Hurricane Ian has again ignited the big debate over whether disaster prone areas should be rebuilt, or not.

This has yet again been another huge tragedy. The loss of life, and livelihoods, and entire lifetimes of memories and hard work cannot be taken lightly, and should not be forgotten quickly.

Still, while fresh at hand, it is an important moment to revisit this question. So, what are the arguments and math for rebuilding or not? What should investors, homeowners, homebuyers, and even renters be thinking about?

Refusing To Be Beaten

In many scenarios in life and business, including disasters, it is noble to refuse to quit, and to be determined to rebuild.

This can certainly be true of one time events. Or even ultra rare events. In fairness, some areas impacted by Hurricane Ian have been hit the hardest they have in 100 years.

Yet, there are many parts of the country, where hurricanes, blizzards, tornadoes, wildfires, and earthquakes are a common occurrence. Even having their own season every year.

If you really love where you live and own property that much, and that is worth more to you than the money and hassle of rebuilding, then no one should hold you back. Providing you are covering the bill, and not them.

With great insurance, or plenty of other investments elsewhere, this may not be a problem. You can have a brand new property. Which may be even better than the last one.

The Futility & Economics Of Rebuilding

At the same time, it is wise to remember that these events can be very regular and predictable. You may have to deal with three storms like this in a single year.

In many areas around the country incurring major damage is not a matter of if it is going to happen, just when, how often, and how hard.

In reality insurance never seems to covers enough. Even if you do get your claim paid it may only come after a long fight that lasts years. Along with lots of legal expenses. All while paying for somewhere else to live in the meantime.

For real estate investors it can mean no income from rentals, and dealing with no utilities for a month or two. With storms like this, it seems that no matter how strong homes are built, they can be wiped out.

It can be a vicious and expensive cycle. One which many have not priced in when they are buying property.

The Options For Investors

As an investor, this is a reminder to build in risk based pricing. Do the math on long term rentals, including if you have to rebuild at least once, and go another 12-24 months without income. Consider how that may change your offers.

Investors can help those deciding not to rebuild and moving to other areas that offer more sustainable living. Either by giving them good deals on housing where they are moving to, or acquiring old homes at a fair price for the current condition and flipping them.

They can be sold to those who are still bullish and wanting to rebuild or live there. Which, again is perfectly fine, if this is extra play money you can afford to lose every few years and the return on the experience works for you. If you have $1B in the bank, and it’s worth $10M every few years to have a vacation home with your perfect view, then why not.

Rehabbing is certainly questionable. There will be a lot of remedial work and dangerous mold to get rid of. It is probably better to wholesale properties as is. Especially in a declining market, with infrastructure issues, labor shortages, and high material costs.

Summary

There are arguments for both rebuilding and quitting disaster prone areas. Have you moved away, stayed, invested elsewhere , diversified better, or started using risk based pricing to account for these cycles?

While newer investors may still be very bullish on growth in the US real estate market, those who lived through 2008 are certainly having some traumatic flashback moments.

There are certainly many, many similarities in the data from the run up to the Great Recession. We also know that a soft landing is almost impossible to pull off. Markets invariably overcorrect before they recover.

This can not just put a huge hole in your savings and capital, but can wreak havoc on income as well. So, if a crash or correction is possible, then how can you save yourself, and continue to make money through it?

The Consequences Can Be Extreme

Failing to act, or even just acting too slowly to changes like these can have serious, and long term consequences.

2008 sent many CEOs and multi-million dollar producing real estate players lining up among hundreds of others begging for minimum wage jobs in restaurants. Many lost their families, and spent a decade or more to build back.

It’s true that a few made it, came through COVID, and are prepped for what's next. Those are the ones most focused on shorting the real estate market right now.

Short Or Long?

There are two choices at this pivotal time in the market. You can play this phase of the cycle short or long.

You can hold for cash flow and until the market rebounds higher. Though rentals may not be as reliable as you hope.

Remember that it may take 10 to 14 years for the market to come back to where it is today. If you don’t want to be holding those assets that long, or risk losing them, then you should be shorting the market. Getting out faster, with the expectations of prices coming down.

If you haven’t already made these adjustments, don’t just go short, you may need to extreme short to get out fast enough. If you haven’t already missed your window of opportunity.

So, what are some of the things that you can do to do this?

Sell Your Home

Preserve that equity and capital by cashing out now. It is better to regret selling and have money in the bank, than regret holding and have nothing. Just like going to Vegas, you’ve got to know when to cash in your chips and step away from the table.

Exit Those Rehabs

This may not be a great time to be fixing up and flipping homes. Don’t finish or begin on any more line items if you don't have to for a certificate of occupancy. Save that cash, sell a little cheaper, and exit.

Exit Rentals

Sell off any rental properties that have peaked for this phase of the cycle. You can buy them back cheaper later, if you want to.

Make Money By Wholesaling

Real estate is still going to be the best way to make money. You just have to play the extreme short. Sell before you buy it, and use 100% leverage by wholesaling properties using transactional funding.

