All Forum Posts by: Jeremy Horton

I've been in the market for STRs somewhat too, I looked at the southern coast summer of last year and said ahh everything looks ok, I'll come back early 2022. Boom. Places have jumped in price by 40-50% in the last 6 months. Now interest rates are increasing rapidly. I don't like it - I think a lot of people got in over their heads. I think there was a lot of extra money floating around that people used for vacation homes. Most places don't cashflow like they would have a year or 2 ago. 2021 was an anomaly - revenue wise. And lots of places want to base their prices and future revenue off 2021 numbers. I'm not seeing very many good deals. I can make what a hands-on expensive STR would make with a LTR where I live. It's not worth the risk especially since we're dealing with a changing market.

Personally I'm going to keep an eye out and give it 6 months to a year. But already you are "hearing" that bookings are down. On top of that prices are starting to come down. DOM is increasing. That's coming from my realtors both in the smokies and the southern coast. 

I don't believe we saw a permanent change in the housing market in typical STR locations, maybe a little inflation but these places got overpriced quick - the demand rose due to low interest rates and money injected into the economy by the Fed and supply simply couldn't keep up. The demand will die down as interest rates rise and the free money disappears. Let the hype die out and we'll be back where we were in 2019 imo

It's never not to risky to invest in real estate and there's many benefits to other types of investments - few examples:

401k (I'm a W2 employee) - I write-off 20.5k a year. That money isn't taxed, used as a tax deduction and should average 8-10% a year and requires no effort or thought. And my employer matches a small percentage. Just because the market goes down doesn't mean I'm not going to invest. It went up tremendously the past couple years and on average earns 8-10% a year. 

Roth IRA - 6k a year tax free growth. Again requires no thought and will average 8-10% a year

Mutual fund/ETFs etc - again requires no thought and will average 8-10% a year. 

HSA - 3k a year, tax free, used for medical expenses. (aka I need a weekend at the beach for my mental health)

Unless your speculating, diverse investment in index funds (such as an S&P 500 tracker) is an easy relatively low risk thing for anybody to do - doesn't require much thought, can give you basic tax deductions, can get tax free growth etc. Just because the market goes up and down doesn't make something high risk. 

As if real estate doesn't come with risk - realistically it takes education, money, getting loans (relatively good credit helps tremendously), time etc. It's a hand on investment. You can be faced with property issues as well - slab, plumbing, fires, floods, tenant destruction, adjustable rate mortgages...the list goes on. You have to meet people and create a team. You hear about a lot of people that do well and make it, but believe me there are just as many that don't. So you take steps to mitigate risk, same as you'd do with index funds. 

Both investment can be good but any investment has inherent risk. 

Quote from @Bruce Woodruff:

The Fed is limited in what it can do once inflation gets rolling....If you lived through the 70's and 80's, you remember the efforts of the Fed and it's seeming inability to stop inflation. Even Ford's famous slogan WIN (Whip Inflation Now) did nothing, a big surprise :-) And they have to be careful not to trigger a recession by screwing around too much with rates.

The rate now is 8.3 with the high of the 70s being 11.3 (I think), so we are down 3. It peaked in April of 1908 at 14.76%, and went down quickly once Reagan took office. Sometimes it the perception of who is in power that drives this stuff.

I expect it to continue upwards for a couple years. Will it reach even 15%? Maybe so........

No they will purposefully trigger a recession - they may kick the can down the road a little bit but it's a loss one way or the other...inflation goes up people can't afford stuff...recession we lose a few jobs and control inflation.  Unemployment has room in increase, so we will see a recession, in my opinion

Quote from @Dave Smart:

Quote from @Jeremy Horton:

Quote from @Nick Barlow:

@Scott Trench I agree with what @Elbert O. Said-debt levels are much higher today, and government solvency is at Risk if we sustain higher interest rates for a long term.

Not getting too political, but higher costs leads to either default, or a combination of higher taxes and rationalizing social services/entitlements, and reducing the latter is politically damaging.

