\n<\/p>\n
If you\u2019ve been thinking about buying a house in 2024<\/strong>, you already may be too late<\/strong>. With mortgage rates<\/strong><\/a> dropping<\/strong>, listings increasing, and spring buying season <\/strong>only a short couple of months away, NOW is the time to act <\/strong>before bidding wars start up again. With so much pent-up buyer demand, agents and lenders are already seeing a spike in activity, and we haven\u2019t even gotten to spring. So, if you want to know how to buy a house in 2024<\/strong>, even with fierce competition, we\u2019re here to help.<\/p>\n Avery Carl<\/strong>, short-term rental expert and agent, and Caeli Ridge<\/strong>, President at Ridge Lending Group, join us to talk about what they\u2019re seeing in the market NOW, what their housing market predictions<\/strong><\/a> are as buying season heats back up, and whether or not now is even the time to buy. Both Avery and Caeli work heavily with investors, so they know what does and doesn\u2019t work when buying a rental property<\/strong><\/a>, NOT just a primary residence.<\/p>\n We\u2019ll touch on the hottest markets <\/strong>that could see the most competition, why rookie investors need to snap out of <\/strong>analysis paralysis<\/strong><\/a> to win in 2024, and why this buying season could become red-hot<\/strong> in just a few months. Plus, David and Rob will answer a listener\u2019s question about how to win in a competitive market without having the highest bid.<\/strong><\/p>\n David: Rob: David: Rob: David: Caeli: David: Avery: David: Avery: Caeli: Rob: Avery: Rob: Avery: Rob: Avery: Rob: Caeli: Rob: Caeli: Rob: Avery: David: Avery: David: Caeli: David: Rob: Caeli: Rob: Avery: Rob: David: Caeli: Avery: Rob: Avery: David: Caeli: Avery: David: Rob: David: Caeli: David: Avery: Caeli: David: Avery: David: Caeli: Avery: David: Avery: Rob: Avery: David: Caeli: Rob: Avery: Rob: Avery: Rob: Avery: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: Rob: David: \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Email <\/em>[email\u00a0protected]<\/span><\/em><\/a>.<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
This is the BiggerPockets Podcast Show 869. What\u2019s going on everyone? This is David, your host of the BiggerPockets Real Estate Podcast. Joined today by the Quaff Crusader himself, Rob Abasolo. Rob, how are you today?<\/p>\n
Fantastic, man. I\u2019m really excited to get into today\u2019s show. We\u2019re calling it \u201cWhy Buying Season is Now.\u201d And I think we\u2019ll really dissect some of the psychology and some of the watchouts and some of the things you should keep in mind if you want to buy a property today. We\u2019re speaking with Caeli Ridge, who\u2019s a nationwide lender, who specializes in lending to investors. We\u2019re also talking to our good friend, Avery Carl. She\u2019s a friend of the show. She\u2019s a real estate agent who specializes in working with investors. Who would\u2019ve thought?<\/p>\n
We\u2019re going to be talking about seasonal strategies, if now is a better time to buy than waiting until spring when all of the other investors tend to hit the market and we see blood in the water.<\/p>\n
Before we jump into it, I did want to mention that if you\u2019re looking for a lender or agent, we actually have a matchmaking service that you as investors can use to find investor-friendly agents and now lenders. We\u2019ve already done the hard work of finding qualified agents and lenders, so you don\u2019t have to worry about that side of it. All you have to do is the fun part of taking action and making deals happen. So if you\u2019re interested in that, head on over to biggerpockets.com\/agentfinder and biggerpockets.com\/lenderfinder today. After we speak to Caeli and Avery, stick around for a special Seeing Green segment where we answer a listener question about buying in a hot market.<\/p>\n
Avery, Caeli, welcome to the BiggerPockets Podcast. Caeli, let\u2019s start with you. How many markets are you currently in as a lender?<\/p>\n
We are in 48 markets, David. We are in all but New York and North Dakota currently.<\/p>\n
Okay. And Avery, how many markets are you in as an agent?<\/p>\n
20.<\/p>\n
Okay. What markets do you two see are most active for real estate investors right now?<\/p>\n
I\u2019ll go first. So we see right now our most active markets being our lowest price point markets. Typically, we see that because the difference in interest rate is a lot smaller on a $250,000 property than on a $1.2 million property in terms of getting into it. So we\u2019re seeing our lower budget markets be a little more active than our higher ones.<\/p>\n
I would say I\u2019ve got maybe a slightly different lens coming from a lender perspective. And I think it\u2019s going to largely depend on the individual investor\u2019s core strategy. So short-term rental might, for example, be Florida. Florida\u2019s laws are a little bit more lenient for short-term rental. The longer term rental, if the cash flow is the primary objective versus appreciation, they\u2019re probably going to be in a landlocked state versus the sun belt states for that. So I think really, David, the answer for me is going to be most of them depending on what their individual strategies are and within the diversification that they\u2019re going after.<\/p>\n
Sure. I have a follow-up question for you, Avery, because you mentioned some of the lower price point markets are where there\u2019s a bit more activity. Can you give us a few examples of some of those markets?<\/p>\n
Yeah, So Branson super active right now, Myrtle Beach, and the Western North Carolina Mountains.<\/p>\n
Now I know both of you work with mainly investors, so I\u2019ll start with you, Avery. What are you seeing from an investor\u2019s sentiment at the moment?<\/p>\n
We\u2019re seeing a lot of, \u201cWell, let me wait and see.\u201d So I think there\u2019s a lot of people on the sidelines that are ready to buy, that maybe have come into our system and have been kicking around talking with our agents and things, but not pulling the trigger because they just are waiting to see what interest rates do, or really anything to shake loose, whether it\u2019s interest rates coming down some or prices coming down some.<\/p>\n
