Random Thoughts Real Estate Investors Have These Days
Posted @ 11:13 pm - Filed under 1031 Exchanges, Buyer's Market, Capital Growth, Financing, Purposeful Planning, RE Investment Practice
Yes, lenders generally have tightened the reigns on real estate investors. As usual, the pendulum has travelled too far in it’s swing back from sub-prime, no-down nonsense. Now? 10% down is becoming more endangered than oil drilling off the California’s coast. And yet, we’re still closing transactions for our clients using 90% loans. Truth be told though, many have been converted into 80% loans. A lot of our cocky attitude has been adjusted for us, so to speak. Ain’t the first time.
Sometimes ya just gotta tip yer hat to the market, and go with the flow. Swimmin’ upstream is fun, but after awhile your admiration for the whole salmon saga rises. Is buying half a dozen income properties at 10% down better than three at 20%? Uh, yeah. But buyin’ those three is way mo betta than nothing.
Go with the flow. For the vast majority of small to medium investors, capital growth is the name of the game. Though I’ve seen this movie a few times before, and loved the part when the buyin’ gets really fun, this is different. This market, in my experience, is the most target rich environment I’ve seen in real time.
How would a real estate investor describe a beneficial perfect storm?
As I said, my career has taken me through buyers’ markets in ‘74-’75, ‘80-’83, and pretty much most of the ’90’s in one form or another. That said, none of those buyers’ markets could carry this one’s jock.
The ’70’s? Give or take 8-9% interest. Plus, back then, there’d not been price run-ups. So investors, at least in California, didn’t have recent history to spur them on. Loans weren’t what you’d call investor friendly. Plus, the conventional wisdom, authored mostly by what I’ve always called the Downtown Wingtippers was to buy and hold ’till the second coming. Or put another way, ’till your first grandson was bar mitzvahed.
The ’80’s? Gimme a break. In San Diego we celebrated ’till we couldn’t walk when interest rates dropped below 12% at the end of ‘83. Basically that buyers’ market was pretty cool for those with bags of gold. But for the vast majority it might as well of been a sellers’ market for all the good it did them. Sure, we did a bunch of owner carry sales/exchanges with some fairly colorful terms. In the end though, the sales/exchanges were few and far between. Watchin’ rates come down from !7.5% isn’t the recipe for a blockbuster screenplay.
The ’90’s? Again, a buyers’ market but was it really? Like the ’80’s before it, falling prices alone do not a buyers’ market make. Or somethin’ like that.
Fast forward to the present.
Falling prices. Not just low interest rates, but give or take historically low. The best part of all? The entire nation is your friendly real estate shopping mall.
Low prices. High income. Low interest rates. Geographically unlimited access.
Call it what you will. We call it a perfect storm — the kind in which you wanna get drenched. Capital growth storms don’t come around much, and that’s an understatement. I’ve been licensed since Nixon’s first year in office, and this is the first one I’ve ever witnessed. That’s 39 years.
That’s not as rare as Halley’s Comet, which has about a 76 year cycle, but it might as well be, right?
Exactly. You can either get the lead out, or wait a few years to regale your buddies about how you coulda woulda shoulda.
Ssoooooo, got a few minutes? Jot down a quick note to me and let’s get you fitted for some storm gear. How’s this for my new movie’s title: Perfect Storm Meets Purposeful Planning. Likin’ it. Have a good one.
This entry was posted on Wednesday, October 8th, 2008 at 11:13 pm and is filed under 1031 Exchanges, Buyer's Market, Capital Growth, Financing, Purposeful Planning, RE Investment Practice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
