All Forum Posts by: AJ Wong

- Permitting. Permitting. Permitting. 

One of the reasons I moved to the Oregon Coast from southern California in 2018 was due to the notable difference in the barrier to investment entry and the non existence of short term or vacation rental regulation. Fast forward five years and there are very limited areas and properties that are eligible for outright vacation rental usage or occupancies of less than 30 days. On any given day, within a given budget or wish list, there are generally a handful of eligible and strong potential candidates on the ENTIRE OREGON COAST. As a consequence of my four years of working with Vacasa and their considerable network of buyers and sellers of permitted vacation rentals, my niche requires constant familiarity with local ordinances, regional requirements and processes and procedures for securing permits as well as the demand to cover an expansive geographical area. If you want to secure eligible vacation rental we can help you find it, but it often is not in the areas you might initially look. A great recent example of a little pleasant surprise for investors seeking a vacation rental in or around Bandon is that assuming you can locate a property within the permissible zone, prepare to invest in a commercial sprinkler system prior to a vacation rental permit. Not to worry,  we have a great sprinkler installation company for reference.

My suggestion is to make friends with the person at planning for both the city and county. Most of the information will be available (although not always clear) on the city/county websites, but regardless of the thoroughness of your realtor/broker/friend get in contact with the source via email or phone. Also on occasion we will write into a purchase offer a contingency for additional verification of vacation rental usage during the standard inspection period or beyond. There is no such thing as too much due diligence. So do it. You do not want to be the buyer left with a property you can't use as intended and I don't want to be the broker that sold it to you. 

- Location X 3

Not sure who said it but location does matter. If the Oregon Coast is on your radar, there aren't many alternatives. It's not for everyone, but everyone that visits leaves with more than they arrived with. As it relates to vacation rentals there is very strong demand. I'd estimate 70% of the rental market is from Lincoln City to Astoria with the vast majority in or around LC, Rockaway Beach and every where in between. The reality is none of these areas are actively expanding permitting but almost everywhere on the coast has demonstrated demand. You wouldn't believe me if I shared what some of the stronger short term rentals gross incomes in areas that would be hard to find on a map. 

But even location within a location matters. Most Airbnb'ers don't want to drive down a long lonely road, unless it's worth it. If it is off the beaten path there needs to be incentive, and good internet. Be on the look out for the quality of neighbors or the over-saturation of quality rentals for that matter. Often because there are so few areas that vacation rentals are welcomed there are higher concentrations of short term rentals in those areas. Also what do people want when they visit? Food. Nature. Activities. Closeness to whatever action that areas offers. 

 - Upfront costs

Hidden costs ALWAYS exist. We discussed permitting hurdles, which means there are periods that the anticipated income might not be received. Also the home is going to be lived in, full time. Things need to work and the space needs to be ready for living. Fully furnished, fully decorated and fully functional. The little touches are what guests remember (and write about) it's also the 2023 aesthetic that differentiates on the Oregon Coast. If the place looks, feels and smells good, you have a good chance of it being in demand. With that said getting it to that condition will take time, effort and investment. Factor in a few flights and weekends getting the property in the condition you would want it in for $200-400/night plus cleaning fees..

One tip is look for a property that is offered fully furnished, or get really good at thrifting. I've managed to furnish many many rentals by spending very very little on quality furnishings. Another helpful bit could be a seller's concession. We helped facilitate a recent Triplex with a full 3% credit to cover closing costs. Over $15k stayed in my clients pockets for appliances and other substantial upfront investment they had to consider. 

- Style, Design & Photos

Above I touched on the fact that the Oregon Coast has a shortage of 2023 version rentals. If you're from out of state, California in particular, properties are often 'cute,' or made to appear that way. There is no shortage of stories of successful yurts, ADU's, grain bins, tree houses and van's that are quite profitable as short term rentals. And in fact my fiancé and I turned a shed into a $4k per month grossing rental, and sold it for nearly $200k..

The one thing those accommodations have in common is style, design and photos. The places generally look cool or at least clean and existing enough to stay in and share. After all your AirBnB is another person/couple/family vacation. We're all quite used to getting less than we pay for, but how often are you pleasantly surprised or at least feel like your investment was worth it? The same goes for your investment or the potential of your a vacation rental. There should be show...BNB Cribs or Pimp my BNB...you can work magic with paint, furnishings, plants and rugs but it still needs to be quality and maintained. Vacation rentals take a beating, quality furniture will hold up but as with your space this is not a one time investment. There will be reinvestment costs, such as the expenses of visiting to update the furnishings and linens for next season. If the first round was done well, these should be expenses covered by the property. 

