After a brief glimmer of hope in the headlines, it turns out the Fed is deciding not to cut interest rates this year. What does it mean for real estate investors?

Hopes Of A 2024 Fed Interest Rate Cut Flop

While the hype around potential rate cuts certainly likely helped boost stock prices and spending for a few weeks, it seems that relief isn’t coming after all.

According to Bloomberg, the Fed now does not foresee cutting rates at all this year.

How is this likely to impact the market?

More Inflation

Higher costs of borrowing result in higher consumer prices. Even though it is claimed that high rates are used to battle inflation, we continue to see the opposite at checkouts online and at the store.

On the upside for real estate investors, this could also help to continue to support a rise in retail home prices and rents in some areas.

More Distress

Recent rate hikes have also coincided with increasing financial distress.

We’ve now got record volumes of nonperforming consumer debt in several categories, as well as ongoing defaults on mortgages, to the tune of billions of dollars.

With the news the NYCB is replacing its CEO and allocating more cash to cover loan defaults, this finally appears to be hitting the banks as well.

Motivated sellers of all sizes and types out there. From regular homeowners to big corporations, to financial institutions.

It’s a great time to be wholesaling real estate. While there are now countless ads and websites offering fast cash offers for homes, you can stand out by taking the time to understand the seller’s unique situation and triggers. Find out what’s most important to them, and not. That may or may not be price, closing date, and term. Then formulate the most attractive offers.

Funding Your Deals

A new report shows that it has not been this hard to get a car loan since the midst of covid. With banks holding money to cover loan losses, expect mortgages to also become harder to get.

Fortunately, whether you are just looking for the funds to get started in real estate, want to lower your risk, or expand faster with more capital, transactional funding is still available, and at great rates.

Still searching for more house deals to wholesale?

Opportunity and housing inventory seems to be growing fast among this one segment of the market. It’s only likely to grow even more this year.

If you are looking to do more deals, and to find motivated sellers willing to accept low offers, check this out…

Landlords Are Going Broke

More and more landlords, big and small, appear to be going broke. All the way from mom and pop landlords with one to a handful of properties, up to big banks with lots of pending REOs and their own underperforming real estate assets. As well as builders who are looking to exit before the market really changes on them.

Why Are They Going Broke?

There are many reasons that landlords are falling into financial distress right now. Ranging from poor acquisitions of properties with big and expensive issues, to the last couple years of the economy.

On the property level this can include deferred maintenance, tenant performance, inflation in holding and operating costs, poor property management and contractors, new regulations and malicious lawsuit trends, and more.

On a personal level this can include diminished retirement account balances and financial power, unemployment, inflation in personal living costs, and credit lines getting cut off.

Finding The House Deals

Some of these properties are being listed through agents. Though many owners are still on the fence, or haven’t listed yet. Especially as they don’t want the expense of Realtor commission.

So, how do you find them? Indicators to look for include; delinquent taxes, google searches related to financial distress, leads from property management companies, mortgage lates, mechanics liens, out of area owners, evictions records, building permits being pulled, code violations, local housing authority contacts and who has failed their inspections.

Make Lots Of Offers

Time to close and stopping the financial bleed are probably most important when it comes to selecting purchase offers. They might not get their whole investment out, but that’s better than losing more, or lawsuits from failing to keep up their properties.

 

While most media outlets proclaim that house prices just keep on rising and will this year, many real estate investors, sellers, and agents are finding the market much more challenging in reality.

Of course, all real estate is local. Ongoing population shifts and new secondary rounds of migration between states and cities may certainly be pushing up prices in some areas, while others struggle.

Still, there is no denying that there are mountains of distress in the shadows. With as much a $1T in real estate loans set to default according to at least one economist.

Of course, doing nothing is only going to hasten your demise. You can’t stop doing deals, or let your money sit idle. So, aside from changing the geographies of where you are flipping houses, what else can investors do to keep doing business and make money, without taking on too much risk?

Of course, nothing is without risk. Not even keeping money in the bank or under your mattress. Yet, there are certainly ways to squash risk to the absolute minimum.

Wholesaling Real Estate

Wholesaling is a far lower risk real estate strategy than fixing and flipping houses, buy and hold, or new construction. It’s all about buying low, and selling low, which is what the current market is all about.

Find The End Buyer First

Make sure you have an exit before you get in. This is how you actually invest with confidence versus just gambling on what could happen. If you have an end buyer, especially one under contract, and with money on the line, you know you are already going to exit and get paid before you make an acquisition.

100% Funding

One of the best ways to minimize risk in real estate investing is to use financial leverage. This allows you to share risk with others.

Best Transaction Funding till offers 100% financing, including closing costs. That means you really have no skin in the game to lose should things really go off the rails.

