Singing - "The party's over..." - Na, y'all aint ready for my amazing singing voice. I considered becoming a world famous singer, but decided to get into Real Estate instead. But do you think the party IS over when it comes to getting a great deal on Rental Real Estate?
We're now nearing the 3rd week of 2020, and it could certainly be argued that sometime between 2010 to 2015 (or so), was the best time ever to buy Rental Real Estate. So now that we're into 2020, are you 5 to 10 years late to the party?
Welcome to Episode #42 - Are You Late To The Party?
Oh, and let me know what you thought of my singing... If enough people request it, I'll give you a full song.
Ok, so no doubt my best deals in Rental Real Estate Investing were back when I started in 2015 through the end of 2018. In comparison to that 3 year stretch, 2019 sucked as it relates to finding amazing deals on Rental Properties. Note however that I said in comparison. If taken on its own (without looking at things through my 2015 glasses) - then 2019 was a great year. Its all just really a matter of prospective.
And I'm sure that from the prospective of someone who started buying in 2010 to 2015, their comparison of then to now certainly has them with an even worse opinion of 2019 - in comparison. I know I certainly wish I had started buying in 2012 - which was likely the best year to snag amazing deals. I think the party really got started in 2012, as the crash was 2008 / 2009 and the dust was just starting to settle in 2010 & 2011.
Plus, whenever there's an economic crash, the first thing to go is the ability to get a loan. So there were all these cheap properties (foreclosures all around) - yet you couldn't get a loan to buy any of them. So it was happy times if you had the cash... But if not, the party hadn't yet started for you.
But after a couple more years had passed... Around 2012 the right balance had begun to emerge of cheap properties and foreclosures everywhere - and there was starting to be the ability to actually get a loan. The party had started - and people where making a killing in single family rentals / flips, small multi-family - and a ton of money was especially being made in the larger multi-family space.
Unfortunately for me, I was in the process of buying out my former business partner of my Web Hosting business. Oh, checkout ViUX.com (V-I-U-X.com) if you need a Domain Name, Web Hosting or other Website related services. So I now own 100% of ViUX since 2014, but it took 3 years of payments to get there again. And during those years, I don't even think Rental Real Estate Investing registered on my radar as anything I could do - despite properties being at an all-time low. I didn't even see them at the time, as you often can't see what you're not looking for.
Case in point - Did you buy stock in Apple, Google, Facebook, Netflix, Amazon or even Microsoft back in the day. You lived right through those stock rises and the signs were there speaking to their likely success - but you didn't jump in. Why? You weren't looking.
So I honestly don't know what the hell I was doing during those 3 years of my buyout from 2011 to 2013. How I could have missed what could have been the greatest Real Estate buying opportunity of my lifetime - is a complete mystery to me. I know what the problem was... Because I didn't have lots of money sitting in the bank, I never even considered that buying Real Estate was a possibility for me then. If only I had it to do over again - but unfortunately my time machine is broken. If it wasn't, not only would I go back and buy a ton of Real Estate - I would buy all those stocks I mentioned (and many more).
But then I took 2014 to get my credit and finances in order; plus I continued working to improve ViUX - now that I owned 100% of it again. So it was at the end of 2014 / the start of 2015 that I finally set my mind to Real Estate.
So the party began for me in 2015. And you could say that I was late to that party. Because it began for others earlier - like I said, around 2012 by which time it was actually possible to get a loan to buy all those cheap properties that were everywhere. And yes, if you had cash and/or the perfect credit needed then to get a loan, the party may have started for you earlier - maybe as early as 2010.
I try not to lament the past (even though I end up doing it a LOT) - so I'll be happy that I got to the party in 2015. As I mentioned in prior episodes (even last week) - I bought 2 properties in 2015. I bought 2 more in 2016; and then added 4 more units in 2017 - ending 2017 with 8 rental units. Then I added 7 more units in 2018, ending that year with 15, but my goal was 16 - so I missed it by 1 unit.
I was trying to double my number of doors / units each year, so I needed to end 2019 with 32 doors to maintain the pace of my original goal. I won't keep you in suspense - I missed that goal also. But I tried! I was bidding on all sorts of larger deals, including the one I wanted most - a 38 unit complex in Thomasville a little less than 2 hours from all my other properties here in Durham, North Carolina. But by the time 2019 had rolled around, prices had climbed (often to ridiculous levels) - and I kept getting outbid. Was the party over? Did the party end in 2019?
So the years of 2015 through 2018 were great for me - the party was in full effect. And trying (unsuccessfully) to NOT lament the past - if I knew then what I know now (famous words), I would have bought at least 3 times the number of properties as I did. Back then I didn't know - and was just learning about: Lease-Options; Seller Financing; Short Sales; Private Lenders; Hard Money; and on... But is the party now over even with this knowledge and additional funding resources? Did these things stop working in 2019? Are they now dead here in 2020?