In my opinion, the Fed has a ceiling on interest rates, and I think we’re getting close to it.

I also think we won’t know that exact number until we’ve passed it, which we will, and they’ll be back to QE by end of year fixing the damage from “over correcting the response to inflation”.

 What makes you think we're close to the ceiling on interest rates? Fed Funds rate is still almost the lowest it's been...ever

Our national debt is most likely by far the highest it’s ever been too. The interest we pay on that debt would be more than the national budget alone if rates keep going up, and if they went to say 20% we are essentially done as a country

 So we'll just raise the debt ceiling...

Quote from @Nick Barlow:

@Scott Trench I agree with what @Elbert O. Said-debt levels are much higher today, and government solvency is at Risk if we sustain higher interest rates for a long term.

Not getting too political, but higher costs leads to either default, or a combination of higher taxes and rationalizing social services/entitlements, and reducing the latter is politically damaging.

In my opinion, the Fed has a ceiling on interest rates, and I think we’re getting close to it.

I also think we won’t know that exact number until we’ve passed it, which we will, and they’ll be back to QE by end of year fixing the damage from “over correcting the response to inflation”.

 What makes you think we're close to the ceiling on interest rates? Fed Funds rate is still almost the lowest it's been...ever

@Chris Seveney

"Also I see people focusing on the supply side saying we have a housing shortage. How did we go from a shortage in 2007 to oversupply in 2008? It was not due to the # of homes built is was due to demand."

 This has been my recent thinking big time. How did we go from a stable housing market in 2019 (if I remember correctly) to the frenzy we've seen the last 2 years? I don't see how supply would've changed majorly in 2 years. I see it as a demand increase due to (1) first time home buyers (Ie:people just wanting a house, but they didn't just ALL decide to purchase the last 2 years...there was a reason...maybe the (2) low interest rates. Low interest rates combined with lots of new printed money I think created this demand...for first time buyers/refinancers/investors/literally everyone. With higher interest rates I can't see the demand staying high...combine that with some layoffs, people not working from home, credit increasing, savings decreasing, these retail investors taking a huge L in the stock market/crypto and the demand has got to dry up a good bit, or a lot bit in some "overpriced markets" - florida, smokies, austin, bay area etc. 

I can see a supply shortage - but this is something that takes time - we don't see 37% appreciation in two years due to a sudden shortage of supply. There wasn't a meteor shower that suddenly wiped out millions of homes creating a supply shortage. It's been a change in demand driven by the pandemic. Let the economy return to normal and I have to think we're going to see at minimum a plateau but more likely a 10% decrease and maybe 20% or more in the coming years in "overpriced" markets. 

So a couple of things from my perspective:

We hear that supply is low - pricing is relative to supply AND demand. What's driving the demand? We have (1) a millenial population buying houses (34% of homes bought last year I believe were first time home buyers) and (2) a demand driven from low interest rates - if interest rates stayed where they were pre-pandemic we would not be having the "supply" crisis we are having today. We didn't have this supply crisis/bidding wars/overpaying/20% appreciation pre-pandemic...this makes me think a lot of the demand was tied to interest rates. I think some of it may be shadow demand. Demand was high for everyone due to the interest rates investors/first time homebuyers/literally everyone. I have to think the demand is going to dry up pretty quickly. Then the 'low supply' won't be as much of an issue and the market will stagnate and contract. It really seems to me the interest rates drove demand in the last 2 years or we would've been seeing this same appreciation well before low interest rates and the pandemic. 

The other thing is we had A LOT of money printed during the last 2 years. Lots of people at home with extra money. Stocks got over valued. Crypto got over valued. Lots of retail investors getting in - and hey you could've made money in almost any investment in the last 2 years. Now I think the party is going to be over - stocks coming back down, crypto coming down - things have to come back down to a true value. This means companies have to truly turn a profit - they may have to layoff workers to do so. Lots of companies that surged during the pandemic 

Why would the housing market be any different? These overprices areas, San Fran, Austin, parts of Tennessee, Florida, overpriced STRs, I have to think those are going to come down in price. How much? Not sure. The demand I think is going to dry up. Why? Higher interest rates, less disposable income, less remote jobs and we're seeing the layoff start since companies cannot be as profitable/get cheap loans as they could during the pandemic. 