Summary

This year is likely to bring a very interesting economy and real estate market. There are lots of opportunities. It is all about finding the right structure, strategy, and model to lower risk, and increase profit margins, so you can get busy making profits, with confidence.

A wide variety of highly impactful changes could be coming to the real estate industry this year. Here are at least seven significant changes real estate business owners, entrepreneurs, and investors should be watching…

Realtor Commissions

Recent lawsuits have found that NAR has illegally colluded to artificially keep Realtor commissions high.

This will not only cause consumers to lose faith in Realtors, but also to put more downward pressure on their commissions.

TikTok to Tinder

This may be the year when advertisers finally realize that no one is really buying things on Tiktok. Marketing is everything, but ROI on marketing and labor is more important than ever. Some may find that they get better results on in person marketing offline or Tinder than wasting time on TikTok.

Employees Vs. Contractors

Strict new criteria is being rolled out for classifying employees versus independent contractors. Many real estate businesses may have to restructure how they hire and what they have team members do.

This comes right on the brink of the world’s largest freelancer platform Upwork looking like it will implode after a string of terrible decisions that have burned their best customers.

New rules around employees and contractors mean that few will want to or can afford to risk even hiring remote workers in places like California or New York.

The Real Jump In Inflation May Be Coming

Consumer prices are still astronomically high, and growing. Though, recent and current events from new regulations to conflicts in the Middle East, and interruptions of shipping paths could create a new round of hyper inflation that is even more significant than post-COVID. If shipping and import costs are quadrupling right now, what will that mean for consumer prices in the next couple months?

The Next Phase Of Migration

We recently experienced huge shifts in companies and residents from places like NY to NJ and FL. That is now triggering a new round of migration from these states to new destinations like AL, SC, and OH. Some media outlets have also posed that the new American Dream is now to leave America for better lifestyles elsewhere abroad.

We’ve also recently seen more than one proposal to open up the use and sale of public lands to foreign entities and migrants.

Property Prices

While some see inflation continuing to lift property prices, other investment industry veterans expect $1T in debt defaults, and prices to fall by 50% or more over the next year or two.

Small price cuts are no longer cutting it. It has to be a complete no brainer with an existing exit at a steal of a deal price to attract solid offers and buyers.

The Middle Class Is Gone

Inflation and a weakening job market leave only room for the highly paid tech elite or the welfare class on food stamps to survive. Consider how you can serve these groups in order to keep business flowing this year.

The bottom line is that real estate investors, entrepreneurs, and business owners will have to do things differently, find new groups to serve with new proposals, and price deals differently this year. Yet, this all means immense opportunity for those who are flexible and get ahead of the curve.

Real estate investors simply cannot afford to allow themselves to fall into a scarcity or fearful mindset.

If you’ve found yourself holding back from doing more deals, or bunkering down instead of pushing to grow your investment business, this is for you…

Self-Fulfilling Mindsets

We almost always get what we think about and focus on. So, when we are focused on growth, positivity, and getting out there to do more deals, it happens.

Similarly, when businesses and investors contract, begin holding back out of fear, and fear they don’t have enough money, guess what happens? Deals don’t get done, and they run out of money.

Remember that there have been other individual investors and CEOs that have made incredible fortunes in real estate in more challenging times than these.

If you want others to keep being active in the market, then you need to lead by example.

If you are not marketing every day, making offers every week, and are not closing on deals every month, then it is only a matter of time before you do run out of money and end up bankrupt.

The only alternative is to get busy making things happen.

The Demand Is Always There

In addition to the fact that real estate wholesalers can do business just as easily in up and down markets, one of the beautiful things about being in real estate is that the demand is always there.

There will always be a need for housing. To the tune of millions of households per year. For one reason or another people will always need to move each year. Investors and companies will need to sell and buy properties each year.

Even in a depression there will be movers, those who need to downsize, divorcees splitting households, those needing to find tax breaks and new income sources.

Connecting the dots between the supply and demand may require some adjustments in your business model, and a little creativity. Yet, there are plenty of deals to do, if you’ll just step up and take advantage of them.

Do Deals Daily

As a real estate wholesaler you really don’t have to worry about what direction the market will be headed in next quarter or next year. It is irrelevant to you making money right now.

Push ahead by making a minimum of five purchase offers each day. Set goals to add at least five new end buyers to your list each day. Based upon your income goals, set figures for how many deals you will close on and exit each month and week. Then just get to it.

A new court ruling has found that the National Association of Realtors has illegally kept real estate commissions inflated.

This verdict could dramatically alter the US real estate industry, in far more ways than many imagine.

Are Realtor commissions too high? How will this change the model of how properties are bought and sold in America? What does it mean for property investors?

Are Realtor Commissions Worth It?

