0:00

This is the Bigger Pockets Podcast Show 869.

0:04

What's going on, everyone? This is David, your

0:06

host of the Bigger Pockets Real Estate Podcast,

0:08

joined today by the co-op crusader himself, Rob

0:11

Avasolo. Rob, how are you today? Fantastic, man.

0:13

I'm really excited to get into today's show.

0:15

We're calling it Why Buying Season is Now.

0:17

And I think we really dissect some of

0:19

the psychology and some of the watch outs

0:22

and some of the things you should keep

0:24

in mind if you want to buy a

0:26

property today. We're speaking with Chaylee Ridge,

0:28

who's a nationwide lender who specializes in lending

0:30

to investors. We're also talking to our good

0:32

friend Avery Carl. She's a friend of the

0:34

show. She's a real estate agent who specializes

0:36

in working with investors. Who would have thought?

0:39

We're going to be talking about seasonal strategies

0:41

if now is a better time to buy

0:43

than waiting until spring when all of the

0:45

other investors tend to hit the market and

0:47

we see blood in the water. Before we

0:49

jump into it, I did want to mention

0:51

that if you're looking for a lender or

0:53

agent, we actually have a matchmaking service that

0:55

you as investors can use to find investor

0:57

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0:59

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1:01

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1:03

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1:05

do is the fun part of taking action

1:07

and making deals happen. So if you're interested

1:09

in that, head on over to biggerpockets.com/agent finder

1:12

and biggerpockets.com/lender finder today. After we speak

1:14

to Chaylee and Avery, stick around for

1:17

a special seeing green segment where we

1:19

answer a listener question about buying in

1:21

a hot market. Avery Chaylee, welcome to

1:23

the Bigger Pockets podcast. Chaylee, let's start

1:26

with you. How many markets are you

1:28

currently in as a lender? We are in 48

1:30

markets, David. We are in all but New York

1:32

and North Dakota currently. Okay. And Avery, how many

1:34

markets are you in as an agent? Okay.

1:37

What markets do you two see are

1:39

most active for real estate investors right

1:41

now? I'll go first. So

1:44

we see right now our most

1:46

active markets being our lowest price

1:48

point markets. Typically we see that

1:50

because the difference in interest rate

1:52

is a lot smaller on a

1:54

$250,000 property than

1:56

on a $1.2 million property in terms of getting

1:58

into it. So we're seeing our... Lower

2:00

budget markets be a little more active

2:02

than are higher one's own. I would

2:05

say I'm a good maybe a slightly

2:07

different lens coming from a lender perspective.

2:09

I'm and I think it's gonna largely

2:11

depend on the individual investors course strategies,

2:14

so short term rental might. For.

2:16

Example: Be Florida. Florida's laws are a

2:18

little bit more a lenient for search

2:21

her rental, the longer term rental and

2:23

if the cash flow is the primary

2:25

objective vs. appreciation, they're probably going to

2:28

be in a landlocked state versus the

2:30

sun belt states. For that

2:32

so I think really David the answer for

2:34

me is gonna be most of them depending

2:37

on what their their individual strategies are and

2:39

and in within the diversification that they're they're

2:41

going after pure ever follow question for every

2:43

because you mentioned in a some of the

2:46

lower price point markets are where there's a

2:48

bit more activity can give us a few

2:50

examples of some of those markets yet. So

2:53

Branson super active right now

2:55

Myrtle Beach and the western

2:57

North Carolina Mountains. Now I

2:59

know both of you work with mainly investors

3:01

so are also with you every what are

3:03

you seeing from an investor sentiment at the

3:05

moment? We're. Seeing a lot as well let

3:08

me wait and see. So I think a

3:10

lot There's a lot of people on the

3:12

sidelines. they're ready to buy that maybe have

3:14

come into our system and had then you

3:16

know taken around talking with our agents and

3:18

things that not pulling the trigger but as

3:20

they just they're kind of waiting to see

3:23

what interest rates do, Whether there are really

3:25

have anything to save lives, whether it's interest

3:27

rates coming down, some. Or. Prices coming

3:29

down some. Do you think if interest rates

3:31

dropped like let's say a one percent tomorrow

3:33

that would completely change the outlook or do

3:36

feel like investors at the moment are still

3:38

a little bit. Ah, Scarred from

3:40

the past year, it's difficult. To say,

3:42

I think it would definitely make a big

3:45

difference because something like. Ninety.

3:47

One percent of. Mortgages,

3:49

Right now for at least according to

3:51

read and are under the six percent

3:53

mark. So as were reporting that the

3:55

right around a little over six and

3:57

a half. Or like six, six.

4:00

They were the last that I

4:02

saw today, so. We're getting closer

4:04

to sellers wanting to make some moves.

4:06

For right now there's just not really

4:08

any inventory because when sellers list their

4:10

properties they then turn around have become

4:12

buyers usually so a seller doesn't want

4:14

a list of property when they have

4:16

an under six percent mortgage to then

4:18

jumped to being a buyer at eight

4:21

percent so just doesn't make sense. So

4:23

I think it's a went down a

4:25

percentage point. At this point we would

4:27

see some things. Are. To move into suggests

4:29

a were a bit of a cellmate because

4:31

you say your property reagan ago then turn

4:33

around and effectively have to buy a cheap

4:35

or property at a higher price. Pointed to

4:38

get something summers is is what I'm hearing

4:40

to what about you would work will kind

4:42

of investor sentiment are you seeing right now?

4:44

well as I might armed robbers. It's okay

4:46

just to interject that will move on interest

4:48

rates and I spent a lot of time

4:51

obviously talking about interest rates and facts or

4:53

that's usually investors first question where the interest

4:55

rates and I feel like there's a real

4:57

psychology attached to. Raise as it relates to real

4:59

estate investing and I know that it's gonna be

5:01

far different of this their owner occupied, but we're

5:04

here to talk of investors. On and

5:06

the psychology is that they aren't doing the

5:08

mouth and they just. Hear the numbers and

5:10

they're listening to the sound bites on.