- Size matters

Personally I have had the most success with smaller footprint dwellings that offered larger amenities. I suspect the reason for this is that the majority of travelers are couples. There is a smaller demand for a 3-4-5 bedroom home and unless the amenities justify the costs. I've seen many oceanfront estates generate well north of $200k annually in gross revenue but the barrier to entry is higher as are the management requirements. It's difficult to turn over a 2-3-4k square foot home in time for the next check in, not nearly as challenging is a 1/1 cottage or a  2/2 condo. 

I suppose the best way to think of it is that there is a larger tenant pool for a $2500/mo rental than a $6500/mo home. Now that's not to say there aren't areas of under serviced full family rentals. Near Bandon Dunes or Cannon Beach for example, a full family sized home (done well) will be just as popular as a smaller foot print due to demographics and composition of tourists. The main point is that many of the most profitable BnB's are extensions of the primary property. An ADU, a room with a separate entrance, a basement..often the real return is hidden beyond the conventional assessment or projection.

- Not all deals are created equal

Investing is a fun game. Much like sports it reveals who's prepared and who has work to do. I like to think I've seen it all, but we're all rookies when it comes to returns. I learn everyday, or at least try to..shout out to Bigger Pockets. One thing I'm reasonable at is identifying creative ways to make a deal work, or on what terms it could be most advantageous as an investment. So for example: seller concessions, owner carry's, extended closings, investor specific lending, local lending relationships, debt structuring and creative marketing. All of these are variable analytics that can affect the proposed value of a transaction. 

In the real world it might look like the $15k concession on a 10% down investor loan that requires a NET of $50k our of pocket on a $500k Triplex. OR in my first personal run, borrowing $60k from a friend at 10% interest only but instead of making monthly payments agreeing on a two year ballon for $72,500. Or 25% down with a local credit union on a six plex that the owners wanted cash only due to the condition. Or a seller carry, where everyone actually wins. All of these are real life examples of outside the box thinking that produced profitable results. In this game you either need to out train, out work or out think everyone else, I suggest a combination of all three. My first focus would be on lending relationships and qualifications. It's nice to browse Zillow, it's more lucrative to be able to close when opportunity knocks. A good lender is worth their weight and they (like good brokers and investors) are few and far between. We often suggest a 10% down no PMI investor specific program to our clientele as a baseline, it's an exceptional program that can make or break a deal! Message me for deets.

- Realistic expectations

I suspect this will be a popular article because there are a lot of people looking to be or already involved in vacation rental ownership on the Oregon Coast and beyond. In fact the statistics support an explosion in BNB inventory, ownership and conversion to rental usages. In their defense that is why many municipalities have taken steps to limit their volume as often the argument is that it contributes to the housing shortage. Politics aside, there are more and more people looking for a quality return, utilizing a short term rental. On the Oregon Coast with persistence and patience there is still an opportunity to secure a permitted and profitable property. However in most coastal areas (any coast for that matter) the barrier to entry is either closed or also increasing. When I first started BNB'ing by rental in Venice Beach there were no rules, now I don't believe you can get a new permit if you wanted one.

Also just because you own a short term rental doesn't mean you won't have typical land lord problems. In fact there's a good chance that you will have more! Management is a critical component to success. On the Oregon Coast this is generally a challenge. Especially if you're property IS off the beaten path. Think of the Coast like an island. Good people are hard to find. It's not impossible. Case in point :) BUT if you intend to self manage (the most cost effective solution) you'll need to make friends with the locals. If you think you are going to be successful as the guy or gal from California and just own a home in paradise without paying with any sweat equity, you should be writing this article. Property ownership takes sacrifice and effort. At least positive producing short term rentals do. There is no magic button, however if you'v even particular and prudent with the aforementioned points getting the assembly line to produce consistently is a more strait and narrow path. A dependable and caring cleaning crew and possibly management team is essential. Get on Facebook, join the local groups, put an ad on craigslist and pay people what they are worth. Build your team. Handyman and plumber included. We have a few excellent references for property management when the time comes. 

