This has been an interesting month on Wall Street. Market volumes rollercoastered triple digit moves of historic proportions this past week. What does this mean for real estate? Are we heading into a recession , a depression, Armageddon or something else? I do not claim to have a crystal ball but as a student of both history and business cycles do occur and some things are predictable. Here are my main thoughts on the subject:
1. This is a great time to get private money at reasonable interest rates. If you had your money in the stock market you probably saw your 401K go down even with the bounce back up of stocks. As I was telling one of my lenders who lost over $15K this week in his stock portfolio—”Isn’t it a good thing you have a 7% yield on real estate. That is like making 20% on your money since you would have lost about 12% if it was in the stock market these two weeks alone.” People will always need a place to live and if you are investing the way I teach you will sleep well at night and so will your investors.
2. Prices are down on real estate. So if you are buying correctly they will cash flow now more than ever! Buy extremely low and sell low or keep them for income.
3. “Subject to” opportunities abound taking over interest rates fixed at 6% or less—wow! You may have to negotiate a second lien off a property or other judgements but wow, to take over first liens with historic fixed interest rates is an investor’s dream come true. P.S. If you followed my mentor newsletters—when I started on my third newsletter I predicted this day was coming of lower interest rates and people running for the hills when the correction was to come.)
4. REO properties are in abundance so diamonds are everywhere. You can get great deals on HUD properties—it’s the 80’s all over again only it is not just the savings and loans but almost all the banks needing to unload real estate.
5. Only a third of America can qualify for a loan now due to risky nature of banks. This provides an excellent opportunity to do rent to own or owner financing. I have two people right now with large down payments looking for a home (one with $15K and another with $10K). It had been slower getting people to put up good deposits the past few years but with people holding their money and with credit issues from downsizing, overleveraged property and other in their lives we can fill a big void.
6. Rentals will be easier to fill. I have found re renting property has been easier than in years past. This is good if you have a few keeper properties you want to have renters pay off your mortgages.
7. Knowledge is power. Get educated and know different strategies as opportunities are presenting themselves and those who know what to do will win out on those who do not.
REAL LIFE STORY THIS WEEK:
One of the things I love about real estate is being able to help do things with what I know. I am managing my church’s putting in two temporary trailers to add classroom space until we start out building project in the next few years to do a more permanent solution. The gentleman who is helping us put the trailers in is a very wealthy millionaire next door kind of guy. He has made a literal fortune in the mobile home business moving trailers, selling trailers, owner financing trailers, managing mobile home parks and more. He also clears hay for land owners as he has a lot of equipment. Recently he had an opportunity to buy a $14 million dollar property for around $4.7million. He knew it was a great deal and went to his banker to see if he could put it together. The numbers would scare most people off but he almost did it and backed out at the last minute since they wanted a cash offer.
If he had put a contract on it for 90—120 days and given a smaller deposit he could have sold this and done very well. As it turned out someone paid about $4million more than that—something he could have optioned and done. I told him I should be the son he never had and just smiled.
What you know or do not know in structuring offers in an environment where people are panicked is the difference in being highly successful or not. If you knew there was gold in them thar hills but did not know how to operate digging equipment would you get someone involved who did to help you mine it? Whether you work with us at VREM or get another mentor—now is the time to educate yourself. One good deal could be your retirement. As people’s 401K’s and life’s savings are in jeopardy be wise and apply yourself to learn how to make the most of this unique and awesome opportunity.
Making wise decisions and taken knowledgeable action with clear exit strategies and plans to help you profit with whatever the market gives you can make the difference to your investing success. There are no self made men. Everyone has had teachers, parents, friends and others to guide them to being successful. Taking action is important but knowing what action to take when is even more critical to success.
Have a great rest of the year—I know I will and I hope many of you will join me.
To Your Investing Success!