Do you think if interest rates dropped, let\u2019s say, 1% tomorrow, that would completely change the outlook or do you feel like investors at the moment are still a little bit scarred from the past year?<\/p>\n
It\u2019s difficult to say. I think it would definitely make a big difference because something like 91% of mortgages right now, at least according to Redfin, are under the 6% marks. So as we\u2019re recording this, they\u2019re right around a little over 6.5%, like 6.4% I think was the last that I saw today. So we\u2019re getting closer to sellers wanting to make some moves, but right now there\u2019s just not really any inventory because when sellers list their properties, they then turn around and become buyers usually. So a seller doesn\u2019t want to list a property when they have an under 6% mortgage to then jump to being a buyer at 8%. So it just doesn\u2019t make sense. So I think if they went down a percentage point at this point, we would see some things start to move.<\/p>\n
Interesting. Yeah. So we\u2019re a bit of a stalemate because you sell your property, where are you going to go? You\u2019re going to then turn around and effectively have to buy a cheaper property at a higher price point to get something similar, is what I\u2019m hearing. Caeli, what about you? What investor sentiment are you seeing right now?<\/p>\n
Well, if I might, Rob, if it\u2019s okay, just to interject, that when we talk about interest rates, and I spend a lot of time obviously talking about interest rates. In fact, that\u2019s usually investors\u2019 first question, \u201cWhere are the interest rates?\u201d And I feel like there\u2019s a real psychology attached to rates as it relates to real estate investing, and I know that it\u2019s going to be far different if it\u2019s their owner occupied, but we\u2019re here to talk about investors. And the psychology is that they aren\u2019t doing the math and they just hear the numbers and they\u2019re listening to the soundbites on whatever their predilection for Fox or CNN or wherever they\u2019re getting their information.
And if they were to take the time and do the math, I\u2019m always trying to educate our investors to say, \u201cListen, the difference in an eighth or a quarter or a half or a full percentage point in rate, depending specifically on the loan size, might only be 50 bucks a month.\u201d So just make sure you\u2019re doing that math. It\u2019s so, so important than just to be on the sidelines listening. But to answer your question specifically, Rob, I would say that, sentiment, investor sentiment, I think that I would differentiate two buckets here. I would say brand new investors are going to be more tentative in that higher rate environment and investors that invest and have been investing, they understand that the market is cyclical and rates will change and price points will change, and then they change their strategy accordingly, they\u2019re going to figure it out.<\/p>\n
Yeah. Do you feel like investors right now in the market are actively looking for deals and transacting on them?<\/p>\n
Absolutely. Honestly, our volume, well, yes, for sure there has been between 2023 and let\u2019s compare it to 21, for example. Certainly there has been a dip in activity in acquisition and refinance, but I wouldn\u2019t say that for us it\u2019s as much as maybe owner-occupied transactions. Like I said, investors are looking at it from so many different facets, and if they\u2019re doing it right and looking at it holistically, they\u2019re not just looking at an interest rate of 8% and cashflow has to be three, four, $500. They\u2019ve reset their expectations. They\u2019re looking at short-term or two to four units. Maybe they\u2019re looking at being private note holders, private lenders. The investor that has been investing or has been educating themselves is making their way through.<\/p>\n
Avery, do you have similar thoughts or sentiments on that?<\/p>\n
Yeah, yeah. So I do think that the people that we\u2019re seeing transacting right now are typically going to be the more experienced investors. And I think that we are seeing a lot of people still have, being a little traumatized from 2021 and \u201922. So I think one of our biggest coaching points for our clients right now is saying, \u201cJust make an offer that works for you. Just offer at the number that works for you.\u201d Because people are still feeling the pain of 2021 and \u201922, where you had to offer asking price, you had to offer over-asking price. So what they\u2019re doing is they\u2019re just swiping left on all these properties because the asking price doesn\u2019t work. And we\u2019re like, \u201cNo, no, wait a minute. You can offer low. Offer as low as you want to go. You do not have a lot of competition right now. Let\u2019s see what happens here.\u201d And we are seeing people get some really good deals that way.<\/p>\n
Avery, as a real estate agent, when do you tend to see more listings hit the market?<\/p>\n
We usually see more listings start to hit the market in January. So March is when you really start seeing a lot more closings. As you know, David, with your team, January and February will be a little slow on the closing side, but March is when things really start to pop closings-wise, which means all the movement is starting to happen in January. A lot of people hold off during the holidays \u2019cause they\u2019ve got a lot to think about with family and gifts and getting through all that. And then they start to either look for properties or list their properties after they get over the big headache of the holidays. So I think, at least with our clients, we are really trying to encourage our past clients to list right now if they have any interest in 1031 exchanging or trading up. We\u2019re trying to get them to do that now because a lot of the analysts predicted that we wouldn\u2019t see the interest rates that we\u2019re seeing now until the end of next year.
