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.

New Jersey has announced it will start selling off homes for as little as $1. Along with states like Ohio and New York, which are again working to get ahead of blight in the form of abandoned homes, it seems more distressed real estate is coming down the pipe for investors.

While many of these house deals require substantial repairs and may be reserved for retail home buyers, investors can expect more inventory to become available this year.

Distressed Debt And Real Estate Deals Are Building Up

It’s no secret that credit card, auto loan, and other debt has been deteriorating in performance, with a mountain of nonperforming debt that has been growing for several years.

As consumers run out of money, savings, credit lines, and find it harder to get new jobs, this will almost inevitably turn into more nonperforming debt sales, and REOs.

In fact, one economist has predicted there will soon be $1T in defaulting real estate debt to contend with.

Buyers have become more cautious, and as the Fed still hasn’t begun cutting rates, they are unlikely to swarm the market or be eager to pay recent market rates.

Get Smart

Many real estate investors in the current market do not have experience with the types of transactions that were popular in the last great recession. It’s a smart time to educate yourself about these types of deals, so that you can embrace them.

This includes REOs, short sales, and various forms of alternative and creative financing. Including using transactional funding to wholesale real estate.

You should know who the parties involved are, what their processes and timelines are, and start building the right relationships now.

Making Successful Real Estate Purchase Offers

What does it take to get offers accepted in this environment?

Fast closings are critical to sellers. Many are under a lot of pressure, and will lose their properties if they don’t sell on a tight timeframe.

Simplicity is key. Buyers can’t afford to be tied up in lots of contingencies. They don’t want long inspection periods, appraisal contingencies, and the like.

Finally, they will prioritize offers from qualified buyers with proof of funds, and who they can be confident in to close.

The S&P Case Shiller Index reports US home prices have hit a new record high, after posting 8 straight months of consecutive gains.

Just how high are home prices in the US now? Why are they going up so much? What does it mean for property investors?

Record High Home Prices

While all real estate is local, and there seem to be many ways to calculate ‘average’, Forbes recently put the average home price in America at over $495k.

Including interest for retail buyers that use financing that means the average home can now cost homebuyers well over $1M.

The average rent households can expect to pay in their lifetimes may well be over $500k as well.

The Ideal Conditions For Real Estate Wholesalers

The mainstream media say that house prices keep going up due to a lack of homes for sale. Of course, high inflation on everything is certainly adding fuel to the fire as well.

Many industry experts, Realtors, veteran investors, and home sellers may disagree with these findings too. Some are certainly seeing transaction volume down, longer marketing times, and buyers wanting to pay less.

Recent bank data shows that there is a mountain of distressed debt growing. Including defaulting credit card payments, auto loan repos, business loan delinquencies, and construction and commercial mortgage defaults.

This signals great distress behind the scenes, with many ripe to be motivated sellers. Together with fast rising prices, and a shortage of publicly marketed units to meet demand, these are the ideal conditions for wholesaling real estate.

Connecting The Dots

There is great need out there. With millions of individuals, households, and businesses needing help. Real estate investors that can help bridge this divide stand to be very well compensated in this market.

While many motivated sellers have not listed their homes, they are out there. Many more would love to, and need to sell, if they can get a reasonable offer. Consider how to identify their distress, and reach and and connect with your purchase offers.

There is plenty of investment capital that needs to be put to work as well. In the form of transactional funding, this money can be very cheap. With current deals on jumbo sized loans coming with as low as 1% interest.

Then it is about presenting this inventory to end buyers. These may be other professional investors, movers seeking to downsize and find more affordable housing, or affluent families looking to protect their wealth in real estate. Find out where they are, and market to them.

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.

If you’ve been laid off, see it coming, or have even just had your hours and income cut back, is wholesaling real estate the answer?

Mass unemployment is snowballing faster than most realize. It’s a domino effect that isn’t just going to wipe out far more jobs, but also most retirement accounts that are not anchored in tangible assets.

If you or someone you know is in the path of this financial avalanche, wholesaling real estate may be the only thing to cling onto in order to survive it.

