Some are pointing to a new $10B Blackstone apartment deal as a sign that the real estate market has already bottomed out. History suggests that could actually indicate we are just now about to plummet from the current peak in prices.

Blackstone: Big Deals, Bad Timing

Bloomberg News suggests that Blackstone’s new acquisition of an apartment operating REIT for $10B is an indicator that real estate prices have hit a new low, and should begin rising again.

The assumption is often that the biggest financial institutions are the ‘smart money’, and always get it right.

Recent history tells quite a different story. In fact, it was at the peak in 2007 that Blackstone bought a portfolio from Sam Zell for $39B. At the time it was a record breaker for the largest leveraged buyout in history. Of course, values immediately began plummeting after that.

It’s worth noting that the history of this transaction and story has been edited in recent years, including on Wikipedia to make Blackstone look more savvy than the big hit they took back then.

With this information, Blackstone’s deal may actually suggest we are at the peak of the market, and a substantial dip is coming.

Buy Low, Sell High

It’s far better to be like real estate billionaire Sam Zell who became famous for buying at deep discounts, and selling high.

Looking across all the economic data from interest rates to ongoing high inflation, to epic levels of defaults on auto loans and credit card debt, and a new rise in foreclosures, it is clear that consumers are running out of money. Without some major game changing shift in finances, we can only logically expect that these property owners that are running out of financial lifelines will soon end up in distress sale situations.

At the same time, one Realtor economist suggests that high property prices and interest rates are the new norm, creating a sweet spot to wholesale properties. Though some pockets of the market are certainly hotter than others. Many Realtors are reporting that their most active listings are those in the lower to mid price range, and fixer uppers.

Big money funds have to keep investing. They may even buy your large portfolios, if you can piece together package deals. Or you can go for fast and high volumes of individual house deals.

In December the Fed finally halted its economy crippling interest rate hike spree. As well as indicating three interest rate cuts could come in 2024.

What impact can real estate investors expect this reversal to have on the market and their businesses?

Lowering Interest Rates

The Fed’s recent series of rate hikes has crushed most of the economy, driven up inflation, and changed the dynamics of many household’s finances for the next decade or two.

Talking about three rate cuts in 2024, and more in 2025, and 2026 suggests that they now realize that they’ve already done immense damage that needs to be reversed quickly.

Depending on a variety of other factors, that may or may not directly lead to prompt reductions in interest rates on credit cards, auto loans, business loans, mortgages, and the interest paid on deposit accounts.

The Impact

The most obvious expectation of lower interest rates for businesses and consumers is encouraging more transaction activity. Especially in terms of real estate transactions.

It could also fuel the ongoing appreciation of property prices. Reversing any temporary dip caused by a lack of affordability.

More money floating around the economy and real estate industry again would be welcomed by many, and could help avert another depression and financial crisis.

But…

The Fed clearly knows that there is more bad news coming down the pipeline that has been published in the data for the masses yet.

While rate cuts seem quite likely in an election year, this reversal will only work if they come in time to have effect before people run out of money. The impact will also be muted by other employment challenges, like AI.

The promise of rate cuts may give many hope, though the real math is a law of physics that everyone still must grapple with in the meantime.

Thankfully, as a real estate wholesaler you can take advantage of rates as low as 1% with Best Transaction Funding right now!

Gratitude is powerful. Here are nine things we can all use to leverage the power of gratitude this month.

It’s not always easy to keep up the habit of practicing gratitude as a part of morning routines. Yet, it is incredibly rewarding when we do take the time for it.

Even if things feel tougher right now, here are some of the things we can take a moment to be grateful for before we get into the season when most are focused on receiving and getting new things.

Low Interest Rates

While many might be experiencing the highest interest rates they’ve seen in their adult lifetimes, they are still historically very low. Wait until they hit 14% or 20% again.

If 5% or 7% still seems too high, then check out our current deal, with interest rates as low as 1%.

