The 2024 real estate market is shaping up to be an exciting landscape. An environment with its fair share of both challenges and opportunities.

What should investors be watching? How can they ace the market and win this year?

The Challenges

Uncertainty: Investors and real estate professionals should have learned to become quite comfortable with uncertainty by now. There will be plenty of it this year. Forecasts are still split between growing or nose diving property prices. Use this to your advantage instead of being hampered by it.

Buy from the bearish, and sell to the bullish.

Staffing: While AI and recent mass layoffs may be creating more unemployment, high consumer living prices mean that workers need to make more per hour in order to make working make sense for them. Be prepared to work with a leaner remote team, or pay a lot more this year.

Changing Demographics: Mass financial distress and migration are significantly changing the demographics of property buyers and tenants. Real estate businesses need to stay alert to this, and be able to adjust to these shifts in supply and demand. Average credit scores will change, as will who is investing.

The Opportunities

Motivated Sellers: While many seem very optimistic about the economy, the data seems to suggest that millions of households are facing extreme financial distress. Many appear to finally be at the end of their ability to hold on to vehicles, credit cards, and homes.

In turn this will yield many opportunities to pick up properties at deep discounts, and on better terms.

Failing Competitors: For all of the above reasons many of your competitors may fail or quit this year. These are great opportunities for acquiring their business. Either in the form of buying their companies, their real estate, or absorbing their staff and customers.

Interest Rates: The Fed is expected to begin cutting interest rates in 2024. That could translate into lower borrowing costs for businesses and real estate.

Well qualified buyers could find this makes for better financial projections when taking out mortgages. While also providing more working capital to companies, and providing room for house prices to grow. It may also encourage more owners to sell and move, creating more inventory.

Of course, you don’t have to wait on the Fed for attractive real estate financing deals. Best Transaction Funding is still offering low interest rate loan deals for real estate investors right now.

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.

 

What separates the best and most successful in wholesaling houses from everyone else?

Many are being attracted to real estate wholesaling. Yet, there continues to be a big divide between the few who are doing 80% of the business, and the masses kicking around deals without much in the way of results. What do top performers do differently?

Think Big

The most successful house wholesalers are typically those that think the biggest. They aren’t looking to make $100k per year. They are looking to make $100k or more per month. They don’t shoot for a handful of deals per month. They are looking for 10 plus deals each month. They have really big visions.

Serious About Finding Good Deals

Great wholesalers are serious about finding very good deals. They are looking for deep discounts, and fat spreads. They are also looking for houses that they can resell. They are looking for 100% returns, $100k spreads, not just a handful of bills, nor deadbeat properties that are just going to be a nightmare.

Care About Presenting Good Deals

One of the biggest differentiating factors is that they care about being able to present good deals to their buyers, and are willing to invest the time and effort in that presentation. They know that their success and ability to stay in the business relies on it. If they just throw up properties that have big lurking issues or un-insurable titles, they are going to burn their buyers bad. At best they’d lose their reputation and any chance at repeat and referral business. Solid wholesalers want their buyers to be profitable. They want them to succeed, and come running back for more, and for them to easily be able to make a good decision based on the information provided.

They Understand Real Estate Financing

This will make or break investors. There are a lot of nuances in mortgage financing. Wrong assumptions have bankrupted many new investors. Those with the best understanding of it have the ability to move with confidence, and complete deals others can’t.

Invest in Building a Great Brand

In order to have more negotiating power, to have prospects seeking you out, to win great investors and vendors, and to hit full potential, you’ve got to build a brand. It has to be memorable, recognizable, and carry value. Leading wholesalers do this by giving their branding the thought it deserves, bringing in a great team, and putting out quality materials.

 

How does access to credit and various types of real estate financing affect recovery and growth?

Availability to capital and credit has proven to be critical for working through crises, fueling the economy, and growing the housing market. We saw this before and after 2008, when comparing US growth and economic strength to other countries, and we’ll see it again in the next few years. There may be additional challenges given the recent hurricanes and Equifax data hack, as well as the affordability crisis the US housing market has been dealing with. Access to these four types of credit may prove to be instrumental in where we see the best recovery and growth next.

Affordable Housing Loans

Fannie Mae has said it expects to blow through its lending caps this year, primarily thanks to backing more affordable housing loans for multifamily properties. While not all the units in these new and redeveloped buildings will be affordable rentals, and rents are sure to keep going up, we should expect more growth where these loans are being made.

