunity, will probably be safe. This is my 3rd financial crisis, first being the Dotcom bubble, second the housing bubble (which ended up being very opportunistic for me), and now this covid19 crisis, and this is certainly the most bullish crisis I've ever seen. Alright best of luck
@mike this is a great point:
"I think it's better to take advantage of historic low interest rates that will benefit you for the life of the property than to avoid any potential short term problems you might have. Just to give a little perspective, a half point increase in interest on a $100,000 property over a 30 year loan will cost $10,000 and you'll pay $18,000 more in interest at a 1% higher rate."
How is the San Jose market?
And, to answer the original questions that @Caleb Bryant asked:
1. Are you still investing in real estate through the Covid-19 crisis?
I am a new real estate investor, so and I think this is a good time to be looking to buy into the market, later this year.
2. Why or why not?
I think this is a good time to begin because a) every day is so routine that this is the right time to be making good habits, and for the past 6 weeks i've been waking up and analyzing deals. Also, I get a lot of joy out of the bigger pockets podcast because in hearing the stories of people in the market, I know that once I do build up a portfolio, I get ownership and equity over what i'm doing - that is so satisfying. It is a long game but very rewarding.
3. What niches are you most focused on and why?I am focused on Jersey City, NJ. My wife's job has their east coast headquarters there. I anticipate that supply will go up and housing prices will decrease in the short term. This is already being seen in the Insights put out by bigger pockets. I am also interested in areas around Chicago, which is where my wife's job has their global headquarters, and because my accountability buddy @Marshall Shen is based there, so I learn about the market from him! (Thanks Marshall!). I am also interested in Portland, Oregon. My friend is a property manager there, so he has boots on the ground to let me know what deals are good.
4. Is that the same focus you had before Covid-19 or not?
No. Until Covid-19, I had not considered real estate. For some reason it seemed too inaccessible - I have no idea why. But I have savings saved up, and as we enter this recession, I expect having liquidity and being able to employ it in something that can make me money, and provide housing for my family, is the best route to take.
I view this as a lifelong game and developing a network and understanding the market is the most important thing to me. If you're interested in connecting, I'll be hosting virtual zoom calls on a monthly basis for everyone to share what they're seeing in the market and share their experience.
- Rental Property Investor · Huntsville, AL · Member since 2015 · 401 posts · 309 votes6y
@Blake Garcia I just realized you were from big sandy Tennessee. Is that near Paris? Used to play with a band out there haha
- Rental Property Investor · Big Sandy, TN · Member since 2013 · 147 posts · 91 votes6y
@Caleb Bryant
Yes sir! On the lake!
- Rental Property Investor · Boston · Member since 2020 · 9 posts · 2 votes6y
I'm of the belief that there are always good deals to found regardless of what may be going on "out there". That being said, I'm hitting some speed bumps regarding financing.
I live in Boston and own two mixed use buildings in Buffalo, NY. Each building has 5 units (one commercial unit and four apartments in each building). Currently no mortgage on either (I own them free and clear) and both in great shape (we were fortunate to be the beneficiaries to substantial grants that allowed for new roofs, furnaces, upgrades, etc, in 2017). They cash flow very well with one property taking in $2,425 a month ($29,100 annually) and the other $2,245 a month ($26,940).
I'm actually surprised at the hurdles I'm encountering trying to get someone to loan against these properties, even at a 50% LTV (conservative estimates are each building is worth $225k - $250k).
Some of the more common objections I’ve heard are:
“We don’t loan to out-of-state owners.”
“We only loan on owner occupied properties.”
“We don’t loan against properties over 4 units.”
“We don’t loan on mixed use buildings.”
I would think in this absurdly low interest rate environment that it would be easier than in the past to secure reasonable loan terms if I wanted to borrow against the properties.
Curious to hear if anyone can offer feedback and/or possible lending solutions. I don’t have a particular property or project that I’m looking to buy right now so there’s no rush, per se, but I’m always looking and would love to have access to capital should an attractive deal present itself.
Thank you in advance to the Bigger Pockets community – this is the best real estate investing resource I’ve come across. –Mike
- Investor · Buffalo, NY · Member since 2019 · 163 posts · 113 votes6y
@Michael Lewis I'm curious as to what neighborhood your buildings are in, and what businesses are in the commercial spaces. I had a mixed use 4-unit under contract here -- ink was still fresh the week that COVID really blew up the stock market and banks -- and overnight the 3 lenders I was talking to about the deal changed their tunes. One even told me to walk away from the deal, when they were telling me 80% LTC just a few days earlier. This was a rather significant rehab job, but I was under contract at roughly $27K per door, with a possible ARV hitting mid $300k range.
Which banks have you already spoken to? I would reach out to Lakeshore Savings (can PM you the exact representatives name and number) and Upstate Bank. Both seem to be very flexibly and specialize in buildings like this.
- 6yMatthew Irish-JonesBusiness MemberReal Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
@Michael Lewis lenders are getting very restrictive. Most lenders I am talking to have basically stopped offering construction loans. They are also turning away lots of new investors. They want to see high W-2 income, positive cash flowing assets, and a lot of liquidity. They are also putting a higher value on experience than before. I have seen pretty qualified borrowers get rejected because they don't have the experience. The rates are still low but, the qualifications are higher.
DM me and I will shoot you a couple email intros to lenders that are still lending.
Irish Jones Realty4.947 Reviews - Investor · Portland, OR · Member since 2017 · 29 posts · 12 votes6y
I AM DOUBLING DOWN.
- Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ 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? - yes
2. Why or why not?- Opportunties exist.
3. What niches are you most focused on and why?- Single families to flip; multifamilies to hold
4. Is that the same focus you had before Covid-19 or not? - Yes
I'll post my answers in the comments!
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