Quote from @Doug Smith:
Quote from @Dominik Porobic:
Quote from @Doug Smith:
Quote from @Dominik Porobic:
Quote from @Doug Smith:
Everybody and their dog are chasing 2-4 unit deals right now. People are willing to overpay...don't be one of them. Create a model you're comfortable with a stick to it. There are so many people with capital chasing fewer and fewer assets, people are bound to overpay.
What makes you think it's going to get any better? My client bid 60k over list on a 3 unit a year ago and now it's worth 100k more than he purchased it for.
Time in the market beats timing the market. Appreciation and rents will catch up in the right location for the right property. Don't wait too long or you'll wait forever.
After getting chastised by someone that was in Middle School or HS during the last crash, I feel I have to answer your post. I don't think I indicated it would get better any time soon, but I have 33 years of experience of real estate fund management and a nationally-known track record with specialty in taking advantgage of and weathering down markets and I've seen many, many cycles. We started this company prior to the last crash and, during that time, many advocated the same aggressive position that you just advocated for. They got destroyed. I see you graduated from college in 2015 and haven't been through a strong downturn. Rates, taxes, and insurance are not going to improve in 2024. Buying real estate is still a great idea, but overpaying for it has been shown time and time again through down cycle through down cycle to crush investors. Your strategy worked 2 years ago, but we're in a very, very different time now. You make money when you buy real estate...not when you sell it.
You are a loan officer and I understand you've been around for a bit, how big is your company just curious?
I would like to challenge your perspective by zooming in on a specific market which I primarily focus on: Southern Maine.
In rapidly growing and competitive market, such as parts of Southern Maine, property values often appreciate at a rate that might justify a seemingly higher purchase price. Overpaying, if done strategically, can be a viable investment strategy. Consider this: paying a slightly higher price for a property in a high-demand area might enable you to secure prime real estate that appreciates significantly over time, ultimately offsetting the initial higher cost.
Moreover, in markets like Southern Maine, where inventory can be limited due to high demand, overpaying might be a tactical move to outbid competitors and secure a property that aligns with your long-term investment goals. Additionally, if the property has unique features or is situated in a desirable neighborhood, the potential for future appreciation might justify a higher acquisition cost.
Also the rise of digital platforms, big data analytics, and artificial intelligence has transformed how we analyze markets and make investment decisions. These tools provide us with unprecedented insights and the ability to identify trends and opportunities with remarkable precision which weren't available to us in previous downturns.
Which company are you asking about? The loan company operates in 46 states. The realty company has been around for a decade (yes, I too have a real estate license) and, admittedly, only covers Florida. The private equity group is nationally-known in the non-performing loan space and develops property throughout the US. I'm invited to speak nationally at industry conferences and I've been serving as an expert witness in foreclosure cases for the past decade and a half. Keep in mind that the arguments you are making were also made in the late 1990s prior to that drop and they were also made in 2005-2007. Our fund, Castle Rock Capital Management, dramatically outperformed much bigger funds during the last crash. One of the biggest differences between how we operated (and still operate) is that we do not build appreciation into the model. We are very, very careful on the exit strategy and don't overpay for an asset. Again, you make money on the buy side. Real estate in at a market peak is like a game of musical chairs. You need to make sure your near a safe seat when the music is about to stop. Digital Platforms like Zillow attempted to use big data to swallow up real estate and got smoked. There will never be a substitue for honing your craft, understanding economics, and continuing to learn. Two things to keep in mind. First, don't try to belittle or call out someone with 15 times your experience when you've never been through a downturn...I would not have done that to you. Second, when every economic indicator is telling you to pump the brakes a bit, don't have your clients stomp on the accelerator. I've seen too many people do what your advocating in several similar markets and they've lost their shirts. I'm not saying don't buy real estate...I'm just saying build your model, do the math, and don't overpay for a property. Particularly not right now.
The housing market is unlikely to experience a crash due to several key factors, according to housing economists. First, the persistently low inventories of homes available for sale, currently at a 3.3-month supply, make it difficult for prices to significantly drop, especially when compared to the meager 1.7-month supply in early 2022. Second, homebuilders have been unable to meet the high demand because they never fully recovered to pre-2007 levels after the last crash. Demographic trends, such as Americans needing larger homes due to remote work and the robust buying power of millennials and Hispanics, continue to drive demand. Third, lending standards remain stringent, preventing the risky lending practices of the past. Lastly, foreclosure activity remains low, ensuring most homeowners maintain a healthy equity cushion in their properties and preventing a flood of foreclosures that could depress prices, unlike the situation after the previous housing crash.
I personally would overpay (if multiple offer scenario) for the right 4-unit where I would live in and be able to generate income as well as eliminate my housing expense (rent). If you only put down 3.5% - 5%, how much are you really risking? You would recoup or save (not pay rent) your down payment in the first year. When interest rates come back down a bit, I think there will be bidding wars like we've never seen.
In my area the last month - there were 467 closed sales, average 7 days on market, with a 102.4% list price received. Most good properties will have multiple offers in where you have no choice but to overpay.
Or you can pay $2,000 for a one bedroom apartment and flush 24k a year down the toilet.
I understand you have 15 times the experience than I do, could you talk about some of your accomplishments? How many properties do you own?
