While some real estate commentators have continued to take to the media to proclaim the housing market will stay strong due to underbuilding and a need for more inventory, a new report from Bloomberg argues that builders are already suffering from oversupply.

Why is there a disparity in these claims, what do the numbers show, and how can struggling home builders become a great source of deal flow for real estate wholesalers?

Too Many New Homes

A new report from Bloomberg states that US home builders are already being lumbered with too many unsold homes.

Inflation in living costs and rapidly rising interest rates have been pricing many buyers out of the market. According to data from the National Association of Home Builders (NAHB), this June saw the most new homes delivered to market in 12 years. The same month, buyer activity dropped to its lowest level in 10 years.

Figures from the US Census Bureau show new home inventory has rocketed to almost 10 months of supply. Compared to the competitive market in which homes were recently selling in a day with multiple offers or waiting lists.

Some builders fear that they are going to be stuck with more unsold new homes than in the last crisis.

Why Are Builders Getting Stuck?

Common reasons that builders are finding themselves in this situation, even when the existing home sales market may be stronger include:

• Pricing new homes at the peak or above market value

• Lack of affordable housing

• Building the wrong type of inventory for consumers

• Overbuilding in the wrong areas

It is worth noting that the most recent data from BankProspector also shows a dramatic spike in construction loan defaults. Lenders may be slowing down draws, and are fearful of extending more time to builders who are hitting maturity dates.

Turning Builder Surplus Into Deal Flow

This surplus of inventory can be great deal flow for investors.

You can help builders close out communities by acquiring their last remaining units so they can get cashed out and onto the next project.

Many builders may be stuck with furnished model homes that they would like to liquidate.

In other cases, those at the front end of new projects need to pre-sell a percentage of units to obtain financing. You can step in and grab multiple units as sizable discounts.

Or perhaps you can acquire and wholesale stalled construction projects and unfinished homes for flippers and other builders who will finish them.

Here are the smart plays to make to not only be one of the last standing after this next phase of the real estate market, but to win big while others are freaking out.

Eliminate Exposure To Risk

A lot of players are currently exposed to massive risks. Solo investors, top selling Realtors, banks, and multi billion dollars funds and tech startups won’t be immune to the evolving market. It may take time for the waterfall effect to hit them, but once it does it can be too late to escape bankruptcy.

Holding onto properties, and holding debt are two of the biggest risks.

Eliminate your exposure by liquidating all of your mature investments, and switching to a wholesaling model. Use transactional funding to finance 100% of your deals, so that you are in, out, and paid in hours, without capital at risk.

Expand Your Network

Your network of contacts is what will get you through the next couple of years, and determine your level of success.

If you’ve been neglecting it, revive it now. Expand your database with new connections. Invest in  strengthening your relationships.

They will all be lead sources soon. Including Realtors, attorneys, other investors, bankers, etc. They may not want to sell on your terms right now, but they’ll soon need you too.

Educate Your Sellers

It may be hard to get sellers under contract for 30% of recent asking prices when they keep on hearing about how fast the market is growing. Some just won’t get it. Arguing with them will only turn them off.

Instead, take a consultative and educational approach. They may not sell now, but they will respect you later, and know who to contact to sell when they need to.

Educate them on market changes, how prices are formulated, and their options as they get into uglier situations.

Do this by publishing content online, by mail, email, and text message.

Don’t Let Leads Get Wasted

Investors have been spoiled with leads in recent years. They cost a lot, are hard to land, and easy to burn. Find a way to make money on them. Instead of only cherry picking the one or two out of a hundred you love, find a way to turn them all into dollars. Wholesale, keep them, refer them out, or find a partner for a JV.

Play The Long Game

Shred your five year plan. You’ve got to keep making money now. Yet, to get through this, and stay on top, you’ve got to think long. Think about where the market is likely to be in 7, 14, and 21 years, and how that will impact your liquidity, net worth, and lifestyle.

Property prices and rents appear to be floating down. With many seasoned investors expecting a deeper dive on the horizon, how much should you be making offers for now?

Shopping For Discounts

In this new phase of the market everyone is looking for deals and discounts. They don’t want the risk of buying in at the top of the market. Then instantly losing as prices continue to come down.

With this in mind, savvy buyers are going to be offering even less than current market value to build in that cut.

You may have recently seen some veteran real estate wholesalers and fund managers remind us how they were buying properties and mortgage notes and reselling them for as little as 30-40 cents on the dollar back in 2008. Sometimes even less than that.

We may not be there yet. Though many investors are sticking to offers no more than 30% of recent comp values.

Don’t get hung up on rules of thumb. Especially as the market is always in flux, and changing. Though do make sure you are ahead of the graph.

