Find out what’s happening in real estate and the economy that could impact your investment strategy, plans, and performance this year…

No Fed Interest Rate Cut Till June

Experts are now pushing back their forecast of a Fed rate cut until at least June this year. That’s not welcome news to millions who were hoping for a break from rampant inflation and high borrowing costs.

Though we could get a well timed rate cut or two before the presidential election.

For now investors need to make their plans based on where rates are at, with a cushion for even higher mortgage and loan rates as banks seek to offset risk and defaults.

The $400M Trump Fine, And The End Of NY

Former president Trump has just been hit with an almost $400M fine in NY, for boasting his properties were worth more than what the judge thinks they are worth.

This ruling has faced harsh criticism from the likes of Shark Tank investors and fund managers. This may be the final straw that has the last remaining investors pull out of NY for good.

It’s a reminder that values are always influx, they are just an opinion, and that opinion can be changed at any time.

It’s a fresh warning of what happened to many investors in the last great recession when banks began slashing credit lines and trying to force homeowners to accelerate the pay back of loans due to revised valuations.

Calls For $50 An Hour Minimum Wage

Forget $15 or $35 an hour. New calls are being made for a $50 an hour minimum wage. That’s about $100k a year. Which may really just be getting by for many households with kids these days.

In turn, it would either mean doubling or tripling inflation on goods and services to keep up with the wage increase, or companies having to lay off another 30% to 60% of their staff.

For real estate companies, it likely means consolidating with fewer team members, but of higher quality, and at higher wages.

The AT&T Outage

AT&T’s massive nationwide service outage is a fresh reminder to investors, entrepreneurs, and businesses that they cannot rely on just one connection.

For both phone service and internet, you need at least one additional back up, and remote alternatives on different providers so that you never get disconnected. You can imagine the havoc this can wreak with closings and deal flow.

These occurrences may become even more common has cyber attacks and online crime grow.

How can real estate wholesalers find more motivated sellers and buyers in this market?

Securing the most valuable and profitable property deals, and getting the best ROI on your time and marketing efforts all comes down to finding and connecting with motivated sellers, as well as buyers.

This requires understanding who is motivated and what trigger points will lead them to convert.

Who Are The Motivated Sellers In This Market?

There are both institutional and individual motivated property sellers in this market.

The overriding theme here is high inflation and high living costs, which could last for many years according to some experts. A factor which may also be compounded by soaring unemployment due to high costs and the rise of AI.

According to Axios, small US banks actually hold 70% of all commercial real estate loans. They also hold almost 40% of all residential real estate loans. These institutions are coming under increased financial pressure as consumers run out of money and demand their deposits back, and default on loans.  They need to convert more assets to liquid cash. Which could make them a prime source of wholesale property deals in the near future.

For those that don’t think they are in trouble, it is worth noting that a coalition of these small banks have been pleading with the government to insure all of their deposits for the next two years.

Then there are all of the individual homeowners who are grappling with financial and emotional struggles.

What Is Convincing Property Owners To Sell?

Owners generally don’t take the action to actually sell and go through with the process unless they are really feeling stress in their current situation, and perceive more relief and pleasure from it.

According to a US News & World Report, the top things keeping people awake at night this year include high living costs, pandemics, gun crime, climate change, and the presidential election.

How To Put This Into Play In Your Business

Utilize the above information to hone in on who your highest converting prospects are likely to be.

Use it to craft your marketing campaigns and in how you pitch your purchase offers.

Then use this same data to understand how to best pitch your properties for sale to meet the needs and desires that your prospects are looking for. Highlight how your properties check their boxes.

Now check out our Fall Loan Deals for financing as low as 1% on your wholesale properties.

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.

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.

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

What does it mean for real estate investors?

The Big Withdrawal Has Only Just Begun

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

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

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

Expect More Capital To Flow Into Real Estate

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

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

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

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

How To Capitalize On The Shift In Markets

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

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

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

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

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

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

90% of real estate businesses are unlikely to survive this phase of the economic cycle. The world’s biggest banks are falling like dominoes. That will have a big impact on everything else.

A few investors and real estate firms will not only survive this, but find it their defining moment. One which enables them to scale, establish their personal and business brands as those to count on for everything that comes after this, and will grow incredibly wealthy in a short period of time.

So, how do you not sabotage your venture, and stay in the game and grow it instead?

