All Forum Posts by: J. Mitchell Bernier

This shows up to in the BTFP numbers the FED reports. Just this month it has grown another 20%, which means that Banks are still seeing liquidity issues. Also, manufacturing and agriculture outlook is looking rough and couple that with a slowing Chinese economy as well....

But its an election year, so probably will just kick the can down the road one more time.

1 Vote

Seattle, Washington

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @J. Mitchell Bernier:

Quote from @V.G Jason:

Quote from @Chris Seveney:

Every year I like to provide some predictions on what I think will occur in the upcoming year as it relates to seller financing, mortgage note investing and the like. So here are my predictions, feel free to offer up your own:

1. We will see an increase in inventory in 2024. This is probably going to be an easy one to predict since inventory was very low in 2023. It did pick up though as the year went on. In Q1 we say about $300M worth of loans cross our desk, Q2 was about $300M/mo and Q3 and Q4 we had weeks where we saw $300M. Toward the end of the year, we started seeing a big uptick in down payment assistance loan failures (2nd position loans under $10k to help with down payments that were in default. We saw over 5,000 of these loans alone...)

2. The bid/ask spread will close the gap, but you will not see 2018 prices again. Right now, still a decent gap between the asking price and bid price, but as property values decline and taxes and insurance increase, sellers will be more willing to sell. I would expect the reperforming loan market to stay around a 9-12% return to investors and NPL's ticking from high teens back into the 20%+ range.

3. Real estate prices will decline in most markets even if interest rates drop. Why do I say this? While there will probably be a quick bump if there is a drop in interest rates - small businesses are tightening their belts, bank liquidity is tightening as well. Throw in income has not been able to keep up with inflation and home prices and its going to give. Will it crash, I do not think so, but I do not see gains, especially in lower priced markets.

4. You will start to see significant cracks in the seller financed space. - This one honestly, I feel is a slam dunk. Why do I say that? see #3 above. Also a significant number of people either sold on subject 2 with their low rates or did seller financing with poor underwriting on the borrower. If prices continue to fade and unemployment increases (which is going to happen), then these borrowers who have no equity will say screw it and walk away. Especially as rent rates come back down or stabilize. Saw this happen in 2010-2012.

5. I will buy at least $30M in notes next year :) - hey had to throw one of my personal goals in there. Make sure to share yours.

1. Agreed on all accounts. Getting to point #3 on this, I think this happens artificially to a degree due to the amount of agents withholding properties in Q4 of 2023 because of seasonality. So many expired listings have told me they'll back up in March, I mean I'm talking 70-80% of them.

2. More houses were withheld on the market than demand in 2023. I think it's a very safe bet to see the inverse true, and then when you classify demand out(the one's who are interested but cannot qualify) it'll get even wider.

3. Agreed, but long term wise, the better markets will bounce back higher & better. 7 years +, 10 years + ideally. The trash markets will see an exodus of REI speculation.

4. The people with balloon payments with 5% equity on an asset that barely appreciated. There's a turnkey provider with 5% down, 2 year balloon payments. They sell neighborhood specifics like that, so all of 2025 you have people racing to the bottom to get out of their loan all next door to each other. This area is the most up foonr explosi, and buying the notes behind it for someone that can manage that process may yield as the best investment in 2024.

5. I intend to grab another 20-30 properties; depending on quality, price points, etc. Will enter probably 5 new markets.

@Chris Seveney, Curious as both of you think prices will decline on the overall asset class next year, but both of you state you are purchasing more. Is that due to the long term projection looking better? I am less worried about what happens in the next 12 months as I am the next 12 years.

So both of yall are very bullish long term, correct?

Right. If we invested for just a 12 month thing, most investments do not make sense especially real estate. I'm thinking 7 years + to trade equity, 12-15 years for material wealth generation. The main purpose of my investments is to put cash some place else, just anywhere but cash. Even if a bank is paying me 5%, I know that's only for a short period time relative to my peak years left of living.

Based on equity curve , investment is making sense after we hold it for 18 years only considering zero appreciation…

However once we are pro in RE we know we can crush that number by investing properly.