The Fed literally tells us what they will do. JPow said we have to control inflation (increase interest rates and essentially force a recession) and that home prices need a "reset". What does "reset" mean - it means they need to come down. How do you get prices down (1) dry up demand (2) increase supply. I have to think he's telling us what they are going to do and we're going to see prices drop in a lot of places. 

Quote from @Marc Izquierdo:

The electrical work sounds right. I just had a panel, meter, and service cable upgraded from 100A to 200A for about the same price that your handyman charged you (mine was done by an electrician). I think the door installations sound about right also. I recently had 6 interior doors replaced (only the doors not the frames) and two exterior metal doors (similar to what you had done) for a total of $3200.

For the tile, it sounds like he's doing the tub surrounds only, not the flooring? I honestly don't think $5,500 is terrible for the two bathrooms. I'd maybe like to see it around $4,700-$5,000 since you bought the tile. There is a lot of back and forth for the contractor (waiting for stuff to dry, having to leave, come back, etc) which adds cost. However, I've done all of my tiling myself so I really can't say for sure that it's a decent price based on my experience. Tiling shower surrounds is pretty common so I would think someone would be able to chime in with those numbers. 

Awesome - sounds like we're not too far off then! It seems like he does a good job and he can do it cheaper than hiring a specialized person (Ie: electrician/plumber etc) from what I've found so far. The smaller things I usually get 3-4 quotes on, the bigger things I'll get 7-10. 

Once I get can an inspection and get the service line upgraded to 200 amps, we'll have AC and lights and be able to move in. The rest of the stuff I'm going to complete after we move in. (Planning on renting out the house I'm in currently and want to get it on the market in the summer before school starts). 

Ah, and yes it was just for the shower/tub surrounds. I'll probably have him go ahead and install the plumbing fixtures/valves too. That way they are done and I can focus on something else. 

Thanks again man, exactly what I was looking for! I'm sure I'll be back with a few more estimates from him lol

I'm in the Louisiana area and have a handyman completing a lot of the repairs on a foreclosure I recently bought - this one will become my primary residence. I want to make sure I'm not getting taken advantage of on the pricing since I'm new to the rehab part. 

I had him swap the electrical box and meter box - swapped from 100amp to 200amp from the weather head down to the meter box - charged me $2250 (Got quoted $3500 from my electrician). New larger electrical box, new meter box etc. 

Had him replace 2 doors today - went from wooden doors to metal doors. Included demo and buying and installing 2 pre-hung metal doors - one with a half window and one just plain white (included door, framing, bottom threshold, hinges, basic knobs and locks). I think these doors cost $300 or so for the one with the window and $200 or so for the plain white one. He's charging me $1400 - seems a bit high (but unsure). This did include the handles and locks - regular lock and deadbolt. He sent me pictures too, they seem to be installed well from the questions I asked (are the tight? any daylight?). One of them has a small dent in the bottom left corner. 

Have a quote from him for $5500 to tile 2 bathrooms. He'd have to demo the sheetrock, put up water proof cement board, and install about 140 sqft of 12x24 tile and frame out 2 stainless steel wall niches. I purchased the tile and wall niches so this would just include labor. This seems high to me and the research I've done. 

The guy does quality work and has a lot of experience and can literally "do it all". Just want to make sure I'm not getting taken advantage of here being new and all. What do you all think - do these costs seem ballpark? (Yes, I have read that popular book on the cost to rehab houses lol)

I would sell as well - I think you could take that capital and deploy it into something bigger. May be hard to find something in 45 days with the market the way it is...but this is a sellers market - we are literally at the top of the market right now. You're seeing a softening happen already, I still think it's a great time to sell. Pros are doing it.