Ep. #50 - Do You Think Your Market Is Too Hot?

What's your excuse for NOT getting into Real Estate Investing? Or if you're already in the Business, but not making much progress - then why do you think that is? Where do you place that blame? I'm hearing a lot of people say their market is just too hot. So competition is their excuse. And you?

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Intro...

Welcome to Episode #50 (half a hundred) - Do You Think Your Market Is Too Hot?

If you've listened to prior episodes of this Podcast, you've heard the many excuses I made for myself that kept me OUT of Real Estate Investing for all those many years that I could have been killing it in this business.

We all have our excuses... And one that I'm hearing a LOT lately (besides the standards of poor credit and/or no money) - is that "My Market Is Too Hot" or some form of that or a version of "There Are No Deals Here". You know how it is... "The Grass Is Always Greener On The Other Side".

Everything's overpriced wherever YOU live, but over THERE, THEY are able to buy houses for $50K, put in $25K of rehab and POP - as if overnight that house magically doubles in value to become worth $150K and it rents for $1,500/mo with like $500 of that as positive monthly cash-flow.

That's what you tell yourself anyway... Or maybe you heard someone on another Podcast telling a similar story. Maybe you read of such examples in a blog somewhere or forum post. And so you're convinced that if only you lived in another market, you'd be killing it in Real Estate just like those people who are fortunately enough to live in that place versus wherever YOU live.

Now hey, if you live in Manhattan or San Francisco - then maybe you're right... However, you can't convenience me that EVEN in those places, that you can't drive an hour or 2 (maybe 3) - and find an area where houses can be bought and rehabbed for a price that still allows them to be cash-flow positive.

Now there are some Landlord UN-friendly cities and states (often the areas that are also overpriced) - where I may not want to own a Rental Home there even if they were giving them away. If your location has ANY form of rent control - count me out. If it takes more than a month or two at MOST to evict a non-paying or otherwise lease violating tenant - then you can keep it.

But EVEN in those places with rent control and where it takes 6 months to a year (or more) to evict someone - you realize that people are still making money there... Right? That even in these seemingly horrible markets - someone has figured out how to make it work. And the fact that it's not easy, may be just the barrier to entry that keeps others (like YOU) out of the game, leaving all the money for those who have already figured it out.

Likewise - EVEN in those markets that are "Just Too Hot" - where there are "No Deals To Be Found"... Someone's making a killing! But it's not YOU, because you're walking around talking about how hot the market is and how there are no deals here - convinced the grass is greener elsewhere, and you'd be killing it also if only you lived there... Wherever "there" is.

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So "The Grass Is Always Greener"... So where is the "there" with cheap properties for the taking, needing little rehab, and then double in value and will rent for 1% of that new value? Detroit? Indiana? Alabama? Iowa? Kansas? Kentucky? Ohio, Cleveland maybe?

At one time or another, I've heard that each of these places have deals - inexpensive properties that rent for 1% (even 2%) of all-in cost or value. I've heard from turn-key providers in all these areas (and others) pitching their properties in those markets. And I'm sure of two things for each of these markets... #1) It's true that good deals can be had there, turn-key and otherwise; and #2) people who live in those same markets are saying that their "Market Is Too Hot" and that there are "No Deals Here". Because the grass is always greener on the other side.

There is some sort of proximity bias that comes into play, and you see things as overly competitive in your own market; while imagining that you can walk down the street throwing rocks in other markets, hitting 2% deals with ease. But again, setting aside the possibly crazy places like Manhattan and San Francisco - there are deals to be had EVERYWHERE and there is immense competition EVERYWHERE ALSO.

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So how do you compete? How do you make it work in your own "HOT" / competitive local market?

For me, I'm in Durham, North Carolina - which was just highlighted in a migration report by the Website - HireAHelper.com. The report on this Website says that a lot of people are doing the same thing that I did back in 1996 - which was to move to Durham from elsewhere in the country. What's funny is that I moved from Sarasota, Florida (the city stated in the report to currently have the 3rd highest incoming migration gain) - to Durham, North Carolina (the city said to have the 2nd highest incoming migration gain).

