All Forum Posts by: Andrew McGuire

One more thing to consider. What are you going to do when your sellers begin declaring bankruptcy? 

Some huge percentage of sellers who are willing to sell subject-to are willing to do so because they are irresponsible and bad with money... that's why they are being foreclosed on. 

I am sure that every once in a while, someone selling their home Subject-To will magically transform into a responsible person, intelligently capable of forecasting their long-term financial future, and turning over a new page. 

But... that is likely to be a tiny minority. The majority of these deals are likely going to see the sellers go on to make terrible financial decisions, rack up debt, and some huge percentage of them WILL declare BK in the coming years. 

What's the plan to handle up to 30-50+ bankruptcies from your sellers all at once in the middle of a bad market? 

One more thing to consider. What are you going to do when your sellers begin declaring bankruptcy? 

Some huge percentage of sellers who are willing to sell subject-to are willing to do so because they are irresponsible and bad with money... that's why they are being foreclosed on. 

I am sure that every once in a while, someone selling their home Subject-To will magically transform into a responsible person, intelligently capable of forecasting their long-term financial future, and turning over a new page. 

But... that is likely to be a tiny minority. The majority of these deals are likely going to see the sellers go on to make terrible financial decisions, rack up debt, and some huge percentage of them WILL declare BK in the coming years. 

What's the plan to handle up to 30-50+ bankruptcies from your sellers all at once in the middle of a bad market? 

 Same logic with people who sell their house seller-finance to someone a bank won't approve? The logic just defies itself.

As for what will  happen, I'm thinking the fed is just going to hang tight until something breaks. Only pause with this view is the election.

And when things break, the chickens will come home to roost for all SF/subto/no cash in players or folks who bought into the FOMO without reserves. It doesn't need to be a 30-40% correction, but what usually happens is all those chickens come home to roost at the same time.

 So pretty much where we are except for the technical unemployment numbers? Continued stagflation and something will undeniably break. Likely the S&P companies that are just too levered. 

And I think the Fed will push it this way and the only doubt I have is the influence of the election. That doubt is strong though. 

I also have a very different view on if rates do come down. I think real estate has a lot more seasonality than folks given attention to. If rates come down end of Q1, any Q1, you'll see prices rip for the prompt 1-12 weeks then dip and in Q4 really correct of that year. If rates go down at any other point, you'll see prices go up quickly in the 4-6 week span then come down. I really feel the rates are the reason inventory is low and once rates come down, we'll see inventory change.

Look at the same cities previously mentioned

Arlington, Savannah, and Boston

Once rates go down, inventory will increase in the long(er) term. Prices may rip in the shorter term, but I think inventory will go up. And buying power will change.

So what are you doing to bridge the equity gap?  Paying cash?

Seems like anyone with 3.25% interest should have solid equity in most cases, so I'm surprised you can find people who want to do Subject2 on these, when it seems like they could sell, wipe out the loan and sell with equity.   

How often is it in AZ that people pay cash for solar panels?  In Texas it seems like 1 in 100.  So if you found one with paid off system, I guess that is a big bonus.  Does it have battery wall to power at night.  I would think in AZ that is a must, because summer heat and AC must run 24 hours a day.   As an investor how does $7/month electric help you?   Can you charge higher rent to make up for the power bill discount?  Do tenants seek those out?

Just remember it's all well and good until it isn't.  Have some cash set up for when things go south.  They will at some point and you don't want to get caught holding the bag.  When it goes south, everything seems to go south all at the same time.  Properties take longer to rent, rent stagnates or deflates, credit dries up, banks tighter on loan rules, credit cards decrease credit lines, your credit score drops because instead of 30% utilization you overnight go to 50-80-100% when they drop your credit line, hard money dries up for flips, stock market goes down and you don't want to take losses or can't use margin.   Real estate is cyclical, stay in long enough and you will go thru a cycle.  Have enough resources so you can hit the other side of the cycle.

See what is happening the CRE investors right now in many cities.

Agree

People are paying money to learn to overpay for real estate, put little to no money down and have no reserves and think it’s all good

Similar thing happened in the multifamily space with a certain guru teaching people to buy Mf and raise $ and how did that work at for those newbies?

Moment raised raised on this short term debt all those dreams were smashed, same is going to hold true in 18-24 months on residential side as well.