Opportunity And Ability To Invest In Real Estate

Just having the opportunity and ability to invest in real estate is a huge privilege and benefit. Many people will never realize that they have this chance to control their own financial circumstances.

The Tax Breaks Real Estate Has To Offer

Taxes are not fun. They only seem to be multiplying and going up. Fortunately, along with many other benefits, real estate offers a lot of tax breaks, if you take the time to take advantage of them.

The Freedom Being A Business Owner Offers

Owning your own real estate investment business gives you complete freedom over your own schedule. Many fail to exercise that freedom, and to take advantage of the flexibility or time off it provides. Though you do have control of that.

Convenience

It’s never been easier to invest in real estate. You can find and wholesale homes online without ever getting out of bed. You can get just about anything you want delivered to your job sites to complete house flips in two days.

Humans

As technology continues to take over, and the major flaws in AI, automation, and cybersecurity become even more glaringly obvious, it’s a great time to be grateful for humans. Even if they aren’t perfect either. Those in your family, that serve you, and that work for you, and who are your customers. You can’t make it without them.

Room For Growth

There is plenty of room to do more, and expand and scale what you are working on. Even if you aren’t satisfied with your current situation, be grateful there is so much available for you to do.

The Progress You’ve Made So Far

Even if you feel like you are going to fall far short of your goals this year and there is so much more you aspire to, take a moment to remember the progress you’ve made. No matter how significant you feel it is, celebrate those wins.

How Many People There Are To Help

There are millions of people out there that could use your help. They may need to sell or buy properties, or invest. Each one is an opportunity to grow your business, and to feel great that you are making a difference.

This is a fantastic time to be wholesaling real estate. Of course, that means that many others are hunting for deals too. If you believe that there is a shortage of publicly listed properties for sale, that may make it even more challenging if you’ve relied on that for deals in the past.

Here are five more ways to out maneuver and beat your competitors to the punch.

Failing Competitors

Even though the real estate investment remains strong and attractive many started folding their businesses out of fear at the beginning of COVID, then as rates hiked.

Even though they may have stopped actively investing, many have portfolios of properties they are holding. Or at least sizable databases of seller leads.

You may acquire their company, their real estate assets at a discount, or their lead lists.

Insurance Agent Referrals

Insurance agents are among the first to find out when people find themselves in a crisis. That may be a health issue, a car accident, or damage to their properties.

In a few cases their clients may get payouts that make them strong cash buyers for your properties.

In most cases insurance companies do not pay claims. If they did, they wouldn’t be in business or so big. In these scenarios policy holders may have to sell their homes fast for cash.

Lumber Company Leads

This is another untapped referral source. When trees fall on garages or homes, lumber and tree service companies get the first calls.

In other cases these referral sources can tell you when prospects are desperate for cash and are trying to sell their trees cheap. Or where there may be a property which also has a lot of value in timber rights. Money that may be used for helping to acquire or extract extra value your competitors don’t see.

The Unemployed

The AI revolution is creating levels of unemployment and interruption to income at a scale we’ve never seen before.

The vast majority of property owners cannot afford to carry their mortgages for even a month or two without a paycheck.

Depending on your contacts and access to data, you may find these sellers by tracking employers that are making layoffs, through recruiters, new credit defaults, and job wanted ads.

Be The Fastest And  Most Attractive Buyer

Have your proof of funds in hand, along with a contract, and be willing and able to close faster than your competition. Those things can mean a lot more to sellers than the top line price today.

Be sure to check out our Fall Deal with interest rates as low as 1% on loan amounts over $600k.

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.

The Fed’s latest hike puts interest rates at their highest level in 22 years. What does it mean for the economy, property market, and investors?

 

Higher Interest Rates, More Economic Turmoil

With the Fed saying they do not expect a recession, the odds of further rate hikes in the near future seem even higher.

The officially published numbers put economic growth well ahead of expectations. Even though many business owners would disagree.

This may well be the result of misleading averages. In which a few that are outperforming at great scale are masking the distress and decline of the majority.

