Quote from @Napoleon DeCiutiis:
Quote from @Wayne Kerr:
Quote from @Napoleon DeCiutiis:
Here's a great way for you to push your sales with the current interest rates. Tell them to re-run their numbers with the predicted FED hike numbers, compare them to current rates, and ask them which is a better time to buy.
So...a lot of realtors do this, this is just FOMO. The prices will come down as interest rates rise and unaffordability increases. This is literally what is happening right now. It's going to take 6 months at least since a lot of comps are ran 6 months back. That's part of the problem now, running comps to prices 6 months ago, but interest rates are double and people wonder why their places don't sell. Priced too high.
There are a TON of people buying STRs (or have bought) that simply ran their numbers wrong. If you're not calculating repairs/maintenance/Cap Ex and especially the cleaning fee into your ROI then you are doing it wrong. You see this so often. People THINK they made a lot, then you take a look at their books and they actually lost a couple thousand in cashflow (yes you still get the tax benefit and hopefully equity paydown, but you're still losing because that money would have done better somewhere else). Even the STS calculator doesn't calculate cleaning costs - you're talking probably 7-8k a year in cleaning on a basic STR.
That being said - I'm not buying into the hype. If there's a good deal - then great. If there's not, then great - it doesn't make a difference to me.
The people that are doing well are those that bought in early early 2021 and prior - right before the run up. You see them now essentially trying to "flip" their places for almost double what they were bought for 2 years ago. Yea you get awesome cashflow buying a cabin at 350k - not so much at higher rates and at 650k. It's still a sellers market imo, but the tide has definitely shifted.
And remember - there is a sucker born every minute. There's tons of suckers buying STRs and doing horribly and think they're doing well - this is because 1 they bought at too high of a price and 2 they are not educated on RE enough to even run basic calculations.
@Wayne Kerr, I agree with what you are saying here. Numbers run it, and if they don't work for your situation- don't pull the trigger. I think we all agree that point for sure.
We were talking about this in the Tom Ferry symposium. Every one of us has an "I wish I would never have sold that house." When is the best time? Yesterday. Regardless of the rates, there are still great listing deals and loan types to counter the current rise. I think @Raymond J. Rodrigues or @Tyler Solomon would back me up. House prices will continue to rise over time (speaking for my market, there's only so much Beach to build on...)
I just bought a condo on a 30-year, 7.25% (interest-only for 10yr) DSCR...rates will go back down, and I can write off the interest. The FOMO goes to the other side of the selling table, too, and buyer agents can take advantage of that. Thanks for the conversation, and I look forward to your reply!
Agreed! Many folks who benefitted from the get rich quick market over the last 24-36 months have lost sight, or completely forgotten that RE is a LONG TERM game. Always has been, always will be. Sure, there are great buy and sell opportunities across the market, but long term appreciation is the ultimate wealth play. As @Napoleon DeCiutiis said, run the numbers and pull the trigger if it makes sense, hold off if they dont!