5:12

You know, whatever of their predilection for

5:14

you know, fox or see and or

5:16

what wherever they're getting their information. And

5:18

if they were to take the time

5:20

and do the math, I'm always trying

5:22

to educate our investors to say listen,

5:24

the difference in an eighth or quarter

5:27

or half or full percentage point in

5:29

rates depending specifically on the loan size

5:31

might only be fifty bucks a month.

5:33

So. Just make sure you're doing them off.

5:35

It's so so important than just to. you

5:37

know, Be. on the sidelines

5:39

listening but to answer questions specifically

5:42

rob i would say that i'm

5:44

sentiments investor sentiment i think that

5:46

i would differentiate two buckets here

5:48

i would say brand new investors

5:50

are are going to be more

5:52

tentative in that higher rate environment

5:54

and investors that in baths and

5:56

have been investing ah they understand

5:58

that the market cyclical and rights

6:01

will change and price points will change

6:03

and then they change their strategy accordingly,

6:05

they're going to figure it out. Yeah,

6:07

do you feel like investors right now

6:09

in the market are actively looking for

6:11

deals and transacting on them? Absolutely. Honestly,

6:14

our volume, while yes, for sure

6:16

there has been between 2023 and

6:19

let's compare it to 21, for

6:22

example, certainly there has been

6:24

a dip in activity and acquisition and

6:26

refinance. But I wouldn't say

6:28

that for us it's as much

6:30

as maybe owner occupied transactions, right? Like I

6:32

said, investors are looking at it from so

6:34

many different facets. And if they're doing it

6:36

right, and looking at it holistically, they're not

6:38

just looking at an interest rate of 8%.

6:40

And cash flow has to

6:42

be three, four, $500, right?

6:44

They've reset their expectations. They're

6:47

looking at short term or two to four units. Maybe

6:50

they're looking at being private note holders,

6:53

private lenders, the investor that has been

6:55

investing or has been educating themselves is

6:57

making their way through. Avery, do you

7:00

have similar thoughts or sentiments on that?

7:02

Yeah, yeah. So I do think

7:04

that the people that we're seeing transacting

7:06

right now are typically going to be

7:09

the more experienced investors. And

7:11

I think that we are seeing a lot of

7:13

people still have been like a little traumatized from

7:15

2021 and 22. So I think one of our

7:17

biggest coaching points for our clients right now is

7:20

saying, just make an offer that works for you,

7:22

just offer at the number that works for you,

7:24

because people are still kind of

7:26

feeling the pain of 2021 and 22, where you

7:28

had to offer asking price,

7:32

you had to offer over asking price. So what they're doing

7:34

is they're just swiping left on all these properties, because

7:36

the asking price doesn't work. And we're like, No, no,

7:38

wait a minute, you can offer low

7:40

offer as low as you want to go. You do

7:42

not have a lot of competition right now. Let's see

7:44

what happens here. And we are seeing people get some

7:46

really good deals that way. Avery, as real estate

7:49

agent, when do you tend to see more listings

7:51

at the market? We usually see

7:54

more listings start to hit the market in

7:56

January. So March is when you really

7:58

start seeing a lot more closings as you. You know

8:00

David with your team. The ah January February

8:02

will be a little slow on the closing

8:04

sites, but marches when things really start to

8:06

pop. Closings was which means all the movement

8:08

of kind of starting to happen in January.

8:11

A lot of people hold off during the

8:13

holidays because they've got a lot to think

8:15

about with family and gifts and getting through

8:17

all that. and then they start to either

8:19

look for properties or list their properties after

8:21

they get over the big headache of the

8:23

holidays. So I'm I think at least with

8:25

our clients. We. Use are

8:27

really trying to encourage our path plants

8:29

to lists right now if if they

8:32

have any interest in Ten thirty one

8:34

exchanging or training out. Were.

8:36

Trying to get him to do that now because. A.

8:38

Lot of the analysts predicted that we

8:40

wouldn't see the interest rates that we're

8:43

seeing. Now it's until the end of

8:45

next year and we've had a really

8:47

good several week run of interest rates

8:50

dropping sharply, and I think that if

8:52

that continues, of course, I'm. Not

8:54

the communists and I can't predict the

8:57

future, but I think it's probably going

8:59

to continue on a downward trend who

9:01

knows how quickly. But to be prepared

9:03

for this, we have a surge of

9:06

buyers every January. Just that's how. The.

9:09

The cycle of the market works every year,

9:11

so that coupled with his interest rates coming

9:13

down faster than we initially thought, I think

9:15

it's gonna be even a bigger spring than

9:17

what we're typically used to because there's just

9:19

so much pan out. The man in the

9:21

market right now. It would he seems

9:23

really saw I think a ruse right

9:26

and I think that are myself included

9:28

in the data in and I'm looking

9:30

at this all day long. I don't

9:32

know that I would have predicted that

9:34

the and I will get to technical

9:36

that the Pc either came out on

9:38

November thirtieth would have promoted or the

9:40

rate reductions that we've seen for the

9:42

last couple of weeks, so we're pleasantly

9:44

surprised. I think as a result of

9:46

that inflationary metrics or Pc for those

9:48

of you that are not familiar personal

9:50

consumption expenditures that's the one that the

9:52

the Fed. reserve focuses on most it

9:54

came in favorable for inflation is

9:56

on the run rates are going

9:58

to start to The

10:01

bad news is that rates fall a lot

10:03

slower than they go up. So

10:06

maybe we did get to see some boon

10:08

or an incentive here as a result. I don't

10:10

know that I would say that I'm going to

10:13

see them falling off a cliff, but I do

10:15

think that that trajectory is on

10:17

the lower slant. But remember, I said

10:20

earlier, an eighth of a point or a quarter of

10:22

a percentage point on $150,000 is $10. So put it

10:24

into perspective and one more time for posterity,

10:26

do the math. All

10:32

right. So we've reviewed some cautious investor sentiment

10:34

out there and some potential good news with

10:36

future rates. We're going to get into what

10:39

that might actually look like in 2024 right

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13:06

here with Avery Carl and Chaley Ridge to get both

13:08

the agent and the lender perspective on if now is

13:10

a good time to buy and what we expect to

13:12

see play out in the 2024 market. It's

13:15

a very interesting psychology that y'all are both kind

13:17

of nailing both sides of it, but

13:19

in my mind, what I always see is when interest

13:22

rates are low, everyone is buying. Everyone

13:25

is putting in offers over asking and thus

13:27

everyone is discouraged and they don't want to

13:29

get in because it's competitive. And then now

13:31

interest rates are high and competition is low

13:33

and those same people are complaining

13:35

about interest rates being too high. So it's always kind

13:37

of funny that there's like sort of this flip-flopping

13:40

and if you go back to the math and you

13:42

math it out, yeah, it's like it can be 10 bucks, it can be 50 bucks.