2024 would be like 2009, a pivot year! This is why forecasting 2024 is so important lol

By Pivot year, are you referring the Fed pivot or are you saying its pivotal in regards to the structural changes that could be coming as @James Hamling is mentioning when it comes to the FED action?

My day job is an AVP for a community bank so I follow closely on the bank side and the investor side. From what I am seeing, the FED will do more as the BTFP has grown over 20% just this month and outlook for certain sectors, manufacturing and agriculture, are not pretty. Couple that with a Consumer who has been fighting inflation on gas and groceries, and as James mentioned, could be fighting more rent increases. So if they do nothing and let the BTFP just expire, liquidity in the markets will be toast. Which as we have all mentioned is unlikely in an election year.

Question is how much does Washington and the FED do?

2 Votes

Quote from @V.G Jason:

Quote from @Chris Seveney:

5. I will buy at least $30M in notes next year :) - hey had to throw one of my personal goals in there. Make sure to share yours.

3. Agreed, but long term wise, the better markets will bounce back higher & better. 7 years +, 10 years + ideally. The trash markets will see an exodus of REI speculation.

5. I intend to grab another 20-30 properties; depending on quality, price points, etc. Will enter probably 5 new markets.

So both of yall are very bullish long term, correct?

0 Votes

Higher for longer not only means a while for rates to come down, but also means that they will not come down as much.

I would plan for 5.5% as the new baseline and 4% will not come again unless something really terrible happens. Now the question is how long till we see 5.5% again? Hoping for late 2025 early 2026, but only time will tell.

2 Votes

My follow up question is this home the one you want to raise your family in. If yes then I wouldn't sell it. Get another inspector to take a look at it see what other repairs may be needed or at all. Then I would use the equity in the condo to refinance the roof debt and any other debt that is associated with repairs to the house. Reason being the Investment property loan is tax deductible.

I dont like the idea of looking at your family home as purely an investment. I understand the pain points now, but if you were planning to stay there for the next 10 years or more, it will all work out in the end from a dollar and cents perspective.

0 Votes

Richmond, Virginia

Quote from @Lane Baker:

I just pulled out $50000(heloc) in equity from a rental of mine. I feel as though I have lost momentum. I live in Valdosta Georgia. What would you do if you had $50k right now in todays market? Anything helps. I need to get this money working for me asap.

Hey Lane, Are you looking in Valdosta specifically? I invest there and anything under 50K is tough these days, but you can certainly find things that still have fairly decent rent to price ratios, its just gonna be closer to 100K or higher price point.

However; even if you can't find anything, that's ok. Your rental, or rentals, are continuing to go up in value and so should your rents. It might not be exciting like it was two years ago, but it's still doing what it's supposed to do.

Feel free to give me a shout anytime if I can help!

0 Votes

Tampa, Florida

Quote from @Carlos Ptriawan:

Quote from @J. Mitchell Bernier:

A bigger financial institution will likely fall if this holds for longer than 2 years. Lenders have a lot on their portfolio with yields below 6% and they can't pay enough to keep the deposits. Not to mention their non-performing assets are starting to grow. It's going to be interesting.

Even the Fed itself is laying off people LOL
The whole nation going bankrupt if this continue for the next 13 months.

Imagine 10 yield in Vietnam is lower than yield in USA LOL LOL LOL

What a time to be alive! Hahaha

1 Vote

2 Votes

I think any time is a good time if you can afford the house you want or if the cash flow makes sense then go for it. However, if anyone is selling you on the idea you can just refi later; run as fast as you can! We have no idea what is going to happen on rates so if that is your exit strategy, its a bad one.

2 Votes

All Forum Posts by: J. Mitchell Bernier

J. Mitchell Bernier has started 30 posts and replied 280 times.

Post: What kind of portfolio rates are you seeing?

Post: Data showing a potentially weak economy?

Post: My Top 5 - 2024 Predictions in Mortgage Note / Lending Space

Post: My Top 5 - 2024 Predictions in Mortgage Note / Lending Space

Post: When do YOU think interest rates will go below 4% again? In 7 years?

Post: Should I Sell?

Post: Need guidance and advice.

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Post: When CD performs better than real estate and 401k

Post: Why is now actually a good time to buy a house?? Ask me!