Focus On…

Instead of focusing on rules of thumb for offering 90%, 50%, or 30%, of previous values, the two things it makes more sense to focus on are:

1. How much you can sell it for
2. How much you need to make

The first is about risk. Lowering your risk. You can do that by focusing on wholesaling real estate, and using transactional funding. Meaning you aren’t getting stuck holding any deadweight properties which may go down in value and put you underwater.

So, before buying, know how much your buyers list are going to pay for it.

If they are willing to pay 90% of market value, then you can offer a lot more to sellers than your competitors, and still make good money.

The second part of this is working based on how much you need to make.

This may either be a flat dollar amount per deal, or a desired percentage return. For example, you may want to be making at least $20,000, or 20% profit for it to make sense for you.

Decide on your number, and on your fees, taxes, and transaction costs so that you are netting what you need. Make your offers based on that.

Some sellers may still be resistant and in denial. Though it won’t be long before they are desperate to sell. You can always update your offer then to account for the changing market.

Tenants are falling behind on the rent in big numbers. It is an area of distress that is likely to grow quickly. It is the opportunity for savvy real estate wholesalers to help a lot of people, and scale up their own deal flow and incomes with a new niche.

The Rental Market Is Broken

Eight million renters are delinquent according to Bloomberg News.

This is probably just the tip of the iceberg given all that is happening in the economy, with massive layoffs, hiring freezes, insane rates of inflation, and a new recession.

In some areas rents are up 50% this year. Rents have grown so fast that cities and counties are debating new ordinances to cap rental rates, protect tenants from huge spikes, or at least make landlords pay more to evict them.

Those who haven’t taken up the chance to move to more affordable areas are finding even waiting lists for homeless shelters are getting incredibly long.

Meanwhile, many rental property owners have waited far too long to sell their assets. They are facing a much different resale marketplace now.

The Opportunity To Help Bailout Landlords

This is a great opportunity to help hurting rental property owners by buying their properties.

You can also still negotiate closing credits for evictions, security deposits, and other items to offset any additional perceived risks.

Even a low offer now could save them from a much worse fate. It is likely to be a much better deal for them than they may get for that property in the fall and winter.

Fuel Landlords With New Deals

On the flip side of this are millions of investors of one level or another who are desperate to find deal flow, and acquire new real estate assets with income potential.

You can be that connection.

Put those properties under contract. Get tenants performing or out, and wholesale them to a new landlord who is in a stronger financial position and is better at management.

There is still a lot of capital out there chasing deals. This huge surge in flight capital from the stock market and other assets into real estate may not last long, so take advantage of this strategy while you can.

How To Help Tenants

Of course, no one wants to kick people out in the street. If you can, help tenants to get back on top with a sustainable solution for staying in place.

If they simply cannot afford it, refer them to something more affordable, and find them a more graceful exit.

Then provide the place to stronger renters who can actually afford it, and need a safe, healthy, place for them and their families.

You can do a lot of good, and get paid very well for helping too.

We are excited to spotlight another successfully funded house flip for one of our great investor clients.

This month one of our investors executed a fantastic wholesale deal. Generating a $235k gross profit in just one day.

Even better, we were able to fund 100% of their deal!

Deal Spotlight

Imagine if you could do deals like this every day…

 

Purchase price: $500k

Funding amount $508,500

Resale price: $735k

Property type: SFR

Location: Southern California

Rate: 1.75%

Time to flip: Same day closing

Here’s how it went down on the A to B transaction, and then the B to C transaction on the same day.

 

 

Funding You Can Count On When You Need It

While other real estate lenders out there may be pulling back, tightening up, and raising their rates, Best Transaction Funding is still here, funding deals, and at our same great rates.

Our transactional funding for wholesale deals still provides 100% of your funding needs for rapid deals.

You don’t even need an appraisal or good credit. It doesn’t matter whether you are a full time self employed investor, or just got laid off from a big tech job and are diving into real estate. We’ve got your back.

 

We love funding big deals too. Bring us your wholesale deals for funding of $500k or more and see how we can help.

You can request your Proof Of Funds on our site right now, and go out and land those deals today.

Get Featured

Do you have a great deal story you’d like to share?

If you’ve recently funded your deals with Best Transaction Funding, or have a closing coming up, and would like to be featured, let us know.

You can inspire others with your success in this space.

For the past couple of years we’ve been told that housing prices are so high, and bidding wars are so competitive because there is an incredible shortage of inventory. Yet, the data shows that there are actually millions of vacant properties across the US. Could these not only be the answer to retaining some affordable housing, but also fueling your deals as a real estate investor?

America Has 16M Empty Homes

According to a new report from Florida Trend in May 2022, the US has 16M vacant homes. Most of those are in Florida. Which has 1.7M, despite being one of the hottest states for buying activity.

