Crisis: To JScott & the rest of us flippers out there.....

[hakrjak]

What impact are you preparing yourselves for from the current economic crisis "fallout".... If things get worse? If things stay bad for a few years?

I guess the main problems they are forcasting (Obviously haven't happened yet, because I and others are still getting loans fine) would be:

1). People can't get approved for mortgages anymore?

or less people can get approved, and only the best credit will fly...

2). Mortgage rates come down or will they go up?

3). Property values fall, or will they stay the same or increase?

4). High unemployment?

I'm just getting ready to start on my 2 new projects, and thankfully I've already got a rent-to-own tenant for 1 of them, so I'll only need to worry about selling 1 in the near term future, but the headlines and the panic are obviously concerning to me.

Goodnight & goodluck all

- Hakrjak

 

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[Runum]

I am not a flipper but I am a an REI.

I am concerned about the values of real estate. My major concern stems from the bailout buying the CDO's. The government will be owning these nonperforming loans. So, basically if the owner defaults the feds own the property. We know there will be more defaults, what will they do with the properties the Fed inherits? I am sure that they are aware of this situation so I do hope they have a plan not to damage the RE market any further.

My main plan right now is to sit tight on purchases unless they are unbelievable deals. I am working on building up my cash reserves to be able to take advantage of the opportunities to come.

 

[randallg99]

What impact are you preparing yourselves for from the current economic crisis "fallout".... If things get worse? If things stay bad for a few years?

I guess the main problems they are forcasting (Obviously haven't happened yet, because I and others are still getting loans fine) would be:

1). People can't get approved for mortgages anymore?

or less people can get approved, and only the best credit will fly...

2). Mortgage rates come down or will they go up?

3). Property values fall, or will they stay the same or increase?

4). High unemployment?

I'm just getting ready to start on my 2 new projects, and thankfully I've already got a rent-to-own tenant for 1 of them, so I'll only need to worry about selling 1 in the near term future, but the headlines and the panic are obviously concerning to me.

Goodnight & goodluck all

- Hakrjak

the mortgages are going to start flowing again within the month. FHA just got carte blanche "go ahead" to approve more mortgages (whether this is a good strategy for the government or not is another story) and speculation that MBSreits are going to start relieving some of the pressure by buying up FRE and FNA debt will absolutely get mortgages flowing big time.... so there is positive light regarding mortgages

the main concern will be higher unemployment but from what I see it is mainly regional - not sure about where you are, but Cali, Florida, AZ and Nevada are hardest hit currently, and the Northeast Corridor is starting to trend higher... if you're in a stable area, then just overcoming the media hyped fear with hard facts and proving them to potential buyers/renters might be all you need to do when marketing the property. If you're not in a stable area, then buying right ala Kyosaki style is prudent. Bidding at 50% of asking prices on 100 properties sight unseen is a tactic I have used effectively... It's a pain in the a$$ amount of work, but the deals come shining through....

an idea I thought of recently, can you start listing the properties before starting the work/rehab? allow potential buyers to select paint colors, cabinet styles, etc? just like a sales pitch for new construction models? Have swatches of paints, carpets, floors, etc pasted on a board of sorts and once property is under contract, you can "fill the customers' orders/requests"

 

[NoMoneyDown]

1). People can't get approved for mortgages anymore?

Until things start quieting down (6mos? 1yr? 3yrs?), I believe only those with good/excellent credit and/or with a 20% or more down payment will be able to get a mortgage. On the average.

2). Mortgage rates come down or will they go up?

Rates have fallen in the last week. I spoke with my loan officer a couple of days ago and he was thinking rates could fall to 5.5% or further in the next few days. He pointed to an economic report coming out today which could move the rates up or down (probably down). Of course, this was before the global banks dropped the BP another 50pts this am.

3). Property values fall, or will they stay the same or increase?

I think this will be a regional call, but probably drop across the board. Some areas (e.g., CA, FL) will drop more than others (e.g., Texas).

4). High unemployment?

Unsure really. I think there will be a domino type of effect WRT the retail space. Consumers will be holding tight on their spending, so retailers will be taking a hit - especially with their golden season coming up and the outlook bleak. Retailers will have to slash their payroll. Same with home improvement. My MIL works at one of the big two home improvement stores, and she says traffic has plummeted recently. Instead of big orders, people are just coming in to buy a light bulb, or batteries, or screws.

 

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[hakrjak]

I just talked to my mortgage broker, and he confirmed that he is having trouble getting investors money now. He said FHA and VA loans are still getting approved no problem with 3% down, but investment property loans are starting to become tighter and tighter. He said there's a risk that the 2 I have submitted (And have supposedly been approved for) might not go through after all.....

Great....

Sounds like Hard Money is going to be HUGE for us flippers -- But the good news is that it sounds like as like as FHA and VA are still lending wide open, we should have no problem selling our properties to owner occupants.

- Hakrjak

 

[hatterasguy]

JScott thats exactly why we are building houses in the low $300k range insted of the $500k++ range like a few years ago. Their are still (hopefully) buyers out their.

My concern is that people will be real reluctant to buy, heck they are not buying cars. So your market is really limited to those thave have to buy for various reasons.

 

[hakrjak]

Yep... Good advice... FHA and VA are still lending wide open, and I'm hearing that people are even getting approved with as little as 3% down with 650 credit?

If that's the case, buyers will still be there... Seems like FHA has been 99% of all sales we've been doing for the past year and a half anyway.

In my market, this means staying with houses in the $100-165k range, which is where I've been all along anyway.

Good luck all!

- Hakrjak

 

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[NoMoneyDown]

Don't forget about USDA loans for those areas that qualify. According to my loan guy, you can get a USDA loan for 102% of appraisal (i.e., not purchase) value. Just keep in mind this doesn't mean you can purchase a home and leave the closing with money in your pocket (although it is possible to come to closing with little or now money). The loan is intended to help move the population to rural areas, but you may be surprised what areas will qualify.

 

[hakrjak]

Yep... There are several horse properties East of Colorado Springs here that would qualify for that USDA program, but nothing I would try to flip. Those properties are next to impossible to sell right now, and have been for several years. For some reason when the local economy was booming, everybody wanted to live out in the boonies -- but now that things are tough, people want to be close to town again!? Oh well...

- Hakrjak