All Forum Posts by: Jed Haslam-Walker

@Johnny McKeon Hi Johnny,

You are in a similar space as a lot of my buyers right now so I feel your pain!

Your point about the potential for downward price pressure that would prevent you getting your refi is a real concern and this is how I would see it. 

• The Real Estate cycle, lags significantly behind the wider economic market normally as in when there is not a war or a natural disaster. When there is a war or a natural disaster it obviously skews the normal cycle by extending the recession phase and sometimes deepening it.
• Ordinarily before the whole Corona virus issue hit the general Real Estate market was probably in the transition between the Expansion and the Hypersupply phase ( different markets will be at slightly different points on the curve but as a general rule that's where we were) this is when the market is responding to extended periods of excess demand/ low supply and developers have begun to develop because the metrics are feasible. This provision of supply continues to come online during the Hypersupply phase until occupancy rates begin to dip below average rates and at that point - when occupancy rates fall BELOW average occupancy levels we call it the beginning of the Recession phase in the Real Estate cycle. The Hypersupply phase can last anything from 2-4 years before a recession hits.
• With the onset of this disrupter - the response to the Corona virus -the Fed has pre-empted the actions normally taken during the Recession to try to stimulate the economy but the drivers for this recession are not economically based and so this again skews the normal cycles.
• The best lens to to try to assess risk is to stay focused on the dynamics of the normal market - prices for multi-family properties are driven by the demand from investors - the competition for the properties is driven by both the desire for the business ( availability of investors) and the cashflow the property can produce in the future - the cashflow is determined by the space market - ie the market for rental space- the rental space market is driven by the employment market largely. As long as you have renters who will want the space and investors who want to buy them you will support the property prices.
• Depending on what class of property you are buying ie Class A, B, C or D will probably determine whether your property holds it's value if those two demand drivers remain stable.. Class B and C multi-familys do not normally see a significant downward pressure on rents even during a Recession because the foreclosure market empties into the Class B and C market for space.
• However - just take a look at the survey results Dave just did and you see that this situation is wrong-footing investors desire to proceed.
• The other thorn in the side of this prediction scenario is the labor market  and the lending market- we are going from a historically low unemployment figures at the end of 2019 to a sharp hike in this quarter due to Corona virus layoffs - areas where tourism is big may well be hit by this and you may  see it in the RE market .
• I do think there is  significant uncertainty about this scenario until a vaccine is found. Once we have a vaccine everything will begin to stabilise but we have no way of predicting when that will be. As long as the virus is out in the general populus and we remain at risk we will see continued scepticism and widespread protective measures and that impacts the lending environment, the labor market and economic growth in general and accelerates us downward toward a recession - this will impact the residential market first, especially for SFRs.
• With no way to predict the timeframe I think you would be wise to plot out your worst case scenario in full and then compare that against your FOMO feeling and see where that leaves you. If you were not dependent on a refi within a year I would say you would be fine to proceed because values will bounce back and your rental rates should stay stable unless you're buying in a tourism hotspot but there is definitely some uncertainty about the pricing of small multis due to investor jitters, layoffs and the lending environment - if there's no competition for small multi- familys you won't sustain the price you need for the refi.
• This might be where your overall goal of increasing your wealth trumps your annual goal of a 4plex this year - equally it is only March so there's time yet...
• Hope this helps.

@Svetlana G. Hi Svetlana,

There are rules governing the methods used to determine what is called in Appraiser land FMV - Fair Market Value.

Appraisers have to follow the procedures in their manual USPAP (Uniform Standards of Professional Appraisal Practices)

normally this leads to FMV being determined on appraisals of property sold in the past 6 months. However, states can sometimes have differing rules on how to define FMV according to the situation, for example if an appraisal is being carried out for the purposes of determining FMV on an estate sale or a divorce sale then the state has to follow statute or precedent specific law for that state - however in a straightforward residential sale it normally is 6 months, If you wish to challenge the appraisal I would suggest you contact the ISA - International Society of Appraisers - https://www.isa-appraisers.org/about

They will be able to help you.

Hope this helps.