And we\u2019ve had a really good several week run of interest rates dropping sharply. And I think that if that continues, of course I\u2019m not an economist and I can\u2019t predict the future, but I think it\u2019s probably going to continue on a downward trend, who knows how quickly, but to be prepared for this, we have a surge of buyers every January, just that\u2019s how the cycle of the market works every year. So that coupled with this interest rates coming down faster than we initially thought, I think is going to be even a bigger spring than what we\u2019re typically used to because there\u2019s just so much pent up demand in the market right now.<\/p>\n
What are you seeing, Caeli?<\/p>\n
I think Avery is right, and I think that myself included in the data, and I\u2019m looking at this all day long, I don\u2019t know that I would have predicted that, and I won\u2019t get too technical, that the PCE that came out on November 30th would have promoted the rate reductions that we\u2019ve seen for the last couple of weeks. So we are pleasantly surprised, I think, as a result of that inflationary metric. PCE, for those of you that are not familiar, personal consumption expenditures, that\u2019s the one that the Fed Reserve focuses on most.
It came in favorable for inflation is on the run, rates are going to start coming down. The bad news is that rates fall a lot slower than they go up. So maybe we did get to see some boon or an incentive here as a result. I don\u2019t know that I would say that I\u2019m going to see them falling off a cliff, but I do think that that trajectory is on the lower slant. But remember, I said earlier, an eighth of a point or a quarter of a percentage point on $150,000 is 10 bucks. So put it into perspective and one more time for posterity, do the math.<\/p>\n
All right, so we\u2019ve reviewed some cautious investors sentiment out there and some potential good news with future rates. We\u2019re going to get into what that might actually look like in 2024 right after this break.<\/p>\n
We\u2019re here with Avery Carl and Caeli Ridge to get both the agent and the lender perspective on if now is a good time to buy and what we expect to see play out in the 2024 market. It\u2019s a very interesting psychology that y\u2019all are both nailing both sides of it, which in my mind what I always see is, when interest rates are low, everyone is buying, everyone is putting in offers over asking, and thus everyone is discouraged and they don\u2019t want to get in because competitive. And then now interest rates are high and competition is low, and those same people are complaining about interest rates being too high. So it\u2019s always funny that there\u2019s this flip flopping. And if you go back to the math and you math it out, yeah, it\u2019s like it could be 10 bucks, it can be 50 bucks.
I feel like probably where a lot of the, I don\u2019t know, some of the fear that\u2019s coming in, Caeli, is that a lot of it comes from one eighth doesn\u2019t make a big difference, but over the past year we\u2019ve seen it go up quite a bit and so I think people are used to rates being in the threes or the fours and now the fact that they\u2019ve doubled does have a pretty significant impact and I feel like we have to see those rates continue to come down before people are comfortable entering the market again, or I would say the masses.<\/p>\n
Okay. And I don\u2019t disagree, Rob, but here\u2019s what I would say, a couple things. First, people have short memories. I\u2019m in that grouping, okay? I can call myself out on that. The average interest rate and investors didn\u2019t just start investing in 2021, \u201922, \u201920, right? That\u2019s not when this happened. When rates were low, we got an amazing opportunity to get some great cash flow, but prior to that, the average thirty-year fixed mortgage rate is in the high sixes, historical average. So we have that. And then let\u2019s not forget that as we move forward, and in talking about diversification and investors, looking at their portfolio, if they\u2019re smart, they do have some diversification in their core, they\u2019re going to have their core philosophies, but then layering in some other forms of real estate investing because the markets are cyclical and because they\u2019re going to change is going to be very, very important.
And going back to, I know I\u2019m beating a dead horse with the math of all of this, but remember if they\u2019re doing it correctly, they\u2019re not only looking at it from the monthly or annual return, what about everything else? All the other very tangible benefits of real estate investing, you\u2019ve got your tax benefits if you\u2019re doing that right, that should offset quite a bit of the interest rate because remember, at a higher interest rate, what happens to the interest deduction that you\u2019re taking on your Schedule E? It\u2019s going to be a lot higher than if it were a 4% rate versus a 6% or 7% rate. Appreciating rents, et cetera, et cetera.<\/p>\n
I guess with that, I\u2019d like to turn it back to you, Avery, because obviously lots of changes happening, lots of sentiment from differing groups of people. And by the way, Caeli, I do agree, I do think our memory is short, but there is such a large group of people that broke in 2020 and 2021, they do remember the 2.75% and the 3.25%. It\u2019s hard to forget. So with that said, Avery, as we move into Q1, tell us a little bit about what you\u2019re seeing inventory wise and how are things sitting on the market at the moment?<\/p>\n
So I\u2019ve been jokingly calling this year the great stalemate because buyers aren\u2019t buying as much because interest rates are almost double what they were a year ago, and sellers are not listing because they don\u2019t want to turn around and be buyers in a high interest rate environment. So what we\u2019re seeing is incredibly low inventory. I think what a lot of people don\u2019t realize is that, they keeps saying, \u201cOh, I\u2019m waiting for the crash. I\u2019m waiting for the crash.\u201d It happened. It happened right underneath everybody\u2019s noses, less houses were sold, fewer houses were sold in 2023 than in the past 15 years. Nothing has been sold this year. So as interest rates go down, I think that sellers are acutely aware people who might need to list, who are ready to trade up, get into other markets, other asset classes, things like that.