The same also appears true of the housing industry. Where some markets continue to experience 40% plus annual growth. While others are seeing steep declines in how much buyers are willing to pay for properties.

Whatever is happening behind those headline data points, we can expect that current monetary policy is going to make credit harder and more expensive to get than any other time in many people’s and company’s lifetime.

How do you deal with this as a real estate investor?

Use Short Term Real Estate Financing

If you are wholesaling properties in days or hours, then high rates won’t hurt you.

It’s just a problem for those that get stuck in longer than expected renovation and construction projects, and long term hold landlords. Who should not be counting on rents and resale prices going up forever.

Transactional funding is probably the best example of great short term real estate financing.

Find The Distressed Owners And Sellers

There are millions of businesses and homeowners already being hurt by high inflation, high interest rates, and mass layoffs. Find those in distress and help them.

You may focus on the lowest hanging fruit, for example those already in foreclosure. Or get ahead of your competition by looking into the leading indicators of this distress and reaching them earlier in the journey. That may be looking at the amount of debt they have, or their location.

Find The Hungry Buyers

There is still no shortage of hungry and interested buyers. Match them up with your deals.

Again, you can hire a better part time CMO or marketing manager to get your listings to stand out above the rest. Or you can find them early and create waiting lists. Hone in on the triggers that indicate they may need to move or buy something soon. This could be mass layoffs by company, deteriorating metro areas with high crime, or rising taxes, and patterns of actively buying investment properties.

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.

Inflation still hasn’t stopped. Regardless of the official numbers being reported or restated, real inflation in the street seems like a runaway train that has to hit a wall and crash eventually.

Hiking interest rates was supposedly the way to kill off inflation. Of course, it only fueled it instead.

Interest rate increases alone haven’t been enough to achieve goals, so, we now have other things, like higher taxes, more taxes, and minimum wage hikes of as much as $33 being floated in some places.

Something Has To Break

History, and the state of many other countries tell us that inflation can go a whole lot higher. Fixed rate, long term loans can disappear altogether. Mortgage interest rates have and can go above 20%.

Things can be made so expensive that just being able to afford food and toilet paper is hard.

When you can’t walk out of the ‘dollar store’ without spending $60-70 for a few snacks or a day and a half of food, nor run into the gas station without spending that much, it’s going to be a problem. Even with a $15 an hour minimum wage, that’s a day’s worth of work. Not counting housing, insurance, or utilities. All of which are going up too.

Then, not only are interest rates going up, but so are overall loan and borrowing costs. For those that can afford homes, now even putting in a few plants is a luxury expense many won’t be able to afford.

What exactly will break, when, how, and how badly will have to be seen, but it doesn’t appear to be sustainable. At least not while maintaining the lifestyles Americans have become accustomed to over the past couple of generations.

$190B In Real Estate Debt Being Sold At Discounts

According to Bloomberg, there is $190B in real estate debt being sold off at discounts around the world.

There are likely a variety of reasons for this. Chiefly being highly motivated sellers. While physical property values may not have changed, financial positions have.

Some are liquidating because they failed to plan and prepare for moments like these and are losing money. Others can’t get any more credit to stay afloat. Some just want more cash on hand. Or the banks that have failed have seen their assets literally bought for pennies. Which can now be cashed in on.

Interestingly, most real estate pros you’ll speak to will say that housing prices are still strong. In some pockets of the country there is more demand than ever. Open houses are busy, and are attracting multiple bids. There are cash buyers who still feel rich, coming from more expensive destinations, to new ones with lower taxes, and less crime.

So, there is currently this sweet spot, with inflation tragically bankrupting many businesses and families. Which means discounts on real estate. While strong demand means there are still great profit margins on wholesaling houses swiftly.

Those that take advantage of this, will find it is what keeps them and their own finances ahead of inflation.

The latest economic forecast from mortgage giant Fannie Mae predicts house prices will fall by over 6% over the next two years. That doesn’t sound like much, but investors, and consumers also need to understand what they are heralding as loudly.

