Just recently, one of the projects I managed for my investor clients gave 86% annualised ROI. Rolled into the New Year feeling pumped to continue the ROI streak. In January 2018, I wrote many offers for my Investor clients! All of them rejected, because of overbidding. Investor friendly houses are selling for such ridiculous amounts, that I almost wonder how the Investor Buyer will profit from it!
I started my real-estate career working for Investors. Some brilliant ones! That was also the time when the housing market had fallen; and not a lot of people had cash stocked-up to invest in properties!
Lately, every 1 in 3 people I meet wants to flip houses or get double digit returns on cash-flow properties. My survey could be biased because since many people know I have real-estate investment experience, they talk to me about it! Some novice Investors even ask me to show $ 200k houses in locations that house multi-million dollar homes; because they believe I can (miraculously) get them cheap houses! Only if I could pull-out such opportunities from the magicians hat!
The fact is: In today’s market, there are not a lot of steep discounts/deals to be availed. There is a shortage of housing inventory AND a multiplication of Real Estate Investors/Deal Seekers.
Past Results: Real Estate investors had a wonderful run when the house prices were still picking up after the crash in 2008. Many made great profits from flips and rental investment properties. Other people saw the prosperity in this business. And they started pouring into the investment market. Newbie investors have increased manifold and they are raising offers on the handful of investment properties. I’ve heard of flipping nightmares by such newbie investors.
Existing Builders: With more competition, our Builder community also comes ‘all-in’. They have workers and employees they have to pay and provide enough work around the year. Builders can buy a house $ 50k above market, blow it out into a mansion, and still make a profit, albeit $ 50k lower. But it’s still, something…
Better economy: Economy is getting better; unemployment is decreasing; Stock market is at an all-time high; people have more money! Anyone who wants to diversify their portfolio or does not want to enter in a record high market, will look into real-estate investments! Thus, adding fuel to existing shortgage of homes
New tax bill favorable to Landlords: The change provides a 20% deduction on taxable income for pass-through companies. While the tax cut is a boon for private real estate investors, it will likely make the inventory shortage worst and even more ludicrous offers! Not only will they pay lower taxes on their LLC (pass-through entity) created for their rental, but they will also hold on to them due to better returns! Though I’d believe the high procurement cost would subsidize the tax benefits!
One thing I have learned is: stick to the investing fundamentals. Don’t buy a property if it does not make financial sense. Work your numbers – Purchase, Cost estimates, Cash flows and ROI’s, ARV’s in the neighborhood etc. I’d rather spend time in doing something I love or where I can generate more money (like putting more hours at work) rather than investing and spending time in unsustainable investing models. Use that money to invest when the market cools down! Can’t get enough of Warren Buffet’s quote for Investors: Get Fearful when others are greedy and greedy when others are fearful
But hey, everyone is entitled to their Opinions and Conclusions! And I wish all Investors the very best in their endeavors! And, happy to help