@Clayton Takeuchi Hi Clayton,

The financing possibilities and potential structuring depends quite a lot on which country the foreign nationals are resident in. There are many countries that offer financing within their country of residence for US property or reciprocal financing structures/ bonuses/ tax breaks etc. There is a global network of International Property Agents ( it's a Real Estate Specialty area that requires quite rigorous training and that is connected up with a network of providers who cater specifically for this client group and others) that are specialists in this area.

@Account Closed Hey Patricia,

Sounds like it feels like a pretty difficult situation right now - you sound as though you're feeling like your PM is not doing their job for you when you really need them to but you also feel pretty trapped yourself to be able to do anything about it without making yourself vulnerable..

Would it be fair to say that you're anxious that your vacancy will cause you some financial hardship?

And would it also be fair to say that you're trying to solve that problem by trying to make your PM do what you think is reasonable and 'just'?

And at the risk of sounding boring and repetitive, would it also be fair to say that you're pretty jumpy about this virus thing right now too - which will kind of make any anxious situation double even triply worse ( that is TOTALLY a word)

One thing I know about anxiety is that 'SHOULD-ING' people generally makes not only the situation worse( your PM wants to sack you) but it also tends to make you feel a LOT worse - it kind of grinds inside you until you explode at the cat/partner/milkman etc...

And can I also just say that lots of people are anxious right now and we all deal with our anxiety differently so maybe those who are not Patricia , friends let's get out of the judging chair ..right?

So next question - is the should-ing working? Like is the PM risking life and limb ( in their own mind) to adhere to your own version of how the world should work? 

Er. NO. 

Gosh darn it!! I HATE it when that happens. If everyone would just BEHAVE. Let me say that again BEHAVE and do things MY way everything would just be FINE. Am I right?

I suggest that the PM will not change their mind and that continuing to stay on the internal track that they should -  you're on to try to solve the problem you have is getting you stuck and that feels bad. :( I'm sorry you're having a hard time :( truly this is hard.

Maybe if you take the focus off the PM, put them on project status for now - as in " I will place you on my mind shelf and I will deal with you and your non compliant errant ways later - ' and instead try to mind-storm some creative solutions for addressing the vacancy/financial  issue?

Are you fortune telling yourself into financial ruin because of the Corona virus? Seems to be a popular pastime at the moment...

Are you convincing yourself that ARMAGEDDON is IMMINENT and we are ALL GOING TO DIE or at least you are going to be financially RUINED because of this...or is this about a general anger that the world won't behave itself?

Hmmmm... hope that helps..

@Anthony Fecarotta Hey Anthony,

I can see that you are really nervous. This mass response can be pretty destabilising especially when so many of our institutions are engaging with it in the way they are. I wanted to try to offer perhaps some things to reflect on that might help a little bit...

It sounds like you have two pretty distinct challenges in this situation;

1. The effect that your anxiety is having on your ability to make a decision that you feel good about.

2. Deciding on how best to proceed financially.

I am a Clinical Psychologist who is now a Realtor and an investor. This COVID-19 situation is triggering a lot of panic related thinking. Once panic or even anxiety begins to churn it becomes difficult to make decisions that feel good and solid like you do ( hopefully ) when you are calm and secure. So I would suggest you try the following first; 

Write a sentence describing the situation, just one sentence on the top of a piece of paper.

Then write down all your separate thoughts about the situation until you have written down absolutely everything.

Hopefully when you have done that you will begin to get some objectivity about how your thinking is holding your reason hostage :) That distancing is sometimes all you need to get a bit clearer and calmer.

Then, continuing to get back to your logical side think:

If I wasn't afraid AT ALL what would I do inside a situation that was presenting these uncertainties?

It sounds like you made the decision to go under contract before you marketed your flip correct? So you were confident it would sell or you didn't need it to sell in order to buy the new house? Or you were banking on not having to hold it for a long time and you could manage the holding costs as long as it wasn't for an extended period right?

So. The problem is the holding costs right? Are you willing to take the risk that the holding costs could go on for an extended period?

Well - just like you said you have no crystal ball and you have now way of knowing how long this situation could go on. So what do we do in those types of situations? We frantically search for a crystal ball? We run around asking everyone for their crystal ball and then when someone says something we like we take them down and steal their crystal ball and leg it?!! No. Ahem.