13:46

That's like probably where a lot of the, I

13:49

don't know, some of the fear that's

13:51

coming in, Chaley, is that a

13:53

lot of it comes from one eighth doesn't make a

13:55

big difference, but over the past year we've seen it

13:58

go up quite a bit. So I think

14:01

people are used to rates being in the threes

14:03

or the fours and now the fact that they've

14:05

doubled does have a pretty significant impact and I

14:07

feel like we have to see those rates

14:10

continue to come down before people are

14:12

comfortable entering the market again. Or I

14:15

would say the masses. Okay, and I

14:17

don't disagree, Rob, but here's what I

14:19

would say. A couple things. First, people

14:21

have short memories. I'm in that grouping,

14:23

okay? I can call myself out on

14:26

that. The average interest rate,

14:28

and investors didn't just start investing in 2021, 22, 20,

14:30

right? That's

14:33

not when this happened. When rates were low,

14:35

we got an amazing opportunity to get some

14:37

great cash flow. But prior

14:39

to that, the average 30-year fixed mortgage

14:41

rate is in the high sixes,

14:43

historical average. So we have

14:45

that. And then

14:47

let's not forget that as

14:50

we move forward and

14:52

talking about diversification and

14:54

investors looking at their

14:56

portfolio, if they're smart, they do have

14:58

some diversification in their core. They're going

15:01

to have their core philosophies, but then

15:03

layering in some other forms of real

15:05

estate investing because the markets are cyclical

15:07

and because they're going to change is

15:09

going to be very, very

15:11

important. And kind of going back to, I

15:14

know I'm beating a dead horse with the math

15:16

of all of this, but remember, if they're doing

15:18

it correctly, they're not only looking at it from

15:20

the monthly or annual return, what

15:22

about everything else? The all the other very

15:26

tangible benefits of real estate

15:28

investing, you've got your tax benefits, right?

15:30

And if you're doing that, right, that's an offset

15:32

quite a bit of the interest rate.

15:35

Because remember, at a higher interest rate, what happens to

15:37

the interest deduction that you're taking under Schedule E? It's

15:39

going to be a lot higher than if it were

15:41

a 4% rate versus a 6% or 7% rate. Appreciation,

15:46

appreciating rents, etc., etc. I

15:48

guess with that, I'd like to kind

15:50

of turn it back to you, Avery, because

15:52

obviously lots of changes happening, lots of sentiment

15:54

from differing groups of people. And

15:56

by the way, Jayleigh, I do agree. I do think

15:59

our memory is short. There is such a large group

16:01

of people that broke in 2020 and 2021. They

16:04

do remember the 2.75% and the 3.25%. It's

16:07

hard to forget. So with that

16:09

said, Avery, as we move into Q1, tell

16:12

us a little bit about what you're seeing

16:14

inventory wise and how are things sitting on

16:16

the market at the moment? So

16:18

I've been kind of jokingly calling this

16:20

year the great stalemate because buyers aren't

16:23

buying as much because interest rates are

16:25

almost double what they were a year

16:27

ago. And the sellers

16:29

are not listing because they don't want

16:31

to turn around and be buyers in

16:33

a high interest rate environment. So what

16:36

we're seeing is incredibly low inventory. I

16:38

think what a lot of people don't realize is

16:40

that they're that keeps saying, oh, I'm waiting for

16:42

the crash. I'm waiting for the crash. It happened. It

16:45

happened right underneath everybody's noses. Less houses were sold. Fewer

16:47

houses were sold in 2023 than in the past 15

16:50

years. There's

16:53

nothing has been sold this year. So

16:56

as interest rates go down, I think that

16:58

sellers are acutely aware of people who might

17:00

need to list, who are ready to trade

17:03

up, get into other markets, other asset classes, things

17:05

like that. They're really, really paying

17:07

attention to the media and this interest rate

17:09

news. It's almost more important what the media

17:11

says about it than what's actually happening in

17:13

terms of buyer and seller psychology.

17:16

But I think as things continue to take

17:19

down, assuming that they will again, nobody knows

17:21

the future. I'm not trying to instill

17:23

any FOMO here. But I think as

17:26

rates continue to take downward, we're going to

17:28

see sellers start listing and it's going to

17:30

be back to multiple offers again, because again,

17:32

there's so much pent up demand that

17:35

at least temporarily things are going to be

17:37

really, really crazy. Maybe not 2021 crazy, but

17:40

it is going to go back to a

17:42

multiple offer situation until things even out a

17:44

little bit. Yeah, it's pretty interesting how some

17:46

of these changes are pretty fast. I

17:49

have a house listed in Houston and the moment

17:51

that they announced that they were dropping interest rates,

17:53

they did go down a little bit and my

17:55

realtor was basically like, man, it was instant here

17:57

and the amount of calls I got on this

17:59

property. just from the announcement from investors really

18:01

who are like, oh, rates are

18:04

moving down, jumping in on it. Clearly, that's

18:06

anecdotal, but I've spoken to a few people

18:08

who feel like, yeah, as rates go down,

18:10

desire, desire and demand go up. There's a

18:12

pattern there that you can recognize when it

18:15

comes to real estate investing. And it tends

18:17

to be that the crowd

18:19

moves as a flock of birds. I've always

18:21

been of the opinion that buyers

18:24

drive markets, what the buyers are doing

18:26

depends what type of market that you're

18:28

getting. Sellers will typically be reacting to

18:30

whatever buyers are doing. And buyers tend

18:32

to move as one big flock. When

18:35

rates go down, when you hear about other people buying houses and

18:37

everyone thinks, okay, I need to get in there and buy a

18:39

house. And when nobody else is buying, it's

18:41

very easy to pull back and say, okay, I

18:43

don't want to buy because nobody else is buying.