This particular case in Missouri resulted in $1.8B in damages being awarded. This follows on from other lawsuits and settlements against individual brokerages, and several years of Justice Department investigations.

The main issue publicly centers around NAR having illegally colluded to keep commissions up at 5-6%.

An issue made extra ironic as it is supposed to be the organization that upholds ethics in the industry, and add credibility to agent members. Not detract from them.

Of course, when you really do the math on what Realtors net in a transaction, and how hard they work, many may be barely scraping in a minimum wage income.

Between privacy, efficiency, and negotiation benefits, the best real estate agents do offer great value. They certainly aren’t overpaid. Yet, gross commissions can be expensive, and eat away at your net as an investor.

Changing The Way The Industry Works

This is much bigger than just making NAR irrelevant or slashing Realtor commissions.

Coverage by Bloomberg cites a push towards the UK and Australian models, where commissions are much lower. Of course, this may come with many unintended consequences.

Often overseas there are no agent licensing requirements. Agents get their own listings, and do not cooperate or share commissions with buyer agents.

In turn, consumers have no one protecting their interests. Living and housing costs are dramatically higher. Homeownership is prohibitive in terms of access and expense. Investors abroad prize the current US model, as their local options are normally wealth preservation with very low yields or negative cash flow rentals. This model would erode our national advantage, and would hurt individuals far more than most imagine.

For Real Estate Investors

First, if you’ve been debating becoming a real estate agent before investing, don’t. Skip the costs, time, and going into a contracting industry.

You may still find great value in using real estate agents. You may also find the ability to negotiate better deals on commissions going forward.

This, in addition to end investors having to get used to lower yields, and negative cash flow, can mean a lot more profit for real estate wholesalers.

Now is the time to make your push, as those who control the inventory, will control the market.

Our Fall loan deals with rates as low as 1% can help! Check them out here.

Financial distress is growing across America. What’s the best way for real estate investors to approach these property owners to secure great deals?

Financial Distress Is Rising

Current monetary policy continues to try and hammer the economy into submission. We’re already seeing the effects in terms of delinquent auto and business loans, credit card debt, and nonperforming mortgage loans.

This combined with mass layoffs, inflation, and other disasters like hurricanes is only increasing the likelihood of many more commercial and residential property owners falling into despair and foreclosure.

The Best Ways To Approach Owners

Approaching these owners can be a very delicate situation. One which most investors and real estate wholesalers get wrong.

The first thing to remember is that everyone naturally gravitates away from pain, and toward pleasure.

So, showing up scaring them and acting like a vulture or another debt collector is probably not going to get you anywhere. They are already inundated with calls from creditors. None of whom end up really being helpful.

Often this means that avoiding any letters, emails, and phone calls often becomes the least stressful option for them. At least until they are evicted.

If you are going to win them over, you have to show that you are going to offer them a real solution, and a better solution that is more pleasurable, and is worth their effort.

A part of this is also giving them a viable and dignified exit.

Some are so scared of having nowhere to go, or just can’t stomach losing that they will be frozen into inaction.

Can you offer them enough cash in the deal to move into somewhere that they can uphold their lifestyle for their families?

 

Then there is establishing a sense of urgency.

Many of these owners may not seem very motivated to sell. This is often because they believe random help from the president or the sky will provide them a golden bailout and free pass to stay. Or that it may take many years before they are foreclosed on and evicted.

You may have to carefully educate them on the likely timeline and their options. Which is a good opportunity to lay out your own offers. Which may include two or three choices, for a limited period of time. After which they go down.

Then it is all about maintaining the relationship. Being there, top of mind as a trusted advisor when they are motivated enough to take action.

Finance Your Deals From 1%

Be sure to take advantage of our MEGA rate sale, with interest rates as low as 1%. Check out the details here.

Now both the Fed and Bank of America are reversing their forecast for a new recession. What does it mean for real estate investors? What if they are wrong?

Which Way Is The Economy Headed?

In spite of projecting a $50B loss just a few weeks ago, Bank of America has now joined the Federal Reserve’s messaging that we no longer need to worry about a looming recession.

Recent GDP data suggests that the economy is growing well again. Though other data compilers suggest business tenants are falling delinquent at high rates, and foreclosures are rising again.

Some may say that this disparity is due to misleading averages. With a small percentage of people and companies making outsized profits, and the majority seeing their finances contract.

Of course, while fundamentals are the reality we have to build with, as we’ve experienced in the past, sentiment alone can drive or crash economies and individual market sectors.

What New Optimism Means For The Real Estate Market

New optimism in the economy, especially driven by the Fed and major banks is likely to lead to more interest rate hikes, as well as an easing of lending. With more private capital flowing as well.

