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About two weeks ago, I made a video explaining why I now own a little over $4 million dollars worth of real estate, and why I choose to pretty much invest EVERYTHING I make into buying more property:
1. First, I can borrow “cheap” money by taking out a fixed 30-year loan at a rate just barely above inflation
2. Second, I can leverage my money to generate a higher return on my investment
3. Third, real estate can make for great cashflow
4. Fourth, I get a LOT of great tax advantages
5. And fifth, I’m a believer in long term appreciation of property values
So given all that, it’s pretty much been an unspoken goal of mine to buy a new property every year. And this officially begins my home search…again…since last year.
To those who believe the market will drop, here are my thoughts – I have NO IDEA what will happen in the short term. But In terms of the people who ARE buying real estate…they’re VERY qualified. They have hefty down payments, they have great credit, they have verifiable income, they have equity in their home, and they’re getting 15-30 year mortgages with the intention of holding it long term. These are very few investors, these are owner users, and they’re not trying to flip the home for a profit in the short term like we saw in 2006 and 2008.
This TYPE of buyer should add plenty of stability to the real estate market in the event we see a downturn, because these are the people who are unlikely to sell, they aren’t going to take a loss on their home, and they have the finances to continue making their payments until the market rebounds.
I’m also seeing a LOT of wealthy people keeping cash on the sidelines, just WAITING for there to be a drop in prices…so I believe that if we DO see a sudden decline in prices, there’s no shortage of people out there to buy back in, giving us some level of support from things getting “too bad.”
However, I’m not naive, and I STILL do want to protect myself IN THE EVENT SOMETHING DOES HAPPEN….and you can only do that by getting a good enough deal where, if the market declines in value, my worst case scenario is just breaking even.
Point being….in this market, or ANY market – that is, I’m looking for value. I want something that I believe has a strong likelihood to go up in value, I want something that has some potential to fix it up, and I want something that would also have a strong rental demand. It’s a tall order, but – it’s out there. Somewhere.
Now…in terms of HOW I find deals in this market…I have two strategies:
One, look every single day and find a property as soon as it comes on the market. Every now and then, you’ll find a listing come up that’s absolutely AWFULLY marketed…I’m talking wrong square footage, terrible pictures, wrong bedroom or bathroom counts, you name it. Sometimes, those properties are also priced under market value because the seller and agent have NO IDEA what they’re doing. If you spot a listing like this, JUMP ON IT ASAP.
Secondly, my other tactic is to look at homes listed on the market a LONG time – because those properties are likely going to be more likely to negotiate. Those deals are AMAZING…go through old listings, make lower offers on homes that have been sitting around for awhile…and at that point, it’s a numbers game. Just go into it with your limit, knowing what it’s worth, knowing the upside the deal has…and stick with it. You NEED to negotiate everything, and if you’re a ready and willing buyer…you have the leverage, as long as you aren’t competing with any other buyers.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com