Mass Unemployment Is Coming

It’s already surging under the radar of official statistics and lagging data. Don’t be surprised if we exceed 20% unemployment by next year.

Consider that out of just over 330M people in the US, only just over 60% of those have been participants in the workforce.

Then look at all the big corporations and tech companies that have been laying off tens of thousands of employees. Including Goldman Sachs.

Then you have AI and automation replacing your gas station and grocery store clerks. Then soon all of your delivery drivers, warehouse staff, and uber and truck drivers.

On top of that the Bureau of Labor Statistics puts around 10% of the entire population working in customer service. About 20% of the working population. All of whom could be quickly unemployed by new technology.

Then another 18M freelancers working on jobs that could soon be replaced by robots. Even if those robots do a terrible job.

In turn, the fallout will force other businesses to fold and make layoffs.

With hiring freezes in place, don’t count on finding another job.

What Can You Do?

You can’t just live off of your savings. You can’t take a job that doesn’t keep you ahead of real inflation. Which by the way is still up by high double digits. These are just paths to a slow financial death, and a lot of stress and sleepless nights.

Entrepreneurship and investing seem to be the only viable answer. To be creative and find a way to create your own income, without relying on anyone else.

Of course, most businesses still have high startup costs, and are slow to produce any meaningful income.

Trying to sell enough products on Letgo or Amazon to pay your bills is going to take a while to build up.

Real estate obviously stands out as an answer. Though most do not have the very, very deep pockets needed, or capital of their own they can afford to bet on rental properties and fixing up and reselling homes. So, what’s left?

Wholesaling Real Estate

For most, wholesaling real estate may be the only thing that can save them.

Using transactional funding, you can have 100% of your deals financed, including closing costs. Even if you’ve taken some credit hits lately.

This is a real estate strategy that allows you to get in, out and paid, in just days. Providing anywhere from $5k, to $50k, to over $500k in profit per deal.

You probably don’t need many of those each month to replace your old income.

Now is the time to get ahead, even if you haven’t been laid off yet.

As capital flows get interrupted and shut down, and borrowing becomes much more expensive, what options are left to fund your real estate deals and business?

Capital Markets Face New Tightening Again

It appears to be that time in the cycle again when capital and credit tightens up, and becomes much more expensive.

Capital markets and especially venture capital for tech startups appears to be contracting. Which will likely prove to be a downward spiral as more of those businesses implode, and their investors become even more fearful.

Failing banks mean fewer options for traditional commercial loans and home mortgages. With higher interest rates making borrowing more expensive through these and other working capital channels.

New regulations to tackle the above may in turn give banks even less liquidity to lend.

So, what are some of the ways that you can continue to fund your real estate business and deals?

Private Funds

Some private funds may still have capital they need to deploy. Or cash from recent exits that they need to put back to work in real estate and mortgage loans.

Friends & Family

Many of the people in your life are currently also eagerly and urgently looking for ways to protect their money from failing banks, a declining stock market, and poorly performing retirement accounts. All while trying to find ways to avoid recent tax hikes and new taxes, while trying to keep up with extreme inflation.

You can help them by putting their money to work, and giving them strong returns.

Grants & Awards

If you are interested in interest free and non-dilutive capital then look around at the various grant programs and competitions available.

You may find additional funds that don’t have to be paid back. Which can also help build your credibility.

Transactional Funding

Perhaps easiest and most efficient of all is transactional funding for your wholesale real estate deals.

Best Transaction Funding can provide 100% financing for your deals, at low rates, and keep your business and income flowing smoothly during these times.

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.

Have you been laid off or see the possibility of it coming in your near future?

The world’s biggest and wealthiest companies have all joined in to create a massive layoff tsunami. In addition to hiring freezes, meaning no new jobs to get for many.

This will no doubt keep on trickling down from tech, banking, and other professional jobs to hit those businesses that have relied on their spending. In turn, that means even more people will lose their jobs.

This is largely a result of recent monetary policy designed to do just this. Recent announcements that the Fed is planning bigger rate hikes, and aiming for a higher peak will quite likely fuel high inflation in the short term.

