Time to dust off those crystal balls and prepare
for what the future may hold…
If only we could see what the future had in store, we would likely be in a great position with our finances, health, love, etc. Very few people can claim that they predicted the market we find ourselves in today, but one thing is clear, opportunity is on the horizon.
We have been riding a wave of a “HOT” real estate market for several years and for many, finding a good deal on real estate acquisitions has been tough. Others that took advantage and decided to exit, were likely incredibly happy with their ROI and right now, most certainly happy they did not wait longer. The days of a sellers’ market does seem to be rapidly switching if it has not completely switched sides altogether. Does it mean you are stuck with a property if you were planning to sell in the near future? Certainly not! What it does mean is that riding the wave up was fun and we were able to see the crest of the peak as it went by—now we are at a plateau or trending down in terms of pricing and the once expansive buyers pool has decreased significantly or even worse, the buyers are aware of their prominent stature as a ready, willing & able buyer and are expecting you to reward them with a great deal. Timing the real estate market is comparable to trying to time your stock market trades; buying when it is at its absolute lowest and selling when it is at its absolute highest. It is almost impossible to do on a regular basis.
If you are a “buy & hold” investor, then a little downturn should not affect you unless you need to sell soon. Nearly all tenants are paying rent on time and only an exceedingly small percentage need help or special considerations so you will continue to have positive cash flow.
Now, what does a real estate correction or downturn mean for you and I? Opportunity! We never want someone to be in an untenable situation or harmed in any way but being able to provide assistance when it is warranted and creates a win / win situation is good! If someone needs to sell and we have the ability to buy, why wouldn’t we want to help out? This does not mean that you would be take advantage of someone, rake them over the coals or kick them while they are down just to make a buck. If they have a reasonable value in mind, the property fits a need, and we can get it at the right price, why not make a deal that benefits everyone involved?
"If you could go back and do 2007 over again, just prior to the real estate bubble bursting, what would you change?"
How well will you be prepared for the coming storm? What if you could go back to 2010 or 2012 before real estate was “in recovery” and you had the ability to buy more real estate. Would you? I know if I had the chance to do it again, I would have gobbled up more foreclosed properties than I did—but like many of you, I expected the good deals to remain plentiful.
"Now is the time to make sure you are ready for when the opportunity presents itself. START YOUR ENGINES, as it were, and take the necessary steps to be prepared."
Frontline Property Management, Inc. has always been focused on leasing, managing & maintaining properties, but our inventory of homes has been significantly reduced over the last few years, with many clients selling to take advantage of the insane resale prices. Over the last 5 years we have seen an incredible influx of well qualified & sophisticated tenants needing properties and with low inventory throughout the DFW Metroplex, rent prices have been increasing and time on the market has been extremely low. While we expected a slowdown in the rental market when the stay at home order was issued, we only saw a slight dip for a short period of time. All signs are pointing to an increase in the rental demand but with low inventory we need to fill that gap.
We work hand in hand with our sister company, Vision Realty & Investments to ensure we are always focused on deal flow and capturing opportunity when it presents itself. Visions & Frontline have a perfect symbiotic relationship with each other that allows us all to provide you with a one stop shop for real estate investments. Together we offer our investors deal flow, opportunity evaluation, negotiation, inspections and walk through to closing, rehab, marketing, leasing and management. Your investment is over seen by two teams working in tandem towards two common goals: to provide great opportunity and service to our investors and good quality housing to the renting public. All you have to do is let us know that you are interested in investing and we will take care of the rest. Contact us if you are ready to add to your portfolio!
Contact us if you are ready to add to your portfolio!
Jay Hartley MPM®, RMP®
Owner - Managing Partner
Office | 817.377.3190
Direct | 817.288.5546
Cell | 817.308.1309
Frontline Property Management, Inc.
3000 Race Street, Suite 132
Fort Worth, TX 76111
Tips on Investing
Why Now Might Be The Perfect Time To Acquire Real Estate
The coronavirus pandemic is acting as a catalyst to a real estate market downturn; however, the underpinnings have been present for years. While no one can truly predict market cycles, historically speaking, roughly every 10 years we head into a recession phase. It’s now been over 12 years since the Great Recession, which lasted a staggering 18 months (the longest since the 1929 Great Depression) and was caused by a subprime mortgage crisis — banks bundling these mortgages together and selling them off as mortgage-backed securities.
This, however, is different. It’s truly unlike anything many of us — or perhaps the world — has ever seen. The causal factor is not related to our real estate system, or gross negligence as it relates to big banks, etc. Looking back to the Great Recession, it was more than a year until the collapse of big banks (for example, Lehman Brothers). Similarly, with the Great Recession, it took over two years to see roughly 50% of the stock market wiped out. In this instance, a severe impact on the stock market took less than one month and was truly unprecedented. Beyond the fact that the stock market sell-off is the highest any of us will most likely ever see in our lifetimes, home sellers are pulling out of the market at increasing rates as well.