Home Prices Are Already Down 4x More Than They Predicted

Fannie Mae previously predicted that house prices would only fall 1.5% this year, and 1.4% next year. So, we are already talking about 2-4x deeper price drops, and many might argue it hasn’t even really started yet.

Or course this is in direct contrast to Goldman Sachs’ forecast, which says we’ve already seen those levels of drops and should bottom out this summer.

Many property owners, and recent sellers may also tell you that prices are already down even double, triple, or more than this forecast.

They Can Revise Back Data

Just as the Realtor’s Association back revised four years of data to show much lower numbers after 2008, any of these report publishers could go back later and say the cuts have already been 50% or greater more than they announced.

It’s All Local

This 6% number from Fannie Mae is a national ‘average’. Which really means that in some areas prices may still be going up by 30%, and they could be going down by 36% in others.

Make sure you have your own intelligence and pulse on the local market.

Low Interest Rates Are Irrelevant In many Cases

Fannie Mae is using the fact that interest rates have been low to claim there won’t be rate shock like in 2006 to 2008, and in turn no major crisis.

However, in the past year mortgage rates seem to have more than doubled. A much bigger increase than in 2008. Buyers were also paying 125% or more of actual values among the fierce competition. Many will still walk away. Many won’t be able to refinance. Many will fall behind and into default for other reasons.

Defaults Are Already Up

The latest bank data published by DistressedPro shows that defaults on both residential and commercial mortgage loans reverse course and started increasing again in the last three months of 2022.

While there haven’t been a tsunami of REOs yet, expect more defaults and foreclosures coming.

It’s a great time to be wholesaling houses on the way down this ladder, and making substantial profits. With both discounts available, and those buying into these forecasts expecting the market to rebound soon.

The Dallas Federal Reserve Bank says that its modeling anticipates the recent rise in interest rates will bring home values down by another 20%.

With the recession reportedly behind us according to recent government data, could this really happen? What other factors might put even more downward pressure on home values? What does it mean for formulating purchase offers?

Interest Rates & Home Values

Mortgage rates have already risen by more than double this year. Many believe that the fed isn’t done with its rate hikes either.

From 2006 to 2009 the Dallas Fed estimated house prices went down by over 30% due to rising interest rates at that time.

As we are already at an average of around 7%, it’s not a stretch that we could see many borrowers paying 9% or far more for mortgages in the near future. In the past they have been as high as 14%, and even 20%.

The higher they go, the fewer buyers that qualify for home loans. The fewer homes that may be sold. Which in turn puts more downward pressure on prices.

The Impact Of New Airbnb Changes

Airbnb has been busy making changes this year. Among their latest announcements are changes to pricing, and trying to attract millions of new listings. Even though they already grew by 15% over the past year.

Many existing hosts seem to think that this is resulting in fewer bookings, and more pressure to reduce prices.

In turn this could make acquiring and holding short term rentals much less profitable. Given this has been a major driver of some markets, any dip here could impact surrounding home trading prices as well.

Other Factors Impacting Home Prices

If the bulls are right, then if we are in a new upward phase of the economy none of this may be worth worrying about.

Of course, last week we covered several data sets that suggest borrowers and their lenders may be falling further into distress. The performance of credit cards, business loans, and auto loans all hit their worst point in two years as of the third quarter of 2022. If they can’t get on track, then together with inflation and higher rates, it is easy to see how many could end up defaulting on their mortgages as well.

A lot still depends on the segment of the market. The luxury end of the market still seems well insulated against any issues. Jeff Bezos can easily afford to lose billions, and still be able to purchase a new $100M home for cash.

Age and tolerance of higher rates may also be a factor. Some may just mentally not want to borrow when rates hit a certain point. Others will be more concerned with the monthly payment.

Pricing It In

Just because home values may be falling doesn’t mean it isn’t a great time to invest. In fact, many have been waiting for this moment to act.

However, it is very important to price in this drop when you are buying.

