- Seasoned real estate investors agree that now is the perfect time to expand your real estate portfolio.
- There’s less competition right now and it’s a good time to make aggressive offers.
- Higher mortgage rates make it harder to find bargains, but they’re still there.
Seasoned real estate investors agree that now is a great time to expand your real estate portfolio if you can afford it.
While mortgage rates have continued to deteriorate and exceeded 7% in October, home sales are slowing. Plus, there’s less competition as more Americans aren’t interested (or can’t afford) to buy a home right now: According to an October survey by Fannie Mae, only 16% of consumers think now is a good time to buy a home.
Four established investors told Insider why they’re still buying despite high rates, how their investment strategy has changed, and their tips for navigating today’s market.
Mike Zuber is ‘ecstatic for what’s to come’ and writes ‘aggressive offers’ twice a week
Michael Zuber believes real estate investors “should be a lot more excited to buy this year than they have been the past two years.”
This is because there is less competition at the moment. With rising mortgage rates and uncertainty about the future of the economy, fewer Americans are looking to become homeowners: According to an October survey by Fannie Mae, only 16% of consumers think the time to buy a house.
That’s great news for Zuber, which has more than 100 units in Fresno, Calif., and is looking to expand its portfolio further. He views home buyers as his “number one competition,” he said. “They have lower down payments and they get better rates, so they’re hard to compete with.”
Right now is the time for investors to make aggressive bids, he pointed out: “I’m always looking for motivated sellers and they’re hard to find. The only time you can find them , that’s when the competition goes away, so I’m excited for what’s to come. I’m ready to write a lot of offers and I’ll close on every good deal.
Currently, he makes about two offers a week. He only writes “attractive offers,” he said, which he defines as anything that will produce a cash return 2-3% above average.
Karina Mejia says potential investors shouldn’t be afraid to buy right now, especially if you’re going to buy and hold
“I really believe it’s still a good time to buy – and I’m not saying this because I’m an agent,” the 25-year-old real estate agent and investor told Insider. She owns homes in Boston, where she lives, and Augusta, Georgia.
“It’s a much better time to buy now than this time last year,” she said. “Now buyers have the ability to do things that they should have done, like inspection contingencies and appraisal contingencies, and they have the ability to get a deal. Now you can actually negotiate and get houses at a discount.”
Whereas, when the market was at its peak, “you couldn’t get your offer accepted if you didn’t go way beyond the requested and waived inspections and assessments.”
As a potential buyer, you need to consider your timeline, she added: Are you looking to stay in your home for the next five to 10 years? Or do you think you will make a move in two to three years?
If you’re looking to buy and potentially sell within three years or less, you’ll probably want to wait to buy, Mejia said: “Values go up and down, up and down, up and down. If you’re going sell within this quick time period, the property might actually be worth less.”
It will be safer to buy if you plan to stay there for a while. Your home will have more time to appreciate in value, which will help offset the expensive transaction costs that come with buying, like your agent’s commission and closing costs.
In general, “I wouldn’t be afraid to buy. I think that’s a mental hurdle that people have to overcome right now,” Mejia said. “If you can still afford a mortgage payment in your current market and buy a home you’d like, then buying makes perfect sense.”
Matt ‘the lumberjack landlord’ braces for rent arrears and market correction
A seasoned real estate investor prepares for tough economic times and a potential recession in 2023.
Matt, who goes by “The Lumberjack Landlord” for privacy reasons, has been building his rental portfolio since the early 2000s and currently owns and rents 137 units.
The New Hampshire-based investor expects more unpaid rent and potential evictions as we head into a year that could see unemployment rates as high as 5.5%.
“As unemployment rises, obviously the rent delinquents rise,” he said. He also expects evictions to be “at their highest in three or four years”.
With that in mind, “the most important thing is open communication with your tenants,” he said. “The mistake a lot of tenants and landlords make is that it becomes a contradictory thing. I’d rather a tenant say, ‘Hey, I lost my job. That doesn’t mean I’m going to speed up the process to get them out. It means that I will try to work with them.
It has also been bracing for a correction since earlier this year, when it did a major refinance to free up some cash.
“Now is the time to get as much money out of these assets as possible and then have the cash available if the market corrects aggressively,” he said of his March 2022 refinance. I don’t think it will be a 50% correction because we just don’t have the bad loan structures we had during the Great Recession, but it could be a 10% to 20% price drop.”
Todd Baldwin refuses to pay 6% or more in interest. If it’s a deal he wants, he’ll pay cash.
“A lot of real estate investors won’t agree with me, but I personally won’t pay more than 6% interest on anything,” Seattle-based investor Todd Baldwin told Insider. in November, asked about the rise in mortgage rates, which exceeded 7% in October. “If the deal is over 6%, I’ll pay cash and hopefully get a discount.”
Baldwin is in the unique situation where he can pay cash if the right deal comes along: in 2021, he brought in more than $1.5 million from property sales, wholesale and rental income , according to documents seen by Insider.
He understands that not everyone can just pay cash if they want to invest now. To help combat high interest rates, consider “house hacking,” he said. That’s how he got his foot in the door in 2015 when he bought his first property.
“If you want to be a landlord but interest rates mean you can’t afford the payment, consider finding a roommate,” he said. If you live with one or more people, you can ask for rent, which will offset your mortgage and potentially allow you to live for free.
“I know having a roommate can suck,” he said. “I did it for five years. But that decision made me a multi-millionaire and now I have the freedom to do whatever I want.”