This doesn’t count all of the vacant land and building lots out there which can also be used for housing. Nor, the enormous amount of no longer needed office buildings, and other commercial properties which are ripe for being converted to housing.

Affordable Housing

One of the big observations with all of these vacant houses, is that they far outnumber the amount of homeless in the country.

Official counts only put the number of homeless in the whole country at 500,000. Each could be given almost four houses each in Florida. Still, leaving over 14M empty homes across the nation.

More can be carved out either by government, private investors, or combinations of both in partnerships to retain a pool of truly affordable housing. That’s certainly better than spending over $500K a unit to develop new housing for the homeless as some governments are doing.

Of course, plenty more of this pool of properties can be sold wholesale to rehabbers and landlords to operate at market rates.

Finding The Deals

The discrepancy between the retail market and all of these vacant properties, is that they are not being publicly advertised for sale online. That doesn’t mean that they can’t be bought.

The key to unlocking all of this deal flow and profits is direct marketing to true off market sellers.

This can be done by mail, email, cold calling, and search engine marketing.

This is a great service to provide. You can help these owners liquidate all of these properties which are costing them money to hold every month, and turn them into cash.

On the flip side, you are providing much needed inventory to retail, rehabber, and landlord buyers. Like mining for diamonds or gold and bringing it to market.

In spite of being in a super hot market, some real estate investors are still finding they are stuck with inventory sitting on the shelf for months, or even years.

With so many bidding wars, and competition between buyers, it seems bizarre for properties to fail to sell immediately.

This is incredibly important. Even more so than many investors appreciate. Properties that are languishing in your inventory are costing you money. They present risk every day. They raise questions about the strength of the market in your buyers’ minds, and can detract from your other inventory. At a minimum, they are watering down your overall returns, even if you paid cash for them.

It doesn’t take much dead weight to sink you. Or to eat up all the profits from your other properties. It puts you at risk of breaking the golden rule to not lose money.

Why Your Properties Aren’t Selling

Pricing:

In this market, when most properties seem to sell in a day, the most obvious reason something isn’t selling is that it is wildly overpriced. It’s not even in the ballpark.

It may make a lot more sense to cut the price, get your capital back, and get on to a deal that you can make more money on.

Trust:

Even if you are offering a stunning deal, if buyers don’t trust you, they are not going to buy. Period.

It’s Too Hard To Communicate With You:

This isn’t about what works for you, but being available in the medium they prefer. Many simply do not want to talk on the phone today, won’t take calls, and never check voicemail.

If you don’t respond to emails and text messages, then you are probably going to miss out on the bulk of buyers out there. The opposite is true as well.

They Aren’t Sure What It’s Worth:

You may not be conveying the value of what you are offering well. Perhaps there is too much uncertainty over comps, property condition, and repair costs.

How To Move Them Faster

Owner Finance:

In addition to the above tips, you may consider offering financing. Think low down payment, palatable monthly payments, and perhaps even three months with no payments to get them started.

Work On Your Website:

It doesn’t have to be big, complex, or fancy, but it should be up to date, and boost your credibility, and likability.

 

Find The Buyers First:

In future, don’t speculate by buying and hoping you can resell. Instead, find the buyers, fill their orders, and use transactional funding to turn them around immediately.

The vast majority of Americans now fear an impending economic shift for the worse. How is the average person responding with their finances? What are experienced investors doing differently right now?

A New Recession Seems Inevitable

Between rising interest rates, gas prices, shifts in federal monetary policy, sinking stocks, and declining GDP in the first three months of 2022 most believe a new recession is imminent. There is a good chance we are already in one, but the data to show it hasn't been released yet.

According to recent surveys, 81% of American adults fear a recession this year. In fact, more than half already report that they are under financial stress already.

Even more pressing than the loss of their savings and incomes, close to half of those surveyed in the Momentive Poll say their thoughts are consumed by rising prices all of the time. Only 1% do not seem to be thinking about it.

According to respondents, the bulk of financial stress is coming from:

Gas prices

Housing costs

Food costs

Medical costs

How People Are Reacting

According to the data, consumers are already frantically responding to this financial stress by:

Cutting back on dining out

Cutting back on driving

Canceling monthly subscriptions

Canceling vacations

As we saw by the $54B overnight loss for Netflix investors, it is already having a big impact.

Investors

Many individuals are already crying out in desperation over the outlook for their stock accounts and 401ks.

More experienced investors who have been through these times before are adjusting by getting out of stocks, diversifying, choosing more liquid investments, choosing real estate wholesaling over flipping or rentals.

They are looking for assets that will benefit from these changes, investing short term to grow their money faster than inflation, and putting money back in the bank to seize upcoming opportunities in the recession. They are not holding devaluing cash, but know cash will be king when sellers turn desperate.