If you are fixing and flipping, and it is taking you nine months to turn around a property, and you anticipate prices down by 20% by then, you’ll need to factor that into your offer and profit margins.

Rental property investors may not see annual rental rates and income affected, though are wise to offer this much less to ensure they are not heading underwater and end up in a position where they cannot sell or refinance for another seven to 14 years.

Fortunately, this is much simpler for wholesalers. Yes, you still want to price in some cushion. Though if you are selling directly to your end buyer within 36 hours of closing, not much is likely to change. Besides, you’ve already resold it.

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.

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.

 

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.

 

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.

 

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.

 

The overwhelming majority of US households now say they believe it is not a good time to buy a home. What does that mean for real estate investors?

According to the latest data from the Fannie Mae National Housing Survey more than 70% of respondents said they thought it was either not a good time, or it was a bad time to buy a home.

The percentage of those who thought it was a good time to buy has reportedly dropped to an all time low.

Those surveyed still said they would prefer to own a home instead of renting if they were to move, but they appear to have become worn out by bidding wars and see prices as just being far too high. So, if you’ve been frustrated in trying to find deals, you are certainly not alone.

Pending home sales also began sliding in early 2021. A leading indicator that closed homes sales and home prices may follow that trend in the coming months.

Talk of interest rate hikes could also accelerate this trend, making current prices unaffordable for millions more, and disqualifying many for mortgage loans. As we know, it was the timing of rate hikes which really pierced the real estate bubble of 2008.

For real estate investors, it is probably past peak time to list and sell properties on hand. Now is the time to get that done before there is any further cooling in home buyer appetite.

Investors who plan to keep using real estate as a source of income are also going to have to put in a little more effort to finding deals. There may still be a short window of opportunity in which even retail priced properties can be quickly flipped for profits in white hot markets.

Yet, those looking for better value deals and built in profit margins should be ramping up networking, marketing direct to owners, and building investor buyers lists, who will keep buying and rent units out if the retail market vaporizes.

There are still plenty of profits to be made in wholesaling houses. It is all about finding real deals at the right prices, and having qualified buyers lined up to take them right away.

 

40 million renter households in the US could be headed for eviction in the next 40 days. While epically tragic, it also brings great opportunity.

According to the latest data from the Aspen Institute this many tenants could be in the street by the end of September 2020. According to the Census Bureau, 34% of American renters didn’t have any confidence they could make rent in August.

Tip of the Iceberg

The truth is that there is probably a lot more distress coming. We are currently at a stage when most of the help seems to be over or at least frozen. Yet, especially renters have now burned through all of their savings and credit card balances waiting the virus out. Even those still employed are mostly probably seeing lower incomes, while expenses are up between hand sanitizer, masks, toilet paper and stocking up on groceries at inflated prices.

Unless there is a major historic change in these dynamics quickly, then it seems a tsunami of evictions is inevitable. It could end up being a whole lot more than 40M. Just think about the impact of 1 out of every 2 or 3 American households facing eviction.

Where’s The Help?

There have been promises of help and a new executive order from the president. In reality that help isn’t being spread out equally and many aren’t getting it. Many landlords and lenders aren’t willing to help, or they are no longer financially able to.

There have been new promises of eviction and foreclosure moratoriums. Not all are obligated to them. There is a lot of confusion between federal, state and municipal levels.

To compound the problem with evictions is where they will go. Affordable housing was already at crisis point before this. Many landlords won’t see the sense in re-leasing to someone else right now. For most it may just make the most sense to cash out.

Much the same is true for homeowners and foreclosures. There will likely be a sizable wave of distress sales in play.

The Flip Side

The flip side is that demand for purchasing properties is massive and urgent. End home prices are up, interest rates are low. Millions are moving for a variety of reasons.

Then there are also rehabbers and institutional landlords to sell to.

While it is tragic for many households. It is a huge opportunity to help many others. It is the perfect opportunity to help and boost your income too. That’s true whether replacing other income from a lost job, or scaling an existing real estate business. No one is ready to buy that many deals, and there are plenty to go around if investors move quickly.

