DON'T Buy A House Before Watching This (2023 Real Estate Buying Guide)

So it has been a crazy year for the real estate and financial markets. But this is also creating some interesting opportunities. And before I get into those opportunities, I just want to say that I believe that the first quarter of 2023 is going to produce some amazing opportunities. That's why I wanted to make this video today. Now, it's not going to be every property on the market and you do have to do some digging, which I'm going to get into here shortly. But there's going to be some great deals to take advantage of for different types of buyers. And honestly, what caused me to dig deeper into this was the fact that Wall street and super wealthy investors were gearing up to take advantage of certain things in the market mean, while the general public isn't even aware of what's happening or they've been scared away from the market. Personally, my family and I own our primary home plus several rental properties. And we are actually looking to add two properties. Right now. We're in the process of making an offer on one, and we're looking at multiple other opportunities for the first quarter. And I'll tell you this, I've worked my tail off at jobs for the past 20, 30 years, but nothing has made me more money than real estate. Owning the properties, which is obviously slow appreciation over time. But then things like paying down the balance, amortization that puts equity in your pocket each and every year and on the rentals, the fact that I'm getting positive cash flow each and every month, that's passive income, which is the best type of income. I don't know about you, but I love making money while I sleep. And that has been a great source of wealth and future income. It's part of my retirement plan. And one could argue that it's a pain in the butt to have rental properties. But here's the thing, you can get a property manager to handle this for you. And also, a lot of the problems that people talk about are grossly exaggerated. So it just comes back to real estate being a great source of wealth for myself and so many of the wealthy clients that I work with. The fact that it completely changes people's financial picture. And I just wanted to stress the importance of this before we get into it because so many people overlook this. So the game plan for today's video is we're going to go over some data points really quick, then we're going to get into how do I identify deals in today's market, how do we then structure those deals to really take advantage of them? And then how do we structure the financing? Right now everybody knows interest rates are higher, but there's ways you can bring the financing down using the seller's money. So I'll explain how that works and then what the outlook is for the financing in the future. So for some of you, today's video might be just good information that you wouldn't have heard otherwise. Some of you may be looking to buy your first home and you want to know how to take advantage of the market. Some of you already own a home and you might be thinking of upgrading that to a nicer, bigger house. Or you might be thinking of buying your first rental property. No matter where you are in those categories, this is going to be really important information for you or someone you know. Now, at any point during this video, if you just want to skip ahead and book a call with myself or the team, you can do so. There's a link in the description below and we'll be happy to go over like your specific situation. But I just want to give you guys all the data and I'm going to show you some amazing opportunities that are going to be coming up in the first quarter. Now here's the thing. Real estate is up huge over the last couple of years, so it's perfectly normal to see a bit of a pullback because nothing could go up in a straight line. It's actually healthy for the market to have these pullbacks. Whenever there is a pullback, you'll see a lot of people jumping on this trend of the market's going to crash just because that's what happened once before. Now this current market is nothing like the market was in 2008. I actually made a video on the specific data points for the current market and why it's nothing like it was in 08 and also why there is a bit of stability beneath this market. You can check that video out. I will link it up here and in the description below. Once you review all of this data, you'll come to the conclusion that the most likely scenario is a healthy pullback and not the crash that many people are scared of. What we really want to do is use this short term event, which is a normal pullback, and see if we can find deals to get even a deeper pullback. So really quick, I think it's important that you know that most of the people who are interested in buying a home or need to buy a home, they didn't just go away, they're still there for the most part. It's just they hit pause because of all the uncertainty with the economy. Now there are some people who lost their job or something major happened financially, but for the most part, these buyers are just sidelined. Currently unemployment is really low and there's a lot of opportunity out there for people to make money. So this isn't like a normal typical recession where you see a lot of joblessness, a lot of pain and suffering out there. It's not that type of environment right now. Basically what's happened is with home buyers, it used to be a lot of fomo, fear of missing out, and it's now changed to FOMO fom fear of making a mistake. No one wants to make a major mistake with their finances, so they're just sitting on the sidelines, just waiting to see how things play out. Now, this sentiment will change and I'll go over a few factors that are going to cause this. So next I'm going to show you a few key data points about the market because it's going to give us clues as to where the market's headed and then also I'm going to get into the opportunities and that's what's going to be really important about this. So stick around. Now, as I said earlier, there are major institutional funds that are gearing up to buy more real estate in 2023, Blackstone just raised a massive fund for acquiring real estate in 2020 that's going to include single family homes in many growth markets. And then JP Morgan Chase just announced a $1 billion