They\u2019re really, really paying attention to the media and this interest rate news. It\u2019s almost more important what the media says about it than what\u2019s actually happening in terms of buyer and seller psychology. But I think as things continue to take down, assuming that they will, again, nobody knows the future. I\u2019m not trying to instill any FOMO here. But I think as rates continue to take downward, we\u2019re going to see sellers start listing and it\u2019s going to be back to multiple offers again because again, there\u2019s so much pent up demand that at least temporarily things are going to be really, really crazy. Maybe not 2021 crazy, but it is going to go back to a multiple offer situation until things even out a little bit.<\/p>\n
Yeah, it\u2019s pretty interesting how some of these changes are pretty fast. I have a house listed in Houston and the moment that they announced that they were dropping interest rates, they did go down a little bit and my realtor was basically like, \u201cMan, it was instant here.\u201d And the amount of calls I got on this property just from the announcement, from investors really who are like, \u201cOh, rates are moving down, jumping in on it.\u201d Clearly that\u2019s anecdotal, but I\u2019ve spoken to a few people who feel like, yeah, as rates go down, desire and demand go up.<\/p>\n
There\u2019s a pattern there that you can recognize when it comes to real estate investing and it tends to be that the crowd moves as a flock of birds. I\u2019ve always been of the opinion that buyers drive markets. What the buyers are doing depends what type of market that you\u2019re getting. Sellers will typically be reacting to whatever buyers are doing, and buyers tend to move as one big flock. When rates go down, when you hear about other people buying houses and everyone thinks, \u201cOkay, I need to get in there and buy a house.\u201d And when nobody else is buying, it\u2019s very easy to pull back and say, \u201cOkay, I don\u2019t want to buy because nobody else is buying.\u201d
There\u2019s this feeling of security that you get from following the crowd, which is how the normal casual investor is going to make their decisions. But when we interview people on this podcast and we talk to people that own real estate, they\u2019re almost always contrarians. They bought when other people were not buying and maybe they sold when everybody else was buying. You see some of that. What\u2019s your thoughts ladies on if people should be moving against the crowd or if it\u2019s wiser to follow the crowd?<\/p>\n
I would say that against largely is going to be more to their advantage more often than not. And not just for those two perspectives, David, but I get to see, because we\u2019re licensed in forty-eight states, I do get to see the trends and there\u2019s a lot of activity in this particular market, for example. As an investor, well, if there\u2019s an opportunity there and the deal works, it works, but I may focus my sights on a place that has equal returns or better because I\u2019m actually doing the legwork and the due diligence and the math, but I\u2019m not oversaturated with competition in offers and I\u2019m sure Avery\u2019s got some insight about that too. So I would say that I would be going against the flock.<\/p>\n
I would say it really just depends on, the favorite phrase in real estate investing is, \u201cIt depends.\u201d It depends on what each individual investor is looking for and needs. So I\u2019ve seen great deals happen in environments where everything\u2019s getting a thousand offers. I\u2019ve seen great deals happen when there\u2019s not a lot of activity going on in the market. So it really just depends on you as the investor and you just keeping on putting one foot in front of the other and keeping following that thread to find the deals because I think it\u2019s when people just stop and say, \u201cI am going to wait and not do this right now\u201d, that they might\u2019ve been one step away from actually getting that deal. And that can happen in any market. It\u2019s just the key is just to keep going.<\/p>\n
Yeah, it feels like in general the crowd is always a little delayed. If you\u2019re following the flock, the flock is usually following the front runner. So it makes sense that you probably don\u2019t want to be with the crowd, but I do think it\u2019s not the worst idea to stay a little cautious right now. I\u2019m not waiting things out per se. I\u2019m trying to get better deals, a little bit more scrutinizing the types of deals I was taking on two years ago. But with all that said, Avery, I mean we talked about the competition side of it. Do you think it\u2019s a competitive, I know overall we said competition is low, but for investors, do you feel like the competition has leveled out? Because the way I\u2019ve experienced this is people who are really serious about real estate and have been seasoned veteran investors didn\u2019t really slow down too much over the last year.<\/p>\n
Yeah, I\u2019d agree with that. The ones who are seasoned and understand what they need out of a deal and that it\u2019s not their first one, I think are definitely have been keeping a more steady pace over the last year than some other ones. I mean, I know myself, we\u2019ve bought significantly fewer deals this year than in previous years, and it\u2019s not because what\u2019s out there doesn\u2019t make sense, it\u2019s \u2019cause there\u2019s nothing out there. There\u2019s 10 deals on the market, in the market that we buy in and nothing has hit the market in two months. And I\u2019m checking every day and waiting for something to come on that fits our buy box, and it\u2019s just that there\u2019s so little inventory coming on. So I think that the experienced investors are keeping going, but again, it\u2019s still an inventory issue at this point.<\/p>\n
What do you guys think about springtime? Do you think that you\u2019re going to see more houses hitting the market? Do you think you\u2019re going to see more buyers coming back in?<\/p>\n
I think naturally spring is where we start to see things pick up high rate, low rate, whatever particular lending environments. I think spring is always going to be where things start to catch a little bit of steam. Avery, wouldn\u2019t you agree?<\/p>\n
I agree. March is always one of our biggest months. So March is typically the month where we see the most closings, and that\u2019s every year. Every year spring is a great time to sell because things pick back up after the holidays like we talked about earlier. So I think we have a little bit of a unique situation and a perfect storm coming into this spring in that we\u2019ve had very, very, very negative rhetoric in the media about interest rates and the economy and the Fed. I\u2019m so tired of hearing the Fed, as I\u2019m sure everyone is. And just now,, right before the spring listing season starts, we get the first kind of good news that we\u2019ve had in a while, the first dovish meeting from Jerome Powell.