Check out our VOD service to make more offers and land more deals fast.

2017 promises to be a big year for real estate. How investors, professionals, and business owners plan now will make all the difference in how much they benefit from the opportunities over the next 12 months.

The U.S. real estate market is definitely entering 2017 on a positive and confident note. The overwhelming sentiment is certainly bullish. That also means it is competitive too. There may be some quick wins to be had while the rest of the industry is still getting warmed back up after the holidays. Yet, who reaps the biggest gains and is still surviving and thriving at the end of 2017 will be those than plan well know.

There are clearly lots of good things happening in the markets, and specifically real estate right now. That has some side effects too. Inflation is a big one. It will catch many investors, agents, and real estate business owners by surprise. We’ve already seen interest rates moving up. Three or more rate hikes are coming in 2017 according to the Fed. This alone means things will get more expensive. Life in general will get more expensive for home buyers and renters, and employees. Hopefully it also means more money in the economy to be spent. Still, it is crucial to factor these rising costs into plans in order to stay afloat and on top of your game.

This will come into play in property costs, and the cost of most types of leverage. That can often be balanced out in the market. Then there are other costs. The cost of building materials, gas, marketing materials, and freelance workers. You have to build these escalating expenses into your plans. Otherwise you’ll quickly be upside down, if not at least be experiencing far thinner spreads than projected. This shouldn’t be a big problem for wholesalers. It may be a little more challenging for rehabbers. Even more so for buy and hold landlords.

With this in mind some will find it highly profitable to lock in contracts and even prepay vendors and contractors in advance before the ball drops for 2017. This will not only hold down costs, but may provide additional tax benefits too. Others might be able to negotiate preferred terms with vendors and contractors by going long with engagements. Instead of month by month print marketing look at quarterly and annual deals. Instead of piece by piece with freelancers consider monthly or annual arrangements. You may get them to put in more effort in investing themselves in your success too.

 

Plan well now. Reap the benefits all year.

As interest rates start soaring wholesaling real estate likely to become top investment choice.

The Fed’s pending rate hike spree could come far faster and harder than most expect. One analyst has forecast a 1.5% and done raise in December. Others anticipate interest rates up 2% by 2017. They will double before they get back to previous territory in the last housing boom. As more aggressive loan programs are rolled out if shouldn’t be surprising to see many property owners with double digit mortgage rates again, at least within a few years.

Side Effects of a Rising Rate Environment

Wall Street has already been wincing and contracting, just at the thought of a rate hike. Higher rates can be bad for some stocks and may result in more investors pulling their cash out, and putting it into real estate.

This activity, along with higher remodeling and building costs could create faster price growth in the housing market.

Yet, easier access to lending, a raging appetite for real estate as an asset class, and rapidly rising prices, along with higher rates can bring other challenges. Competition and thinner cash flow levels are two of these.

It’s also important to note that many investors have already recently tied up the bulk of their cash in startups, equities, and rental properties. So there will be great opportunities for wholesaling houses, but the cost and sources of money can change some of the dynamics in the market.

Funding Your Real Estate Deals in 2016 and Beyond

Buy and hold investors, and rehabbers that are tight on cash may be able to turn to credit lines and even reverse mortgages. But they must stay alert to the potential for negative cash flow if using high loan to value purchase loans.

End buyers made up of regular home buyers armed with access to more aggressive high LTV loan programs could be among the most active in the market.

This means great opportunities for wholesaling using short term mortgage financing. Many rehabbers and landlords may see wholesaling as their new best strategy to get in, out, and paid without holding onto the debt. Even if rates nudge higher this will be barely noticeable to those using transactional funding and hard money loans to quickly flip properties in a matter of days.

Authored by Best Transaction Funding BestTransactionFunding.com is the leading source of transactional funding and hard money loans for real estate wholesalers in the US, where 100% financing, and saying “Yes” is what we love doing all day long.