Could a Trusted Realtor be Right?

Question

I know a Realtor I trust. I was picking his brain about the local situation in re: investing in say, a flip or at least, wholesaling. He surprised me by noting that, at least in the area he specializes in, which probably has about 3-400,000 residents, the situation for a newbie investor like me is grim. He said that for a few reasons, now just ins't a good time to pull a deal off. He noted there was a serious lack of supply, that 50 bidders show up on the courthouse steps and compete aggressively for foreclosures, that there is a big investment group buying up everything they can get their hands on for buying-holding, and that basically the investors he knows are sitting tight. He said I was basically 18 months late to the party. He noted buy and hold was a different animal, but as far as getting a deal worth an investor's time, he doesn't see it. 
Could this be true?  I was reading in a book that there is always a good time to find value by improving a property and buying under market value. Is is possible that it is just really hard to by something for 30-40% under market value at this time in this market?  I suppose if I were buying a residence, even 5% below market value would be cool - instant equity. But as far as making $20,000+ I'm fairly intimidated now. Thoughts?

Braden C. · Answer

He's right, MLS is very hard to compete for any good deals and there are lots of bidders at tax deed and foreclosure sales.

Problems like these create incredible opportunities for those creative enough to think outside the norm. There are lots and lots of other rocks to look under.

Joel Owens · Answer

Hi Jason,

Sounds like a seasoned broker that knows his local market.

Many flip type rehabs are drying up in the markets. Regular homebuyers are jumping back in seeing recovering markets and the lowest interest rates that will only rise. Many investor buyers have finally gotten off of the fence to purchase while at the same time banks have pulled back on foreclosing. This has led to a limited supply in many markets.

I am sure if you did enough mailers and ran enough campaigns that eventually you will find a deal where you might make 20,000 or more. A broker knowing what you are looking for Is like a needle in a hay stack could look for months and months  and not find it as people are throwing out multiple offers.

Buyers have to be ready, willing, and able to buy AND I will add realistic. If someone tells me they are looking for a Publix anchored shopping center for instance fully performing at an 11 cap then I know they are either misinformed or have pie in the sky thoughts that will never happen. This type of buyer will still be looking 18 months from now and have not done anything.

if I know for instance the market is a 8 cap but someone is wanting a 9 cap then I know if I put in the time and find a 7.5 to an8 we can get it close to a 9. That is being realistic as a buyer in the marketplace.

So if you want to put in hundreds of hours to find the one property others are not submitting multiple offers on then the payoff is great for you but I wouldn't expect a seasoned broker to do that simply for the time versus return just isn't there.

Hope it helps..........

Matt Devincenzo · Answer

That is what I was told out here in San Diego and have seen it as well, house prices have increased significantly in the last year because of REITs and foreign Investors it seems like.

But one of the local guys also said this "focus on off market deals". Motivated sellers that aren't in foreclosure or haven't been contacted yet through direct marketing, maybe tired landlord that have evicted recently, or properties with code violations they can't fix or pay for.

I'm not going to pretend that it is what I've been doing here, I personally decided to focus on buy and hold in a more numbers friendly market back home in FL, but if that many houses are selling for a premium then it seems that if you can find any of the deals that aren't going through the more traditional sources you'd have a good potential for profit.

Justin S. · Answer

Its always hard a for new investor to enter the market but its not impossible.  Your Realtor described my market as well but I would not let it discourage you.  Investing is hard work and its twice as hard if you are new at it.

Could a Trusted Realtor be Right?

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