At the same time, the data shows the value of retirement savings plummeting, leaving most with little to no financial back up.

Whether you see the potential for being laid off in the near future, or have already been let go, there is an urgent need to generate income now. Not in two months or six months, but to stay ahead of the bills due this month.

Secondary to that is rebuilding cash reserves and savings for larger expenses and the future.

Why Wholesaling Real Estate Stands Out As The Only Answer

For the majority in this situation, wholesaling real estate is really the only solution. And it is a highly attractive one.

First, it enables you to get paid fast. If you dive in, you can probably make money in wholesaling a lot faster than it would be to get a paycheck from a new job. Plus, there are no interviews to ace, no requirements to pass, or tests to take.

It is also one of the few things that can provide a high enough income to keep up and create a surplus.

Additionally, it provides lump sums of cash to rebuild reserves.

Unlike fixing and flipping houses or buying apartment buildings, you can use transactional funding to finance 100% of your purchase price and closing costs, so there is no money out of pocket.

This is also something you can do anytime, anywhere. You can do it from home. You can do it through a pandemic or recession. You get control of your financial future, and are not relying on others for your income or financial health.

The world’s largest asset manager appears to be in financial trouble after blocking client requests to access their funds.

Could this be the beginning of a new liquidity crunch? How fast might it flow over to other institutions? What can you do as an individual investor to protect your finances and grow them in the coming turbulent times?

Is A New Liquidity Crisis Already In The Works?

Blackrock recently announced that it will not be honoring its clients requests to withdraw funds that they’ve made since September last year. At least for one of their $3.5B property funds. This is the world's largest asset manager, which boasts $10 Trillion dollars under management.

That is around 20x bigger than the FTX debacle. Which should be a major red flag for everyone.

Then we also saw Goldman Sachs ring in the new year with the announcement it will be laying off close to 10% of its workforce, across all banking departments.

What Does It Mean For Investors?

Big brand names seem to mean nothing. The bigger they are, the harder they seem to fall. Remember Lehman Brothers. They were far, far smaller than Blackrock.

Invest directly for yourself. Individual investors should be very wary about having too much of their money tied up in any one fund, bank, or entity. Invest in a way that you can control your own assets. Keep your money diversified.

Stay liquid. Having more cash on hand seems essential for making it through what’s next. Executed well, some of this cash can be used to capitalize on discounted deals and investment opportunities. Cash is king in a financial crunch.

One great way to balance continuing to grow and do more deals is to maximize financial leverage. Check out transactional funding for 100% financing for your real estate deals.

Get in, and get out fast. This is certainly shaping up to be a very volatile year. Wholesaling properties, especially when you are pre-selling them seems to be one of the best ways to create more cash fast, and to avoid getting stuck. Or having your money tied up in anything too long.

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.

Home sales contracts are falling apart at the highest rate since the depths of the COVID lockdowns in 2020.

Why are all of these pending home sales failing? What does that mean for you as an investor? How can you most profitably navigate this phase of the real estate market?

New Record High Number Of Contract Cancellations

According to new data from Redfin, the number of home sales contracts has hit its highest levels in two years. From back in the pit of the lockdowns when nothing was moving.

Both June and July saw increases in contracts being canceled. Nationally, that stands at 16% of all pending deals falling through. With some markets in Nevada and Florida seeing almost 30% of deals failing.

There may be a variety of reasons for this. Including lenders changing their minds after providing loan commitments, as well as rising interest rates which can kick buyers out in the middle of the process.

Buyers may also be canceling if they fear values may come down. If lenders see declining markets it can lead to a spiral in re-appraisals, lower LTVs, and even fewer contracts making it to closing.

Managing This Factor For Real Estate Investors

The number one thing this means for investors is that they need to build in these ratios to their numbers. If you put 10 deals under contract next month, only expect 7 of them may close. Or if your goal is to sell 20 properties a month, you may need at least 30 under contract to hit that goal. Expect this failure rate to increase as well.

One of the best strategies to beat this is to focus on real estate wholesaling. Meaning you don’t close on the buy side until you have it sold. This way you won’t get stuck with properties. Additionally, this strategy enables you to finance your acquisitions using transactional funding that doesn’t rely on appraisals to close.