- Art & Science

Despite all of your research and AirDNA tools, there is a balance between planning, execution and monetization of vacation rentals and short term rentals. As hard as they are to find and procure on hard numbers, there is an art to making them attractive, consistent, marketing and profiting. The featured authors and columnists didn't invest in a property that was out of the ordinary (although their timing or foresight might have been earlier) generally the exceptional component to their story is just that..their story. Maybe they have a following because their container home went viral or they have all five star ratings because guests get cookies from the local bakery at check in. Whatever it is, there has to be something, some differentiator about the property itself or the experience with the property that is notable, memorable or worth investing in. 

Not just from the perspective of the owner and host but also of the tenant. What would you pay to stay there and why? Where can you as as investor create hidden value? What makes it valuable in the first place? The answers can be simple. I can walk to the beach for under $250k. My dog has a fenced yard. $35k for a custom ocean view casita in Mexico instead of $3k per month on rent in San Diego for one year. Ok it might take a little rocket science but the guiding principle is to create something for yourself. If you create the absolute 'best' sanctuary or home on the Oregon Coast (regardless of the type of domicile) it will be in demand because: A. They're hard to find. B. hardly anyone else puts their full love into it. All too often we get attached to what other people want, but in this case a little selfishness can go a long way and by bringing OUR vision to life we offer the best experience to others. 

- PS

Short term rentals are potentially a great addition to a property portfolio or a focused strategy to investment success. However there are other dynamics and alternatives that are increasingly underutilized that can offer alternative paths to investment or profitability. Since there are so few STR permits forthcoming, I believe the value of securing a permit and the associated benefits should increase. Additionally since there will likely be lower available BNB inventory over time, there is an expanding demand for furnished medium term rentals. Those rentals that are greater than 30 days available for 1-3-6 months. For example the 'tiny home' shed I created in Coos Bay was rented by a traveling nurse for $4k per month for 3 months in December 2020. More on this next time..

I started writing this post last week, but the banking errr.. financial 'crisis' of 2023 (and make no doubt about it, that's what this is) has been 'evolving' so rapidly I had to delete what I was going to post to stay relevant. Describe it however you would like but there is a large debt and small dollar problem. 

QE5 or whatever we're on is now, the FED is expanding its balance sheet, calling emergency meetings and the financial analysts and experts of the world have no clue what's going to 'break' next. 

Well surprise, they've had no clue all along! The net effect of monetary policy is to kick the proverbial can down the road. We never solved the issues of 2008 and in fact created a much larger everything debt and everything asset bubble. The asterisk this go around is that there (or should I say their) is 'stubborn,' 'sticky' or 'persistent,' inflation. Not of the transitory type, but of the self induced, savings and wealth destruction kind. 

Self induced - because it was artificially suppressed interest rates of 2005ish that created the housing bubble and the past decade that created the current one. Banks invested in low yield assets, as rates have risen, those same assets are worthless...errr..worth less. Considerably less. What are we to expect? Consumers don't care what banks do with their deposits so why should they? Even the industry 'leaders' at SVB with often tens of millions in deposits didn't do their homework...but who cares. They were paid in full. 

Call monetary policy or programs by any name you would like but the net effect is inflationary spending. Every bailout, every depositor insurance policy, every natural disaster aid, infrastructure project and bullet or navy boat is paid for, usually with debt. Which BTW has been historically cheap debt, BUT the interest costs just went up, a lot. 

It was actually the cheapness of the debt itself that helped contain inflation inspire of record monetary supply. Businesses and investors borrowed at historically low rates, keeping the costs of doing business low and prices in check.

Let's also be clear. Resources are finite. Commodity prices will rise with demand, consumption and time. 

My ignorant perspective is the planet/market isn't producing these limited supplies in increasing quantity without a corresponding increase in input of energy and expense.  The costs of living are going to increase. Doesn't it have to from 0%? Unless the demand destruction is significant enough to offset the rising costs of commodity prices. Which is a pleasant explanation of a recession. 

More importantly I think the growth of the US money supply is all but a foregone conclusion. In a nutshell, the more dollars in the system, the less our savings are worth. According to the Congressional Budget Office: "Changes in CBO’s Budget Projections. CBO’s projection of the deficit for 2023 is now $0.4 trillion more than it was in May 2022; the projection of the cumulative deficit over the 2023–2032 period is now $3.1 trillion (or about 20 percent) more, largely because of newly enacted legislation and changes in CBO’s economic forecast, including higher projected inflation and interest rates."

Time will tell.. 