In the current environment, this would also mean fueling inflation. As well as the potential for more hiring and salvaging jobs that may have been in question a few weeks ago.

This would support more confidence in buying and leasing both residential and commercial real estate. In turn, driving up prices even further.

What Happens If The Experts Are Wrong?

Of course, those top headline news stories are not always something you can rely on. No one gets it right 100% of the time. Especially when it comes to pinpointing turns in economic and market cycles.

If this rebound does not appear, then we could see even more layoffs, loan defaults, and bankruptcies.

Perhaps what is most important as an investor is to remember that every segment of the market, and every location is on its own timing in the cycle. It’s about finding the gaps, and bringing together the distressed opportunities and motivated sellers, with motivated buyers who see the value in paying more. Focus on this, and the fluctuating forecasts don’t have to impact you and your income or wealth. Decide to control your own destiny.

While many parts of the country are seeing very strong and growing real estate markets and home prices, new data seems to reflect a sizable amount of stress still bubbling under the surface.

What does it mean for real estate investors?

Bank Of America Expects To Lose More Than $50B

While the Fed has proclaimed that banks have been passing stress tests with flying colors, Bank of America seems to be among those that are much more pessimistic.

The Feds have predicted the bank will bring in a lot more revenue, with fewer losses than the bank is forecasting. Which across anticipated losses on loans and credit, and goodwill, they expect to exceed $50B, in just a nine month period.

Interestingly, while the Fed is expected to continue hiking interest rates, they are also calling for banks to have higher capital reserve requirements.

We can expect these trends will make banks even more cautious about making loans, and their capability in doing so. Especially on the consumer and homebuyer front.

Airbnb Revenues Crashing

While Airbnb hotly contests the numbers and say they are growing, one short term rental data analytics firm has proclaimed that hosts are suffering a 50% drop in revenues.

Altogether the above suggests that many short and long term rental property landlords may be about to run into more issues. Both in being able to get financing and making ends meet.

Real Estate Wholesaling

While there will continue to be buyers of income properties, that pool may shrink. There are also likely to be a lot more distressed asset sales coming down the pipe.

Real estate investors that are on the front lines of this may find it high time they switch to a real estate wholesaling model.

This enables you to get in, out, and paid, without worrying about long term financing, or renter dynamics. Nor being pinched between inflation and rent controls.

Best Transaction Funding is also continuing to actively lend on wholesale deals.

If you need to keep your income up, profit margins up, and utilize smart leverage, it could be time to embrace this model.

Bloomberg has just mapped out a recent $100B shift in wealth in the US. Where is the money leaving and going to? How can you make sure you are a beneficiary rather than a loser in this transition?

Wealth Is On The Move

According to a new map from Bloomberg News, $100B in wealth has already shifted. Mostly to the south. Much of it out of California, and the Northeast, and even mid-east coast.

Some has gone to parts of central Texas. Though Arizona has been a significant recipient too. With Florida appearing to be the biggest winner. Though, with wealth actually leaving the Miami and South Florida or Orlando areas in favor of more northern parts of the state.

More Wealth Migration Is Coming

There are many factors which are highly likely to keep on moving wealth.

This includes continuing to compound the reasons people and businesses are fleeing, with higher taxes, and unfriendly environments for businesses.

More Fed interest rate hikes are expected this year, which will compound inflation and force more to move out of lack of affordability.

Predictions that inflation will fall by 2% by 2024 are likely just playing smoke and mirrors with the data. Even if it comes down 2%, but real inflation has risen by 30% or more recently, that isn’t near enough of a cut to make a difference for most consumers, workers, and property owners.

The Real Wealth Shift To Care About

The real wealth migration that should be on our minds is that between individuals and corporations, or other entities.

We are probably about to see one of the most significant of these shifts in our lifetimes. The richer are getting much richer, much faster. The middle class and below are going to be bled dry fast.

As a real estate investor you want to make sure you are on the receiving end of this wealth. There are several ways to position for this.

Which includes operating in the states and areas where the money is moving to. When the money moves it, that means big bumps in house prices, local spending, rents, and more. You can target the movers themselves too. Helping them from where they are trying to move out of.

You can invest ahead of this to find the deals, and wholesale them for more.

All the dots seem to be connecting for another dot com and technology company implosion. That stands to create a lot of real estate buying opportunities. Are you ready to capitalize on it?

The New Tech Bust

Recent bank failures are just the tip of the iceberg. Those liquidity issues are directly impacting the tech world. Especially those highly inflated companies that have grown fast, have weak fundamentals, and need more money. Which is the vast majority of them.

These companies that constantly run at a loss, or are reliant on fresh injections of private and public capital are going to quickly run out of gas.