In order to keep your ratio of contracted to closed deals strong you want to be extra diligent in vetting buyers and their offers before locking into them. Prioritize cash buyers, big down payments, higher credit scores, and faster closings.

You may also build in steeper financial penalties for those buyers that do cancel. For example, larger, non-refundable deposits, to compensate you for your time and potential losses if they cancel the contract.

You can also prevent issues by pricing your deals lower. Instead of pushing the peak of the market, list under market value to give them a better deal, and remove the risk of financing issues.

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

Eliminate Exposure To Risk

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

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

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

Expand Your Network

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

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

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

Educate Your Sellers

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

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

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

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

Don’t Let Leads Get Wasted

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

Play The Long Game

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

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

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

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

The Consequences Can Be Extreme

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

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

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

Short Or Long?

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

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

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

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

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

Sell Your Home

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

Exit Those Rehabs

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

Exit Rentals

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

Make Money By Wholesaling

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

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

Shopping For Discounts

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

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

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

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

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

Focus On…

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

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

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

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

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

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

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

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

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

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

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

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

Deal Spotlight

Imagine if you could do deals like this every day…

 

Purchase price: $500k

Funding amount $508,500

Resale price: $735k

Property type: SFR

Location: Southern California

Rate: 1.75%

Time to flip: Same day closing

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

 

 

Funding You Can Count On When You Need It

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

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

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

 

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

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

Get Featured

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

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

You can inspire others with your success in this space.

Few saw the change coming this fast. Yet, in just a matter of weeks it appears that the North American real estate market has substantially shifted in favor of buyers.

This is great news for real estate wholesalers. It also means that those who are still stuck holding properties need to move them very fast.

Home Sellers Are Slashing Prices

We’ve fast gone from incredible bidding wars, with even big investment firms proudly paying 50% over market value for properties, to sellers almost competing just as fiercely in slashing their asking prices.

In Boise, Idaho 40% of home sellers have recently reduced their prices. Followed by around 30% in New Orleans, and Cape Coral.

Home Values Are Coming Down

Of course, in turn, sales prices and home values are coming down along with that. Some cities are already reportedly seeing them down 10% to 15%. For example, in Kalamazoo, MI.

Similar trends have been reported in Canada, where the market has also flipped, and recently hot markets like Waterloo are down by 8.5% as of April. With economists expecting them to drop by 20%.

It is true that these are reductions from very lofty highs. If the Fed can manage a soft landing it could just mean a slowing of growth, without an absolute crash.

Though JP Morgan Chase’s CEO just warned that we are facing an imminent financial hurricane.

What It Means For Real Estate Investors

Those still holding rehabs and speculative flips need to exit them fast. Or they face being caught underwater, with dead weight that is dragging them down.

Of course, most experienced investors have been waiting for this moment. They’ve been waiting for asset prices to come down, and the numbers make sense again.

It’s time to get bidding, and scaling. Just at the right figures, which price in the drop. Then wholesale them fast enough not to get caught with any further declines.

Obviously, this is best done by filling pre-orders from other investors who have cash and are ready to buy them immediately once they are under contract.

While capital markets have been flush, and business and mortgage lenders eager to put money to work out there, rising rates, and fear of a contraction could change that.

This makes leveraging transactional funding for quick in and out deals, with low risk an even more appealing option as we look ahead.

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

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

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

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

Why Your Properties Aren’t Selling

Pricing:

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

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

Trust:

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

It’s Too Hard To Communicate With You:

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

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

They Aren’t Sure What It’s Worth:

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

How To Move Them Faster

Owner Finance:

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

Work On Your Website:

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

 

Find The Buyers First:

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

 

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.

 

How can real estate investors use inflation to their advantage?

We all know that inflation has been breaking records. Yet, according to Treasury Secretary Janet Yellen, it could get far more extreme this year. She warns of “enormous” economic impacts from current crises.

This means that we could easily see the most furious rate of inflation in US history by the end of 2022. That is scary for a lot of people. For a lot of people who are not prepared and positioned for it, it should be.