 '6%' inflation means your $100k cash reserve is $94k next year and $88,360 in March 2025. Equity investor? Well last year your $100k equity position is on average $80k+/- and not looking like a great return year or even super safe at the moment..Oh and the banks themselves don't seem all that stable but that won't really matter if the money on deposit isn't worth anything. lol 

Sooo where do investors go for security and safety? 

Historically? Hard, tangible assets: Land. Gold. Commodities. Real Estate. 

I'm under 40 but I've lived 40 financial lives. I, like many of my clients are concerned to say the least. Do I think the 'world' is going to end? No. Do I think the financial landscape as we know it is going through monumental, necessary and painful evolution? Yes. Unfortunately for most of us, we need to adapt or risk losing most of what we worked for if current trends continue. 

I'm forever bullish real assets. Will asset prices fluctuate? Yes. But those same commodities and services that are inflating will make developing or creating US real estate more expensive. I've held the perspective for sometime that US real estate was somewhat undervalued considering the amount of required resources and skills to build to modern standard and the safety and accessibility in comparison to other countries. 

That's not to imply it's not an uncertain time to invest, but most residential real estate investment in the US is leveraged. If the property cash flows and the capital invested isn't losing purchasing power, that seems like a double win? Perhaps the paper value or Zillow Zestimate drops, but isn't that what all these bank assets (the same mortgage backed securities underlying the market) are doing? I'm certain to get some push back here, but at least you know where your 'money' is. It isn't where you think it is at Wells Fargo and at this point should it be? 

I could be well off base, and things go back to 'normal' but when is the last time US economic conditions were normal? 2003-2007 was an artificial boom. 2008 the world stood still. 2009-2019 0% rate artificial boom. 2020 end of the world. 2021-2022 Covid stimulus. Whatever this is? 2023 Financial Crisis..

What is certain is that people will rent, eat, buy, sell, get married, have children and pass their assets on to their children. What's not clear is the quality of those experiences without some observant, prudent and calculated investment of time, capital and credit. 

Off record, I think all good times come with a cost. A cost the USD and policy has enabled and is clearly on the down slope. In the near term there will likely be opportunity as housing rates drop and programs are enacted that ultimately support lower residential housing costs. In the medium to long term the cost of a high standard of living is going to increase, as is the quality of investment required to meet that standard.

Conversely credit conditions for businesses and borrowers are likely to tighten, in fact my local credit union reached out to me weeks ago to let me know that they would be focusing on existing members and that indeed underwriting guidelines would be more cumbersome for clients. As the lifeblood of businesses, housing and the economy many experienced investors or businesses owners are already planning for a more restrictive lending environment. 

This past treasury auction was weak, as I finish this there is discussion of Schwab coming under investor focus as the majority of their income is based of interest rate related returns and many of their assets have an average yield of 2%ish..this is profitable in an ultra low interest environment where depositors are paid relatively nothing but if they flee to more secure assets..such as..real estate..their $7 Trillion empire could begin to wobble. That would be bad. 

I doubt we'll all agree but the risks of investment INACTIVITY or complacency is also increasing. 

"There is more lost by indecision than bad decision," is an old adage that might be more relevant to prudent real estate investment than at any time in recent memory. 

Fearless forecast:  healthy investment portfolios of the future MUST include high quality real estate.

Quote from @Andrea Heffernan:

We have just started our first STR in Manzanita, Oregon, and we thought we'd try Vacasa. We were warned, but other PMs were more expensive, and we thought we'd give them a shot. TERRIBLE. Their onboarding team got EVERYTHING wrong. Will be switching soon! My goal is to self-manage, but the city requires a local agent, and Housecleaners are very loyal to PMs. It's hard to find people on the Oregon coast, but I will find someone.

Hi Andrea..message me I have a great local broker and PM that can help
support your STR. As a RE broker with Vacasa for many years I can agree with almost all of the above comments. The RE division was separate, successful and underutilized, unsurprisingly they recently announced its planned ‘uncoupling’.. Ultimately I think property management (especially STR management) is a very difficult business and a true ‘technology company’ should reduce the costs to customer while enhancing service. That’s certainly been our experience on the RE side but for the few clients that elected Vacasa PM services that generally has not been their recent experience or as the company has expanded. 

On a positive, there seems to be some opportunity for vacation rentals on the coast and my tenure with Vacasa has enabled invaluable experience and relationships for investors in our niche market. RIP Vacasa. lol 

By now you might have heard that a few financial institutions in the US and beyond have run into some difficulties..