18:45

There's this feeling of security that you get from

18:48

following the crowd, which is how the

18:50

normal casual investor is going to make

18:52

their decisions. But when we interview

18:54

people on this podcast, and we talk to

18:56

people that own real estate, they're almost always

18:58

contrarians. They bought when other people were

19:01

not buying, and maybe they sold when everybody

19:03

else was buying. You see some of that.

19:05

What's your thoughts, ladies, on if people

19:08

should be moving against the crowd or if it's

19:10

wiser to follow the crowd? I would say that

19:12

against largely is going to be more to their

19:15

advantage more often than not. And not just for

19:17

those two perspectives,

19:19

David. But I get to

19:21

see because we're licensed in 48 states, I

19:23

do get to see the trends. And there's

19:26

a lot of activity in this particular market,

19:28

for example, as an investor.

19:30

Well, if there's an opportunity there and the

19:32

deal works, it works. But I may focus

19:34

my sights on a place that has equal

19:36

returns or better because I'm actually doing the

19:38

leg work and the due diligence and the

19:40

math. But I'm not

19:43

oversaturated with competition in offers. And

19:46

I'm sure Avery's got some insight about that

19:48

too. So I would say that I would

19:50

be going against the flock. I would

19:52

say it really just depends on

19:54

the favorite phrase in real estate

19:56

investing. It depends. It depends on

19:58

what each investor. individual investor is

20:01

looking for and needs. So I've

20:03

seen great deals happen in environments

20:05

where everything's getting a thousand

20:07

offers. I've seen great deals happen when there's

20:10

not a lot of activity going on in

20:12

the market. So it really just depends on

20:15

you as the investor and you just kind of

20:17

keeping on putting one foot in front of the

20:19

other and keeping like kind of following that thread

20:21

to find the deals. Because I think it's when

20:23

people just stop and say, I'm gonna wait and

20:25

not do this right now, that they

20:27

might've been one step away from actually getting that

20:29

deal. And that can happen in any market. The

20:32

key is just to keep going. Yeah, it feels like in

20:34

general, the crowd is always

20:37

a little delayed, right? If you're following the flock,

20:39

like the flock is usually following the

20:41

front runner. So it kind of makes sense

20:43

that you probably don't want to be with the crowd, but

20:45

I do think it's not the worst

20:48

idea to stay a little cautious right

20:50

now. I'm not

20:52

waiting things out per se. I'm just trying to

20:54

get better deals. A little bit more scrutinizing the

20:56

types of deals I was taking on two years

20:58

ago. But with all that said, Avery, I

21:01

mean, we talked about sort of the competition side

21:04

of it. Do you think it's a competitive? I

21:06

know overall we said competition is low, but for

21:08

investors, do you feel like the

21:10

competition has leveled out? Because the way I've

21:12

sort of experienced this is people who are

21:15

really serious about real estate and

21:17

have been like seasoned veteran investors didn't really

21:19

slow down too much over the last year.

21:21

Yeah, I'd agree with that. The ones who

21:23

are seasoned and understand what

21:26

they need out of a deal and that

21:28

it's not their first one, I think are

21:31

definitely have been keeping a more steady pace

21:33

over the last year than some other ones.

21:35

I mean, I know myself, we've bought significantly

21:37

fewer deals this year than in previous years.

21:39

And it's not because what's out there doesn't

21:41

make sense. It's because there's nothing out there.

21:43

Like there's 10 deals on the market and

21:45

the market that we buy in and nothing

21:47

has hit the market in two months. And

21:49

I'm checking every day and waiting for something

21:52

to come on that fits our buy box. And it's

21:54

just that there's so little

21:56

inventory coming on. So I

21:58

think that the experience... investors

22:00

are keeping going, but again, it's still an inventory

22:02

issue at this point. What do you guys think

22:04

about springtime? Do you think that you're going

22:06

to see more houses hitting the market? Do

22:08

you think you're going to see more buyers

22:10

coming back in? I think naturally spring is

22:12

where we start to see things pick up,

22:14

high rate, low rate, whatever

22:17

particular lending

22:19

environments. I think spring is always going

22:21

to be where things start to catch

22:23

a little bit of steam. Avery, wouldn't

22:25

you agree? I agree. March is

22:27

always one of our biggest months. March

22:29

is typically the month where we see the

22:31

most closings, and that's every year. Every

22:34

year, spring is a great time to

22:36

sell because things pick back up after

22:38

the holidays like we talked about earlier. I

22:41

think we have a little bit of

22:43

a unique situation and a perfect storm

22:45

coming into this spring in that we've

22:48

had very, very, very negative rhetoric in

22:50

the media about interest rates and the

22:52

economy and the Fed. I'm so tired

22:54

of hearing the Fed. As

22:57

I'm sure everyone is, and just now,

23:00

right before the spring listing season starts,

23:02

we get the first kind of good

23:04

news that we've had in a while,

23:06

the first dovish meeting from

23:10

Jerome Powell. It's kind

23:12

of, I think, going to accelerate that

23:15

typical cyclical thing

23:17

where we see a lot more houses come

23:19

on the market in the springtime. I think

23:22

that plus positive rhetoric in the media, which

23:24

again, I think is sometimes more important for

23:26

just the psychology of the masses than what

23:28

the actual rates are. Plus,

23:32

as those people start to list

23:34

because of this psychology going on and

23:36

the actual rates being lower, I

23:39

think that we're going to have a bigger spring than what we're usually

23:41

used to seeing. Yeah, I can see

23:43

that happening. I think, as odd as this sounds,

23:46

for every year that I've been in real estate

23:48

and you notice it more when you're an agent,

23:50

people always underestimate how powerful the seasonal changes are.

23:52

They're always like, oh, the market's so slow. I

23:54

don't know how we're going to get by. And

23:57

then springtime hits and escrows go through the roof.