Relying On Others For Liquidity & Access To Funds

Cash flow and liquidity are what will bankrupt most companies and individuals in the months ahead.

Expect banks and mortgage lenders to struggle to have enough funds on hand, or the willingness to provide access in the year ahead.

Transactional lenders are likely the most reliable for real estate wholesalers. Though make sure you have cash on hand, and spread your deposits amongst banks so that you aren’t caught short when they fail.

Allowing Your Reserves To Be Depleted

No matter how much savings and capital reserves you have, it will be blown through quickly if you keep on tapping into it.

When you do face the decision to tap emergency funds, make sure you pause, and explore new strategies, income streams, inventory types, and funding partners so that you stop the bleed as quickly as possible.

Slowing Down Your Marketing

If you stop marketing, you stop making money. Your business will fail. It is just a matter of how soon. Instead, step up, juice up your marketing efforts, and grab more market share.

Robbing Your Most Loyal & Profitable Customers

When things get leaner many companies make the perilous mistake of robbing and squeezing their best customers. This will burn your relationships and wind up killing your brand permanently. Don’t raise your fees just because you can or to extract more from them when they are going through the same thing too. Giant companies like Facebook and Upwork or Wells Fargo have tried this and it has done irreparable damage.

Doubling Down On Bad Decisions

Be willing to acknowledge mistakes and pivot quickly. Don’t do further damage by doubling down in a direction that is failing.

Spam

Yes, scale up your marketing. Do not resort to spamming your hard earned and bought audience with spam. It will have the opposite of the desired effect.

Living It Up, While Hurting Customers

Don’t be like the big banks and gas companies that are taking out big bonuses, lending their friends hundreds of millions of dollars, and posting record profits, while you are complaining about costs or are shorting your customers. You’ll never get their trust back.

Giving Less Instead Of More

During times like these you want to be looking for how to add more value to your customers and partners, not how you can strip away what they already expect to be included.

Whether it is keeping up with living expenses, building a retirement fund, or creating your legacy, financial needs seem to be scaling fast.

The great news is that for those wholesaling and flipping houses, deals are also growing, with more motivated sellers, and record high prices.

Growing Financial Needs

Real inflation is now like a runaway train hurtling at full speed, with no sign of slowing down. People won’t stop spending, causing prices of groceries and other daily and monthly expenses to continually escalate and spiral up. $10 for a carton of eggs, or your car insurance going up 30% with no warning is just the tip of the iceberg.

At the same time Fidelity has warned retirement savings balances dropped by around 25% last year. Morgan Stanley predicts the S&P 500 could come down by another 25% plus in the next few months. Factoring in real inflation, those with IRAs or 401ks invested in stocks could see the real value of their retirement savings down almost 80% by the end of this year.

Meanwhile a new poll shows that most believe they need at least $3M to $5M to retire. While Vanguard reports the median retirement account balance they manage is less than $28,000.

That’s a big gap, and it’s growing.

There’s no question that real estate, and especially quick flips or wholesale deals can be exactly what is needed to supersize income, and regain, and grow your nest egg quickly.

Home Sales Are Down, But Records Are Being Set

Bloomberg reports that existing home sales have now fallen for 12 months in a row. Yet, some markets are still seeing organic appreciation of 30% plus year over year.

Luxury Palm Beach homes have recently been flipped for 86% returns, totalling tens of millions of dollars. A trailer in the Hamptons recently sold for almost $4M.

There are huge profits to be found, if you get out there and do the deals.

Making It Work

It’s true that giant financial institutions, banks, and corporations are struggling. They are slashing workers and closing offices. Even Walmart, which should be a top performer in this phase of the market is reporting it is down for the second year in a row, and is cutting its financial outlook.

Of course, many of these companies, including Upwork and Walmart are those that have been self-sabotaging by burning their best and most loyal customers, and stripping away customer service over the past year.

If you give bad deals, and treat people poorly, they are going to shop somewhere else.

So, as the number of motivated sellers increase, and there are great opportunities for fast flips, stand out with great, human service, and price your deals competitively, and you should have no problem exceeding your financial goals this year.

There are likely to be many more distressed properties ready to buy very soon. How do you make sure that you are ready to fully capitalize on this opportunity as a real estate investor?