Somewhat counterintuitively the implosion of SVB bank and the downgraded risk of other regional and international banks and lending institutions led to a significant reduction in US mortgage rates. How can this be? 

The temporary cause seems to be a change in sentiment regarding what long and short term interest rates will do, with many 'analysts' and 'experts' forecasting the Federal Reserve will blink and pause or slow their rate hikes for concern of causing or perpetuating other credit calamities. 

The BIG questions on Wall Street and beyond are:

- Who and What are next?

- Where do we go from here? 

- How bad is it going to get?

I am not a financial expert, and this is NOT financial advice but these events have a significant effect on each of us, our money and our industry, so I'll do my best to be direct and unbiased in my forecast. 

TO save us all a lot of time I suggest watching this incredibly informative, educational and timely documentary released by FRONTLINE PBS.. YESTERDAY! Entitled 'Age of Easy Money' LINK TO VIDEO

In short since 2008 (when the previous/current system FAILED) we've had historically free money and arguably too much of it. This money went through banks, which have consolidated, expanded and funded the most speculative growth in human history in the form of: corporate overvaluations, stock market overvaluation, speculative SPAC's, VC's, cryptocurrency, art, real estate and wasted resources. 

The scale of this 'investment' is unfathomable. The price tag for the 2008 Bailout in the form of TARP (Troubled Asset Relief Program) was initially in the $787B range. The total amount of 'liquidity' provided from 2008-2018 was in the $6T range at +/- 0-.25% all the while mortgage rates were in the 6%'s When Ben Bernanke (former FED HEAD and architect of the ultra zero rate environment) left in 2018 he was replaced by current FED President Jerome Powell. Powell almost immediately looked to enact a tightening policy and markets freaked. Then President Trump went ballistic and the FED shortly changed course and provided an additional $5-6Trillion in a variety of financial mechanisms to stabilize the markets. As quoted in the documentary..."Powell did in a weekend what took Bernanke a decade."

That's all well and dandy...until Covid hit. In March 2020 after the stock market had plummeted nearly 20% in 3 days the US announced the largest stimulus and QE in the history of the world. Flooding the markets and central banks with a $2.2Trillion package and another $5-6 Trillion in petty cash. 

Where did all of this 'currency' go? It went to the banks. Some of it went to businesses and individuals (remember the $1200?) and apparently a LOT of it went to fraudsters for Lambo's and Bitcoin...The banks were so flush with cash that they parked it in low rate bonds and treasuries and lent the rest out speculatively. There was so much cash that borrowers even got low mortgage rates of 2.5-3% even though interest rates hadn't really moved at all..

Valuations of all assets went through the roof...$69k bitcoin anyone? Or $1M monkey pics? Pick an asset graph, overlay it with the dates of the stimulus and you'll see an identical peak and decline chart. Since rate hikes began roughly 12 months ago, the FED has raised rates nearly 500 basis points from near ZERO and embarked on a substantial quantitative tightening cycle essentially reducing the amount of capital available and increasing the cost of that capital. 

Fast forward to this week and banks with 'solid' books a year ago, now hold investments with 1-2% returns and the prospect of drastically reduced economic activity and growth prospects to keep new funds flowing. 

So how does this effect real estate lending and what happens to the RE market? 

Well the smart money is on a decline in general asset prices. Money was cheap, so like everything else the values increased and surely there needs to be some type of correction to reflect the inflated prices and current costs of borrowing...right?

Maybe..and maybe not..

Real Estate is a unique asset class that generally is local and lagging. Commercial office space aside, there are so many factors influencing the price of residential real estate beyond affordability that determine the direction of the marketplace. 

Housing supply is low. Many owners have affordable payments or considerable equity and aren't inclined to move due to uncertainty or  disadvantageous circumstances. Those 2020-2021 speculative buyers seem to have guessed right, and the excess inventory normally making it's way to the first time homebuyer likely ended up in someone else's portfolio. 

The point is that most borrowers are presently in a comfortable liability position and unless there is a drastic slow down in economic activity and mass layoffs, many are likely to remain in those investments or homes for sometime. 

So what about the big elephant in the room...inflation? Well again I'm no 'savant' but my experience with 2008 and my understanding of the reciprocal law of the universe is that what goes up must come down, or the money supply will shrink and the economy will get worse before it gets better. 

