All Forum Posts by: Steve Theobald

Thanks @Alexander Felice.  I think that the high-pressure goal setting and madness of crowds you mention are real things.   I applaud you for your relaxed and wise stance.  

(I am now going to tread lightly and objectively on a touchy subject and will avoid using names)

One of the things I see here in Utah is big meetup groups and high-cost (up to $20k) real estate "communities."  While these may work for some who approach life with some common sense (like you), for many, it seems they are just being pressured weekly to "jump in and do a deal."  

A high-profile member of one of these groups told me in the last month that he thinks their members are picking up the bulk of the deals in Utah.  Their members have paid huge sums, so they are eager to get their "education investment" dollars back by getting a deal asap.  I agree that they are busy!   

I saw close to 300 people at the event I attended as a guest - and it actually scared me.  I saw all these newbies as dangerous competition.  Dangerous because they are stealing my deals by overpaying.    I think they are also dangerous to themselves because the Utah market is not very big, and there are many variables to control in a successful investing career.  I honestly don't hope they fail, but I fear most will. 

I know many of the members personally to be intelligent, honest folks who will truly help their fellow investors be smart about things, but I felt like the group I attended was the epitome of the word "frenzy" portrayed in my picture above.

The education appears to be top-notch, but the MLM recruiting structure does bad things to the members and the prospective members--it sucks in people who probably shouldn't be in real estate, and for the members it turns all their friends into targets, LOL.  This can really strain relationships if you are not smart about it.  One person I know was trying to recruit an 80 year old client of mine.  

Think about that one for a bit....

Nicely said @Russell Brazil

They keep having babies but I don't see any new land popping out of Mother Earth.  Only one way for prices to go (long term).

Great input all.  Thanks for your thoughts. 

Recession?  A couple of you write as if it is a foregone conclusion.  While you may be right, I read that the last 6 weeks in the stock market has been the strongest in 30 years (granted it just looks like one big "dead cat bounce" and it is now right back up to where it dropped from at the beginning of December).  And the top economists in Utah have suggested a flat market here for the next 12 months - not down.  Now nationally, things could be about to tank again, but I haven't been watching so much.  

So, absent a true crystal ball, what is a PRUDENT real estate investor to do in this potentially volatile and downward environment?  @Account Closed says "commodities."    I'd love to hear other thoughts!   My input is this:  Mid to low-range flips bought right and done well.  In the short 8 to 12 week time frame needed, a good rehabber should be able to make nice profits regardless of the market direction.

@Amy Kendall  I really like the bus analogy.  Not getting this deal was tough because my client knew the seller personally and because they have been trying to get something for several months now.

@Mica Moore, very true.  The asking price was $150k, and after the comments from the listing agent, my client jumped $8k to $158k - our formal offer.  At $158k, he was at his max.  So I was impressed with his willingness to both come up due to the competition, yet hold firm at his calculated Maximum Allowable Offer.  Since there were at least 9 offers above ours, I didn't feel bad losing out on this one.  Unless the winning bidder on this one is an owner occupant with lots of cash OR a rehabber who is also a contractor and a realtor, I fear there will be some pain in a couple of months.

I just now got the response from the listing agent for the house in the story:

So there you have it.   Directly out of the listing agents mouth.  The market is crazy.  

But you don't need to be.

I wanted to share this with people outside of Utah too, so I posted in the general forum. But it was mainly written for those of us in Utah.

https://www.biggerpockets.com/forums/311/topics/67...

(This was written mainly for investors in Utah, but hopefully others can benefit as well)

A newbie investor client and I went to a home yesterday that only had a two hour window for showings. There were about 30 other people there! It was a cramped madhouse. My client decided to make an offer at numbers that worked for him, and in an effort to not waste time, I texted the offer numbers to the agent. He said "You are not even in the top 10 offers!" This is just one anecdotal piece of evidence as to why finding deals is hard right now. The competition is legion.

And while the wholesalers seem to keep dropping properties in my inbox, they are still mostly overpriced -- with the wholesalers leaving only tiny scraps of meat on the bone. But who can blame them with all the willing buyers out there?