It's important to note that there isn’t always a correlation between a recession and a housing crisis, even though many of us who have lived through the previous Great Recession assume that today's real estate market is going to hit rock bottom in a congruent fashion. Keep in mind that the housing market is strong and resilient. Everyone needs a place to live, and in previous recessions (other than that of 2008), housing prices have actually increased or remained steady. I predict the current climate could lead to a significant drop in real estate values in the short term, at least in markets that are overly inflated (South Florida and Las Vegas, for example).
However, when the market has low inventory (as caused thus far by the current crisis, with many sellers taking their properties off the market) combined with low interest rates, it still seems to be a highly competitive market, which should keep prices relatively stable once the threat of the virus passes. The flip side to this is lenders are financially strained by waiving mortgage payments, and this could translate to fewer loans being made to prospective homebuyers in the future, which could send prices lower.
Regardless, instead of fearing this market or what may transpire in the near future, I recommend using this time to acquire property. Mortgage rates are unbelievably low, and in the short term, there will certainly be deals in your local market. I personally have put multiple offers in on investment properties, some at 25% under list price. Many sellers are willing to negotiate with buyers and are eager to unload their inventory. Putting in offers during this period is certainly not a sure thing and carries an intrinsic risk, but in the long run, you'll more than likely do well.
Up & Coming Trends
Flipping Houses: The Six Most Important
Calculations When Assessing a Fix & Flip
How Much Does It Cost to Flip a House?
Dive deep into the aforementioned six areas to calculate as accurate an estimate as possible. That way, you can invest confidently in properties where the numbers make sense.
Surprise repairs or sitting on the market could mean the difference between a good investment and a bad one. Prepare yourself appropriately to walk away from your flip with a stuffed wallet.
Current Cost of the Home--
This is obvious. How much are you going to have to pay up front in order to get this flip started? Know that this cost will also have an impact on other calculations, like closing costs and financing costs.
ARV (After Repair Value)--
The ARV will determine whether or not all of your repairs are worth the time and money. Investors calculate a home’s after repair value to estimate what they will walk away with when they finally sell the flip to the new homeowner.
Projected Repair Costs--
Every house has different needs based on its square footage, when it was built, and how it was maintained by previous owners.
Before you buy, consider which repairs must be done:
- Roof and gutter maintenance/replacement
- Exterior carpentry (siding, windows, doors, deck, and/or porch)
- Septic repairs
- Electrical, plumbing, HVAC maintenance or replacement
- Flooring and drywall replacement/cleaning
- Appliance replacement
These are just some of the repairs you may face when flipping a home. Bring a comprehensive checklist when walking through a home to thoroughly assess the work that needs to be done and how much these repairs could cost.
These costs could reach up to 10 percent of the sales prices, so don't forget to factor them in when assessing the flip.
Unless you have cash to play with, you're going to need to get a loan for your flip. The more you sit on the flip, the more interest your loan will accrue.
Other Monthly Expenses--
Even if you don’t anticipate owning the home for more than a few months, you’ll still have expenses to pay as a homeowner.
Here are a few:
- Property taxes
- HOA fees
- Landscaping maintenance
Keep these costs in mind as motivation to sell quickly. The longer you sit on a flip, the more you will have to pay in electric bills and property taxes.
The difference between a good or bad flip could be one simple oversight. Consult with real estate investment experts about anything you’d like clarified or double-checked.
Rates Are Historically Low, But It’s Extremely Hard to
Get a Loan—Here’s Why (& What to Do About It)
Real estate, like all other asset classes, goes through market cycles. As the market goes up, property values increase, and the ability to get a loan generally becomes easier. As the market goes down, property values decrease, and the ability to get a loan generally becomes harder.
When the loans get harder to obtain, you may begin to ask yourself:
- Why has it become so much more difficult to get a loan today, when two months ago it seemed easy?
- And most importantly, how am I going to fund my next deal?
Now, in order to answer the above questions, we need to take a step back and see how lending has evolved in real estate.
Recent History of Lending
From 2005- 2008
, real estate went through its infamous “no-doc” period, which basically meant giving out loans with no required documentation. As you can imagine, this did not end well—it caused a collapse in asset prices not seen since the Great Depression.
, the pendulum swung the complete opposite way, and getting a loan became extremely cumbersome. This period was famous for the ample amount of deals to buy—but no capital to buy with.
For the last nine years
, the process of getting money for a deal can be summarized in one word: easy. When I talk about getting money, I’m referring to the debt of the deal.
For example, say an apartment building costs $1 million. For simplicity purposes, I have to raise 25% (or $250K) for the deal from my investing partners, leaving the remaining 75% (or $750K) to be funded by a debt provider, such as a bank, agency, or private lender.
Obtaining that 75% debt has been “easy” up until COVID-19 hit. Now we enter what I call the “corona crazy” environment.
To put it simply, the world has changed—in almost every way—in the last two months. These changes have drastically affected an investor’s ability to get loans on deals.
Where Can You Get Money for Your Next Deal?
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