They may have gotten away with a lot of bad practices and decisions while they were flush with cash can could afford to keep losing money. Yet, these issues will be greatly magnified and compounded without money to hide them.

Most notably including poor customer service, not so intelligent AI, and blatant abuse of their customers and their data and identities. Upwork and Coinbase are just two of the big and obvious recent case studies of these issues.

The Side Effects

When that bubble pops there will be even more layoffs, bankruptcies, and much higher unemployment.

While much of this is currently being hidden in the data by the shuffling of assets and paper debt between banks and other organizations, we can reasonably assume that there are already masses amounts of distressed commercial real estate and related debt hiding in the shadows.

In turn, this hits the residential sector when entrepreneurs, their employees, and local small businesses and workers depending on their revenues end up not being able to pay their bills.

Getting Ready For A Buffet Of Property Deals

There should be no shortage of deals for real estate investors this year. You will only be limited by your goals, marketing, and the financing partners you’ve chosen to align with, or not.

Still, it is wise to watch macro trends in addition to what’s happening in the immediate real estate and economic cycle. They may impact the height and localization of the ensuing rebound.

The British Empire, Rome, Machu Picchu, Tulum, and Detroit seem unlikely to ever regain their glory days. Something which may also be true of some recent financial and business hubs of super prime real estate.

Though the suburbs, tertiary cities, and towns around them, may well surpass them. Offering both better growth, and more downside stability.

These are places, where even if there is never another dot com bust, will continue flourishing, and see property values rising. It’s a win-win for real estate investors.

A new FHFA mortgage rule that goes into effect on May 1st aims to penalize those with higher credit scores and down payments, in favor of subsidizing higher risk borrowers. What does it mean for the real estate and mortgage market? What is the impact for investors?

New Mortgage Rules Going Into Effect

The new rule being instituted on May 1st switches around the long term trend of lower interest rates going to the most credit worthy and low risk borrowers.

There has always been risk based pricing in the mortgage market. Though, until now low risk borrowers that have been the most responsible with their credit, and who are putting more skin in the game with larger down payments have been rewarded with lower borrowing costs and interest rates.

Now the Federal Housing Finance Agency is working to subsidize the risk on lending to those with bad credit scores by charging lower risk borrowers more. Then using that money to give low rates to others.

For those purchasing a home or refinancing with a 680 credit score, on a $400k loan can expect to pay around an additional $40 a month, according to coverage from the Washington Times. Right during a time when mortgage rates have already doubled, and housing prices have been sky high, along with other inflation.

Trouble Continues To Brew In The Banking Space

Since the Great Recession FHA and similar loan programs have effectively acted as the new ‘exotic mortgage’. The types of loans that were blamed for the 2008 financial crisis. Loans with low down payments, to those with weak credit, and most likely to default.

This new rule seems to build on that, creating even more risk. Right when banks and lenders are already failing at great scale.

This may inflate that bubble even more, filling it with highly risky loans, and setting those lower credit borrowers up to lose everything.

Where it applies to ‘government backed’ loans, the other risk is of course that all taxpayers will end up footing the bill, and have to bail out these organizations for reckless lending.

The Opportunities

In the mid to long term this seems almost certain to lead to more distress, mortgage defaults, and in turn, more discounted homes and loan notes for sale.

At the same time, in the short term, it could mean an opportunity for those with weak credit and low down payments to still buy a home of their own. Which is fantastic for those that can really afford to sustain those homes long term.

This may be a new area of focus for some investors, who can flip and wholesale more affordable homes to lower income borrowers. Helping to fill the gap between distress and demand.

The good news is that, as a real estate wholesaler, you already don’t need a great credit score or any down payment with transactional funding. It’s a great way to make money in real estate and then pay cash for your own house.

Following on from other recent runs on banks and stocks, last week saw Bank of America customers alone withdrawing $2.3B they had invested in stocks.

What does it mean for real estate investors?

The Big Withdrawal Has Only Just Begun

Warren Buffett recently said that he believes more bank failures are likely. Based on previous financial crises, when 1,000 or more banks and financial institutions went under, it does seem highly probable that we’ve barely seen the tip of the iceberg of this trend.

Expect more runs on banks. Expect more big sell offs in the stock market. As well as withdrawal requests from other funds, and asset classes. Including sectors like municipal bonds.

That leaves millions of people and organizations with the big dilemma of what to do with their money now.

Expect More Capital To Flow Into Real Estate

It is that time in the cycle when more capital ought to flow into real estate.

Gold is already overpriced and provides no income. Venture capital is suffering after years of pumping billions into companies with no real business model or tangible value.

Real estate makes the perfect safe haven for wealth preservation and down side protection. As well as providing new sources of income for all of those losing dividends and jobs.

