(4 FREE Commercial Videos) Are Investors Overcrowding The Residential Real Estate Market?
I found a nice rehab in my area the other day listed at $289,000.00. I calculated the ARV at $425,000.00. It needs $70,000 +/- worth of rehab. I offered the bank $249,000.00. The agent told me they already had multiple offers and turned down a cash offer over $265,000.00.
Without getting into a bunch of calculations, I determined that I’d be risking almost 350K to make less than 50K. Not a good trade-off. I passed.
Speaking with several local real estate agents and rehabbers, I learned this is a common story right now. What happened? I thought banks were desperate to get rid of properties?
This is purely my opinion, but here’s what I think…
The government has put most of the bad banks out of business and has bolstered the balance sheets of the remaining banks through TARP funds, etc.. Additionally, by cutting lending, banks have sufficiently protected their remaining asset bases and understand the market is in recovery mode. What does this mean for you?
First, banks don’t seem to be in any rush to get rid of inventory. They are either quietly releasing properties bit-by-bit, or selling large blocks of them to REIT’s and hedge funds (meaning you don’t have access to them – you don’t have $200MM to spend).
Second, because we are more efficient and computerized than ever, and real estate data is easily obtained on the internet, investors are evaluating deals quickly. This, in turn, allows them to make tons of offers each week (I know some making 50+ offers/week).
Finally, banks have access to this same data and can easily evaluate inventory in local markets. They also see the multiple offers coming in on their properties. Thus, in active markets banks are holding out and demanding top dollar.
Are there good deals out there? Certainly. But banks right now are not “giving away” properties like we thought they would, and it seems all this activity is cutting margins and making it more difficult to find home-run deals.
Do you agree with me? I’d love to get your stories or comments to post. Are you killing it right now or having a hard time finding deals?
If residential investing has become overcrowded in your market, commercial investing may be a better play for you. And, as promised last week, here are 4 more FREE training videos from Peter Conti, a commercial mentor:
Click on each title to view the video
We also have a free webinar with Peter coming up on February 17th.
We’ll send some emails out ahead of time so you’ll have plenty of notice. Peter will cover:
– How to get your first apartment building in 90 days or less.
– How to use other people’s cash or credit to buy commercial properties.
Peter is the author of “Commercial Real Estate For Dummies.” He is a 20 year real estate veteran. He currently mentors a limited number of students throughout the Country.
Til’ next time, Jeff
P.S. If you need any of the following, I can help:
-> Title Services
-> Creative Real Estate Transactions / Contracts
-> Private/Hard Money Lending
Office: (800) 883-8290