24:00

And there's so much demand and all this product hits the

24:02

market and it gets snatched up and it turns into

24:04

a feeding frenzy. And people go, oh

24:06

my God, the market's back. As if we

24:08

can't expect that to happen. I feel like

24:10

it's always more significant than we expect it

24:12

to be, even though we know this is

24:15

going to be the case. All right. So we expect

24:17

to see a surge of supply and demand in the

24:19

spring, but what are we going to see with mortgage

24:21

rates and prices? And what guidance are these experts giving

24:23

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27:23

what do you expect to see for mortgage rates in 2024? Do

27:26

you think that investors should be holding out waiting

27:28

for rates to drop to jump in or do

27:31

you think that rates are going to stay steady?

27:33

I think that depending on the individual investment, there

27:35

may be reasons to pause, but 9.9 times out

27:37

of 10. No,

27:40

I think that a loan size is

27:42

going to dictate the final answer to

27:45

that. But as I keep repeating, the

27:47

difference in payment between 6.75 today and 6.5

27:52

or 6.25 in six months or eight months

27:54

or 10 months, whatever is negligible and

27:56

it should not preclude someone from taking

27:59

advantage. of the opportunity today and the

28:01

inventory today and all the other benefits

28:03

that the assets going to

28:05

produce. So no, in terms of where rates

28:07

are going to go, I am like

28:10

kind in the opinion that I think that they are on

28:12

the run. They will come

28:14

down slower than we see them go up

28:16

as historically what happens to interest rates. But

28:18

guys, rates are fluid. Rates are not a

28:21

straight line. They're going to go up. They're

28:23

going to come down. And I really try

28:25

to do my work and

28:27

job to educate investors that you need

28:29

the rate to work the deal, but

28:32

stop fixating on the rate. The rate

28:34

is not as relevant as so many

28:36

other variables of vetting the transaction. So

28:39

let me run a hypothetical situation by

28:41

you two. Let's say that springtime

28:43

comes and rates come down at the

28:45

same time. That is going

28:48

to make investors feel much better about buying. Most

28:50

people that are listening to this are kind of

28:52

waiting for some scenario like that before they jump

28:54

in. What can we expect to see prices do

28:56

if that does happen? I think in the

28:58

short term, they are going to go up. As

29:00

things even out, once we get more of an

29:02

equilibrium with inventory in the market, I think that

29:04

that will even out too. But I think in

29:06

the short term, I'm not sure how long I

29:09

mean by the short term, but I think they will go

29:11

up, at least for a while. And in

29:14

the meantime, just offer as an extra to

29:16

that, whether it's now and they're taking advantage

29:18

of whatever opportunities are available to them today

29:20

versus in March or later in the year,

29:22

they need to be ready. They need to

29:25

be prepared. And if they just make a

29:27

decision in March, I'm going to get in

29:29

now and they're not ready. They don't have

29:31

their capital ready. Their credit is maybe there's

29:34

some X, Y, or Z that needs to

29:36

be looked at or fixed, whatever it may

29:38

be. If they're not prepared, then they're going

29:40

to be trailing, especially if we all agree

29:42

that March is going to be bigger than I think

29:44

the last year's March

29:46

in particular is because the deeper psychology from

29:49

March of 23 versus what I think

29:51

we're going to get in 24 because of the

29:53

new language about rates. So if

29:56

you're not ready, you're going to be at a

29:58

huge disadvantage. Okay, so we all agree that

30:00

there is a potential that kind of

30:02

the stalemate that we're in right now

30:05

that higher than previous rates and lack

30:07

of inventory has created this

30:09

pressure where there is significant demand but there's

30:11

also low supply and rates are

30:13

staying steady but it doesn't feel like it's

30:15

because of lack of interest. It feels like

30:17

there's very difficult market forces that are pushing

30:20

together. With that in mind, how are

30:22

you advising clients to buy? The people

30:24

that are buying right now, should they

30:26

be thinking of having multiple exit strategies?

30:28

Are there certain areas that you feel

30:30

like are prime to explode or going

30:32

to be better position for investors to

30:34

be in than others right now, Avery?

30:37

Again, I think that's kind of dependent

30:39

on what the individual investor is looking

30:41

at. We keep

30:43

telling our clients like, hey, offer low,

30:45

just come in low, come in where

30:47

you think it makes sense and let's

30:50

see what kind of a deal we can

30:52

get you here on the purchase price. But

30:54

I want to be careful before I say this next

30:56

thing because I know a lot of agents have been

30:58

saying all year, marry the house, date the rate and

31:00

I hate that. I think that encourages people to invest

31:03

irresponsibly. I think what people need

31:05

to do in order to make

31:08

sure that they don't over leverage themselves in that way

31:10

is make sure that the numbers work at the interest

31:12

rate you're able to get it for now. Let's beat

31:14

them up on the price as much as we can.

31:17

Make sure they work at what you're able

31:19

to get now interest rate wise and then

31:22

later if and when rates

31:24

come down, which could be next month, it

31:26

could be 10 years from now, but if

31:28

and when that happens, then any refinance room

31:31

that you find to refinance into a lower

31:33

rate is just extra.

31:35

So make sure that that refinance

31:37

part is extra and

31:39

not necessary when you're investing

31:42

right now. Do either of you have a

31:44

market or several markets in mind where you

31:46

think that we're likely to see rents go

31:48

up more than the surrounding areas or values

31:50

go up faster? What are your thoughts on

31:52

that? I will just offer that

31:54

for rents going up. I don't know that.

31:56

I think, Avery, you can handle

31:59

that. of home

32:01

prices, et cetera, generally speaking,

32:03

historically speaking, the Sunbelt

32:05

states are going to offer. And there's exceptions

32:07

to every rule, OK? But

32:09

the higher the appreciation, the lower the

32:12

cash flow, higher the cash flow, lower

32:14

the appreciation on, let's say, a single-family

32:16

long-term rental. So for appreciation, typically, those

32:18

Sunbelt states are typically where you're going

32:21

to find the price points

32:23

increasing at a greater clip

32:25

than an Indiana, for

32:27

example, or certain markets in Indiana. And

32:31

the rents, Avery, I'm going to have you.

32:33

You probably have that better than I do in

32:35

terms of specific markets where we see rents

32:37

really on the rise. There is actually, let me say

32:40

one thing. There is a website that might be useful.