It is also far better than holding cash that is devaluing daily due to ongoing hyper inflation that is only being fueled by continued Fed rate hikes.

How To Capitalize On The Shift In Markets

This is the perfect time for real estate investors like you to step up and help people on all sides of this equation, and be well compensated and boost your own finances in the process.

On one side there are many distressed sale opportunities. Some of the best value deals we’ve seen in over a decade.

On the other side there are millions in America alone that need somewhere safer and more profitable to put their money.

It’s all about being the connector to help those selling and buying, and make some very attractive profits in the middle.

Now is the time to ramp up your marketing to end buyers who are looking for new homes, fix and flip deals, and rental properties to add to their portfolios.

There are enormous amounts of money out there searching for a home. So, it’s all about stepping up and making sure they know you are there to help.

A new survey reveals that over half of Americans expect to lose everything in a new recession. Most believe that recession is already here.

While that is tragic for all of those individuals and families, it does create an enormous opportunity of a lifetime for real estate investors to help, and to be well compensated for that.

America Is Going Bankrupt

Big bank failures, and the dollar amounts involved are likely to make the last great recession seem miniscule in comparison.

If the world’s biggest banks can go under so fast, then not only will that have a waterfall effect on other businesses, but most individuals stand little chance of making it.

55% believe they will lose everything in a new recession. Close to 70% believe that recession is already here in 2023. While some at the very top and bottom may be insulated from this, it seems like there are many more who are not in tune with the economy, or do not have a healthy appreciation for just how fragile their financial situation is.

Here are the three main things this means for real estate investors…

Millions Of Motivated Sellers

The US population is estimated at around 336M in 2023. Around 60% of households are homeowners. That suggests at least tens of millions of those individuals who are becoming uber motivated to sell their properties before they lose them.

Some will need to be educated and nurtured through your funnel. Others will require creative solutions. Yet, not even all the banks left standing will be able to buy all of these deals. There is so much opportunity.

Massive Housing Needs

The flip side of this is that all of these tens of millions of households will need somewhere new to go.

Many may have to rent. Many will not be able to due to destroyed credit, and lack of documentation that has now made it harder to rent from all of these corporate landlords than to get a mortgage.

So, there will also be millions needing to buy new homes. As well as other investors looking to load up on supply to meet the booming demand for affordable housing and rentals.

People Need To Make Money

Jobs are being obliterated. Fed monetary policy continues to push toward creating more unemployment to deflate the economy.

Many are losing all of their savings in bank crashes and a tanking stock market or other exotic investments.

This is a great time to build out your own team with the best talent. Including training others how to help you wholesale houses so that you both win.

The next banking crisis now seems to be well underway. SVB’s going bust is likely just the first domino to fall. Which means it is time to get busy finding those deep discounts and doing the best real estate deals of your life.

$1 Deals

HSBC just bought the UK business of SVB (Silicon Valley Bank) for just $1.22.

During previous crises saw real estate billionaires like Sam Zell made famous for similar $1 deals.

Many more huge bank failures are likely in the works. Which is going to have a waterfall effect on other businesses, and individuals, spawning even more distressed assets.

House Deals For 40 Cents On The Dollar

During the last financial crisis it was common for real estate investors to pick up properties and mortgage notes for as little as 40 cents on the dollar. Sometimes even less. Though you can still probably make sizable profits at 60% or 70% of recent values.

While not all property owners and sellers are that deep in financial distress yet, or won’t see and admit it, we can expect millions of motivated sellers to emerge soon.

Making Money In This Market

This is when the real wealth gets made. It is when the few winners emerge, and displace the majority of the competition.

This will probably represent the best discounts on real estate you will see in your lifetime. Thankfully, interest rates are also much lower than they were last time too. At least for the moment. Financing is still available too. Especially for real estate wholesalers seeking to eliminate risk, and make their money before asset prices change further.

To succeed and be one of the winners it may take flexibility in your business model and some creativity. As well as staying strong while others panic.

To access many of the best deals and discounts, and in volume, it can take connections. Be sure you are staying ahead by building your network, and developing strong human relationships.

Then to turn those deals into dollars of profit, you’ll need to be unleashing some of your best marketing to end buyers yet.

Those with the best marketing, and who continue to stand out from their competition will be those that are able to enjoy the most money moving into their businesses, and will create an upward spiral, instead of the reverse.

Technology and automation tools can be essential for scaling a profitable real estate investment business today.

However, without a little common sense, jumping on the latest fads can mean you are dooming your business to failure instead of streamlining your way to greater success.

Self-Sabotaging Fads For Real Estate Investors To Be Wary Of

There are countless new apps, software, and automation tools coming out each day. A couple of them may truly be valuable. Most are a distraction.

