Has The Economy Fallen Off a Cliff? Or Is This Seasonal?


#1

Friends -

I run the same ads in my local newspaper and on CraigsList for my 2BR, 3BR, and 4BR homes (rent or RTO). Since last fall I’ve consistently gotten 40+ calls/week from these advertisements. But two weeks ago the inquiries dropped to 2 calls/week…(!) I lowered my prices 10% in the advertisements over the past week and now only 1 person has called this week… An apparent 97.5% drop in demand.

Has anyone else seen such a sharp drop-off for either rentals or RTOs? Something in my market (Oklahoma City) has just fallen off a cliff… unless this is a ‘normal’ drop in demand for April/May… I know we are no longer in tax season, but this is ridiculous…

Please let me know your thoughts,

-Jefferson-


#2

I live in Central MO the past 6 months have been very productive for me, I now have a list of prospective buyers to call as soon as a unit comes available. It wasn’t always so. This is a streaky business, your slow streak will pass. I would change up the looks of my ads (make em wierd for a while) and use some bandit signs, maybe use some print ads to reach some different folks. I would think OKC would be booming what with $120+ barrel oil prices.


#3

Over the years I have tried to understand and predict the ebb and flows of the mobile home market. One of my first years as a Lonnie dealer I found that Christmas (of all times) had a huge excess of demand that I quickly ran out of homes. The next year I bought extra homes and ended up paying lot rent for months on empty homes.

I find that once I find a high or low, I can find some way of justifying it but I am not good enough to predict it before hand.

For what its worth I have traditional seen a pattern in the months surrounding the end of school. Some of my biggest movements come at that time so I try and have my other work caught up as best I can so that I may be prepared to jump on vacancies quickly.

One might argue that this is the calm before that storm for you. One could argue that the price of gas and increase in food costs has people hunkering down more. I just never know until it happens and then I get to sound cool by theorizing its exact cause.

The only advice we can give each other during periods of high vacancy or low demand is to keep trying everything and anything. Greg got creative to fill vacancies. I have done the same. Sometimes taking a few temporary tenants is better than vacancies. Other times I wish I had left a particular home vacant rather than have to deal with the mess that temporary tenant left me. It


#4

Our “season” here in FL is Nov-March. Things are always slow here during hot months.

Folks here just don’t have the money to buy right now. I am trying to put a dent in hard money loan and have a deluxe 28 X 56 3/2 with fireplace and custom cabs on 1/4 acre lot for sale.

Appraised for 74K in Jan. Selling for 55K…no bites. Have 17K and change in the deal. 2 years ago this would have sold for 75K Cash or 82K contract with 10K down and 10% interest. Will reduce to 49K may 1st. Home has been on the market for over 1 year!

Things will get better here…there is just a TON of homes on the market right now.

Greg


#5

hi all…i’m in south fla stuart-port st. luice area and thinks going real bad here…i just brought a house from the bank 3/2 and 1/4 lot and good area for 36,500…and two months ago i brought 2 mobile home lot here 22,500…and seem to be a lot of foreclosure coming out!!!i real think the econonmy is falling of part!!!


#6

These are the times that fortunes change hands. It is a fact of life here. Those with cash or access to cash will create fortunes provided they have the wherewithall to endure the downward slope and ride it back up.

It is no different than buying stocks “when blood is in the streets” as the sayings go. I have not seen anything near to blood in the streets in my area (yet) but if it comes to that I will take action to improve my portfolio.

I do however caution those who are seeking to flip properties as I suspect this curve will take time to return. Landlording may become a necessary evil for those flippers. I however prefer it anyways so it will remain business as usual.

By focusing on providing lower income housing we seek to market to those who may be downsizing in this market. I think we all see more of them to come.

Tony


#7

Hey Tony and all,

Tony, I know that you don’t flip properties but do you know others in NC that are flippers that are having problems selling land/homes?

I am just starting out with limited cash and my plan was to flip a land/home to build up some cash so that I can pay off some debt/improve cash flow and move to my next deal. I want to be able to stay in the game and not use up all my cash starting out the gate with a rental home/land properties. I know one option is to use the land bank technique you describe, but I would have to hold the property a year before I could pull cash to fund another deal.

It seems Greg is having issues flipping so I am thinking I need to find other ways/strategies to enter and stay in this game. I guess one could be to find some cheapo mobile deals and try to flip them for cash to build up my funds.

Any other advice?

Shawn


#8

I agree with Tony, now is the time to get some good deals. As he said you need to be able to get at cash to do this now. You are correct in thinking about doing L/D’s right now. Here is how we come up with cash on lonnie deals, you might see if you can do this in your area. We buy a lonnie deal for $1500.00 do a minimal clean-up. ( if we have to do any remodeling of course the price would be higher ) We put it on the market OWNER WILL FINANCE $7500.00. When they call we ask them how much they can give as down payment. We use that as our base . Let’s say they can give $1500.00 down. We tell them that for every $1000.00 more that they can raise for the down payment, we will take $1000.00 off the sales price. So if they give 2500.00 the price is 6500.00. If they give $3500.00 the price is 5500.00 etc. You would be suprised how they can get relatives to help them come up with a higher down payment! This can get cash to secure some bigger and better deals that you can cash in on when the market comes back!


#9

I do not personally know of folks that are successfully flipping land/home properties in my area. This does not mean that they do not exist however.

I have seen some try this with poor results. One guy had his land/home property on the market for 2 years. He had made a doll house out of it. Meanwhile Scotts down the street rented for $700 per month.