It\u2019s, I think, going to accelerate that typical cyclical thing where we see a lot more houses come on the market in the springtime, so I think that, plus positive rhetoric in the media, which again I think is sometimes more important for just the psychology of the masses than what the actual rates are. Plus as those people start to list because of this psychology going on and the actual rates being lower, I think that we\u2019re going to have a bigger spring than what we\u2019re usually used to seeing.<\/p>\n
Yeah, I can see that happening. I think as odd as this sounds for every year that I\u2019ve been in real estate, and you notice it more when you\u2019re an agent, people always underestimate how powerful the seasonal changes are. It\u2019s always like, oh, the market\u2019s so slow, I don\u2019t know how we\u2019re going to get by. And then springtime hits and escrows go through the roof and there\u2019s so much demand and all this product hits the market and it gets snatched up and it turns into a feeding frenzy and people go, \u201cOh my God, the market\u2019s back.\u201d As if we can\u2019t expect that to happen. I feel like it\u2019s always more significant than we expect it to be, even though we know this is going to be the case.<\/p>\n
All right. We expect to see a surge of supply and demand in the spring, but what are we going to see with mortgage rates and prices? What guidance are these experts giving their clients? We\u2019ll hear from Caeli and Avery on all of that after a quick break.<\/p>\n
Caeli, what do you expect to see for mortgage rates in 2024? Do you think that investors should be holding out, waiting for rates to drop to jump in, or do you think that rates are going to stay steady?<\/p>\n
I think that depending on the individual investment, there may be reasons to pause, but 9.9 times out of 10, no. I think that loan size is going to dictate the final answer to that. But as I keep repeating, the difference in payment between 6.75 today and 6.5 or 6.25 and six months or eight months or 10 months, whatever, is negligible and it should not preclude someone from taking advantage of the opportunity today and the inventory today and all the other benefits that the asset\u2019s going to produce.
So no. In terms of where rates are going to go, I am like-kind in the opinion that I think that they\u2019re on the run. They will come down slower than we see them go up as just historically what happens to interest rates. But guys, rates are fluid, rates are not a straight line. They\u2019re going to go up, they\u2019re going to come down and I really try to do my work and job to educate investors that you need the rate to work the deal, but stop fixating on the rate. The rate is not as relevant as so many other variables of vetting the transaction.<\/p>\n
So let me run a hypothetical situation by you two. Let\u2019s say that springtime comes and rates come down at the same time. That is going to make investors feel much better about buying. Most people that are listening to this or waiting for some scenario like that before they jump in, what can we expect to see prices do if that does happen?<\/p>\n
I think in the short term they are going to go up. As things even out once we get more of an equilibrium with inventory in the market, I think that that will even out too. But I think in the short term, I\u2019m not sure how long, I mean, by the short term, but I think they will go up at least for a while.<\/p>\n
And in the meantime, I would just offer as an extra to that, whether it\u2019s now and they\u2019re taking advantage of whatever opportunities are available to them today versus in March or later in the year, they need to be ready, they need to be prepared. And if they just make a decision in March, \u201cOh, I\u2019m going to get in now,\u201d and they\u2019re not ready, they don\u2019t have their capital ready, their credit is maybe there\u2019s some X, Y or Z that needs to be looked at or fixed, whatever it may be. If they\u2019re not prepared, then they will, they\u2019re going to be trailing, especially if we all agree that March is going to be bigger than I think the last year\u2019s March in particular is because the deeper psychology from March of \u201923 versus what I think we\u2019re going to get in \u201924 because of the new language about rates. So if you\u2019re not ready, you\u2019re going to be at a huge disadvantage.<\/p>\n
So we all agree that there is a potential that kind of the stalemate that we\u2019re in right now that higher than previous rates and lack of inventory has created this pressure where there is significant demand, but there\u2019s also low supply, and rates are staying steady, but it doesn\u2019t feel like it\u2019s because of lack of interest. It feels like there\u2019s very difficult market forces that are pushing together. With that in mind, how are you advising clients to buy? The people that are buying right now, should they be thinking of having multiple exit strategies? Are there certain areas that you feel like are primed to explode or going to be better positioned for investors to be in than others right now, Avery?<\/p>\n
So again, I think that\u2019s dependent on what the individual investor is looking at. We keep telling our clients like, \u201cHey, offer low. Just come in low, come in where you think it makes sense and let\u2019s see what kind of a deal we can get you here on the purchase price.\u201d But I want to be careful before I say this next thing \u2019cause I know a lot of agents have been saying all year, \u201cMarry the house, date the rate,\u201d and I hate that. I think that encourages people to invest irresponsibly.
