All Forum Posts by: Stephen Dispensa

Jeff, yes these are MLS stats, and I agree there's rarely any rental inventory on the market. What's different is these are mostly single family homes. The realtors representing them failed to sell their clients flips so we're seeing rental inventory dumped on the market. That's why I was so taken aback by these numbers because there's NEVER any rental inventory on there.

 Yeah I've got 30 doors under management and no issues so far, BUT... next renewals come up in May so we shall see where things are at by then. And then I have a TON of renewals in July and August. 

I can't see a major crash because there's still just too much money out there to invest or purchase. Too many people still want to live here, and too many people were sidelined when prices and competition went crazy the last few years. But there are investors who overpaid and overbuilt and they're going to have to sell at a loss. Fact is the sooner they rip the bandaid off the quicker we all get through it. I still wouldn't think twice at an opportunity I see today because I think we will be well into the turnaround by the time and projects taken on right now are finished. I'm not in love with single family rentals, but as this sell off starts, my thought is to grab up what you can, even if it means renting at a loss for a year. Because you make money when you buy. And if we wind up with a glut of inventory priced to move come March and April, literally fortunes can be made picking up undervalued assets.

 I agree. As an agent I utilize every step in this process to vet deals for my buyers. However, the idea that a listing agent is going to be more motivated by not having to split their commission or being able to cut commission to get a deal done isn't really accurate. First, if the property has been on market that long, the agent likely just wants it off their plate anyway. Using a cooperating agent isn't going to be much of an issue. Second, if a deal is so close in numbers that a slight commission cut can get it across the line, an agent representing you can propose such a split with the listing agent anyway. And you still get all the benefits of an agent representing you. 

There's a reason why there's a TON of recently renovated homes hitting the market as rentals. It's because investors paid too much for these properties and now are stuck with the market softening. I wonder how many of them bought direct from wholesalers or listing agents with no representation? I bet it's a good portion.

So I noticed an aberration in the Tampa market, it started back in December and really gained steam this month. And it's in the availability of rentals. As of today, 1/17/2023 there are 1,172 rental units available on the MLS for Hillsborough County. 346 new rentals have come on the market since January 1st. To give you some perspective, want to know how many rentals came on the market for the same area in January of 2022? One.

That's right, last year for the entire month of January, ONE new rental cam on the market for all of Hillsborough County. This year, just 17 days in, we have 346 new rentals on the market. So what gives and what does it mean?

Well for starters, if you look at the history on many of these rentals, you'll see that these were properties that were recently put on the market for sale but didn't find buyers. You'll also often find that these properties were purchased within the last 12 months and have undergone significant renovation. It would appear that these were all flips and these sellers are now trying to find an out while they wait for rates to come down and the market to rebound. 

The problem is many of these investors bought too high, increasing rates cooled the market, and now they're stuck with these homes. Since January 1st, 281 properties have leased, however it doesn't look like the market is absorbing these rentals fast enough. So what is going to happen?

Well I think we'll be looking at a sell-off within the next 90 days. In areas like South Tampa some of these "flips" were purchased at 500k or more. Anyone who is stuck holding hard money at 12+ percent on loans that run from 300k to 700k is going to be hurting very quickly. If they can't get a lease in place, they're going to have to dump them, give up the property deed in lieu of foreclosure, or risk foreclosure itself. I think there's going to be some significant discounts in the single family space through this summer, however I don't think those deals are going to last forever. There is still plenty of money that's been sitting on the sideline. Plenty of buyers who were priced out in 2020 that have been waiting for an opportunity to buy.

The next few months are going to present key opportunities to add to your portfolio in the Tampa Bay area. Do you have a team in place to execute? 

I'd be curious to know how their credit/income/background check panned out. Did they have trouble qualifying?

As a PM, we have had times where I've rented to a tenant that did not meet our minimum requirements (after owner approval when we had a unit sitting on market for a while) HOWEVER, I always did two things in these cases:

1. Took additional security. Make it clear that this is because their credit falls short and we take this seriously

2. Made it clear that we were doing them a favor, and that they were lucky to be getting the opportunity to live in this unit. If they screw it up we won't hesitate to remove them.

But like others have said, just evict them immediately. 

My advice to investors is to first look at a property from 30,000 feet and analyze the 4 areas where you make a return from real estate investing:

1. Appreciation

2. Cash flow

3. Debt paydown

4. Tax  Benefits

Calculate all 4 and understand the actual ROI of a property. Immediately you'll see there are more investments out there that are worthwhile than you thought. However, you need to tame those four quadrants to individual situations to make deals work. If you're in a higher tax bracket the depreciation expense may save you a TON of money, however if the cash flow isn't there financing may be difficult. When comparing two properties, one may cash flow great, but another may be in a neighborhood with rapidly appreciation values and skyrocketing rents. You're opportunity to increase both appreciation and cash flow would be huge and tip the scales towards investing in the property with less initial cashflow.

What I usually recommend in this situation is that you request a seller credit for a replacement roof. Then use NREIG to close with the existing roof. Their rates are a little higher but they provide the best way to close on any property with issues. Then replace the roof under your supervision using your own roofer. Once the roof is replaced, send the information and pictures to your property inspector and they will generate a new 4-point for you and you can switch property insurance at that point to a cheaper plan.

Maybe see if you can take out a blanket mortgage that refinances the two multifamily properties and uses the equity as the down payment for the third property? Could save you from multiple closing/filing fees by bringing everything under one loan. The rate would probably be slightly higher than the original rate on your first two properties but may be lower than what you would pay on a new loan for the 3rd property. 

Definitely Pressure Washing. You've got an excuse to door knock and gain clients for that business. While you're there you can let them know you're also involved in real estate, and see if they know anyone looking to sell or invest. If you find sellers in particular, team up with an investor or flipper that will cut you in on the deal. Legally you can't take a referral fee for the sale transaction, however they an give you a small ownership in the deal which would allow you to share in the profit. 

Once you're in a deal, offer to do everything you can to help the project along. Supervise the rehab, maybe you have some contacts in the maintenance division at the property management company where you work. Maybe you can give those guys some side work redoing kitchens and bathrooms, flooring, painting, etc. to help drive construction costs down. 

Best part is, you can invest TIME in your real estate business while making CASH from power washing.