Inflation, New Eviction Moratorium, Sliding Home Sales: It’s Time To Turn To Wholesaling
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.