Airbnb Mortgages

With housing costs so high, and short term rentals in so much demand, a lot may demand on where Airbnb landlords can operate and get specialized financing. We are already seeing some lenders begin to tailor programs to buyers of short term rentals, or like in Seattle; down payment assistance programs for those who will list part of their new homes for rent.

Hard Money Rehab Loans

Between the millions of vacant and foreclosure units in the US, and the millions impacted by the recent string of hurricanes, access to asset based rehab lending will be critical and pivotal in which locations are able to rebuild and bounce back.

Transactional Funding

Even with all the above, there is still a significant gap between the supply and demand. Those with best access to the supply may not want to engage in rehabbing or hold long term. Those that do want that may not have front line access to the best deals. This is where real estate wholesalers come in. With continued access to transactional funding they can connect the supply and demand chain, and help both sides in greater volumes, faster.

Keep an eye on the markets where these types of real estate financing are becoming available. They could offer some of the best opportunities, be first to rebound, and provide investors the best growth prospects.

What’s trending in the real estate financing space now?

Here’s what’s changing in the market as we roll through the second quarter, and into the second half of 2017…

Rising Loan Volumes

The Mortgage Bankers Association, analysts, and individual lenders are expecting loan volumes to rise this year. Commercial real estate loans are predicted to hit new highs in 2017 and 2018. That’s following RealtyTrac’s annual house flipping report which shows far more flippers are now using financing. Buy and hold real estate is still popular too, yet many rental property investors have most of their capital tied up in equity and will need to use leverage to expand their portfolios this year.

Higher LTV Financing

Lenders are expanding loan programs with new higher LTV options. In addition to 100% transactional funding, VA and USDA loans, private lenders and rehab lenders are also moving closer to offering 100% financing for fixing and flipping houses and small multifamily properties.

Declining Credit Score Requirements

Various efforts are being made to reduce credit scores used in underwriting. How much relief this provides to investors will depend on how front line mortgage originators adopt them. Many are still being far more stringent than the secondary market demands.

True Stated Income Loans

Alternative documentation loans have been on the fringes of the market for a while. Now we are finally seeing more lenders offer stated income loans for investors that don’t require tax returns, or even bank statements.

Equity Sharing Loans

Lenders are bullish on the market continuing to grow. More are wanting a piece of that rising equity, in addition to interest and origination fees.

JVs

Savvy investors and lenders are increasingly partnering up. This can be a great strategy for expanding, while minimizing risk, increasing diversification, and gaining access to more lucrative investments.

 

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

How can you save our real estate transactions when your financing hits hurdles?

Real estate financing may have become marginally easier to obtain over the last year, but that doesn’t mean that everything will always flow smoothly. Often small quirks can easily be overcome. In other cases the deal just hits a roadblock. Experienced real estate investors learn to recognize the difference. So if your current mortgage loan app is at a dead end or stalemate, how can you save your deposit, funds invested in due diligence, and get the deal done?

1. Tap Retirement Funds to Put Down More Money

In many cases getting a loan is simply about an acceptable risk level for the lender. Many other factors can be overcome if buyers are putting down more money. This can help outweigh being light on assets, having high debt ratios, or weak credit. One of the places to tap extra cash to save the deal is retirement investment accounts. If you are purchasing your own home and are a first time buyer you may be able to tap your 401k or IRA without triggering any taxes. As an investor, rolling over to a self-directed account can make the whole deal even more profitable.

2. Partner Up

If your deal is on the rocks, a conventional loan isn’t an option, but you don’t want to lose the opportunity consider bringing in a partner. If the deal is that good there should be no shortage of potential partners willing to come in with the cash to complete. This can be friends, family, local private lenders, crowdfunded capital, or other peer investors you find online or at area groups.

3. Hard Money Loans

If your original financing is caught in the weeds due to technicalities and paperwork quirks try hard money loans. This offers far more common sense underwriting, and a hard money lender could swoop in and save your deal, and close in just a few days.

4. Transactional Funding

Transactional funding could really be the ace up the sleeve of many real estate investors when they need to close on a deal fast, but don’t have extra cash to put in. Transactional lenders can provide up to 100% financing, with no new appraisal, and can close in just days. It may be the perfect solution to save what you’ve put into this deal, get closed, and still make a profit.