All Forum Posts by: Pete M.

We're not avoiding that area; I'd say simply that we're focusing on other areas, based on the team's knowledge and experience.  Deals can be had anywhere, for the right price and strategy.

And I see from above that you'll be living there, which changes the dynamics strategy entirely.

@Austin Kelpis What's your goal with the property? I'm guessing it's a turn-key rental at that price, but I also don't really buy in that part of KC. If it's a buy-and-hold, will it meet the 1% rule for cash-flow (or better yet, have you broken down the numbers for debt service + taxes + insurance + PM fees + vacancy/CapEx/maintenance withholdings as compared to market rent)?

I'd find an agent or two (@Caleb Brown, for example) in the local market who can give you some insight.  And if you use a PM, you'll always want their second opinion on the location and property, especially since you may be hiring them to manage it!

All valid points, and I think you're right. We're seeing some initial panic-selling (and capitalizing on that), but mostly in the SFR and small multi space. Some from the smaller space and most from the larger commercial MFR are going off-market or waiting to see if we have a "V-shaped" recession, where things ramp up again quickly.

We're highly leveraged (between 75-80% average across our portfolio), but we also kept healthy reserves and seed our reserve accounts from the start.  You can be highly-leveraged if you have the cash to back it up, but many ignore that part, and may be in for a hurting (call it capitalist Darwinism, perhaps).

And you're definitely right about the private capital drying up, no doubt there!  I've been talking to more lenders in the last few weeks than in the last couple years combined... but we have found a few with not-too-unreasonable terms, and we're exploring ways to use private capital for short-term bridge loans and then refi those into conventional loans.

Mostly playing devil's advocate here, but this crash is also exceedingly different from the 2007-2008 crash.  We've seen the longest run-up in the US economy leading to this, coupled with the largest single-day losses on Wall Street, plus the skyrocketing unemployment that never happened (to near this extent) during the last crash due to stay-at-home orders across the nation (also not part of last crash).  The hysteria and fear around this recession feels dramatically different as well.  There are also banking regulations in place that weren't there before, forbearance options for conventional loans, and checks being cut to individual families (though those amounts won't last many very long), so who knows.

I'm not saying you're wrong, the true effects (and therefore opportunities) will take time to manifest (especially around foreclosures), but I'd not depend too much on what happened roughly a decade ago to tell us exactly how this one will play out.  I certainly won't claim to know, but with any interruption to the norm, opportunity will arise.

I imagine it will depend a lot on your specific financial situation.  We have cash available, and a few lenders to work with, so we're buying.  Closed on a duplex in Kansas City, and under contract for another single-family.  And looking for more.  Some better deals have come to market already, but I expect even more will over the next few months (especially on the commercial multifamily side).  While nobody will cheer for the interruption to life, deaths from COVID19, and financial straits many will be in, I'm looking forward to the opportunity to buy discounted properties and greatly expand our portfolio.

Biggest change is underwriting more conservatively than before, negotiating harder with sellers, and keeping more reserves than before.  We've always seeded our reserve accounts from the start, so even with some non-payment on rents (though not many), we're at no risk of defaulting on any mortgages.

@Matthew Irish-Jones  Good explanation, thanks.

@Matthew Irish-Jones Good to know, thanks.  I do know that the income of the tenant factors into the approved rent amount (at least where we buy), so I wonder how much this process varies by area.

Either way, appreciate the insight.

Thanks.

@Carl Millsap How did you pull those rent comps?  What's the actual source?  I'm looking for ways to pull those myself, if possible.

@Matthew Irish-Jones Interesting, so you just call and they provide you with the comps they'd use... do they provide a full, large sample, or typically just a few?

Thanks for the responses.

Following...

@Rebecca Beam Was this a conventional loan, or a private money loan?  I typically use private lenders, and they're all pausing closing any long-term loans because there's no liquidity on the backend (no institutions or private buyers are buying the notes from them, so they won't close on them).

If you're talking conventional, they are generally still able to close.  Same for many commercial loans, though with tighter restrictions.