REI Businesses

Real estate investment businesses led by experienced managers that have been through it before are preparing by building out their infrastructure so they can scale, building databases of sellers, investing in follow up marketing, and readying to buy a lot at discounts.

Summary

The fact that so many fear an imminent recession, and are reacting with their dollars already is likely to bring it about. The financial stress is already mounting, and will directly impact savings and investments. The experienced know exactly how the cycle plays out, and are getting ahead of it, and positioning to benefit and thrive through it.

 

We could be in for far higher interest rates than most are expecting. Just how high might they go? What will it mean for real estate investors?

High Rates For Solving Inflation

It is being posed that we need extreme interest rate hikes to take the bite out of inflation.

To really make a dent, or halt inflation, financial experts and experienced CEOs say that interest rates need to be raised to at least the same rate as inflation.

This would make it more expensive to borrow for most things, and may cool consumer spending. Of course, it can have the opposite of the desired effect too. Simply making things more expensive and driving up inflation to breaking point.

Some may argue that the current hyperinflation economy has been purposely created and manipulated. It may not be based on real fundamentals. Either way, the Fed seems to be planning for rate hikes.

To match current inflation, rates would have to go up to at least the official rate of inflation which is approaching 9%.

If you look at your own expenses, you also know that you are actually paying 30-100% more for many things.

Are Rates That High Really Possible?

Many investors and homeowners have never seen rates that high. They probably think it is crazy talk.

However, looking at the facts, we see that it has happened before. The Fed has jacked up their rates to over 22% in the past. Average mortgage interest rates have been over 16%. That’s a whole world of difference from the 2% rates some saw advertised last year.

What Big Rate Hikes Mean For Real Estate Investors

One of the first things to watch out for is obviously any floating and adjustable rate debt you may be holding. Otherwise the payments on that debt could theoretically soar by 8-10x what they are now.

This will also clearly throw millions into bankruptcy. Or at least mean they can no longer afford their bills and housing.

This will bring many opportunities to help owners get out of debt, and to buy their properties from them. Start marketing to them based on leading indicators of potential distress. Like large amounts of revolving debt, ARM mortgages, and missed payments.

Using low rate transactional funding investors can take advantage of these opportunities at scale, do some good, and grow their own finances.

 

Foreclosures are rising. Is it enough to shift the market, or just fuel real estate wholesalers with more deals to do?

According to ATTOM Data foreclosure filings leapt almost 30% between January and February this year. With a year over year increase of almost 130%.

That sounds like a lot, but it still only means around 26,000 new foreclosure filings for the month. That is sadly many individuals and families that could be losing their homes. Though it certainly isn’t enough to satisfy current demand.

There may be far more foreclosures in the works when you add filings and defaults from each month. Though most are being snapped up as pre-foreclosures before they become REO, due to the high amounts of equity in the market. Of course, banks may also see taking back properties as being attractive and profitable.

More Foreclosures Are Coming

One reason for such a large percentage spike in foreclosure activity is that the legal process is just recovering from moratoriums and shut downs.

With around just 1 out of every 2,500 housing units receiving a foreclosure notice in Jacksonville and Orlando, FL in February, the market seems much healthier than in 2008. When it wasn’t uncommon to see the foreclosure rate 5-6 times as high.

However, there are a variety of factors which could produce even more foreclosures, and motivated seller deals in the near future.

Opendoor has estimated it is holding $6B in unsold properties. That follows Zillow’s failure, with around 7,000 properties to unload. That could be added to with the failure of other big iBuyers like Offerpad.

Then there is inflation, which is cramping consumer finances. Even aside from groceries and gas, there are large hikes happening in taxes and insurance. Many will see jumps in property tax bills. Some condo and townhome owners are seeing their HOA dues jump by 300% to 400%.

Seeing The Opportunities

With such great end demand for real estate, investors will find any more distressed and motivated seller inventory very attractive. With the potential for better value deals, and more volume.

This doesn’t just have to be residential either. Some of the biggest wholesale deals we’ve seen recently are office buildings. Retail and mixed use could be areas to explore as well.

 

New changes to what is being reported on credit reports could hit many potential home buyers hard, and keep them out of the market.

Along with rising interest rates, new hits to credit scores could take more home buyers out of the market. This may be welcome news to some investors who have been craving less competition.

While credit scores may not be needed to obtain transactional funding to wholesale properties, investors should also be watching out for the impacts on end buyers, and who may end up not qualifying or being able to close.

Buy Now, Pay Later

One of the latest moves by the big credit bureaus has been to include buy now, pay later loans on credit reports. This includes TransUnion and Equifax.

According to TransUnion, this is being done in the name of “inclusion.” It is estimated around 100 million Americans use this type of financing each year. It’s already a $91B market, growing at over 45% per year. It is expected to become a $4T market by 2030 according to Allied Market Research.