So I think what people need to do in order to make sure that they don\u2019t over-leverage themselves in that way is make sure that the numbers work at the interest rate you\u2019re able to get it for now. Let\u2019s beat them up on the price as much as we can. Make sure they work at what you\u2019re able to get now interest rate wise and then later if and when rates come down, which could be next month, it could be 10 years from now, but if and when that happens, then any refinance room that you find to refinance into a lower rate is just extra. So make sure that, that refinance part is extra and not necessary when you\u2019re investing right now.<\/p>\n
Do either of you have a market or several markets in mind where you think that we\u2019re likely to see rents go up more than the surrounding areas or values go up faster? What are your thoughts on that?<\/p>\n
I will just offer that for rents going up. I don\u2019t know that, I think, Avery, you can handle that, but in terms of home prices, et cetera, generally speaking, historically speaking, the sun belt states are going to offer. There\u2019s exceptions to every rule. But the higher the appreciation, the lower the cash flow, higher the cash flow, the lower the appreciation on let\u2019s say a single-family, long-term rental. So for appreciation, typically those sun belt states are typically where you\u2019re going to find the price points increasing at a greater clip than in Indiana, for example, or certain markets in Indiana.
On the rents, Avery, you probably have that better than I do in terms of specific markets where we see rents really on the rise. Actually, let me say one thing, there is a website that might be useful. I don\u2019t know if you guys want to keep this in here, FHFA, Federal Housing Finance Agency. It\u2019s a government website. Obviously, it\u2019s free. But I mean they put a lot of money into it and you can go in there and look at the different data and metric. They\u2019ll go pass, present, and even futuristically where it\u2019s not rents, but it will be appreciation in markets for housing. You\u2019ll be able to get that data.<\/p>\n
Yeah, I think for the rents rising, I don\u2019t think any are necessarily about to explode, but same answer as the past few years. I think Southeastern states really are, especially the areas where the medium-ish metro areas like Charlotte for example, where a lot of people from California, New York are moving into those smaller metro areas in Southeastern states. I think those are areas where it\u2019s looking pretty good to me.<\/p>\n
Okay, so if you had someone listening, they\u2019ve got some capital, they\u2019re ready to rock, but they don\u2019t have to rock. Are we in general advising people to buy now and try to avoid some of the competition coming in spring or are you on the side of, \u201cWell, wait to buy and see what rates do\u201d?<\/p>\n
So I never necessarily tell people to wait to buy because we just don\u2019t know what\u2019s going to go on and what six months from now looks like. And I know when I first started investing, I had to save up my first $25,000 to buy my first long-term rental. And over the course of time, it took me like a year, my husband and I, a year to save that up. Our original target price was a hundred thousand dollars house. That same house was $140,000 by the time we saved up for it.
I would recommend buying what you can find that makes sense now just because it is such an unknown, especially now in the future. If you can find something that makes sense now, I think go ahead and buy it. I mean I know there\u2019s one market that I\u2019ve been trying to buy in for the past probably three or four months. And when I saw that interest rate drop the past couple weeks, I remember to myself, I thought, \u201cOh, man, texture agent before everybody else jumps in.\u201d So I felt like, \u201cOh, my god, I got to do this before everybody comes back.\u201d So it definitely, it affects me too.<\/p>\n
Yeah, I was wondering the same question because it is an interesting dance where things start to pick up in January, but the competition is lower in January in theory than in March where everything is going in. So it seems like what you\u2019re saying is basically like, \u201cIf you find a good deal, jump on it because we don\u2019t know the level of good deals that we\u2019ll have in a quarter or two quarters or for the rest of the year,\u201d right?<\/p>\n
Yeah, that\u2019s how I feel. And then I also have this level of not saying, \u201cOh, yeah, you need to buy now,\u201d \u2019cause everybody is like, \u201cWell, she\u2019s a real estate agent. Of course, she\u2019s going to tell you to buy now.\u201d But that\u2019s how I feel is, that we don\u2019t know what\u2019s going to happen, especially in the near term. Things have been really volatile the past couple of years, so if you can find a good deal now you need to jump on it.<\/p>\n
That is the joy of being an agent. That is absolutely right. When you don\u2019t tell somebody that they should push forward and prices go up, they\u2019re mad at you. I\u2019ve literally had people say, \u201cI said I didn\u2019t want the house, but why didn\u2019t you change my mind?\u201d My own brother has said that. \u201cWhy didn\u2019t you push me harder to write a higher offer on that house? I definitely should have bought it. I lost it by $7,000.\u201d And then obviously if you tell people, \u201cI think you should buy the house,\u201d and the market goes down, everyone\u2019s going to be mad at you. It is very difficult when you\u2019re judging your portfolio by how it does in the near term, which is why we try to tell people you should be putting a strategy together to build it over the long term.