We calm down and carry on ( there's Churchill coming out again) - we take the anxiety out of the picture and we reason it out. What's a good way to reason out a situation for a completely unprecedented scenario? Well the one thing that we can pretty much guarantee is that the only thing that's guaranteed is that this shall pass.

We decide on priorities; What are my priorities in this situation - getting the new house/ moving out of the flip or ensuring I do not lose money?

In the meantime you could plot out a sequenced scenario ;

If I had to hold it for 3 months what would I do? pay for it, get it rented?

If I had to hold it for 6 months what would I do? etc.

I think when people are saying that the real estate market is not affected by the virus they are meaning that downward pressure on prices and rents tend to lag behind the general market economy and so number changes would take some time to show up but you rightly point out that the buying and selling behaviour has been impacted by the social restrictions and this is very new so I agree that there is an impact albeit temporary.

To respond directly to your concerns about extending - I wrote an offer yesterday and we included a hot off the press COVID-19 Addendum to the contract to mitigate the buyer's exposure if delays resulting from the disruptions caused deadlines to be missed - the traditional Purchase Contract in FL at least has a Force Majeure contingency in it but COVID-19 is not considered a Force Majeure event so you may need to consult with your agent/Attorney about how to get an extension. We have had buyers trying to extricate due to anxiety and this has not worked because the Force Majeure is there to protect against processes not being in place to complete the transaction rather than sentiment changing.

I hope at least some of this has helped a little bit. And I sincerely hope you get some peace of mind. Remember that it is not the circumstances that are the problem it's the way we thing about them :)

:) good for you. Most welcome.

@Joshua Walker Hi Joshua,

It sounds like potentially a good opportunity. So the 20 doors are spread across several properties? And the cost of $550 is for all of them?

If you were my client I would say several things at this point;

• Whether you're a newbie or a seasoned investor the rules of successful investing still apply and due diligence is vital so cool your jets. 
• Be careful of distressed sale situations - everyone can get emotional and emotion is the enemy of successful investing decisions. Whilst you absolutely have to be able to act quickly on a good opportunity - you only act quickly if you're nimble enough to be a ninja. If you haven't got the skills and the training in place you're not nimble you're just impulsive and panicked. Skills and training take time and effort so don't expect yourself to be able to do all of that in five minutes flat.
• The driver in this situation seems to be the seller's situation. He wants to offload ALL of his doors because he is unwell correct? It sounds like you are possibly contorting your investing strategy and pace to match the deal that is on the table rather than negotiating the deal to fit your needs. The best deals are win-win. There will be a deal inside this situation that fits well for both of you. Be confident. You are bringing something to the table that he really wants. Figure out what deal would be incredible for YOU. Then negotiate skilfully. 
• Planning to sell to cover your reserves is risky. A lot could go wrong and you could be over- exposed. If you get over-exposed it could really scupper your future. If you have no reserves and you hit a problem- a costly problem then you potentially are in default or at worst very stressed and that is not a good place to be and could threaten significantly your future. Over exposure we know is a very bad place to be for a property investor.
• I would suggest you stay ( or get!) calm and remember who is in charge. YOU are. Run your numbers. Clarify both your profit/ return parameters per property and your risk tolerance in numbers and in the structure of the situation. Do your due diligence. Be swift but not rushed. When you're clear about what would deal would actually make you feel happier and more secure when you go to bed at night then you'll know your deal parameters. Then negotiate. Negotiate really hard and get the deal that works for you.

The other really important thing I would say is this; most catastrophic investment decisions, whether it be property, stocks or business decisions are made inside EXACTLY this type of crucible - the investor is excited and doesn't want to miss out on a great deal - the deal of a lifetime. Successful investors understand Epictetus; ' circumstances do not maketh the man, they reveal him.' There will always be good deals - the skill is in not only having the confidence to know and to trust that, but also to recognise the deal that is good for you and then to be able to go after it not have someone else's great deal go after you.