Now I don't know how accurate this report is, or what criteria they used to come up with these rankings; however, I have no problem believing that Durham has the 2nd highest incoming to outgoing percentage gain in population. I came to Durham 24 years ago (not knowing a soul here) for a job and better opportunity. Within a couple of years, I had started my first company, switched jobs (while I still needed one) and for a much greater pay, met my now wife of nearly 20 years - and I've been here ever since.

But I didn't start buying Rental Properties here until 2015. And I've already talked in other episodes how I wished I had started in 2010. But even in 2015 there was still competition. Certainly not like today, but it was there. And while the challenge now may be finding that great deal - the challenge then was funding the MONEY to buy that great deal. And you had to have faith that it was a great deal - as it's not obvious while you're in the midst of it.

Which is why I think a lot of people who are reluctant to pull the trigger on a purchase now are going to look back at this time years from now (when getting funding for a purchase is relatively easy) - and kick themselves for sitting on the sidelines. Everyone's mentioning how hot the market is; how its a seller's market; and there's no deals out here - yet I've got 3 Townhouses under contract for purchase later this month. I even got them under contract for FAR LESS than the original asking price. And I've got offers here pending for my clients also.

So I'm getting cash-flow positive deals under contract, even on the MLS - yet other's claim there are no deals on the MLS anymore. So am I a fool for buying in a so-called "seller's market"? Or maybe you should be asking HOW am I doing deals here and now; and HOW was I able to get them under contract substantially below the asking price - if its a seller's market?

Well, I can't give up everything for FREE here on this Podcast, so let me know if you'd like for me to be your Realtor in the Durham Market. Yes, its HOT... But that doesn't mean there are no deals here to be had. It's totally possible to get cash-flow positive deals here, between the MLS and certain off-market opportunities - they're here. And I'm even able to meet or surpass the 1% rule (2% is even doable, but harder to come by).

But now along the lines of the migration report I mentioned earlier that has Durham in the #2 position for incoming migration gains... What do you think happens to Real Estate values and prices when population increases in an area, and so you have more people seeking the same limited resource - that being housing? You can't avoid that prices and thus values will increase in that area.

So what does that mean for people buying Real Estate in Durham NOW? And for people like me who had the good fortune to have been buying for years? We're likely to do pretty well - right!? What are the chances that I suffer any vacancy when my properties are all located in areas of Durham where people actually WANT to live? And so I can also raise my rents and have that still be true.

And if you're aware of what's going on here in Durham, North Carolina. Nearly ever place you look has construction going on. And especially in the Downtown area... There are luxury condos and townhouses being built - that are selling for $600K, $800K, a Million and more, $1.2M townhouses and condos in Downtown Durham, North Carolina.

If you had told me 10 years ago that that would be the case, I would have laughed in your face... Who's paying a Million dollars to live in Downtown Durham!? Well, surprise, surprise - they are! And so that has an effect on all of the Real Estate in the area. It's in part why I opened the barbershop that I spoke about in last week's episode on Mangum Steet in Downtown Durham. Because you walk out the front door, and you literally see Million dollar townhouses being built - and they're selling!

And then all around - you drive down any street in the area and you see construction and you see rehabs going on. So there's great things taking place in the area. So pretty much, anything you bought years ago, is worth $100K, $200K more than what you paid for it. And all signs point to that being true going forward as well.

So while you're complaining that the "market is too hot" and that you "cannot find any deals" - I'm buying for both myself and my clients. So maybe you need a better deal source - a better Realtor perhaps? Because the market is NOT too hot... You're just not trying hard enough. Money is being made here and elsewhere on a daily basis by the people who are not worried about the market condition - and they are just putting in offers and negotiating deals. So if you can't do that yourself, let me do it for you - I'm that rare Realtor who is actually an investor myself.

But more importantly, I've got systems and processes in place to find deals - and I can't buy everything myself. Stop sitting on the sideline complaining and let's do a deal together!

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Outro...

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