You’ve seen these ads online. Now when you go to check out you may see payment plans being offered by Buy Now, Pay Later companies like Affirm, Zezzle, Klarna and After Pay.

It seems convenient, but this could also create major problems.

For a start, borrowers using these loans for items as cheap as $50 can’t really afford them. It is also multiplying inflation. Now fashion companies can quadruple their prices, because consumers can pay over time. So, instead of a pair of yoga pants being $25, they may sell for $100. Then there are many hidden costs or interest involved in some of these types of credit.

This is during a time when there are already tens of billions of dollars in spiking business and credit card defaults and late payments.

The lenders want this credit on reports to motivate people to pay on time. Or perhaps because they are not paying on time. Including them on credit reports may only exclude millions of borrowers from homeownership.

This also comes in the wake of some lenders counting recent COVID forbearance programs the same as foreclosure. A move that takes even more out of the buyer pool. Even if their mortgage company put them into forbearance without their permission.

Summary

Be wary of convenient looking buy now, pay later deals. They are not designed for the benefit of consumers. Now they might exclude millions from being able to buy homes.

On one hand this may free up more inventory and lower competition for investors. It also means that while it won’t affect you obtaining 100% transactional funding for wholesale deals, it may mean many end buyers won’t qualify to buy your deals with financing.

 

With the fast changing real estate market many investors are wondering if they need to be changing up their offer strategies, and how much they are offering sellers. So, what should your offer formula be now?

The Changing Real Estate Market

The economy, finances and real estate market keep on changing at a face pace. There have been plenty of twists and turns, with more to come this year.

The housing market has continued to beat expectations. Multifamily is very strong too.

Tens of billions of dollars are chasing deals in this space right now. Which is also leading many investors to question their offer strategies. Especially as they find it more challenging to secure deals with often overly optimistic sellers.

The big question is how much to offer to still ink profitable deals, and keep up deal flow? You’ll starve without doing deals, but don’t want to be losing money by overpaying either.

Be Wary Of Rules Of Thumb

There are many books, articles, and speakers out there plugging their rules of thumb for making offers on properties to flip. Much of this is outdated and out of touch.

You cannot just stick to one rule of thumb and offer formula. Market dynamics are changing all the time. Some investors are used to making offers in the 60-70% range. Others have driven hard bargains at 40 cents on the dollar during crisis times. In other phases of the market a lot of money has been made offering 90% of the retail value for homes.

In the past some appraisers and lenders have gone up to 125% of the value knowing the market is growing so fast.

Be Wary About Overpaying

Overpaying will catch up to you eventually. Even these big funds blatantly paying 50% over value for properties will eventually find they pay for it.

At the same time, you may need to be more aggressive, and be willing to pay more for property than you thought it was worth over the past couple of years. Remember, it is about what the market is willing to pay for it.

Still, with prices expected to rise, at least one guru has been advising his followers to make offers based on pending sales, not closed comps. That is extremely dangerous.

Pending sales often don't close. They are not used for lenders and appraisals. It can mean big trouble flipping, and being restricted to only cash buyers willing to over pay.

Stay Flexible

Be aggressive enough to land the deals. Yet, conservative enough to not lose money and get stuck with dead weight you can’t sell.

Sellers won’t hold out forever. If you hold firm, the sooner they will fold. There is a lot of distress building. Especially with inflation in gas, insurance, and medical bills. As well as declining consumer debt performance.

Ideally you already have end buyers lined up in advance. You know their numbers, and can base your offers on that. Then with transactional funding your risk is incredibly low, deals are presold, and you are in and out, and paid.

 

There are a lot of myths and misconceptions about real estate that can confuse investors. That’s in addition to changing trends which can lead to focusing on the wrong deals or not being active enough in the right areas.

Here are some of these factors that you want to be alert to now, and use to guide you in maximizing your potential this year.

Community Isn’t Really That Important

As with micro lofts, and tiny urban condos before, there has recently been a lot of hype about multifamily, and developers building in fabulous community spaces.

According to Pew Research, 69% of those surveyed found the most meaning in their life within their families. Just 16% said they were attached to their local communities.

That may suggest the real estate that is most in demand is going to be single family homes, or multigenerational homes in the suburbs and beyond, rather than tiny spaces in dense urban areas.

Big Flips Are Being Supported By Inflation

We are currently experiencing some of the most fierce inflation in almost 250 years. That’s bad for most people, but is definitely working in favor of real estate investors, flippers and wholesalers.

Rental rates are up 70% in many areas. 30% plus home price appreciation seems very common.

This is enabling investors to make amazing profits. Such as the recent $190M flip by fund billionaire Dan Och, who more than doubled his purchase price of $93M in 2019.

Yes, They Are Making More Real Estate

One of the biggest myths in real estate is that they aren’t making more of it. That’s simply not true.