In general 'we' essentially delayed the economic repercussions of the pandemic by inflating the 'economy' temporarily. The problem is the majority of this 'growth' was not real growth in terms of infrastructure, work force or hard assets. In fact it was just the opposite, speculation on digital architecture (ie: blockchain, web3, metaverse, apps) neglect and delay of public/private investment (think oil refineries) a generation or two that lost years of education and work skills practice and training and an overconsumption and misallocation of physical resources..the world created 1 Trillion masks at a cost of $400B..a few billion of which reached the oceans..https://www.foxnews.com/politi...

All of these factors are inherently inflationary. The US inflation rate is supposedly not as high as it could be because we essentially export our inflation via the exorbitant privilege of having the USD as the global reserve currency, though according to statistics we are still losing roughly .5% per month or 6% per year on our savings and buying capacity. Considering the volatility and uncertainty of the markets, I personally have never been more bullish on Real Estate. It is a historical hedge along with gold, silver and other commodities that might not offer the same upside as equities but they certainly don't share the same risk appetite either or the same levels of stress. 

I do think it's fairly obvious that if mortgage rates bounce pabove 7.5-8% there will be a dramatic slow down in sales activity, beyond that and those same strong fundamentals could shift swiftly (as we've seen with some aforementioned banks.) 

With reduced money supply and increased interest rates should come higher mortgage rates, however as we've seen as a flight to safety mortgage rates have responded by declining as the market prices anticipated rate cuts. I should note that the general consensus is that rates would continue to decline through the end of Q4 2023 potentially in the 5%'s. 

As of the date of this writing rates on a 30 year mortgage have dropped nearly 1% in a week. 

The anticipated near term effect on the housing market is a push similar to what we saw when rates dropped in February. 

The anticipated effect on inflation remains to be seen. It certainly seems like the Federal Reserve and Governments worldwide are now essentially providing quantitive easing and bank bailouts but calling them by other names. France is supposedly going so far as to raising the retirement age from 62 to 64, assumedly to improve their financials?

That in layman's terms is restarting the printing press, absorbing the bad debts (that central banks enabled through historic low rates in the first place) and likely less or more conservative underwriting standards from those same banks. The projections are astounding, with JP Morgan estimating that the US Central Bank could need to provide, inject or insure up to $2T more USD. The net result on regional and smaller community banks is that there will be less of them. Big banks will continue to get bigger and leave investors and consumers with fewer banking options. 

As real estate and the underlying mortgage securities and financial mechanisms are an essential component of the entire financial system (as we saw in 2008) I expect that this pivot in liquidity will inevitably have a positive effect on mortgage rates. In other words, regardless of what inflation does, eventually the FED will provide some kind of backstop to mortgage backed securities that will drive rates downward. 

Clearly the future has never been more certain. Historical regulatory standards, precedence and influence was implemented in less than one week! Actually one weekend..lol The argument could be made that US Real Estate investment has never been more appealing and that availability to credit and favorable and reliable financing should continue to be available. 

If access to housing credit is dramatically reduced or substantially more expensive the real estate market is likely to become more consolidated through the underwriting of mortgage debt by a more concentrated collective of major US Banks.

For better or worse I was a mortgage broker in 2005 and through 2011. I was licensed as recently as 2022. I think the most concerning component of the current banking 'crisis' (and let's call a spade a spade) is that nobody really knows what the bad debts are but sooner or later we're going to pay for them. 

Hope this helps? 

Real Estate is historically stable or at least generally takes longer to see the effects of market conditions than other asset classes such as: stocks. 

Two weeks ago I wrote about how market sentiment has shifted due to a decrease in rates and there was a flood of buying activity. Those same buyers might be just as surprised as I was today to find that rates have increased again by nearly .5-.75%+ since that post. (A 30 year conventional mortgage is supposedly once again approaching 7%ish..)

Those are volatile moves for a mortgage market that can effect buyer(s) purchasing power and obligation significantly. 

The next few weeks will likely  foreshadow the intensity of the spring and summer markets, however it’s possible in our increasingly interconnected and responsive economy that buyer(s) will once again shelve their purchase plans until conditions and rates improve. 

That begs the question; can buyers or even sellers for that matter ‘time’ the market? Or are market ‘swings’ overblown and overvalued? 

My advice to clients that are looking to purchase is to be as prepared as possible with financing options based on property type or condition they are targeting. 

