New Hampshire Single Family BRRRR Market Trends - Covid 19

[Anthony Simboli]

I'm in the process of looking for a single family (live in) property in New Hampshire. Ideal scenario is a place where I can live in the unit but also spend the next 1-3 years remodeling myself and then sell &/or rent the property after. 

My question is, has anyone been doing this in New Hampshire (or other states) and noticed a trend in single family homes that need some good TLC now that the economy is likely going down. My assumption is that prices will continue to trend down, but rates may increase.

Thanks!

[Troy Zsofka]

Hi @Anthony Simboli

Are you looking for a lease option on an SFR that you can live in and then purchase down the line, or a fixer-upper to purchase now and then live in while you improve it and then sell?

I have properties that are good for lease options, but everything I have at the moment is leased up. Never know when that will change though. I can also do seller finance if the deal fits, but that's not an option on owner-occ (at least not for me).

As far as where the market is heading, I think that's still rather up in the air. I know there are a lot of buyers out there who think they're going to get a steep discount, but at least in the near term, it's still a seller's market from what I'm seeing. I listed a house early April and after the open house I had an offer that was $41K (just under 20%) below list net of concessions with a 100% financing contingency. The buyers apparently felt that the sky is falling and they could get that type of offer accepted on a house that was just listed. Anyway, it went under contract a week later at full list net of concessions. If you're looking for something that needs work and won't pass inspections, and especially if you have cash, you may find something at a decent discount, by my advice would be that if you want to offer significantly below list, target properties that have racked up some days on market. Few and far between are sellers who are going to list a property for X and then accept 0.8X four days later. Prior to listing, maybe, but once they're in the full services of an agent, I don't see it.

As far as rates. Yep, no question they're eventually going to go up; they don't have anywhere else to go. However, my money's on rate increases still being over the horizon since the Fed needs to keep them low to combat the impending threat of recession. I think the mentality is "medium-term inflation be damned, everything in the arsenal needs to be used to keep things above water near-term".

Perhaps there will be a moment in time where great deals can be had before rates start heading back up. If that happens, and you can act within that window to lock in a low fixed rate on a discounted property, it may be one heck of an opportunity (I'm thinking that's a few months out depending whether we have a second wave of COVID, and it might very well be location-specific, proportionate to the degree of economic carnage caused by COVID). However, I'm guessing banks will decrease leverage limits (already have in CRE, as have HML lenders). Also, it still remains that cash is king, and sellers are much more likely to accept a low-ball offer if there's no financing contingency hurdle. I had to chuckle at that offer I mentioned above; almost 20% discount, 100% financing. Truth is, I would have accepted a cash offer discount of 5%, maybe even 10% with the right ancillary terms, just to protect myself from the current market uncertainty (and many sellers will accept significantly steeper discounts than that for cash offers), but someone forgot to tell these particular buyers that 100% financing doesn't afford them any bargaining power. The reason I share this is that although some people are assuming that prices are going down, and extrapolate from that sentiment that we're in some sort of buyers market where they can dictate their terms to newly desperate sellers, I haven't really seen that yet in the markets where I own property. Of course, I'm not an agent so I don't track the data anywhere near as closely as they do. I expect it to likely occur in some asset classes in CRE, and I won't be surprised if resi sees at least some sort of a dip, but the breadth and depth of any real estate downturn is still, to a great extent, anyone's guess.

Happy investing,

Troy