It is an old saying used to pump up offers on prime real estate. Yet, over the past couple of decades we’ve seen that it is possible to create more land.

Dubai has been building artificial islands for luxury real estate projects for many years. All of the space exploration we’ve been doing is even opening up the potential for real estate deals on other planets. Now, one professor has recommended expanding Manhattan artificially to lower property prices, and for building thousands of new affordable housing units.

Some may be disappointed if they held onto once prime real estate too long under the cloud of this myth. Yet, you can still make uncapped money wholesaling in old and new areas.

TikTok Overtakes Google

Last year TikTok overtook Google as the most popular website in the world, and surpassed Facebook as the most popular social network.

This is likely changing how people get their information, their perceptions and tastes, and more. Consider that when you are evaluating which properties will be in the most demand.

 

The three most important days of the year for investors are upon us. Will you make the most of them?

Tax refund season may fuel renters and retail home buyers with down payments and moving money. The summer may have traditionally brought peak home buyer season in many destinations. Fall usually brought a dip in asking prices and more negotiability for wholesalers. While the end of year brought a sprint of closing as individuals and businesses sought to save on taxes.

Yet, this year, we have three extremely pivotal days that investors should be leveraging to their fullest. Don’t miss out.

Thanksgiving

No matter what your beliefs about this traditional holiday or how you’ve celebrated it in the past, this is a powerful day for leveraging the value of gratitude.

If you have already experienced its value in your life, there is even more reason to make a whole day for it. If you haven’t made it a part of your daily success habits, use this day to kickstart it.

Dig into all the things that you are thankful for. Go deeper and broader than you can with a few minutes each morning. Consider all of the opportunities to be grateful for.

Black Friday

Black Friday may prove even more pivotal this year. Sure, there will be some people who live all year waiting for Black Friday. Especially retailers, and individuals who really should be doing anything else but splurging on unnecessary items.

This year may prove to be more pivotal, with so much hype about scarcity and such extreme price inflation manipulation.

It is a day to lead by example. Are you going to be sold and fall for the mayhem? Or are you going to use your funds to make smart and profitable investments? Find sales on properties, or be the one benefiting by selling a lot of them on Black Friday.

You can bet there will be plenty more sales through the end of the year, and the beginning of next year if you need to go retail shopping.

Giving Tuesday

It’s been Cyber Monday every day since COVID restrictions came along. Amazon and Apple will be just fine without you spending even more with them for a day. American Express will also be okay if you don’t use their cards to splurge on Small Business Saturday. It’s worth supporting small businesses, but Giving Tuesday may be even more impactful.

If you like you can even give grants to others to start their own small real estate investing businesses this Tuesday.

With so much to be grateful for, and so many deals you could have been selling on Black Friday weekend, you as a real estate investor are probably one of the best positioned to give.

It doesn’t just have to be a handout either. You can give for charitable tax deductions. You can give investments to your family and friends. Or you can give the gift of knowledge of real estate investing to others so that they have more to give next year.

 

Why are so many overpaying for houses by so much these days?

Who are these bullish buyers willing to pay high premiums for properties and why are they doing it? What does that mean for investors who want to enjoy the upside, but not end up bankrupt?

Who Is Paying So Much For Houses?

All types of buyers appear to be paying top of the market prices and more.

This includes retail home buyers all over the country who are looking for new places to live. Then there are big Wall Street backed funds and iBuyers who have been buying up entire new home communities at 50% or more over their top of the market values.

Why Are They Paying So Much?

There are a variety of factors driving this activity, including:

 

• Those who are banking on continued inflation and long term value
• Those believing homeownership may soon be a limited luxury for the wealthy
• Those must deploy their capital at all costs
• Movers with cash going into cheap areas
• Buyers using low interest rate loans, and are finding payments cheap
• Those who used Zillow to guess home values

 

The Trap

Just like the stock market and cryptocurrency, the biggest players and market manipulators like to suck in all the money before a correction. Those stuck holding the hot potato when that happens get burned.

This is okay if you are wholesaling and double closing with transactional funding. You won’t get stuck. However, if you are speculating and holding it, you could end up reliving a rerun of 2007.

Use It To Your Advantage

If others think properties are worth it for them at those prices and they are happy to pay them, you can serve them, even if you are making offers for more than you would normally feel comfortable. Sell in bulk to funds and wholetail to regular home buyers.

Though if it isn’t selling, understand you have to seriously drop your asking prices, and already have that priced into the offer you made.

 

Here are the factors real estate wholesalers should be monitoring as they plan acquisitions and marketing campaigns now.

The Supply Chain

Manipulated or just messed up, the average US household is finding supply chain pains and disruptions very real.

Some are ignoring it and hoping it passes. Others are stressed about it. Some are finding it painful as they can’t find their kids’ favorite foods and the end of year holiday season is a big question mark.