You should be automating elements of your prospecting, follow up, and systematizing your business so that offers are going out, properties are being sold, and you just have to focus on the big picture of growing your real estate business.

However, some companies have gone to the extreme of trying to go a tech only route, relying on not so intelligent AI tools, and in the process cannibalizing their own businesses.

This is most notable in customer service. Live chat tools became very useful. Users have gravitated to the ability to conveniently chat with businesses online, from their phones, and get real, instant help from humans on the other side. This has been very efficient for brands too.

Now some have tried to replace these human interactions with just chat bots. It doesn’t work. It just becomes a source of frustration. Like old phone systems that just looped customers around, pressing different numbered options.

This problem is compounded by companies like Upwork which have also ended any human customer service or ability to contact them by phone. This is true even for their top revenue producing customers that have helped build and fuel their business for over a decade, and have brought them over $1M in transactions. They are just burning their best and most loyal customers, and brand advocates.

It’s worth noting their stock price has tanked by more than two thirds in the past couple of months because of this. It is probably just the beginning of their downfall. As well as the overall AI bubble, just as we saw with the initial dot com bubble.

The Number One Predictor Of Success

The number one predictor of future business performance is customer happiness.

If customers aren’t happy, the business will go south. This can tank the largest global corporations. It will certainly cut short the life of small businesses as well.

The reverse is also true. Repeat customers are cheaper, more profitable, and easier to work with. They will also help grow your business with referrals.

It’s just basic elementary school math and common sense.

How To Balance Great Service, Efficiency & Profitability

Do use technology for marketing, for following up with those in your CRM, and for enabling prospects to enjoy an automated process, when it works for them.

Just remember that at times many will also need a human. Whether that is by phone, text, email, or chat. Consider that $15 an hour for a great service rep, could help you make or keep a $1M a year customer. Do the math on those returns.

The office real estate space appears to be undergoing a tale of two markets simultaneously. Much like housing has recently. Could that make it one of the busiest sectors for real estate investors in 2023?

Office Vacancies

NAR’s Commercial Real Estate Forecast for 2023 sees CRE prices coming down slightly, with increased vacancies. Especially in the office sector, due to the rise in remote work.

They’ve put the current vacancy rate in San Francisco around 15%. Though the government there fears 30% plus vacancy rates are coming, which will put a huge hole in tax revenues.

Similar trends seem to be happening in other office heavy markets, which used to be major business hubs. Like NYC.

According to Yahoo Finance, in the spring of 2021 26% of companies expected their office space needs to stay the same (already at post-COVID levels). 12 months later, just 9% of companies expected to need the same amount of space going forward.

This along with higher rates, and fears of a recession could well provide a lot of distressed properties and motivated sellers for investors.

Demand For New Office Space Is Growing

At the same time Yahoo reports that demand for new office space has been growing. This trend started in September and October. Led by Los Angeles with an over 37% increase in demand for new office space.

This seems most logically driven by more companies moving out of Silicon Valley, and to more affordable LA. Just as we’ve seen on the east coast, with massive migration from NYC to South Florida.

Along with this we seem to have a new generation of well funded startups happy to spend hundreds of millions of dollars on new facilities. Including manufacturing plants, biotech labs, cannabis growing facilities, and offices.

Making The Most Of Office Trends For Investors

With so many companies now proving that you can build and operate a multi-million and multi-billion dollar business with all remote teams, there is really little need for traditional office space any more.

Some old companies are desperately trying to hang onto that old and inefficient model. Especially those with big and expensive leases. It’s probably only a matter of time before they are forced to catch up to the new world of work, or are displaced by those with distributed workforces.

Some may find comfort in having satellite offices and part time desks and meeting rooms available. Though may rarely use them.

For investors we are likely to see a lot of office buildings come available to buy in 2023. These can still be repurposed or repositioned for highly profitable flips and wholesale deals.

They may be renovated for new modern startups, broken up into more boutique and shared workspaces, transitioned to being housing, or other CRE uses.

Could expanding welfare and stimulus programs lead to a new surge in housing prices and rents?

COVID stimulus certainly brought a boost to the economy, along with hyperinflation. With more crises seeming likely, and more government welfare programs being expanded, might we be on the verge of a new surge in prices?

What might be the downside of this? How can investors invest through this?

Is The Recession Over?

According to the latest government data, the recession is already over. The economy reportedly rebounded with a strong 2.6% rate of GDP growth in Q3 2022.

Of course, there don’t seem to be any CEOs that agree with this. 98% or more of them are planning to deal with a recession over the next year. Even Jeff Bezos faces a $23B cut to his net worth as Amazon cuts its expectations for the end of year shopping season.

Moving To A Welfare State

Arizona, Massachusetts, and Oregon appear to be test subjects in dramatically expanding welfare programs.

