Finding Deals In A Hot Market

[Andrew Holmes]

Finding Deals in a Hot Market – Chicago & Surrounding

Are you getting frustrated finding great deals? The key is, knowing what is happening in

TODAY’S marketplace. It’s amazing what has happened in the Chicago market place over the last year! In the past it was easy to buy and challenging to sell but NOW it’s tough to buy and easier to sell. Knowing stats such as absorption rates, homeowner rates and vacancy rates are some key tools to evaluate the market. 

Knowing what areas are moving better than others will give you a leading edge in the

market. Some price ranges within markets are moving very well while others are stagnant, yet the absorption rate has gone down to 5 month supply compared to 15.1 month supply approximately 18 months ago. Generally, the average absorption rate for most markets is 6 months and is considered normal. 

However in the Chicagoland area the average absorption rate is generally a 10 

month supply. Are you wondering why the Chicagoland area has a higher absorption rate

than the general market? It’s simple: The suburbs in the far outskirts of Chicago tend to

take longer to sell.

Here is another interesting point about the Chicago land market: 

First take a look at these stats for Single Family (SF) Attached SF and 2-3 unit buildings:

Total Inventory: 69,229

Under Contract or Pending: 25,118

Active: 44,111

Shadow Inventory: 30,111

Pre-Foreclosures: 32,101

If you look closely and diligently the opportunities become brighter and more

apparent, and sometimes just glaringly obvious.

Now, for some interesting news about home ownership in the United States: Pay Attention

because this affects real estate investors in a tremendous way!

US HOMEOWNERSHIP FELL TO THE LOWEST RATE IN ALMOST 18 YEARS!!

What does this mean to an investor? A HIGH RISING DEMAND FOR RENTALS AND

INVESTOR PURCHASES IN THE HOUSING MARKET 65% of Americans owned their homes in the first quarter which is down from 65.4 the previous year. It’s currently at the lowest levels since 1995!

(Just an FYI- 65% is good, 67.5% is the tipping point, and 68% and above is dump all and

time to get out of the market. The last time we got up to 69% (2007) all hell broke loose in

the market) These numbers are MY (Andrew Holmes) PERSONAL OPINION ONLY.

Let’s now take a look at what is happening with VACANCY RATES.

Vacancy rates for rented homes dropped to 8.6% from 8.8% a year earlier. Owner-

occupied vacancy rates also fell from 2.2% to 2.1%. BEWARE! The madness of over paying for properties has already begun. Many rehabbersa nd people who are holding properties for long term are overpaying. Recently, I had to turn down 2 deals that other investors were over paying by 25K.

If you are a wholesaler it’s time to step up your game NOW! There are new investors that

want properties and this can be a gold mining opportunity.

ARE YOU A WHOLESALER?

What methods are you using to find your deals?

What price range are you targeting?

Are you in a position to assign/sell an investor a

property?

The demand for homes and investment properties are pushing prices up and now is the

time to go back to POCKET INVESTING.If you are not aware of the POCKET INVESTING TECHNIQUE make sure you read up on the subject. There are pockets that are opening up in the marketplace that are on fire . Are you finding them? As you are looking for these pockets please keep in mind the intrinsic value of the real estate is key. Pocket investing

does not work well with rehabs and flips but it works great with wholesaling and long term holds. Do you know when the best time to set up searches is? October. Why? While most

investors are hibernating between October-February this is the perfect time to pick up

some really good properties. Less competition means more opportunities! By the time the

property is purchased and rehabbed spring is just a round the corner.

Here are a few suggestions on how to look for deals: 

 To begin with sort all deals by Pocket Investment Strategy and then:

1) Use the MLS search in the following order:

a. Short sales

b. Probates

c. Undervalued Listings

d. REO

e.Distressed

f. Regular Sales

2) Search for Pre-foreclosures Occupied Properties ONLY that are not part of the MLS.

(Do not go after unoccupied pre-foreclosures)

3) Probates

4) Shadow Inventory owned by small banks narrowed by property type

5) Distressed properties or direct seller purchases

This is a lot to get started with, so try to just pick one that you feel most comfortable

with first, in an area that you feel comfortable with(no bigger than a 3 mile radius),

and try to get one or two in that area first, then try growing from there. You’ll start

getting to know your area faster than you think!

Until next time – keep looking, keep communicating,

and keep your lines open!

Andrew