In real estate it means that some construction materials are not available. Furniture is hard to come by, and orders placed are not guaranteed to arrive. Rehabs are taking longer than normal. Fewer new homes will be coming to market.

The Second & Third Home Market Is Growing

According to Bloomberg the demand for second and third homes is growing. This can be a great niche for wholesalers to target. One which is often rich with qualified buyers who aren’t price sensitive.

The New Recession

Some analysts are arguing that by the time the next set of economic data comes out it will reveal that we’ve already entered a new recession. They are mostly basing this on what they see as the leading indicator of falling consumer sentiment.

While the majority of mainstream data being published shows the economy is growing, while mortgage forbearances decline and unemployment is low, it is important for investors to seek out the raw data to draw their own common sense conclusions as well.

On the bright side, recessions are a great time for real estate wholesalers to find distressed inventory.

Though any new stimulus and new policies could easily mask a dip or extend the current run up.

Warp Speed Inflation

Those making less than $250,0000 are probably feeling the impact of rampant inflation already. It is at the grocery store, the gas station, and in the tax bills. There is no sign of it slowing.

The good news is that real estate keeps growing faster than inflation. That includes house prices and rents. Many of which are up 50% to 70% this year alone.

Liquidity & Credit

How fast things can continue to grow versus running into a financial crunch depends a lot on credit markets. This includes interest rates, international credit, and mortgage availability. Some markets have been seeing close to 60% of home sales going to cash buyers already. Financing is essential to keep things moving. Right now that money is available. Especially for real estate wholesalers. Take advantage of it.

 

How do you keep your deal flow alive when you end buyers are landlords and buy and hold investors?

Pandemic lockdowns and ensuing restrictions, new policies and eviction bans have rocked everything rental property investors thought they knew about real estate. This might have put a dent in your deal flow if you’ve been wholesaling houses to them. So, how can you help them, and keep your business flowing?

The Big Eviction Ban Problem

Covid related restrictions and rules have impacted rental property operators in a variety of ways. One of the most notable is eviction bans. Regardless of them already being ruled unconstitutional, they are still out there.

In fact, new legislative bills like the Federal Disaster Housing Stability Act of 2021 are proposing both automatic and potentially never ending eviction bans.

That isn’t exactly making acquiring more rental properties very attractive to most buy and hold investors.

Here’s how you can help them, and keep your business firing on all cylinders too.

Serve Up Performing Rentals

No one wants to buy a non-performing rental with an occupant they may never be able to remove. Yet, the data suggests that the bulk of rental properties are performing well.

Find those with a track record and good tenants, and wholesale those deals instead.

Provide Deeper Discounts To Offset Risk

Investing decisions are all about the balance of risk and reward. If you can help lower your end buyer’s risk, and offer more promise of potential reward it could tip many more buyers in your favor, and lead to a lot more deals with each one.

One way to do this could be to offer deeper discounts to buyers; building in equity, and creating larger spreads for them.

Another option could be 12 to 24 month rental and income guarantees.

Turn Them Onto Smarter Leasing Structures

It is true that aside from Section 8 style government paid housing, the old traditional annual lease is probably dead. It is just far too much risk for any private and individual landlord to take on.

Yet, with a little creativity there may be many innovative leasing options that can avoid this attack on landlords, and help them pull in that cash flow.

This may include entire leases being paid in full in advance, switching to short term rentals, memberships, or even finding other ways to derive income from a property; such as renting it for storage or parking.

 

Almost 65% of millennials now regret their home purchases according to a new Bankrate survey.

This may be a shame for all of those who got caught up in the home buying frenzy of the past year. Yet, it also signals some new opportunities for real estate investors as well.

Homebuyer Remorse Grips Millennials

According to the data the majority of millennials now regret buying homes.

Some of the top reasons they are giving for this distress include:

• Additional homeowner expenses like maintenance costs

• Buying a home that is too big or too small

• Home mortgage payments and rates too high

• Buying in a bad location

• Overpaying for their homes

It seems millions just jumped into the market on a whim, without really thinking the decision through, doing a budget, analyzing what was important in a home, or educating themselves about the market.

How Wholesalers Can Help Out

In many scenarios these homes have quickly become a burden for homeowners. It’s now just a big payment each month. One that prevents them from enjoying the life and freedom they really want. It’s stressful. For a lot of homeowners it may be unsustainable.

As a real estate investor you can help them out. Even if they bought at the peak of the market in the past year, soaring inflation and frenzied competition means those properties could easily have 20% more equity in them now. For some, that is enough money to make a decent profit on wholesaling them.

All many of these owners probably want is enough money out to go move into a nice rental.

Some won’t act in time, and unexpected maintenance, repair and property tax bills will bankrupt them. That can turn into nonperforming loan notes and REOs. Both of which can be buying opportunities for investors.