The short answer to those questions is NO! Now there is a longer answer that begins with IT DEPENDS... Because while the party may not be over even here in 2020 - we've certainly past the point where you can damn near throw a rock and hit a property that can be bought and rehabbed for less than 70% of it's ARV (After Repair or Rehab Value). So while the party isn't over - what is over is "Amateur Hour".
So that longer answer to the question of "is the party over" is... IT DEPENDS - on if you're willing to get the education; do the work; and put in place the people and systems as needed to find and take down the deals that ARE still out there. Because they're are deals still out there - but you're no longer likely to find them by throwing rocks - as you could a few years ago.
It will now take more than just the MLS to find deals. Even direct mail alone is no longer sufficient. And people have long since figured out that someone without enough money to do legitimate marketing (so they're break the law by placing some form of 'We Buy Houses" signs everywhere) - likely doesn't have any CASH to "Buy Your House Fast for Cash" - despite what the cheap / illegal sign says.
You think people are climbing over each other to call the number on a sign of someone who has already shown a propensity to cut corners (and even break laws) - when it comes to what may be the most important financial transaction of their life!? I'd say NO.
So the party is NOT over. But (THANKFULLY) the amateurs are being pushed out of the business. And I say "Good Riddance" - because it doesn't take much to become a professional - so why should I shed a tier for someone who's not willing to put in the work to learn the business from the ground up (as I did)!? As YOU are doing!
So I commend you for listening to this and other shows like it. I commend you for reading the books like those I've posted at: www.andlandlord.com/books/ - and if you're going to read or listen to these books anyway, please help offset the cost of producing this show, by getting them from this page on our website - as we get a little affiliate kickback from Amazon.
Your success with Rental Real Estate Investing in 2020 and beyond (keeping the party going) - will center on your work to educate yourself to the business; and how to find the deals that ARE still out there; and learning how to recognize a deal when you see one.
That recognition will come from walking as many properties as you can and estimating the rehab required on each one. Then running the numbers on all such properties to see if you've really got a deal (or not) - or if there's any possibility to MAKE a deal where one might not otherwise be readily apparent.
For example, could you add square footage (out), or even pop the top and go up? Can you create additional bedrooms within the existing square footage. Can you go with a short-term rental model or extended stay - for additional income? Is there a student rental play or maybe residential assisted living? Knocking down the existing property and build new - maybe even multi-family? I could go on naming many different methods of making a profitable deal where there might not otherwise have been one. But you're certainly not going to be able to do that, if you've not educated yourself as to the process and options.
So the party IS over for those who want to just throw a rock and hit a deal, or just push the proverbial "easy button". But for those who are willing to get the education and do the work - the party's just getting started. There will be ups and downs in the Rental Real Estate Business (like waves), but once you learn how to surf those waves - that's when its just fun! Go get it...
People have been getting rich on Real Estate for decades - really going back hundreds and even thousands of years (before the current crop of humans on this planet even existed). But the economic crash of 2008 / 2009 might just have created the best Real Estate buying opportunity of our lifetimes.
Now as humans we tend to suffer from "recency bias" - thinking that what we've experienced is the best (or worst) that anyone in history has ever dealt with. True or not - in this episode of the [... and Landlord!] Rental Real Estate Investing Podcast, I'm asking the question - "Are You Late To The Party?"
"The Party" I'm speaking of is the situation that followed the "Great Recession" of 2008 / 2009, where a year or few later (sometime between 2010 to 2012) - in many (if not most) locations in the country, it was possible to buy Real Estate for LESS than its replacement cost. In other words, you could often buy a property for less than it would (or did) cost to build that same property new. That's a situation (a party) that doesn't happen every day.
So in this [... and Landlord!] Podcast episode, I mention my envy of those who were able to jump on those deals right at the start of the party (around 2010 to 2012). And I lament the past a bit (something I try NOT to do), in that I didn't get to the party until 2015 - but still in time to grab some amazing deals that are paying off big-time for me today. And I start the episode by asking (singing in fact) "is the party over?"
If you're just seeking to get started in Rental Real Estate Investing here in 2020 - are you 5 to 10 years late to the party? Is the party over? In fact, did the party end in 2019?
So just this past weekend, I submitted an offer on behalf of one of my Investor clients (acting as their Realtor). And even though we were several thousand over the listed price on a distressed Townhouse in Raleigh (NC) - the seller went with another offer. I'm told by the listed agent that there were over 70 showings in only 4 days and at least 20 offers submitted (including mine on behalf of my client).
So you can see from this one anecdotal example, that Real Estate is HOT right now, and competition for even highly distressed properties is high. From 2015 to 2018, I bought several properties just like this one - after they had sat on market for months in many cases. Now they go in days and for tens of thousands more than back then. So if "the party" is getting an amazing deal on a property - its not far off to ask "are you late to the party" or even "is the party over?"
Listen to this episode of the... and Landlord Podcast to hear my answer to these questions... And It's NOT "YES!" - What is over, is "Armature Hour". You're going to need more than the MLS or Zillow to find deals in 2020.