 

Inflation in 2022 is expected to accelerate far faster than we’ve seen in decades. Even beating out the hyperinflation of 2021.

As a real estate investor you should be prepared to survive it, and understand how to leverage it to your benefit, instead of becoming a victim of it.

Transwarp Inflation

We are running out of terms to describe just how fast inflation is accelerating in the US. Some have started dubbing the pace we’ll see in 2022 as ‘transwarp’ inflation. Transwarp is about 8x the speed of light. It is a whole new dimension and laws of physics.

It is quite likely we will see mind blowing inflation over the next year. Price increases many didn’t think possible.

Consider that the Dollar General has been bringing in a new brand, called Popshelf, which targets prices around $5, instead of $1. Major food suppliers like Heinz are also increasing prices on some groceries by 20% in the first three months of the year. The actual retail price tag that consumers have to pay could go much higher.

In some places rental rates have gone up over 70%. Insurance rates have already gone up by 30% on many customers.

As a real estate investor or business owner you must anticipate these changes, and budget for them. Otherwise you could soon be in the red. Price in inflation on everything, including labor, software, marketing, title, taxes, interest rates, and utilities.

Property Prices

House prices have been growing even faster than inflation in some areas already. Property prices could go up much further in 2022. At least in some areas. Especially with ongoing migration and new covid variants. Use it to your benefit in flipping houses. Price it into your offers.

Distressed Inventory

Extreme inflation means many will no longer be able to keep up financially. At least unless they are also benefiting from COVID and the shifting economy. Such as  startup entrepreneurs, CEOs of big business, and real estate investors. That means the potential for millions more falling late on housing payments. This could provide much craved inventory for real estate wholesalers, flippers and landlords.

With the right marketing, connections and pitch, you can help out these property owners, help them exit to somewhere they can afford, and be well paid in the process.

 

Flipping and wholesaling properties to short term rental operators like Airbnb landlords can be a highly lucrative strategy for investors. Here’s the 411 on what type of inventory you should be sourcing for them…

The Short Term Rental Market Is Growing

Recent events have only accelerated the need and demand for short term rentals. This includes those on platforms like Airbnb, Homeaway, and VRBO, but not exclusively. In fact, Airbnb alone has said that it is facing a shortage of 1M or more units.

Regular landlords are switching to short term rental arrangements to get away from eviction bans and being tied to bad tenants.

Ongoing travel limitations have created a boom of domestic travel. As remote working is also making it more common that people will look for new places to stay for a few weeks or a month at a time.

Of course, these types of rentals also rent for far more than the average annual rental as well.

Serving Up The Product

There is a huge need for properties that can be used in this way. You can fill this gap as a wholesaler and fuel your business with deal flow and higher profit margins if you have the right product.

That means understanding what’s most important to their end users. So, what features should you look for and can find to create a better product for them?

Realtor Magazine recently published a lot of data on the top features these renters want, as well as the top issues that turn them off.

Price

Price was the most important factor for guests. With most looking for units in the $50 to $99 per night range. Remember that some of these platforms can add 30% or more on top of the nightly rate in fees, so be sure to factor that in. So, on a $100 a night rate, the owner may only get $70, before all of their costs.

Location

Real estate is all about location. In this case, tourism based cities were actually the least desirable.

Style

Users’ favorite style of place to stay is actually traditional, not modern or contemporary.

Internet Connection

With more people working on the go, reliable and fast internet is a top need.

Parking

Poor parking is one of the top pet peeves of guests. They don’t want to have to pay extra for it. They don’t want to have to struggle to find it. They may need two or three parking spaces.

 

Looking for more deal flow?

It’s competitive out there. Some investors may want to expand the property types they are flipping and wholesaling to maintain their volume and incomes and to grow while the market is ripe.

If you aren’t already, consider these types of properties…

Rental Condos

The president has now extended the national eviction moratorium until the beginning of April 2021. NY has already stretched that out until May. Even without any further extensions it could be years before many landlords can expect to evict occupants.

That doesn’t mean that there aren’t legal ways to get them to move, or start getting income coming back in. It just may be beyond what most landlords want to deal with.

You can flip these units to other investors willing to put in the extra work. Or help vacate them and resell them to retail buyers or convert them into short term vacation rentals.

Suburban Single Family Homes

There has been a rush to the suburbs and rural areas over the past year. It makes long term sense for many buyers. Though there will be plenty who realize it just isn’t for them. They will find it too quiet and boring or too wild. As they move back to the city, especially as lockdowns fade, expect to be able to flip these deals that motivated sellers are eager to get rid of.

Vacant Land

There are many reasons land is in demand now. Some want to acquire neighboring properties to retain their privacy and expand their space. Others want to build new homes or have their own getaways where they can park RVs. Some are looking at the long term and are happy sitting on land indefinitely. Meanwhile many realize they have extra land they never use and which is costing them money to hold every month, and could use the cash.

