More tough news for landlords and house flippers point to real estate wholesaling as the best possible investment strategy, this year and going forward.

There are many ways to make money in real estate. We hope house flippers and private landlords continue to participate in the market. They are some of the best exits and end buyers for wholesalers. Yet, right now, and for the foreseeable future it appears that wholesaling is the best play for minimizing risk, and maximizing the upside.

Rates & Inflation

Despite the fact that 83% of consumers say that they are already worried about inflation, and analysts have been saying we have already been in a period of hyper inflation since last year, the government is hungry for more of it. Treasury Secretary Janet Yellen wants interest rates raised to cause more inflation. The Fed says it is moving up its timeline for new rate hikes, but wants to see more inflation first.

So, get ready for whatever is faster and bigger than hyper-inflation.

That can be good for rental rates and those holding real estate in some cases. Though it can also crush markets, just like it was set up to do going into 2008.

A New Eviction Ban

Despite the previous eviction ban being ruled an overreach and unconstitutional the Biden administration has just instituted a new eviction moratorium through July. There is also talk of a “whole of government approach to eviction prevention/diversion.” It’s not clear exactly what that means, but it appears all rules and assumptions about the private rental property market and industry have been shredded.

No one wants mass evictions and foreclosures. Though there is little pity for wealthy executives squatting in $5M mansions in The Hamptons. With virtually zero unemployment there is no reason for any renter household not to be able to pay the rent.

Unfortunately, the current unprecedented trend in historic use of powers to control private property suggests no end is in sight. If the intention is to prevent any evictions permanently, either the government will have to start paying rent on all rental properties in America, or may have to seize them by eminent domain and give them to the largest private funds to manage them as public housing projects.

There are common sense and legal ways to throttle even 15M new evictions and foreclosures. Such as slowing down the courts and pacing them out over a period of years. That could avoid a crisis, and current demand would easily absorb any new inventory coming into the market.

Home Sales Slide For Fourth Month In A Row

May marked the fourth month of home sales declining. This may be surprising going into what ought to be the peak buying season. Yet, house prices have just kept on rising.

On the bright side, less competition from retail home buyers means more acquisition opportunities for real estate wholesalers, and more negotiability.

With this latest news many landlords may decide they have to sell units as-is, even with non-performing tenants in place. That can make for great discounts for wholesalers who are willing to turn them around.

The Bottom Line

The current environment is clearly not friendly to house rehabbers and landlords. To lower risk, and make money faster than inflation, wholesaling seems to be the only logical answer. Fortunately, these same challenges could be creating more buying opportunities for wholesalers too.

 

Looking for more deal flow?

It’s competitive out there. Some investors may want to expand the property types they are flipping and wholesaling to maintain their volume and incomes and to grow while the market is ripe.

If you aren’t already, consider these types of properties…

Rental Condos

The president has now extended the national eviction moratorium until the beginning of April 2021. NY has already stretched that out until May. Even without any further extensions it could be years before many landlords can expect to evict occupants.

That doesn’t mean that there aren’t legal ways to get them to move, or start getting income coming back in. It just may be beyond what most landlords want to deal with.

You can flip these units to other investors willing to put in the extra work. Or help vacate them and resell them to retail buyers or convert them into short term vacation rentals.

Suburban Single Family Homes

There has been a rush to the suburbs and rural areas over the past year. It makes long term sense for many buyers. Though there will be plenty who realize it just isn’t for them. They will find it too quiet and boring or too wild. As they move back to the city, especially as lockdowns fade, expect to be able to flip these deals that motivated sellers are eager to get rid of.

Vacant Land

There are many reasons land is in demand now. Some want to acquire neighboring properties to retain their privacy and expand their space. Others want to build new homes or have their own getaways where they can park RVs. Some are looking at the long term and are happy sitting on land indefinitely. Meanwhile many realize they have extra land they never use and which is costing them money to hold every month, and could use the cash.

Commercial Real Estate

While many are finding a hard time envisioning a future in which office or retail makes sense at all, some big developers are bullishly pushing ahead with building big projects and hoping tenants come back. In other cases redevelopers are converting these buildings to warehouses, distribution centers, or more residential units. It is another space in which there are lots of motivated sellers, and the potential for big gains on the flip side.