I hope that helps, sorry to quote Epictetus at you I got a bit carried away but those Greeks knew a thing or two :)

It's such a downer when you miss out on a killer deal :( but remembering that in Real Estate there are ALWAYS good deals to be had makes it easier to see it as a learning opportunity - especially when you have an awesome group like BP around you.

The inspection issue is an important legal instrument, which sometimes is not done well I would have to agree. This is where building a great team is really important. If you research inspectors in your area you will find out who the good firms are, you'll also create a relationship with a contractor who can view with you once your numbers are figured out and you view the property if you do view it. Sounds like you might need to find a Realtor who has experience of working with investors too..can I say that..?

Your skill set is not going to be the same as everybody else's - if you are up against a seasoned contractor who has an army of discount accounts and instantly available tradesmen and women and a slew of loaded investors or bank accounts behind them then you are going to be in a weaker position but luckily there are lots of deals to be had so you get to move on and let them deal with the subsidence issue that nobody spotted because they didn't do their due diligence! Right? 😂

@Kendal West Hi Kendal,

Good for you for reaching out for help and also good for you for putting in the legwork you clearly have.

It sounds like there are a few things going on:

1. Understand your lender: The properties you are offering on are out of synch with the current bank financing criteria. There are lots of avenues for funding but if you are starting out with the conventional residential products do some deeper research on what lender criteria are at the moment - understand their pain points. These criteria fluctuate with general market conditions and with area so getting clear on their parameters would put you in a stronger position when you offer.

2. Financial parameters: I would also suggest that you widen your financial scope a bit. When you are first starting out you will be terrified of getting it wrong ( because you're..er..human) you will be wanting to get the best deal but if that means you're offering too low then you won't get in the game at all. Good deals exist within a range and this range will widen and narrow according to market and neighbourhood phases so if your financial model is outside the current market conditions you will be out of synch. 

3. Narrowing your radius: I agree with @Pete Woelfel that knowing your neighbourhood and your property type is essential but I would suggest you monitor three areas not just one, this will widen your funnel and if your risk tolerance is low as it sounds like it is from the offer acceptance rate you are getting then you may need to have more properties that fit your criteria.

If you are looking to flip you may be looking for too high a profit margin in your area( within the constraints of your lender profile) and if you are looking to buy and hold or BRRR you may need to switch lender, increase your pool or get a little more flexible with your numbers.

Hope this helps.

Best,

Jed

@D Turner @Yolanda Salas Yolanda is absolutely right. It's very frustrating as a professional when people operate in underhanded and corrupt ways. It definitely makes the job harder for the rest of us. 

The difference between a real estate agent and a Realtor is that a Realtor has voluntarily chosen to join a professional organisation of Real Estate Agents that governs their behaviour with very strict codes of ethics and best practices. This organisation is expensive to join, charges annually and there are specific requirements for training. The reason for this organisation, the National Association of Realtors ( NAR) is precisely to provide buyers and sellers with a higher calibre of professional service. It is a badge that helps the client on either side of a transaction know that the Realtor follows a strict code and if they don't they can and are quickly disciplined. Real estate agents are not required to join this organisation it is voluntary - agents are not permitted to describe themselves as Realtors if they are not a member of NAR - it is a violation to do so and would fall under mis-representation which is a serious offence.

Notwithstanding membership of a professional body the behaviours described are illegal at least they are in FL. Florida law states that all offers on a property MUST be submitted to the seller in double quick time too. As Yolanda correctly pointed out - ANY violation of that can be reported to the Department of Business and Professional Regulation which governs real estate agents' operations. Anyone can log a complaint against a real estate agent or a broker, anonymously if they need to and the DBPR have a strict timeline that they must respond to this complaint and resolve it satisfactorily. There is a very well oiled machine that deals with these issues.

A good Realtor serves their client first and foremost - not themselves. When you put yourself in the position where you do not have a professional operating on your behalf you make yourself very vulnerable and you reduce your opportunity for a good deal. I have seen so many disasters that look perfectly fine in the surface of the transaction but once the closing papers have been signed the clean-up from deals that have been made trying to either do it on the cheap or to try to get the upper hand can be very ugly indeed. A good Realtor should be your greatest asset.