Yet, it is also presenting equally unprecedented opportunities for real estate investors. Both to help others, and scale their own ventures.

Start By Preparing Yourself

Begin by insulating and positioning yourself for what’s coming.

Be sure you have revisited your budgets at home and in your business to account for inflation in your own costs.

Prepare your systems for scale now. Don’t get caught in the weeds, and sabotage this opportunity by being unorganized.

Free up more cash. Use transactional funding to do more wholesale real estate deals. This way you can maximize the number of deals you can do, while staying flush.

Determine who it is that you can help in terms of buyers and sellers this year.

Finding The Motivated Sellers

Property owners are being hit hard with inflation from every angle. Absolutely every expense is going up.

Note that this doesn’t just apply to homeowners, but also commercial property owners and businesses. Many of which have additionally been hit by lockdowns, riots and looting, and disruptions to their business models.

A big part of finding the motivated sellers now, is understanding where they are feeling the inflation pain the most, and how it will show up.

Alternative Leads

Instead of competing for leads based on the same data, consider alternative leads. Instead of REOs and foreclosures, how about leads on people trying to sell their vehicles because they cannot afford them anymore?

What about leads on those with large amounts of revolving debt sensitive to interest rate increases? Or those defaulting on business loans?

Targeting People To Market To

If you are mailing, using social media marketing, content marketing, or outdoor advertising and PPC, who will you target?

It could be owners of properties in HOAs who are raising their dues. Cities with even fiercer rates of inflation in living costs. Groups of the population hit especially hard by taxes. Or those heavily reliant on gas vehicles for work and everyday.

Motivated Buyers

Of course, to complete the cycle and turn deals into dollars you have to sell them too.

This could be targeting retail buyers moving to cheaper areas. Especially those cashing out lots of equity. As well as those now interested in using their equity windfalls to invest in real estate.

 

What are the best deals for real estate wholesalers to be working now?

As the market continues to change and revolve, where can wholesalers find the deals? Where can the good deals be found? What moves might you not want to make?

Foreclosures

Foreclosures have been growing again. While the actual number of foreclosures is relatively small on a national basis, there are pockets of higher activity.

ATTOM Data says foreclosure filings rose almost 130% over the past year. Still, with only 25,000 or so filings in a given month they can be snapped up quickly by a hungry market.

However, there are cities and zip codes where 1 in every 300 to 400 housing units is receiving a foreclosure notice. Those are 2008 level numbers.

These areas include Cleveland, OH, Kissimmee, FL, and West Palm Beach.

Distressed & Motivated Sellers

Banks still seem to be holding very few REOs. They are being auctioned off first, or sold fast.

Wholesalers may find better deals, and less competition if they market directly to distressed and motivated sellers.

This may include leads on homeowners who have large amounts of consumer debt. Those who have fallen behind on credit card and car loan payments, or small business loans.

HOA Properties

Rampant inflation is everywhere. Recently property owners have been complaining that their condo or home owner associations have raised their dues by 300% to 400%. That means many won’t be able to afford to keep their units.

If you are in and out fast, and can flip them to more affluent buyers these could be great deals.

Commercial Real Estate

It’s no secret that the residential market is heated and hyper competitive. Switching to commercial properties could lead to less competition, and bigger paychecks.

Consider which properties are most in demand by end buyers, which types are being liquidated, and which will do well in a new crisis.

This can include self-storage, multifamily, and office buildings.

The Deals You Have Pre-Orders For

The smartest and most profitable way to wholesale is not to speculate, but to simply fill orders for your end buyers. This way you don’t get stuck with properties, and you can use transactional funding to finance your entire purchase price.

Find volume buyers who will stick with you through the changes.

Moves Not To Make

With the way the market is evolving some wholesalers have considered fixing and flipping, buying and holding, or getting into Airbnb properties. This can be a huge mistake. It means moving down the food chain to more labor intensive and higher risk deals.

You do not want to be stuck with properties that have peaked.

If you looked at who survived previous crises best, it seems to be those that stuck to wholesaling.