So who are these people who keep "overpaying" (my opinion)? Are they investors from California who say something like "I can beat out all these Utahns and still have $400k left over from my sale in CA"? Yes. Are they newbies who are in a frenzy after their last Meetup for which they paid $X to join? Yes. Are they Buy and Hold investors who are looking at the 10-year horizon and like what they see and are willing to plop down some extra cash? Yes.

I went through the last recession. I still have some PTSD from some of the deals I did then. I just caution everyone to be prudent at the purchase, since that is the only time you have full control. I am not predicting anyting here (the market looks solid), I am just recommending that you don't join the madness and keep your offers in the realm of reality. It is better to walk away than to do a deal just to stay busy. Honor your calculator!

So what does a seasoned investor do? He or she MUST market and network and find their own deals. Drive for dollars. Knock on doors. They all work. But this takes time and it takes dollars. Be willing to spend both.

And keep your full time job if you have one. The peace of mind from having consistent income is worth much more than you may think.

Success out there!

@Nathan P.  Thanks for the recommendation.

This is a fabulous thread about duplexes and more! Great ideas everyone.  And truly the best deals are the ones YOU create by beating the streets, talking to all, and licking those stamps.

This being said, the MLS does have some nice "haystack needles" and the data is there for easy review. But anything from the MLS can only be a starting point. You still have to create the deal through negotiation.

Hi Tanner.  Good to hear from you again!  Many of the investors I work with who have homes listed have complained, "My listings are just sitting there!"  They are not panicked yet, but know that they need to factor in a bigger buffer on subsequent deals, and have asked me adjust my flip and rental deal-finding calculators.  

I don't think interest rates alone have spooked buyers, but I think the stock market volatility along with tariff talk (certainly related) are adding to the uncertainty. And then there is the natural market cycle.  Regarding interest rates, one study showed until we get above 6% the impact on purchases should be minimal.  The current 30-year rate is about 4.5%.

Remember that we have had about a 5-6% average per year rise in home prices for the past 6 years in Utah from when we bottomed out in July of 2012.  Nothing goes straight up forever, and the housing cycle is no exception.  Then you have normal winter quarter flattening/weakening.  

As far as the stock market goes, we are STILL in the longest bull run in the 100+ years of the stock market.  We crossed above the 200 day moving average on the S&P in the summer of 2011, and are still flying way above it.  But the current downtrend has many concerned.  We are about 10% below the highs (FYI, an official "bear market" is a 20%+ drop for two months).  So stock market jitters must be a factor too.  

So what am I looking at now?  I think SELLERS, with their new-found equity, should experience very little pain as they take a slightly lower offer to get their homes sold. The DOM (days on market) here in Utah, which has been as low as 8, is now around 35, so we are FINALLY entering a normal market again.  

As an agent for investors, I am actually looking forward to the next year.  I think the "fear of the sellers" will be greater than the "fear of the flippers" (or B&H investors), so purchases will still happen.  That spread is what I am banking on to stay in business and even thrive.  Even with flat or slightly downward prices, the flipper believes he/she can get in and out in 3 months and come out just fine, but the seller can see no end to the potential drop (especially those still affected by PTSD from the last correction.)  Investors should not be afraid to hold firm on their lower offers.  The deals will come as more and more sellers get spooked by increasing DOM.  

For those selling rehabs, if necessary, I say take your potentially painful haircut quickly and move on, especially if you have hard money in play.

And if you are about to list a home, remember that it is better to price the home competitively from the start and hold firm than to lower the price each week down from an overly-optimistic starting price.  The latter method statistically nets the seller less money--buyers sense a highly-motivated seller and have all the reasons in the world to push hard for an even better deal.

(And whatever you do, don't do what some guys do when buying and drag out the Due Diligence for 13 of 14 days for example and then try to negotiate a huge deduction.  That is just wrong.  Do it on days 2 to 5 if needed.  Please don't ruin it for the seller--everyone is watching the DOM.)

So that is what I am seeing.  Let's make 2019 a great year.