Distress And Defaults Are Mounting

The latest bank and mortgage debt data released by DistressedPro shows that mortgage loan performance reversed trend in the last three months of last year.

Defaults and nonperforming loans are on the rise again. This appears widespread, across almost all sectors. Including commercial mortgage loans, residential home loans, and even multifamily mortgages. The only exception which seems to remain healthy is in farmland and agricultural loans.

Many of the improvements of the past two years have been erased. With many newly defaulting loans, as well as those now being deemed non accrual stage loans by banks.

Although REOs haven’t piled up yet, it is an important metric to watch in terms of overall bank and market health.

Defaults on auto loans and consumer credit card debts have also hit a new high, signaling many mortgage borrowers are barely hanging on. With more likely to fall late on their home loans and who will need to sell their homes.

So, how do you prepare to capitalize on this moment as an investor?

Have Your Funds Ready

There are going to be a lot more distressed properties and motivated sellers to buy from soon. Don’t get caught short, and beat out to the best deals because you aren’t ready to move fast with your offers and closings.

Pool your capital together now. Get your POF (Proof Of Funds) from your lender, and be ready to make fast cash offers.

Have A Strong Team

Those with the strongest teams will win.  Find the best talent, and when you’ve got them, don’t let them go.

Get familiar with working in a remote environment if you haven’t already. Ask around for referrals if you can. Unfortunately, platforms like Upwork which used to be good have now stripped away all of their customer support and have been burning their best talent. While scammers like Amurra Spices, and their fake Airbnb have taken over and aren’t paying freelancers for their work. As a result you may now find the best outsourced help freelancing for themselves.

Have Your Marketing Prepped In Advance

You should have your marketing mapped out and materials created weeks in advance to avoid rushing out junk. If you need to have a new marketing strategy plan created for this new phase of the market.

Focus On Providing Solutions

Focus less on price, and more on finding opportunities, and solving the problem and needs. This applies to both your sellers and end buyers. Focus on what’s most important to them.

What’s motivating sellers to sell their properties in this market?

Finding motivated sellers is critical for house flippers, real estate wholesalers, and acquirers of buy and hold income properties alike.

However, the latest data shows that mortgage borrowers of all types may be in a much stronger position than believed. At least for now. So, if they aren’t falling into foreclosure yet, what are some of the motivators that make for good sellers and deals in this market?

Mortgage Debt Performance Stays Strong

The latest round of data from banks reported by DistressedPro shows that mortgage lates and defaults have fallen across all sectors. Including residential, commercial, and farm loans. There are almost no REOs being held by banks.

Many thought there would be a lot more foreclosures and defaults by now.

Thanks to many locking in very low rate long term loans, there could be a stronger foundation in the market for this cycle. Which supports property values, and helps to avoid a new massive foreclosure crisis.

Buyers & Sellers Get Bearish

In spite of the above data, Fannie Mae has been one of the most bearish on the housing market. Predicting trouble in the real estate market could throw the entire economy into a new recession next year. Even though we just exited one.

Their recent survey shows just 16% of home buyers think that this is a good time to buy. With only around 40% of sellers thinking that this is a good time to sell.

How Do You Find The Motivated Sellers

Of course, just because it may not be as an attractive time to sell a home for regular homeowners as in the summer, that doesn’t mean people won’t have to sell.

Layoffs are surging, with few new jobs due to hiring freezes. Along with diminishing affordability due to inflation, and consumers defaulting on more credit card debt, auto loans, and business loans than any point in the past two years, many are in financial distress.

There are lead lists that can help identify these markers. Investors can also use SEO and content marketing to educate owners about their options and lead them to getting an offer.

Other real estate companies, businesses, and even the world’s largest banks have been selling off real estate assets to recoup capital to keep operating. Even at prices much lower than they were valued at a few months ago. Try direct marketing to them.

Falling home prices could be the most pressing motivator right now. In the past three months alone an estimated $1.3T in home equity has been lost due to declining prices. Any seller with some common sense, and educated on how much further prices can go down will see it is better to cut their losses now, than to wait and lose more.

Trying publishing more educational content around this. Whether it is on your blog, or via email or print newsletters.

Bank banks, fund CEOs, and even the Fed are all responding to the changing economy in different ways.

What are they saying and predicting? How are they reacting? What does it mean for real estate investors?