New initiatives in these states have begun using medicare and medicaid funds to pay for just about everything, including housing, appliances, and furniture.

With previous COVID stimulus trailing off, a new Newsweek poll reports that 63% of Americans support sending out new inflation relief checks. Funds that would help offset the Fed’s recent rate hike spree, though obviously would spike inflation even further.

Of course, this is like catching a double edged sword. More government welfare and stimulus has to be paid for in new and higher taxes. Ultimately, pushing those on the edge into needing full time government assistance. Or just making it so unprofitable to work that it is better to stay unemployed and live on welfare permanently.

Will More Stimulus Stimulate The Housing Market

Housing prices and rents soared with COVID stimulus money. With more money like this in the economy, and the government absorbing inflation in rents, it is quite likely that rental rates could continue to rise fast. Low end house price increases may also surge.

The middle class being taxed out, and who just can’t keep up with extreme inflation in food and living costs may be more likely to let their homes go and fall into distress. Lowering homeownership rates, and creating more rental inventory.

Investing

Whether we fall into a new depression, or government programs flood the economy with cash and fuel inflation, real estate investors can find some sweet spots to operate in.

Most notably, these may be wholesaling affordable housing, and flipping rental housing, including whole communities to bigger funds.

Bloomberg’s headlines recently announced that house prices just fell the most since 2009. Is that possible? If so, what do you do as a real estate investor?

Have House Prices Really Fallen That Much Already?

In contrast to Bloomberg’s report, Zillow data shows that while even hot markets have seen average home values falling a few thousand dollars month over month, they are still up by double digits from last year. Though there are many individual motivated sellers, companies, and banks accepting deep discounts from cash buyers.

If you lived or invested through real estate in the 2008 Great Recession, then you know that house prices can and did go down much, much more. They are likely to again.

How Far Can Prices Go Down?

If you owned property between 2006 and 2010, or know anyone who did, there is a good chance that property fell by as much as 50% to 70% in value during that time.

There are some exceptions. Slow growing, Midwest markets, and where home equity loans were limited to 80% LTV, like in Texas, may have suffered less severe drops.

Still, given that many buyers have recently been overpaying for properties by as much as 50% over top retail asking prices, this next dip could be even deeper than the last.

Real Estate Is Still The Best Way To Make Your Money

Those that are just now experiencing a rotation in the economy and real estate cycle for the first time may find this very scary.

It doesn’t last forever. Prices will rebound and surpass recent highs. At least according to what we’ve seen throughout history up until now.

However, if you didn’t plan for it, and don’t know how to navigate this part of the market, it can be shocking.

Fortunately, this is actually one of the best times to invest and make money in real estate!

There is a lot less competition, you can demand much better value deals, and terms.

How To Make, Not Lose Money In A Declining Market

There are several keys to winning in this market. One is making sure that your offers are low enough to be in and out, and make a profit, before the market catches up to you.

The next is to stick to wholesaling real estate. This means either flipping the contract without even buying the property yourself. Or buying and immediately reselling to an end buyer within 1-3 days.

You can lower your risk, and dramatically boost your cash on cash returns even further by leveraging and using transactional funding to finance 100% of your purchase price.

Check out these real estate statistics and data points…

$1.7M

That’s the price tag of a single public toilet being built in San Francisco. Construction is expected to take at least three years.

While on one hand it may signal that prime real estate is still demanding a high price tag, it is probably safe to bet that very, very little of this money will actually end up being spent on the toilet. Which could easily be built for 1% of that.

40 Years

One real estate company has made the headlines for their now notorious 40 year listing contract. Clearly not a great sign that they have any confidence in being able to sell the property.

In fact, customers have reported that they were lured in by as little as $900 in emergency cash to sign the listing, only to have their property end up in foreclosure, and owing thousands of dollars to the broker, despite losing their homes.

$870k

That’s how much of a financial loss singer Harry Styles took on his former LA home. He purchased it for $6.87M, then sold it for just $6M. It has now been relisted for an optimistic $8M.

98%

This is how many US based CEOs told the conference board that they are preparing for a recession over the next 12-18 months. That’s up to 99% for CEOs in Europe.

It’s unclear what the remaining 1-2% are basing their optimism on. The fear and reactions being made by these CEOs is almost certain to create a recession by itself. If they are only just beginning to prepare now, most of their businesses probably won’t survive.

The great news is that this is going to bring a lot of deals and negotiability for real estate investors.

50%

The latest data from Zillow shows that over 50% of home sales in SWFL are now completing for less than listing prices.

While prices still seem to be up by double digits over last year, values have peaked and fallen in all major markets in the region on a month over month basis.

It’s certainly time to make new offers and find better value deals than we’ve seen in a decade.