For the right property and ‘right’ deal the  terms could and should be workable. 

In fact difficult sales environments often create more advantageous and creative solutions to conventional terms. 

Have the recent rate increases already shifted your market? 

Our biggest challenge here on the coast is a lack of quality listings. 

Cheers. 

Quote from @Dennis Nguyen:

We are starting to see multiple offers again in Washington! I would not be quick to say the market has shifted though... I'm going to monitor closely within the next month and see what happens. Might be just a small surge. 

Yes even since this post rates are up .25-.375% which is quite significant. Let us know! 

Quote from @Michael Baum:

Thanks @AJ Wong. Yeah crime is a problem everywhere, but at least here, the cartels aren't in charge.

There is a do not travel advisory for parts of Mexico but I think this area has a highly recommended do not travel which is not as severe.

Is the area you are in considered the tourist area? 

Foreign investment is definitely not for everyone. Between Rosarito, Valle de Guadalupe and Ensenada there is non stop tourist activity. Constant influx due to accessibility. Lack of quality tourist infrastructure. 

Quote from @Michael Baum:

Great post @AJ Wong. Sounds like a cool thing. Do you have some pics of your place?

Will you just list it on AirBNB and VRBO? Is there another system in Mexico for vacation rentals or do you concentrate on US folks?

What about the crime rate. Rosarito is the 3rd most dangerous district in Mexico I have read.

 Howdy. Yep I’ll post a few soon or message me..Airbnb is mostly used. Crime is a legit concern but isn’t it anywhere now? Not so at all in my neighborhood but we hear of things here and there. I will say personally I literally feel safer here than in downtown LA or Portland. No random mass shootings to date.  

If you're like me, you like a good deal. It's probably why you're on BP in the first place..hoping to learn, grow and gain an edge in your investment portfolio. My urge to find or create success is a bit more adventurous than most, so when it came time to sell my investments and home on the Oregon Coast, I found myself and my dog Mazzy traveling south to Baja Mexico, in the southern Rosarito area. 

At the time I had just sold another profitable property (a couple in fact) and things were uncertain. I couldn't quite find an investment worthwhile and rents were/are abhorrent so I figured I'd rent a space near the beach, surf, regroup and recalibrate. 

Fortunately I've been able to sustain, evolve and expand my real estate business in both Oregon and California business through exceptional networking and the incredible support of my co-brokers and assistance. I cover such a large geographical area it wouldn't be possible or efficient to physically be there to support my client's transactions, although I return as needed. 

Anyhow, six months into my $750 monthly furnished lease and the owners of my community of 'campo,' offered me a property for sale. In most areas within 50 miles of the Ocean a foreigner (those without Mexican citizenship or passport) ie: me, cannot generally own 'title' to the land beneath the home they own. This is changing somewhat andwith some asterisks as foreigners can own the 'right's but the property is held in a 50 year trust and renewed for another 50 years at the buyers choosing. The annual cost is essentially equivalent to and includes the annual property taxes. 

Personally my property is in a 'campo.' Or land on which the same family has owned the 10+ oceanfront acres for decades. Most of the 60ish homes began life as mobile homes because if you lease the land and the property moves you can take it with you when the lease ends. Once the structure is 'fixed' it is attached to the land and although the structure transfers, the land ownership always belongs to the land owners. In an nut shell it is similar to a mobile home park. You own the structure, the community continues to own the land. 

I have a 10 year lease renewable for 10 years. If the family sells, the new owner needs to compensate me for my 'dwelling.' No clue what that would mean but quite confident the family will continue to own the property beyond my tenure. 

My lease is $275 per month with security and water included. Next decade it can increase a maximum of 10%. This is an increasingly low and unique agreement. Many in the area and admittedly higher end communities can range from $5-700/month with much shorter durations. 

For me this allowed for a very minimum initial investment..I bought the existing structure on I'd estimate a .08-.10Acre piece of land with an ocean view for under $25k. Initially it was a 800SF studio home with a bathroom. It was poorly built, I probably could've utilized what was there but wouldn't. I demolished 70% of it and salvaged all the materials. I paid $1k for a phenomenal architect to build my dram vacation home/rental but ultimately abandoned the plans after a full feasibility and cost estimate from several reputable builders here.

The cost was surprisingly affordable but I ultimately decided to go slower and a much smaller scale. I figured it's Mexico. Much like the OR Coast, the visitors come, but the amenities and options for a 'quality' updated 2023 style accommodation it not. I know what I look for when I go on vacation or an extended stay, and I very often don't find an affordable option or even anything of value. And I'm all about value.