specific fund for acquiring single family homes. Why are they buying? Well, they know that demand is pulled back, so they're going to use this to get better pricing on properties. But the main thing they're looking at is supply. They know that there is an undersupply. There's a shortage of single family homes in many of the growth markets throughout this country. The builder simply did not build enough homes over the past decade and currently to meet the demand, to fully meet the demand of all the households being formed. So if you zoom out and look over the several years, there's just going to be a continued shortage of single family homes. In many growth markets. Demand will go up and down a bit based on the overall economy. But the main thing is there's not going to be a huge amount of supply coming on the market, which is good for housing prices over the long term. So let's look at interest rates, which are the biggest driver of demand. You saw interest rates spike this year, which caused the demand to pull back. But then you're now Seeing them cool off. Now, mortgage rates move with inflation. They don't move with the short term rate that the Fed moves up and down, they move with inflation. So as inflation got out of control, so did mortgage rates. But now in the last couple of months, you've seen inflation cool off just a little bit. And at the same time, mortgage rates have started to cool off just a little bit. Now they're still elevated, they're still a lot higher than they were last year, but they're getting to be more reasonable. Now, interest rates are something that we definitely need to keep an eye on because this is the single biggest factor that's driving the market today. Now, there's a big factor here that's very important to know. There is a significant group of homeowners who have a 30 year fixed mortgage rate below 4%, some people even below 3%. These people have locked in ridiculously low interest rates for the life of the loan and they're not going to be in a rush to give that up. Meaning there's a lot of stability in the homeowners who have these super low rates. And that has never been seen before. That's a new factor specific to this market today. Now this is important because this is just another factor that's going to keep the inventory numbers low. So now we're going to look at some opportunities. And the purpose of looking at all that data first was to show you that, hey, yes, there's going to be some great deals out there, but at the same time, we have to be realistic because there's also some stability in the market. And it's not going to be some crazy crash like it was back in 08. The market is completely different this time around. So here's the deal. Wall street super rich investors, they're all going to look to acquire quality assets at a discount that they can hold for the long term. That's how they get even richer. This is what happens every time that there's a pullback in asset prices. It seems like almost a transfer of wealth from the middle class, from the everyday people over to the rich people. But it doesn't have to be that way. We can participate in that too. So here's how we find deals in the current market. The most common way to get a good deal is to find a motivated seller. This is a seller who maybe has a life event where they need to sell. They may be in a financial hardship where they need to sell, or they could be some other factor that's driving them to sell within a Certain time frame. Now we want to look for motivated sellers in conjunction with aged listings. These are properties that were listed too high and they've been in the market for too long. This causes the listing agent and the seller to be more willing to play ball with negotiating. Now another motivated seller is going to be an institutional seller or a builder. Right now on the institutional side, there are companies that acquired a bunch of properties that now need to flip them. Or there could be an individual, small company, mom and pop style, that acquired property got in over the head and they need to get rid of this thing quickly. One of the ones that comes to mind on the institutional side is Opendoor. Opendoor bought a bunch of properties over the last year and they still own a significant number of homes in the country today. So if I look at just an example in my market, Opendoor owns a significant number of properties. In my market, there's many, many properties that they still own. And these are great deals because they are willing to negotiate. In many cases on these properties, they listed them too high and now they're willing to play ball on the negotiation side. Like let me show you. This is an entry level rental property in Sparks, Nevada. This property is actually pretty nice on the inside. It does need some work on the yard a little bit, but it looks like a good quality starter home or rental property. And this thing was listed way too high. It's been sitting on the market and it actually was in escrow in the summer, but then fell through and then now they're cutting the price they're willing to negotiate on this specific property. I think you can get this one at a great price and also structure a great deal on it. Now there's many more just like this. And there's also nicer properties that are owned by Opendoor in this market. Some of them have been remodeled. There's some great opportunities for upgrading your properties or even looking at properties that are just going to make great rentals. Now on the builder side, there are some builders who are motivated to sell existing inventory of homes. So they're willing to cut really good deals on it and structure really competitive financing as well. That's another area that we can look at for motivated seller opportunities. Now on the high end, I'm seeing some really significant discounts because these properties are usually listed way too high by listing agents. They sit on the market. I'm seeing properties in the high end that are getting a half a million dollar discount from where they currently listed. I saw one the other day that was list listed way Too high. And it's now being sold one full million dollars less than where it started at. So you will see some bigger moves percentage wise on the high end properties on a case by case basis. So how do you find the deals in the market? Well, there's software