32:42

I don't know if you guys want to keep this

32:44

in here. FHFA, Federal

32:46

Housing Finance Agency, it's

32:48

a government website. Obviously, it's free. But I

32:50

mean, they put a lot of money into

32:52

it. And you can go in there and

32:55

look at the different data and metrics. They'll

32:57

go past, present, and even futuristically

33:00

where, it's not rents, but it will

33:02

be appreciation in markets for housing. You'll

33:04

be able to get that data. Yeah,

33:07

I think for the rents rising,

33:09

I don't think any are necessarily

33:11

about to explode. But same

33:13

answer as the past two years, I

33:16

think southeastern states really are, especially the

33:18

areas where the kind of medium-ish metro

33:20

areas like Charlotte, for example, where a

33:22

lot of people from California and New

33:24

York are moving into those smaller

33:26

metro areas in southeastern states.

33:28

I think those are

33:31

areas where it's looking pretty good to me. OK, so

33:33

if you have someone listening, they've got some capital. They're

33:35

ready to rock, but they don't have to rock. Are

33:37

we in general advising people to buy now and

33:40

try to avoid some of the competition coming in

33:42

spring? Or are you on the side of, well,

33:44

wait to buy and see what rates do? So

33:47

I never necessarily tell people to wait

33:49

to buy, because we just don't know

33:52

what's going to go on. And

33:54

what six months from now looks like. And I

33:56

know when I first started investing, I had to save

33:59

up my first. 25,000

34:01

to buy my first long-term rental. And over the

34:03

course of time, it took me like a year,

34:05

my husband and I a year to save that

34:07

up. Our original target price

34:09

was $100,000 house. That

34:11

same house was $140,000 by the time we saved up for it. So

34:15

there's just, I would recommend

34:18

buying what you can find

34:20

that makes sense now just because it

34:22

is such an unknown, especially now in

34:24

the future. If you can find something

34:26

that makes sense now, I think go

34:28

ahead and buy it. I mean, I know there's one market

34:30

that I've been trying to buy in for the

34:32

past probably three or four months.

34:34

And when I saw the interest rate

34:36

drop the past couple of weeks, I

34:39

remember to myself, I thought, oh

34:41

man, texture agent before everybody else jumps in.

34:43

So I kind of felt like, oh my God, I got

34:45

to do this before everybody comes back. So

34:47

it's definitely, you know, it affects me too. Yeah,

34:50

I was wondering the same question because it's an

34:53

interesting dance where things

34:55

start to pick up in January,

34:58

where the competition is lower in January and

35:00

Syria than in March where everything is going

35:02

in. So it seems like

35:04

what you're saying is basically like, if

35:06

you find a good deal, jump on it

35:08

because we don't know, yeah, the level of good deals

35:10

that we'll have in a quarter or two quarters or

35:13

for the rest of the year, right? Yeah, yeah,

35:15

that's how I feel. And then I also have this level

35:17

of not saying, oh yeah, you need to buy

35:19

now because you know, everybody's like, well, she's a real estate

35:21

agent. Of course she's going to tell you to buy now,

35:23

but that's kind of how I feel is that

35:25

we don't know what's going to happen, especially in the near term.

35:28

Things have been really volatile the past couple of years. So if you can find a

35:30

good deal now, you need to jump on it. That is the

35:32

joy of being an agent. That is absolutely right. When

35:35

you don't tell somebody that they should push forward

35:37

and prices go up, they're mad at you. I've

35:39

literally had people say, I said I didn't want

35:41

the house, but why didn't you change my mind?

35:44

My own brother has said that. Why didn't you push

35:46

me harder to write a higher

35:48

offer on that house? Like I

35:50

definitely should have bought it. I lost it by $7,000.

35:54

And then obviously if you tell people, I think you should

35:56

buy the house and the market goes down. Everyone's

35:58

going to be mad at you. It's very difficult

36:00

when you're judging your portfolio by how it does in

36:02

the near term, which is why we try to tell

36:04

people you should be putting a strategy together to build

36:06

it over the long term. What's funny

36:08

is 20 years down the road, no one even remembers

36:10

what their real estate agent said or what

36:13

was going on at the time of that one specific

36:15

deal. But I've yet to meet

36:17

the investor who says, the house that

36:19

I bought 30 years ago was a mistake. In

36:22

fact, what they always say is, I wish that

36:24

I would have bought more. So the trick is,

36:26

how do you survive for 30 years in this

36:28

market? So for people that are looking

36:30

to buy in the near term, they know that

36:32

they want to get in the game. Do you

36:34

have any advice for that person of what they

36:36

should be cautious of and what they should be

36:38

looking for? I'll start with you, Jaylee. I would

36:40

say, again, be prepared, right? Get prepared,

36:42

start talking to your support team, get your

36:45

finances in order, etc. And

36:49

it's going to be a matter of individually,

36:51

and we look at it very individually, where they

36:53

are right now, where do they want to be

36:55

in a year, where do they want to be

36:57

in five years? So it is very individual, I

37:00

think the answer to that question. But

37:03

I agree with the last sentiments in

37:05

that now is the time. Rarely

37:07

will I tell someone to wait on interest

37:09

rates. There's too many variables that none of

37:11

us can predict for. And we haven't

37:13

even talked about what could be changing

37:15

in their own individual lives that could

37:18

preclude them or make it more advantageous.

37:21

That would be my advice to be prepared and

37:24

take advantage when you can. What about you, Avery?

37:26

I definitely agree with Jaylee. You definitely want

37:28

to be prepared, make sure you have all

37:30

your financing in order. And

37:32

definitely when you're looking at deals, especially

37:34

if you're looking at on MLS deals,

37:37

just sort by days on market. Because I've

37:39

seen this, even with my sellers, we're on

37:42

the listing agent where people will make low

37:44

offers and make low offers, and they say

37:46

no 100 times, and then one person comes

37:50

along, makes the same low offer everybody else

37:52

has made, 101st try, they're finally fed

37:55

up with it, and they sell it to them. So

37:57

high days on market is a really great thing to...

38:00

kind of start with if you're looking to really try

38:02

and get a deal in this market. It doesn't always

38:04

work. Some people are just overpriced and

38:06

they're stuck on their price and that's what it

38:08

is. But if you make enough offers, you will

38:10

find that person that finally says, okay, fine. Let's

38:13

just get rid of this. Don't hesitate to offer

38:15

low on things. Just make the offer that makes

38:17

sense for you. Start with high days

38:19

on market and also terrible listing photos are a favorite

38:21

way of mind to find good deals. Okay.

