All Forum Posts by: Lawrence Potts

Chad,

Depends on where you're looking and who you're renting to. Have you thought about short-term rentals? Maybe traveling workers? And what about your market? Can you buy a SFR and build an ADU? Are you finding deals off-market? Maybe bring on a partner and look at other markets? We are missing some important details. You can find cashflow anywhere and you can make cashflow work, it entirely depends on your metrics, your goals, and your market. Take what the market is giving you and adjust. In some markets, you can't be rigid and looking at deals the same way everyone else is. Define your target audience, how much they are willing to pay, and what they are willing to pay for. Then you'll find out what you need to find and how much you need to make it work. Then you'll find out where to find those deals. And sometimes the deal goes a different direction. My first deal I ever bought I tried to house hack but it didn't pan out that way, the numbers didn't work. I ended up selling it and got myself a 4-unit with the profits. But I wouldn't have been able to buy that 4-unit if I didn't have that deal. You have to be creative and make deals. Hope that helps!

@Jeff P.

Escalation clauses are super helpful in multiple offer situations. That’s creative, good work 👍 it helps protect the buyer’s from overspending

@Corby Goade

This is gold! I always call the listing agent prior to making an offer and after. First to figure out what’s most important for their client: quick closing, if they’re doing a 1031, how many offers they have in hand, etc. Second to confirm they got my offer (all of these ideas are from David Greene’s Book!) Good point!

@Nader Hachem

Hey Nader,

There are a lot of things you can do try to do to "beat the competition." Make sure you're pre-qualified, shorten closing periods, etc. But if you're having a hard time beating them, why fight it? What is your agent doing that makes them a better choice than other agents if he's playing the same game as these other guys? Has he called up expired listings that fit your criteria? Is he cold calling off-market potentials? Have you guys calibrated your plan at all? Adjusted to the competition? I can say that some of my clients are getting deals because we don't even worry about the newest thing hitting the market: we'll target houses that have been on the market for +30 days or so and we can get contingencies. There are deals out there, you have to make them. You can try cold calling too! Or send out mailers. Or go door knocking. Or calling property managers. Or going to REI meetings and asking people if they have anything they'd be willing to sell if the price made sense. Or calling title and getting a list of all non-owner occupied homes in a specific neighborhood and contacting them. Or talking to real estate attorneys. Be creative and make sure your team can do the same. Hope that helps!

@Bernard Walter

I’d pull equity out now. Slowly raise rent incrementally over the next few years. Does your state have rent control? Oregon only allows a 9.9% increase this year…

Buy assets! If you can get 3 houses that can cash flow $200 each, you’d be netting $100 after the $500 increase in your mortgage. I’d be buying if I were you. What I’d buy may be different but I’d still be buying even if I’d negative cash flow on one/two properties a year. You’ll make way more in appreciation long term than you would in cash flow. Think about it:

Would you give up $100k to make $100/month this year? How many months of $100 cash flow would it take to make $100k? I’ll give you a hint: 83 years! 1,000 months…..

@Jace Holt

Thank you for your post! Very good point and I’m glad you mentioned it: the dollar has inflated significantly over the last 2 years. We will probably never live the days we had prior to the trillion of dollars printed prior to the pandemic. Cost of living has increased significantly. However, I disagree that employee pay has not increased with inflation. Yes, you can flip burgers now for almost $15-17 an hour, but those on salary at $50k a year have not seen a doubling in income. If anything, maybe they got a 3% annual raise? That’s the middle class decreasing and loosing buying power. The $15-17 an hour burger flipped can’t buy a home. And they’ll get comfortable their and become forever renters. The $50k a year worker now has to find a better job or find more income because the cost of living is higher, he lost buying power to buy their first home, and work won’t give them a raise to match inflation but to kick rocks. So they’ve need to relocate and/or find a better job.

@Jay Hinrichs

I was waiting for you to chime in @Jay Hinrichs!

Yes, people are forgetting that lending is going to tighten up and credit is going to drop. Right now you can fog a mirror and get a mortgage (not like prior to 2008), as long as you have a decent job and pay your bills, etc. Everyone that keeps saying that they are waiting for the time to jump have been and will forever say that

@Eric Bilderback

It’s ironic how they always make sure we are aware of what they did after the fact, after they get to make their moves and line their pockets first. I love this post. Thank you for sharing.

@Greg R.

I think one thing to consider though is that we are not building at the same pace as we were 15-20 years ago at the very least. We are behind in new construction nationally over 5 million homes. This is completely dependent on location, but I think generally we are seeing that we are not building enough. Material supply is low. 85% of our lumber comes from Canada. In 2021 the US almost doubled their tax tariff on Canada, thus increasing our retail costs compounded with the lack of inventory caused directly/indirectly by the pandemic. So there’s no incentive to build, not enough material, and certainly cannot build a home fast enough causing higher carrying costs and more expenses for the ones financially tied to the build. The numbers don’t pencil out. Having too much capital locked into a build for that long with that much risk doesn’t make sense. So not as many people building.

We are relying on existing homes to sell to make up for our supply problems. I think you also bring up a good point though, life factors such as a change in work, unpredictable life events, etc., can cause people to sell. Even if it’s people moving to a different state because they realized a huge amount of equity and decided it was time to move because they could work remotely. But I don’t think that the number of life changed home owners is going to keep up with the demand. Demand will decrease as we continue to see interest rates climb but our issue is we are not building.

And what we are building are not SFR's. On the west coast, we are seeing apartment buildings and duplexes, 4plexes being built. There's going to be a huge shift in homeowners vs renters here and we are planning on it by building rental units.

Just my two cents but I think we need to dig deeper than just supply vs demand and ask how and why our supply/demand look the way they do and what can change them.

Plus nationally we can see influxes in who’s to get hit the hardest. Maybe Nebraska is building a lot faster than California? Maybe Oklahoma will hardly feel the dip in the market compared to New York?

@Joey Montefinese

Hey Joey!

Good question….it’s where you know best. You wouldn’t buy stocks in a company without researching the business, etc., or buy a car without a test drive and studying everything about it online. So the best location to invest for you at anytime in your investing career is the area you understand the most. That means doing some research, networking, drive by’s (or google street view if away from where you live), identifying what your strategy is and who your target audience is, and taking actionable steps towards your goals, whether that be making some phone calls, finding a partner, getting your finances in order to be lendable, etc. YOU have to become the expert in YOUR location and become so good at it that they can’t ignore you. I’m not saying analysis paralysis, because you can’t become an expert without deals under your belt, but you need to do enough to get the first deal, then the second, and third, and so on. So find the most important next step for you, find that location, and take action. Be the person that people come to you asking if they can partner with you in YOUR location.

Hope that helps!