Commercial Real Estate

While many are finding a hard time envisioning a future in which office or retail makes sense at all, some big developers are bullishly pushing ahead with building big projects and hoping tenants come back. In other cases redevelopers are converting these buildings to warehouses, distribution centers, or more residential units. It is another space in which there are lots of motivated sellers, and the potential for big gains on the flip side.

 

Where are the buyers and sellers to keep fueling your real estate wholesaling business?

We have been through some exciting times recently. Some investors are doing incredibly well, others are still struggling to find their feet again and adjust. It’s all about knowing who is buying and selling, how they are doing it, and what’s driving them. Know this, and you’ll find wholesaling much easier. Nail it and this could be your best year yet.

Who Is Buying Homes?

1. Flippers

Flippers are still buying. They need to in order to keep the money coming in. Though we may likely see more wholesaling than fix and flip due to market changes.

2. Landlords

Buy and hold investors realize that passive income is more important than ever before and they are looking for ripe opportunities.

3. Investors Who Are Expanding

Investors of all types, from those listed above to funds are expanding to new areas and property types to balance and de-risk portfolios.

4. Those Using Self-Directed Retirement Accounts

One of the biggest problems successful investors have is minimizing taxes. Retirement accounts can offer some relief. Yet, they often only provide real peace of mind, profitability, and maximum benefit in their self-directed forms.

5. The Wealthy Seeking Wealth Preservation

Wealthy home buyers have been very active. They are still buying up prime properties with big price tags. They see it as being safer than stocks or cash in the bank.

Who Is Selling Homes?

1. People Fleeing The City

Between the virus, lockdowns and rising crime, many are urgently looking to exit urban cities for less crowded areas.

2. Old Financial Centers

High priced areas that relied on physical office buildings and local jobs have quickly become less attractive, and will probably see steep declines in property values. People recognize those markets have popped and it’s time to cash out.

3. Owners Who Can’t Keep Up With Bills

With tens of millions of workers freshly unemployed, many just can’t keep up with the bills. Many need a reset or to downsize.

4. Over-leveraged Landlords

Landlords who over-leveraged and overpaid, and had no reserves to weather the storm should be cashing out if they can. They realize they can’t just count on high vacation rental and occupancy rates.

5. Speculators

Those who were banking on easy end loans and appreciation to make money are finding it’s not there now. They may have to sell at steep discounts and find another strategy.

 

What are the most common mistakes real estate investors make when hiring and working with outsourced staff and freelancers? How can investors and real estate businesses recruit and wield these assets more profitably?

Outsourcing has become the way to run a business and hire today. It is very hard to remain competitive when maintaining an in-house staff today. However, this type of hiring and labor management is still new to many real estate CEOs and investors. How effective and profitable these freelancers prove to be in your organization depend a lot on how they are hired and allowed to work.

Watch out for these five common blunders and how to ace them instead…

Being too Vague or Detailed in Job Postings

Want to hire the best freelancers for your real estate business? Be wary of being too vague or too detailed upfront. Put yourself in the shoes and mind of a top freelancer. Experts are going to be looking for roles they have experience in. There’s a big difference between an SEO ‘expert’ and an online marketing professional with real estate SEO experience. If they don’t know this is a real estate gig, they are probably just going to pass or reject the offer. On the other end of the scale, the best are fielding multiple job offers and are browsing hundreds of job postings each day. They simply don’t have the time to read a book about the job description or jump through a lot of hoops. Make it easy for the best to apply. Then be very clear about the deliverables and role once you narrow down your short list of your top potential hires.

Not Prioritizing Value

When you are out there evaluating house deals price is really irrelevant, right? This is especially true for flippers and property wholesalers using transactional funding. How much the property costs doesn’t matter. As long as the value and profit is there. The process is the same, but if you can make $200k flipping a million dollar house, without using your own money to fund the deal, that’s better than doing the same amount of work to flip a $50k house and netting $10k, right?

So, when shopping freelancers, look for the value. For example; if one charges $80 an hour, but can deliver the same results in one hour that a $20 an hour freelancer take 6 hours to do, the one with the higher rate is actually cheaper and more profitable.

Failing to Fully Utilize Freelancer Assets

Freelance team members are assets. Yet, they are often sorely under-utilized. You don’t want to throw too much work on a team member that is outside their area of expertise. Even if they are good it can be counterproductive. Yet, make sure you are using each one you have to their maximum value. If they have more experience in one area than you do, listen and test their ideas. Then get out of your own way and let them do their best possible work.

Not Sharing Goals, Values and Milestone Objectives

It’s impossible for your team members of any type to help you reach your goals and to appropriately represent your brand and company values unless they know what they are. They are not mind readers. Make sure you share these critical factors and keep them visible.

Being Slow to Pay

Most freelancers work on a very short income and cash flow cycle. That is usually days or a week, versus how some real estate businesses try to stretch out invoices with other vendors for 30 or 90 days. They typically have a dozen plus clients at a time, and are naturally going to do their best and prioritize work for those they know are going to pay, and pay on time. Plus, it gets very expensive for them to chase down invoices. If you want fast, top notch work, be their best client.

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