JPMorgan Tries To Go Back To The Office

JPMorgan’s Jamie Dimon has been ordering workers back to the office. Even as other multi-billion dollar companies and new startups are finding that remote work is far more productive and profitable, if not an advantage and essential in today’s economy.

Especially in real estate, experienced pros know that you don’t make money being in the office.

At the same time it has been revealed that the company is working on finishing a $3B office building in NYC. This and any other investments they have in retail and office real estate may explain why they are so desperate to sell this return to old workplaces.

Goldman Says Housing Market Will Flatline In 2023

Goldman Sachs forecasts that US house prices will flatline line with 0% growth in 2023.

Black Knight reports that house prices have already fallen into negative territory according to its data.

Meanwhile Michael Burry of the ‘Big Short’ predicts the stock market is headed for the ‘mother of all crashes’.

 

Bank Of America Goes For Broke With No Down Payment Mortgages

At least on the surface, Bank of America appears to be the most bullish on the US real estate market. They just announced that they will be offering 100% financing, no down payment home loans for buying in predominantly minority markets.

They must believe that the market is going to keep on going up, or they would be immediately losing their investors’ money.

Of course, they also made similar moves right before 2008, and then lined up for big bailouts from the very investors they hurt, as well as the homeowners they put in such perilous positions.

For Real Estate Investors

If you are tuned into the market, doing deals daily, then you already know the state of the market, even without having to listen to these pundits casting their vision and trying to manipulate it in the press. Though it is always interesting to see both what others are saying, and how they are reacting, while watching their motivations behind the scenes.

There is always money to be made in real estate. Perhaps far more in the current conditions we are in.

More than ever, succeeding in this market appears to be about pricing deals right on both the buy and sell side, and moving quickly in and out of deals before you are caught by changes.

 

There’s a lot more foreclosure and REO activity out there today than many realize. Many cities still have thousands of foreclosure properties, and auctions have spiked by over 100% in some places. The deals are out there if you know where to look and how to approach those holding these assets.

Special Servicers

Special servicers handle the bulk of default debt and REOs today. If you are a licensed Realtor, you can approach these servicers and try to get REO listings. Or, if you have experience and a good presentation you may be able to buy REOs and non-performing notes in bulk.

Some of the top special servicers include:

1. Key Commercial Mortgage

2. BNY Asset Solutions, LLC

3. Midland Loan Services, Inc. (now part of PNC)

4. Bank of America

5. Prudential Asset Resources

6. Centerline Capital Group.

7. GEMSA Loan Services, L.P.

8. Hatfield Philips International Ltd.

9. Situs Servicing, Inc.

10. TriMont Real Estate Advisors

11. LNR Property Corp.

12. Ocwen Financial Corporation

13. Wells Fargo Commercial Mortgage Services

 

Pros:

• Low amount of effort if you have a good presentation on hand

• Can be done online

 

Cons:

• Often a wait and hope strategy

• Need to be able to buy in the tens of millions of dollars range

• No direct communication with real decision makers

 

REO Agent Directories

Realtors can be a great source of REOs, especially from the bigger banks and servicers. Check out the following directories where they hangout. If you are a Realtor you can get listed on them as well.

• REO Network

• Fannie Mae

• HUD Homestore

• REO Industry Directory

• Instant Home Link

• HAR.com

 

Pros:

• Easy to find contacts

• Can be done at scale quickly

Cons:

• Can be time consuming to personally comb through endless directories

• Can be a waiting game

Go Direct to Banks for REOs

Local community banks, credit unions and private lenders have REOs too. This inventory is typically less competitive and often overlooked. Go straight to these asset holders to purchase their REO.

Pros:

• Less competition

• Easier to reach decision makers

• More loyal sources of repeat business

Cons:

• Each will have fewer assets on hand than the big banks

• Probably don’t have organized processes for liquidating REOs

• Need to be good at relationship building

Pre-Foreclosures

Getting to these properties as pre-foreclosures before the auction and becoming REOs can mean they have more equity, less accrued fees on top, and sellers can be more flexible to work with. Find them online, by acquiring lists, and through attraction marketing.

Pros:

• Potential savings on Realtor fees, back interest and fees

• More flexibility in negotiations

• Ability to really help individual homeowners

 

Cons:

• Typically means working just one property at a time

• Sellers may not want to sell, even if they need to

• Lots of competition in most markets