38:24

With some sentiment of like, hey, just make a low offer. Is

38:26

it working? Like are people taking

38:28

lower offers? Yeah, it's happening. I mean,

38:30

it's not happening every time. I don't want to

38:32

set unrealistic expectations, but it's it.

38:34

We're definitely seeing some deals happen. So if

38:37

you just keep in the game,

38:39

eventually you will get one. So it

38:41

is working. Someone at

38:43

BPCon accosted me and was like, Rob Abasolo.

38:45

Hi, I had a listing that you low

38:48

balled by $200,000. And

38:51

I was like, oh, sorry. It

38:53

only penciled out at that price. And

38:55

then she was like, if it was $10,000 more, we would have taken it. And

38:58

I was like, that doesn't sound like I low balled you

39:00

that much then if you were close. Why

39:03

didn't you counter me? Yeah, exactly.

39:05

Yeah, it was a little bit

39:07

of an awkward confrontation at the

39:09

buffet. But it does feel like

39:11

it is more plausible these days

39:14

than it was two years ago. So

39:16

there's a little bit of encouragement there. You can come in

39:18

a little lower and at least you'll be

39:20

heard. That's what it sounds like to

39:22

me. There was a time where just getting an inspection

39:25

contingency in your deal felt like a huge win. And

39:28

I forget, it wasn't that long ago

39:30

where you were just going in blind and

39:32

hoping that things worked out, competing against 15

39:34

other people. That yes, it is

39:36

harder to get cash than it was, but you're

39:38

getting longer to make those decisions. You're getting to

39:41

investigate the property much more thoroughly than you were

39:43

before. There's always something

39:45

when it comes to real estate investing to focus

39:48

on that can be problematic, but there's also benefits

39:50

to every single market. So let's not throw out the

39:52

good while trying to avoid the bad. Ladies, thank you

39:55

so much for joining us here. If you would like

39:57

to get in touch with either Avery

39:59

or Chaylee, they're information will be in the show

40:01

notes along with Rob's and mine. Let us know

40:03

what you thought of today's show and if you've

40:05

got a second, please take a minute to leave

40:07

us a five-star review. Wherever you listen to your

40:09

podcast, those help us out a ton. I will

40:11

let everybody go. It's been great having you all

40:13

here and thank you for sharing your knowledge, your

40:16

heart and the information. Stay tuned as Rob and

40:18

I take a question from a listener who's in

40:20

a market where buying season is already heating up

40:22

in our Seeing Green segment right after this break.

40:24

All right, it is time for our Seeing Green

40:26

segment where Rob and I take current questions from

40:28

you, our listeners and hash them out on a

40:30

mic so you get the confidence and clarity

40:32

that you need to move forward building your

40:34

own portfolio. Today's question comes from Steve who

40:36

is already feeling the heat of buying season.

40:38

Steve writes, I am a new investor trying

40:40

to purchase a property out of state. The

40:42

area I am focusing on has a very

40:45

small supply of property. So the landscape is

40:47

very competitive and I am outbid on every

40:49

offer even if I go way above the

40:51

asking price. I like working with my real

40:53

estate agent, but do you think I am

40:55

at a competitive disadvantage compared to investors who

40:57

work directly with a property owner or a

40:59

seller's agent? This leads to my

41:01

second question, what can I do to stand out

41:03

from the crowd besides paying in cash or

41:06

throwing too much money with every offer I

41:08

write? Okay, so Steve really broke it down

41:10

for us. Can working with your own agent

41:12

be a disadvantage and how can you get

41:14

your offer accepted besides more money? Okay, let's

41:16

get into this. The first approach here would

41:18

be if you're buying in a competitive market

41:20

where there's going to be several offers on

41:22

every property, there's probably not a

41:24

secret formula that you can use. You tend

41:27

to get the best deals when you're not

41:29

competing with other buyers. I'll say that

41:31

again. When you're buying real estate, if

41:34

there's only one person trying to buy it,

41:36

namely you, you are competing with

41:38

the seller and negotiating against them. The

41:40

minute you try to buy a property that has

41:42

other interested buyers and there's other offers, you are

41:45

no longer competing with the seller, you are competing

41:47

with the other buyers. So there

41:49

is nothing that you can do when you're trying to

41:51

buy into the best markets where everybody else is trying

41:53

to buy other than write the best

41:55

offer possible. I think that makes sense. I was going

41:57

to ask, I mean, is it? It's

42:00

kind of advantageous to go directly to the

42:02

listing agent like he's asking and saying, hey,

42:04

will you represent me as well? I

42:06

personally think that would give you more leverage

42:08

but I think it's always best to have

42:10

your own realtor because at the

42:13

end of the day, I mean, the listing agent, they

42:15

represent the seller first and foremost. I always think it's

42:17

kind of hard to get like any

42:19

information from the listing agent when I'm working with them.

42:22

Has that been true in your experience? Yeah, and I've

42:24

been on both sides of this. I've been the listing

42:26

agent that has people come directly to me and I've

42:29

been the buyer's agent that's trying to buy the property

42:31

for my client representing them.

42:33

When I'm the listing agent and someone comes to

42:36

me and says, hey, I want to write an

42:38

offer through you directly, what kind of a discount

42:40

can I get? I always say nothing. But I

42:42

might say, hey, rather than going 100 grand

42:45

over and not knowing if you're going to hit, if

42:47

you come in here, I will tell my

42:49

client that this is the offer that should be taken because

42:52

it's literally the best offer. So one of the benefits that

42:54

you can get is if you're like, I don't know if

42:56

I need to go 50 grand over, 100 grand over, 150

42:58

grand over, going directly to the listing agent, they

43:02

may say, well, here's where the other offers

43:04

are. You got to be higher than those

43:06

because that still fulfills the fiduciary duty to

43:09

the seller. They are getting the seller the

43:11

most money possible. They're just not

43:13

getting you as the buyer the best deal possible. If

43:15

you want the best deal possible for you as the

43:17

buyer, you're going to want to write a lower offer,

43:19

but then you might not get the deal at all.