And what\u2019s funny is 20 years down the road, no one even remembers what their real estate agent said or what was going on at the time of that one specific deal. But I\u2019ve yet to meet the investor who says, \u201cThe house that I bought 30 years ago is a mistake.\u201d In fact, what they always say is, \u201cI wish that I would\u2019ve bought more.\u201d So the trick is how do you survive for 30 years in this market? So for people that are looking to buy in the near term, they know that they want to get in the game. Do you have any advice for that person of what they should be cautious of and what they should be looking for? I\u2019ll start with you, Caeli.<\/p>\n
I would say, again, be prepared, right? Get prepared, start talking to your support team, get your finances in order, et cetera. And it\u2019s going to be a matter of individually, and we look at it very individually where they are right now, where do they want to be in a year, where do they want to be in five years. So it is very individual, I think, the answer to that question. But I agree with the last sentiments in that now is the time. Rarely will I tell someone to wait on interest rates. There\u2019s too many variables that none of us can predict for. And we haven\u2019t even talked about what could be changing in their own individual lives that could preclude them or make it more advantageous. That would be my advice is be prepared and take advantage when you can.<\/p>\n
What about you, Avery?<\/p>\n
I definitely agree with Caeli. You definitely want to be prepared. Make sure you have all your financing in order. And definitely when you\u2019re looking at deals, especially if you\u2019re looking at on MLS deals, just sort by days on market, because I\u2019ve seen this even with my sellers, where I\u2019m the listing agent, where people will make low offers and make low offers and they say no a hundred times. And then one person comes along, makes the same low offer everybody else has made on the hundred first try, they\u2019re finally fed up with it and they sell it to them. So high days on market is a really great thing to start with, if you\u2019re looking to really try and get a deal in this market.
It doesn\u2019t always work. Some people are just overpriced and they\u2019re stuck on their price and that\u2019s what it is. But if you make enough offers, you will find that person that finally says, \u201cOkay, fine. Let\u2019s just get rid of this.\u201d Don\u2019t hesitate to offer low on things. Just make the offer that makes sense for you. Start with high days on market. And also, terrible listing photos are a favorite way of mine to find good deals.<\/p>\n
Okay. With the sentiment of like, \u201cHey, just make a low offer,\u201d is it working? Are people taking lower offers?<\/p>\n
Yeah, it\u2019s happening. I mean, it\u2019s not happening every time. I don\u2019t want to set unrealistic expectations, but we\u2019re definitely seeing some deals happen. So if you just keep in the game, eventually you will get one. So it is working.<\/p>\n
Someone at BP con accosted me and was like, \u201cRob, have a solo high. I had a listing that you lowballed by $200,000.\u201d And I was like, \u201cOh, sorry, it only penciled out at that price.\u201d And then she was like, \u201cIf it was $10,000 more, we would\u2019ve taken it.\u201d And I was like, \u201cThat doesn\u2019t sound like I lowballed you that much then if you were close.\u201d<\/p>\n
And why didn\u2019t you counter me?<\/p>\n
Yeah, exactly.<\/p>\n
Yeah. It was a little bit of an awkward confrontation at the buffet, but it does feel like it is more plausible these days than it was two years ago. So there\u2019s a little bit of encouragement there. You can come in a little lower and at least you\u2019ll be heard. That\u2019s what it sounds like to me.<\/p>\n
There was a time where just getting an inspection contingency in your deal felt like a huge win. So let\u2019s not forget it wasn\u2019t that long ago where you were just going in blind and hoping that things worked out, competing against 15 other people. That yes, it is harder to get casual than it was, but you\u2019re getting longer to make those decisions, you\u2019re getting to investigate the property much more thoroughly than you were before. There\u2019s always something when it comes to real estate investing to focus on that can be problematic, but there\u2019s also benefits to every single market. So let\u2019s not throw out the good while trying to avoid the bad. Ladies, thank you so much for joining us here. If you would like to get in touch with either Avery or Caeli, their information will be in the show notes along with Rob\u2019s and mine\u2019s.
Let us know what you thought of today\u2019s show. And if you\u2019ve got a second, please take a minute to leave us a five star review wherever you listen to your podcast. Those help us out a ton. I\u2019ll let everybody go. It\u2019s been great having you all here, and thank you for sharing your knowledge, your heart and the information. All right, it is time for our Seeing Green segment, where Rob and I take current questions from you, our listeners and hash them out on a mic, so you get the confidence and clarity that you need to move forward building your own portfolio.<\/p>\n
Today\u2019s question comes from Steve, who is already feeling the heat of buying season.<\/p>\n
Steve writes, \u201cI am a new investor trying to purchase a property out of state. The area I am focusing on has a very small supply of property, so the landscape is very competitive and I\u2019m outbid on every offer even if I go way above the asking price. I like working with my real estate agent, but do you think I\u2019m at a competitive disadvantage compared to investors who work directly with a property owner or a seller\u2019s agent? This leads to my second question. What can I do to stand out from the crowd besides paying in cash or throwing too much money with every offer I write?\u201d<\/p>\n
Okay, so Steve really broke it down for us. Can working with your own agent be a disadvantage? And how can you get your offer accepted besides more money?<\/p>\n
Okay, let\u2019s get into this. The first approach here would be, if you\u2019re buying in a competitive market where there\u2019s going to be several offers on every property, there\u2019s probably not a secret formula that you can use. You tend to get the best deals when you\u2019re not competing with other buyers. I\u2019ll say that again. When you\u2019re buying real estate, if there\u2019s only one person trying to buy it, namely, you are competing with the seller and negotiating against them. The minute you try to buy a property that has other interested buyers and there\u2019s other offers, you are no longer competing with the seller, you are competing with the other buyers. So there is nothing that you can do when you\u2019re trying to buy into the best markets where everybody else is trying to buy other than write the best offer possible.<\/p>\n