That means Scott received almost $17,000 while that guy got the pleasure of making mortgage payments, insurance payments and tax payments on a vacant house.

I do know of some folks successfully doing what I call slow flips with these land/home properties in our area. Attorney Bruce Berger who speaks with us at our boot camp does these type of deals. He has a unique twist on lease/option type approaches (imagine that, an attorney who covers all the legal pitfalls upfront in his documents).

The lease/option approach helps him to receive income while he works to get the tenant/buyer financing over the next year. I do not know what percentage of his actually sell but I know he is having success. He does get some back of course.

Shawn, there are ways to buy land/home properties without your money. We have always done so but I hate to say it that way because too many folks flock to the “No Money Down” hype and seek fast riches. This is a get rich slow game but you can do these with none of your money. That is exactly why we use American General to finance the purchase and the fixup.

Tony


#10

Thanks Dan and Tony - using hard money lenders was another option I was considering as well. I will definitely check out the local American General office as I seek financing.

Shawn


#11

Properties right now is a viable model anywhere. I know for a fact is not viable in Florida.

My model has been to do these with none of my money in the deal. I would hard money enough$ to complete 4 L/H’s approx. 160K now and sell two for all cash to “free and clear” two for our portfolio to rent out.

The last time I did this we sold one for 74K all cash and another for 55K and a Note for 21K. I am selling the one above to clear up HM loan and get debt free. Not a bad return but there is a lot of work involved here.

Rentals are the only segment of our model that is really profitable right now. We are showing a 26% net net from rentals and are at 89% occupied last month (90% we consider full). We always have 5-6 moving in or out or evictions. The good old dayus of 95% are gone for now. We could increase profit dramatically if we risked doing highly leveraged deals…we opt not to. One thing that skews this number is we get 8K per month cash flow from a 1K investment (option consideration) on a 26 space Park. Our numbers would be much lower without this item.

One inherent benefit of rentals is “equity build” and in marion County florida last 2 years our real estate prices have fallen 26%. We have bought right mostly cash and this downturn has not affected us much. The highly leveraged/ refi flippers are dying. Their model depends on a rising market/ liberal refi credit scenario to be viable.

Tony is correct there will be fortunes made by savvy investors that can buy basement bargains in this cycle…there will also be fortunes lost and not just on paper. We have lost 688K in equity in two years but this is paper money. We live for cash flow…a friend quoted, “you can’t eat equity”. I love it.

Lonnie nailed it…there will always be a need for affordable housing. There will be huge demand for this in the coming few years. We are already seeing families downsizing into mobiles (and put the rest of the furnishings in storage) Hmmm Self storage maybe increasing?LOL

Fear is fueling this down cycle and the liberal media is fanning this fire.

They need to quit it…

Greg


#12

Tony,

If you don’t mind me asking about how many land/homes do you currently own/rent?

Just curious as to what kind of time is involved with your landlording duties of several rental properties. I plan to gradually switch from my full time job to investing/landlording in the future.

Shawn


#13

For years we have all heard that “you cannot eat and equity sandwhich.”

I say we all pony up some cash and start a line of Beer that is marketed strictly to real estate investors.

We can all it “Equity Beer.”

Our slogan can be, “You can’t eat and equity sandwhich, but YOU CAN DRINK AN EQUITY BEER!”

Tony


#14

Shawn,

How many properties it takes to set you free of a job is determined by several factors and the most important one is the one people hate the most.

If you are willing to live very modestly, in most cases it does not take many deals at all to quit your full time job.

How many more properties it will take to provide the type of business you want will also be a huge factor.

We often hear folks say the don’t work on homes, the write checks. Well that’s okay but chances are you are going to have to do a heck of a lot more deals so that they can support you writing checks for everything.

I prefer to have fewer units, decent cash flow and to do everything myself. This is not for everyone but it means I can focus better on a smaller portfolio and keep it running more efficiently. Yes, I do have to work but I have found that even the check writers have work to do, they just don’t get to drive a truck as cool as mine!

Tony


#15

Thanks Tony - yeah I plan to do a lot of the work myself because that gives me an excuse to get a cool truck again!

Had to trade my Titan due to gas prices and long commutes to work…hopefully my deals will afford me enough to buy gas for one though…

Shawn


#16

it would have to be a “lite” beer! GROAN!

I have heard from 2 NCinvestors this week and both are doing well. Your economy up there seems anemic but still cranking out decent deals.

I remeber that you and Scott have a lot of your properties in Section 8 housing. Is this sheltering you from some of the high vacancy problems we are seeing elsewhere?

I have a 2/2 single with screen room and garage being inspected next week. The Progran here will pay a max of 584 per month here (we typically have rented these for 650. The lady and her Mom who are attempting to rent this say their “copay” is 131 per month. Is this in line with your area Tony?

Thanks,

Greg


#17

Our rental market demand remains strong and yes, the section 8 units have greatly helped us in not only maintaining a steady income but has greatly reduced our turnover, vacancy and damages.

In our area, the section 8 vouchers have increased twice this year. We are adjusting our rents up slowly as we speak. Apparently we got a little bit behind on our rent increases. We got so busy focusin on getting older units up to more modern standards but we never bumped the rents by that much. Sometimes we are so busy putting out fires that we forget to bump the rents a bit.

The good news is that the properties are in better shape and even if we don’t or for some reason cannot, raise rents we are in good shape in this market.

And yes, I do credit the section 8 program with many sleep FILLED nights for me.

Tony