43:22

So my advice to people is if you're in

43:24

a multiple offer situation, just accept you're not going

43:26

to get a great deal. No, the logic makes

43:29

sense. Also, the leverage that you have going to

43:31

the listing agent is that they make more money,

43:33

right? They'll make more, a bigger

43:35

commission. So there's a little bit of motivation to make

43:38

it a win-win for everybody. Is that

43:40

true? Most of them are just trying to

43:42

make their seller happy. Most agents are just whatever it

43:44

takes to make my seller happy. That's

43:46

what I'm going to do. So they're going to present

43:48

your offer that came directly to them, and they're getting

43:50

paid on both sides, and they're going to present the

43:52

offer of the other people. And a seller is just

43:54

going to say, which one makes me more money? Which

43:57

one's most likely to close? Now,

43:59

what usually... happens is the seller says, if

44:01

I go with the one that came to you,

44:04

you don't get paid that commission. The commission comes

44:06

back to me. That's almost always how it goes

44:08

down. The seller says, well, I'm not going to

44:10

pay you the buyer's agent commission if you're representing

44:12

both sides. So you have to credit it back

44:14

to me. And now your offer isn't better than

44:16

the other ones. The agent isn't going to be

44:18

making more money because they had to credit the

44:20

money to the seller to make that the sweeter

44:22

deal. And now the listing agent usually goes, yeah,

44:24

it's not really worth it. Just take one of

44:26

the other ones because I don't want the additional

44:28

risk. In my experience as an agent, I haven't

44:30

seen going directly to the listing agent work when

44:33

there are multiple offers. I have seen it

44:35

work when there's nothing on the table. When

44:37

there's nothing coming in and you go directly to

44:40

that listing agent and you say, hey, here's my

44:42

offer, present this to the seller and they're getting

44:44

paid twice, then they're more likely

44:46

to present your low ball offer in a

44:48

very positive light to the seller. They're not

44:50

going to say, yeah, this guy is low

44:52

balling us. We should kick rocks. You just

44:54

don't have that advantage when there's other buyers

44:56

and other offers on the table. I think

44:58

there's a little bit more 4D chess you

45:00

can play when you have your own realtor

45:02

that's going up to bat for you, right?

45:04

So if you don't have this realtor yet,

45:06

always remember you can go to biggerpockets.com agent

45:08

finder to look up an investor friendly agent

45:10

that can go up to bat for you.

45:13

So let's get back to Steve's question here.

45:15

How can your offer get accepted besides more

45:17

money? And honestly, I just think with the

45:19

current climate and the amount of options that

45:21

are available, the answer is relatively

45:23

simple. Just keep making more offers.

45:26

I wouldn't overpay for a house just because

45:28

you really want to get into this specific

45:30

market. We have your price point settled.

45:33

We know that you're pre-approved for a certain

45:35

amount. I might consider just making more offers

45:37

or finding more properties where there might be

45:40

a little bit more pain from the seller.

45:42

So that might mean filtering out on Zillow

45:44

90 days, 180 days and seeing what's been

45:46

sitting on the market a little bit

45:48

longer and going for some of those where

45:51

you have a less competition clearly

45:53

based on the fact that they've been on the market

45:55

so long. How do you feel about that? I think

45:57

it's good. And I also think that in the best

45:59

markets, you just... don't find houses with high

46:01

days on market because there's not a lot of

46:03

product and so they just sell. There's nothing wrong

46:05

with continuing to take action, looking at properties, writing

46:07

offers, and just not getting one in contract and

46:10

just sticking with it. At a certain

46:12

point, markets do change, more inventory will come on

46:14

the market. It will work. Sometimes you just get

46:16

ants in your pants and you really want to

46:18

get something because you're tired of putting all the

46:20

work in and not getting the result. But

46:22

to us, success is doing the work. It's

46:25

not necessarily getting a whole bunch of houses

46:27

in contract at prices that you don't like.

46:29

So take a little bit of pressure off

46:31

of yourself, Steve, if you're writing offers that

46:33

aren't working, knowing that you're writing them at

46:35

the right prices for you. All right. If

46:37

you'd like to have your question answered on

46:39

Seeing Green and we'd love to have it,

46:41

please head over to biggerpockets.com/David, where you can

46:43

submit your question and hopefully have it answered

46:45

on the Bigger Pockets podcast. Rob, thanks for

46:47

joining me today, both with Seeing Green and

46:49

with our show. This is David Green for

46:51

Rob won't steal your girl, but might steal

46:53

your house. Abasolo. 2023

47:16

was one of the wildest housing markets ever. And if you want

47:18

to know what's coming in 2024, you'll

47:20

need to stay ahead of the game. Thankfully, that's a

47:22

lot easier with the 2024

47:24

state of real estate investing report, head

47:26

to biggerpockets.com/24 report to download it for

47:28

free written by Bigger Pockets, VP of

47:30

data and analytics and on the market

47:32

host Dave Meyer. This report has data

47:34

driven insights that every investor needs in

47:36

it. You'll find a look back of

47:39

2023 unprecedented housing market from which markets

47:41

fair the best to the commercial real

47:43

estate correction and why supply and demand

47:45

simultaneously fell off a cliff. Dave also gives

47:48

us suggestions for investing in 2024 from which

47:50

metrics to watch for to which types of

47:52

property could house hidden opportunities. If you want

47:54

to invest or want to start investing in

47:56

2024, you have to get your hands on

48:00

the 2024 State of Real

48:02

Estate Investing Report. Again, head to

48:04

biggerpockets.com/24 report to download

48:06

the report for free. That's

48:08

biggerpockets.com/the number 24 report to

48:11

get ahead of the housing market in 2024. The

48:14

content of this podcast is for

48:16

informational purposes only. Past performance is

48:18

not indicative of future results and

48:20

all hosts and participant opinions are

48:22

their own. Investment in any asset,

48:24

real estate included, involves risk. Use

48:26

your best judgment and consult with

48:28

qualified advisors before investing. Only risk

48:31

capital you can afford to lose.

48:33

Bigger Pockets LLC disclaims all liability

48:35

for direct, indirect, consequential, or other

48:37

damages arising from reliance upon information

48:39

presented in this podcast.