Real Estate Investing Podcast

Raising ROI & Interview with Buy & Hold Real Estate Investor
Posted Tuesday, June 29th, 2021 by Richard Roy

Is the HOT real estate market cooling? Asking price vs ROI: ways to buy rental investments to maximize ROI. How will foreclosures impact real estate market inventory? We chat to an experienced property investor with investments across the U.S., about his long-term buy and hold approach to real estate investing.

Is the HOT real estate market cooling?

The real estate market is still very hot but, I don’t know about you Glenn, but I feel like it’s cooling. In other words, I’m seeing more properties available than we had a month ago. Just a month ago we were paying $8k or $9k over the asking price, just to get the property. It was almost impossible. I wrote 40, maybe 43, offers in the month of May, and I think I probably got 4 or maybe 5 of those. The rest of them were declined at market or $5k over market. I had one in Cordova $25,000 over market and it was declined because somebody outbid us.

Well, let’s talk about why the market is hot. The market is hot because there’s low inventory. Okay, so you’ve got more owner-occupants than investors and then you have low inventory. This causes competition which then has risen up the market value, especially in the eastern suburbs. So people that wanted to just upgrade aren’t doing it because they’re going to sell high and buy high, which makes no sense right?

How will delaying forclosures impact real estate invetory?

The CFPB is putting in place regulations that, effective August 31st, will let the mortgage servicer know that they can’t file for foreclosure until the beginning of 2022. So you’re looking at six months. So what I hope will happen is that mortgage companies will go through and do forbearance plans and do some form of a modification to bring people current, because everyone should be back at work. The forbearance plan is probably the best thing to do because it allows homeowners to get caught up. I don’t think that the level of foreclosures is going to be anywhere like we saw in 2008, 2009. This could be setting up a larger issue 6-8 months from now when all of a sudden we go through 2022 and we have a rash of foreclosures. What happens?

Asking price vs ROI: ways to buy rental investments to maximize ROI.

Part of our standard process of working with investors is to provide what we think the market value. This figure comes from RPR, Realtors’ Property Resource. The annual taxes, the estimated rent, the current rent if it’s tenant occupied, and then I tell the investor to figure out what their ROI is going to be and how much they would be willing to pay for the house – all in order to maintain the ROI that the investor is looking for. So if that means they can offer over asking price, that’s what we do. They always ask me, “What do you think we have got to offer?” My advice is always to sugegst it depends on what their expectation is of ROI. Look at the ROI and determine how much YOU are willing to pay to get that number that you’re looking for and don’t go above it.

Then you should look at your future ROI if you are long-term holding, and stop focusing on today’s ROI. Then the value doesn’t matter because you are looking at what you are going to be making long-term on the property over taking a short hit to get the property, and be competitive, and then bump the rent.

Chat with an experienced property investor with investments across the U.S. about his long-term buy and hold approach to real estate investing.

Brett: Trey, I appreciate you taking the time to join us today. I just wanted to talk us through your personal experience in the investment world. If I understand, you guys have properties in other states currently.

Trey: Yes, so we also had a rental in Colorado, which actually we’ve moved back into that rental, so it’s now our primary residence. So we don’t currently have a rental in Colorado. We have one in Memphis.

Brett: Two we currently working repair issues out.

Trey: That’s exactly right. We’re very excited about it. Memphis is our focus market at this point.

Brett: I hear different stories from different investors what drove them here, but what how did you find the Memphis and what got your interests about Memphis to?

Trey: So part of it is kind of “happenstance” over the years. I’ve spent a little bit of time in Memphis just for work events over the years and became interested in Memphis. More recently, what I see going on in Memphis right now is really appealing to me as an investor. And so, like I said years ago, I made some work trips out there just to grow to understand and like the city.

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