I think that makes sense. I was going to ask, I mean, is it advantageous to go directly to the listing agent like he\u2019s asking and saying, \u201cHey, we represent me as well.\u201d I personally think that would give you more leverage, but I think it\u2019s always best to have your own realtor because at the end of the day, I mean the listing agent, they represent the seller first and foremost. I always think it\u2019s hard to get any information from the listing agent when I\u2019m working with them. Has that been true in your experience?<\/p>\n
Yeah, and I\u2019ve been on both sides of this. I\u2019ve been the listing agent that as people come directly to me and I\u2019ve been the buyer\u2019s agent that\u2019s trying to buy the property for my client, representing them. When I\u2019m the listing agent and someone comes to me and says, \u201cHey, I want to write an offer through you directly, what kind of a discount can I get?\u201d I always say nothing. But I might say, \u201cHey, rather than going a hundred grand over and not knowing if you\u2019re going to hit, if you come in here, I will tell my client that this is the offer that should be taken \u2019cause it\u2019s literally the best offer.\u201d
So one of the benefits that you can get is if you\u2019re like, \u201cI don\u2019t know if I need to go 50 grand over, a 100 grand over, a 150 grand over,\u201d going directly to the listing agent, they may say, \u201cWell, here\u2019s where the other offers are.\u201d You got to be higher than those because that still fulfills the fiduciary duty to the seller. They are getting the seller the most money possible. They\u2019re just not getting you, as the buyer, the best deal possible. If you want the best deal possible for you as the buyer, you\u2019re going to want to ride a lower offer, but then you might not get the deal at all. So my advice to people is if you\u2019re in a multiple offer situation, just accept you\u2019re not going to get a great deal.<\/p>\n
No, the logic makes sense. Also, the leverage that you have going to the listing agent is that they make more money, they\u2019ll make a bigger commission. So there\u2019s a little bit of motivation to make it a win-win for everybody. Is that true?<\/p>\n
Most of them are just trying to make their seller happy. Most agents are just, \u201cWhatever it takes to make my seller happy, that\u2019s what I\u2019m going to do.\u201d So they\u2019re going to present your offer that came directly to them, and they\u2019re getting paid on both sides, and they\u2019re going to present the offer of the other people, and the seller is just going to say, \u201cWhich one makes me more money? Which one\u2019s most likely to close?\u201d Now, what usually happens is the seller says, \u201cIf I go with the one that came to you, you don\u2019t get paid that commission. The commission comes back to me.\u201d That\u2019s almost always how it goes down. The seller says, \u201cWell, I\u2019m not going to pay you the buyer\u2019s agent commission if you\u2019re representing both sides. So you have to credit it back to me.\u201d And now your offer isn\u2019t better than the other ones.
The agent isn\u2019t going to be making more money because they had to credit the money to the seller to make that the sweeter deal. And now the listing agent usually goes, \u201cYeah, it\u2019s not really worth it. Just take one of the other ones \u2019cause I don\u2019t want the additional risk.\u201d In my experiences, an agent I haven\u2019t seen going directly to the listing agent work when there are multiple offers. I have seen it work when there\u2019s nothing on the table. There\u2019s nothing coming in, and you go directly to that listing agent and you say, \u201cHey, here\u2019s my offer. Present this to the seller,\u201d and they\u2019re getting paid twice, then they\u2019re more likely to present your low ball offer in a very positive light to the seller. They\u2019re not going to say, \u201cYeah, this guy\u2019s lowballing us. We should kick rocks.\u201d You just don\u2019t have that advantage when there\u2019s other buyers and other offers on the table.<\/p>\n
I think there\u2019s a little bit more of 4D chess you can play when you have your own realtor that\u2019s going up to bat for you, right? So if you don\u2019t have this realtor yet, always remember you can go to biggerpockets.com\/agentfinder to look up an investor-friendly agent that can go up to bat for you. So let\u2019s get back to Steve\u2019s question here. How can your offer get accepted besides more money? And honestly, I just think with the current climate and the amount of options that are available, the answer is relatively simple, just keep making more offers. I wouldn\u2019t overpay for a house just because you really want to get into this specific market. We have your price point settled. We know that you\u2019re for a certain amount.
I might consider just making more offers or finding more properties where there might be a little bit more pain from the seller. So that might mean filtering out on Zillow 90 days, 180 days and seeing what\u2019s been sitting on the market a little bit longer and going for some of those where you have less competition clearly based on the fact that they\u2019ve been on the market so long. How do you feel about that?<\/p>\n
I think it\u2019s good. And I also think that in the best markets, you just don\u2019t find houses with high days on market \u2019cause there\u2019s not a lot of product, and so they just sell. There\u2019s nothing wrong with continuing to take action, looking at properties, writing offers, and just not getting one in contract and just sticking with it. At a certain point, markets do change, more inventory will come on the market. It will work. Sometimes you just get ants in your pants and you really want to get something because you\u2019re tired of putting all the work in and not getting the result.
But to us, success is doing the work. It\u2019s not necessarily getting a whole bunch of houses in contract at prices that you don\u2019t like. So take a little bit of pressure off of yourself, Steve. If you\u2019re writing offers that aren\u2019t working, knowing that you writing them at the right prices is free. All right. If you\u2019d like to have your question answered on Seeing Green, and we\u2019d love to have it, please head over to biggerpockets.com\/david, where you can submit your question and hopefully have it answered on the BiggerPockets Podcast. Rob, thanks for joining me today, both with Seeing Green and with our show. This is David Green for Rob \u201cWon\u2019t steal you girl, but might steal your house\u201d Abasolo, signing off.<\/p>\n