Are Buyers still Buying?

Question

I have had many of my vote buyers telling me they’re not buying or they’re looking for an extreme discount on the price I present?

Have cash buyers preferences changed?

I also heard buyer are looking for cash flow more than ever? Should I begin to focus primarily on cash-flowing properties ?

As a buyer or wholesaler what have you guys done or been doing to overcome this?

Any insight would be appreciated.

Horace Hayes · Answer

@Sardar Mustafa Khan I definitely think buyer preferences are shifting, due to market uncertainty. Im a newer investor out of Atlanta and Im interested in having more meat on the bones when I make deals, those bigger discounts you mentioned.  My typical strategy is BRRR so I can take advantage of getting a short term profit and long term income.  With this strategy the key is to keep debt low and credit score high for this to continue working as banks are tightening their lending quals.

Brenden Mitchum · Answer

Hey @Sardar Mustafa Khan!

I'll briefly touch on each of your questions here in hopes of providing some insight.

1. The reason your buyers are now looking for extreme discounts is to offset the potential dip in values coming. The mortgage market is pretty out of whack right now and last time that happened we saw values plummet. Any flippers and BRRRR people out there are looking for larger discounts to hedge against this. Both of these models completely rely on that ARV, whether to sell or refinance. So if prices drop by 20% mid-flip then they will have needed to bought at a 20% discount from their typical target to still get their target returns. That being said, short term it's really hard to tell what's going to happen with prices (they are still going up in my area).

2. Cash buyers preferences have changed for the same reason I listed above. Most "cash" buyers are still borrowing money, whether it's private or hard and they definitely don't want to get caught in a contraction with a 12 month high-interest loan on their hands.

3. Obviously with future values so uncertain, the safest strategy at the moment is to focus on cash flow. Now, more than ever, appreciation is a guessing game. Many investors are aware of this so it's not surprising to see a shift in focus to cash flow. Who cares if values go down as long as you're cash flowing. You can sit on a property that is underwater as long as it cash flows.

4. As a new investor, I am hyperaware of these facts and am significantly tightening up my criteria in these times. Cash flow requirements for me have gone up to take into account potential rent decreases and vacancy increases (short term) and I am no longer looking for anything that needs significant rehab or a refi. I do believe now is a great time to get debt, while it is cheap, so I am still looking but with a more skeptical eye.

Hope that helped a bit! If you have any other questions or just want to chat, feel free to message me anytime!

Barry Pekin · Answer

@Sardar Mustafa Khan,

I stay active with the local REI groups, and they are definitely still buying.  It probably depends on the area and the buyers.  This is a time of uncertainty, but if investors are doing this for their livelihood, they can't exactly take a break for a few months.

Are Buyers still Buying?

Most Popular Reply