Wholesaling To Landlords

Equipped with this information and facing a changing market, investors may want to expand or change up who they are reselling properties to.

Many retail buyers are getting priced out of the market. It is true that interest rates are low. Yet, recent data shows that it will now take South Florida homebuyers 17 years just to save up a 10% down payment. That’s 34 years to save a 20% down payment. That could certainly lead to a decline in homeownership.

While many rehabbers have been sitting on the sidelines during the pandemic according to ATTOM Data, and will continue to due to hyperinflation of construction materials, other types of buyers are scaling up.

Buy to rent landlords are growing as fast as they can with cheap money, and in anticipation of a new wave of renters coming to the market. These end buyers may have lower profit expectations, and are likely to be bulk or repeat buyers too.

 

At least five new notable changes could be set to fuel the recent real estate bull run even further. If you thought we might be peaking, or have felt prices are a bit too high, these happenings could drive even more action over the next year…

CDC Eviction Ban Ruled Unconstitutional

Two judges have recently ruled that the CDC overstepped its authority with its COVID related ban on evictions. One of them called it unconstitutional. This doesn’t mean that every foreclosure and eviction will now go through overnight, and the CDC is sure to appeal to avoid bankrupting financial losses. Yet, it is a great step in the right direction for landlords and other real estate professionals and businesses that provide them with inventory.

More Government Paid Housing

New changes to HUD housing vouchers are not only injecting an extra $5B in funding into the program, but are also waiving requirements so that the government can pay the rent, even if renters can’t prove their identity or residency status. Fox Business reports that only around 20% of those eligible are currently receiving the help. Under the expanded voucher program, renters are supposed to be able to forward these government payments to any landlord who will accept them. For landlords too scared to take on cash tenants, this could certainly revive the market.

Mass Rezoning To Boost Property Value

New legislation is being used to undo and eliminate exclusive single family home zoning. In favor of making every parcel of land eligible to build multifamily apartments, including in the suburbs. This dramatic change could fuel a massive flurry of new development, and greatly changing the value of lots that single family homes sit on now.

Lenders Easing Up Access To Credit

The Fed reports 27% of banks are easing their lending requirements for credit cards, and 17% are making it easier to get car loans. Traditional banks appear to be starved of growth in their lending businesses after tightening last year, and burning many customers when they wanted help the most. Some like JP Morgan Chase are saying they will even offer credit without credit scores.

The Bubble Is Popping In Other Asset Classes

On May 19th 2021 Bitcoin investors lost almost half of their portfolio values in a single day as the price crashed. Similar hits were seen across other cryptocurrencies, including Dogecoin. Then there is also the anticipated correction in the SPAC market and public stocks. Except another big rush of capital to the safety of real estate as investors see the data.

 

This is the year to be supersizing your real estate investing business.

If you thought last year was big, this year should be even bigger for you. If you missed out on the massive surge last year that saw many investors, and the whole market setting records, then don’t miss out this year.

The Market

Last year saw almost 7M homes being sold. Property prices hit new highs, and most wholesalers couldn’t keep enough inventory on the shelf to meet the demand of their buyers.

Looking at the state of the current market and the outlook for this year, the fundamentals are all lining up.

We have:

• Low interest rates

• Plentiful capital, cash and equity in the market

• Record setting demand

• Large amounts of supply in private marketplaces

With the USA forecast to outpace most of the world in economic growth this year, we can also expect a massive resurgence of inbound international investment.

There may be holes in the market which are suffering as millions of households restructure this year. Though there are also just as many, if not far more housing markets benefiting from this shift.

Are You Thinking Big Enough?

Often the only thing standing between an investor and far bigger goals and rewards is thinking big enough.

Like, often when people first get into real estate they think $1M is a lot of money. A year in they realize that isn’t much at all. There are other people out there not only shooting to build billion dollar businesses, but $50B to $100B plus businesses.

If you aren’t sure if you are thinking big enough, then consider these two recent deals.

One Miami restaurateur just sold a single family home within 24 hours of listing it, for $12.5M, after multiple offers. He had purchased the place for just $3.59M. Not a bad margin on a single deal.

Then there is the fund that just bought an entire new home development of 124 houses for 50% more than the builder expected to get for the homes individually on the retail market. This now seems to be a common practice in which big funds are bidding over overpriced deals and are borrowing hundreds of millions of dollars to do it.

Now we also have pension funds and other institutions which used to invest billions in office space looking to move into residential. Some builders are now tracking how much they are wholesaling in bulk each quarter.

How Do You Make The Leap?

Start with big goals.

Expand what you are looking at in size and volume. Don’t think about what you can afford, but instead how and where to get the funds. Then get busy building your network of bigger buyers and sellers.