that we use to really narrow this process down and identify the good deals in any market. Now, going through the software takes time and it would be a whole nother video. But the team and I are happy to go through this with you on a one on one basis for anybody who is interested in digging deeper into specific criteria for your market. Now, when we do find one of these deals, how do we determine how much to offer? What's the biggest disc we can get and then how do we structure the deal? Now every deal is going to be a little bit different. So we're going to need to do some analysis on each specific deal to find out, like what's the sweet spot for where we should make an offer on this property. We want to make an offer at a discount to what the current market value is, because that's a good deal. It also gives you a cushion in case prices pull back a little bit more. It's important to know that most experts are showing that over the next year or two, prices aren't expected to pull back more than 10%. And in super aggressive markets, they've already pulled back 10% and maybe are due for another 5 to 10%. But we've also seen in other markets you're only getting about a 5% discount from where the market values are. So every market is different, every deal is different, and that's where we need to dig deeper. But here's something that's important on every deal. When you're making an offer on the property, you want to ask for credits from the seller. So instead of taking the full amount of the discount in the price of the property, what we do is we ask for some discount, but then we also build in credit. Credits can be used to pay your closing costs. They can also be used to buy down your interest rate so that your monthly payment will be lower. If you go back to when I was talking about interest rates, interest rates are a bit elevated currently, but when they pull back, you can refinance this debt. So what we really need is a great opportunity to get through the next couple years so that our payments aren't too high. One way to do that is called a temporary buy down where the seller pays for your interest rate and monthly payment to be lower for the first One, two or three years of the loan. This is built into the deal and it keeps your monthly payment low for the first couple years of the loan. This is important because most experts agree that in the next two years you'll have an opportunity to refinance this debt at a lower rate. So this gets you through that period with a reasonable monthly payment. You could also use the credit from the seller to just buy down the rate permanently, but you don't get as much bang for your buck. So one of the things we do when you're going to make an offer on a property is determine should we do a temporary buy down or should we do a permanent buy down? How long are we going to keep this loan and when are we going to be able to potentially refinance this loan? These are all factors that play into how we structure the deal from an interest rate perspective. Now everybody's situation is going to be a little bit different. So we have to tailor this analysis to the individual and how well qualified they are, all these other factors that go into it. Another thing you can use the credits for is to make repairs or improvements to the property. For example, if you need to replace the carpet, or if you need to replace the floor or new paint, sometimes the roof may need some repairs. These are things that can be built into the deal because of the current market situation. Now, when the market flips more to a seller's market, you don't really have the opportunity to build these things into the deal. But right now you can definitely do this on most transactions. Now another way you can get creative with the financing is with seller financing. This is where a seller will finance the deal for you and you can negotiate those terms. There are properties out there where the seller is willing to carry a note, meaning they will issue you the debt and we can negotiate that debt, the monthly payment, all of that stuff as part of your deal. This is something that we have to identify where a seller will be willing to do this. And lastly, the other two creative things you can do with financing are assumable loans or buying the property subject to the current financing. There are certain cases where you could take over the current buyer's loan and that might be at a really low rate. This is rare, but it can happen. But then there's another case where you might be able to buy the property subject to with a legal contract to make the payments on the existing finance, meaning there's a third party company involved. You make the payments, that company, they will pay the current debt on the property. You legally own the property, but you've basically taken over the payments, taken over the financing, which would typically be at a much lower interest rate, a lower monthly payment. So again, these are deals that we can identify in the market on a case by case basis, but they are out there now. If you have questions on any of the stuff I'm covering in this video or you want to look at possibly taking advantage of the market in the first quarter, we've set aside time to do one on one consultations where we can go deep into your specific scenario. Look, look at deals in your market in the price points you're interested in and actually run the numbers. Is this a good rental property? Is this a good property for you as a primary home? How much would the payments be? How much would you be able to afford? All those things have to be done on a case by case basis. We're happy to do that for a select number of people. We do spend a lot of time with each individual client these days, so we set aside a certain amount of time. If you want to grab one of those spots, there's a link below where you can book a one on one strategy. Call with us and we're happy to go through that with you. With you again, I know for sure they're going to be amazing deals in the first quarter. I'm taking advantage of this personally. I know many people are doing the same and we're happy to go through the numbers with you if it's something you're interested in exploring more. So I hope you found this video helpful. Please let me know if you have any questions. And until then, just want to wish you a very happy New Year.