My investment strategy here was to spend a total of what I would've on a rental in Southern California in a year, and create a property worth having with investment potential that I 'own' here. 

Fast forward six months and my project is nearly complete. I can confidently say I can develop you a home here in northern Baja. I have a reliable crew, handle on costs, rules, materials and timeline.

The differences between developing and investing in Mexico vary considerably. It is certainly not for everyone, but for me it was actually more comfortable, natural and doable than in the PNW. I won't go too deep but here are some pluses and minuses that I've learned so far..full disclosure I work with a Brokerage here called Tera Realty. The owner is the cousin of the family that owns our community. She is beyond sharp, bilingual and welcomed me to formally join here brokerage. We should be on the first Mexican MLS soon. Here to help or connect you directly if anyone has any questions regarding MX.

Pro's:

- Cost. You can in fact 'own' and develop here for the cost of an annual lease in Southern CA or beyond. The average salary here is roughly $200USD and construction workers might make 2-3X that. A really good 'contractor' or team leader might make $1-1200. Either way they EARN it.

-Labor. Local work ethic is legendary and rightfully so. These MEN poured two tons of concrete in 5 hours. An entire house foundation and then some..in time for lunch. The amount you can accomplish in a condensed amount of time is astounding. 

-Rules. There are none..or close to it. If you need a septic you install it, if you want to demolish your home you do it and if you want to build go for it! Slowly regulations are coming online but for the most part you build to your standard. Vacation rental permit/licensing? lol 

-Proximity. I've traveled the globe and lived in Nicaragua and the OR Coast. There are a lot of nice places, but most involve getting on a plane or other considerable effort of time, expense and effort to reach and ultimately enjoy. We are 45-60 mins from downtown SD and three hours from LA with no traffic. You can come for the day. There is no shortage of tourists and others seeking value.

Con's:

- Laws and rules. The same rules that allow freedom also restrict potential. No septic rules are nice but where does the waste go? Standards are not high because they're not required to be. Due diligence as a result is essential. I paid for a local attorney just in case. 

- Language. Building in English is hard enough, I don't speak fluent Spanish yet but I'm learning. Thank goodness for Google translate. 

- Detail. Things get built but because the aim is usually to get the job done and not done 'right' or to code, certain things will turn out slightly different than you desire or anticipate or even instruct. Little details that they'll do 'their' way but without much logical reason sometimes. Let me say, these men are professionals! Experts at what they do and they do it ALL. But here and there they need a nudge. For example the didn't square my pool to the property line and it was just a few degrees off. It would have been about 20 degrees off if I didn't catch it early though. 

- Materials. The same selection of materials isn't quite as available. For example PEX or the flexible water lines/tubing/piping hasn't made it here yet. Not that you need it, materials are WAYYY cheaper (I suppose that's a positive!) and the crew will figure out how to keep the job moving, but if we're improving standards sometimes it involves importing and planning for certain items state side. 

All in all the building and development process here has been exceptional. Things get done, quickly and if you plan and supervise well, done well. The investment potential is considerable. There is a steady stream of visitors and many looking for extended housing. My neighbors are from WA, NV, CA, ID, TX, AZ and beyond. Many southern Californians and locals travel stateside weekly and daily for work and school. 

The value is still exceptional. Oceanfront homes or impressive large very very luxurious properties in the $4-500k range still. 

You can build a brand new dream home the land for $150-250k or a magazine worthy Bali bungalow type casita without the land for $1-125/SF. 

Or a more rustic, traditional tiny estate for $60-85k. I expect mine will generate at least $15-25k per year if it were full time. It's more for me to enjoy, and for less cost than most coastal annual leases or even many pickup trucks nowadays. I figure even $1k net per month makes my next purchase or rental more workable, but either way.. I 'own' a beach house in MEXICO!  

I'll try to post some photos and bookings metrics in the coming months.

Cheers. 

Quote from @Pandu Chimata:

Thank you for the offer. In fact, I did receive Vacasa projections for this property. 

 Awesome. I work on the RE brokerage side so if you end up listing with a brokerage let me know we can give you the BP special investor treatment and market it to our vacation rental buyer list of nearly 1K qualified buyers..I'm presently in the SD area and beyond if you'd like to connect. Good luck!