I currently live in Indiana, but will be moving to Arizona in July '07. I have plans to start investing once I get to Arizona, but that is still 7 months away, and I want to get started now (Rule #2 in REI - You have to take the plunge). However, it is winter in Indiana (albeit mild so far) and I am concerned that finding buyers during cold weather is an issue.
I am looking for advice on the “time of year” importance of investing in real estate. Are there any Northerners in here that started their business in the winter months?
In my neck of the wodds,(northeast) I know if you want to buy and sell the market slows down and it also sometimes takes a bit longer for people to rent your units if they are empty but if they are in a good location it should not be too much of a problem. People tend to want to stay put in the winter.
We don’t have serious winters here in Texas. It was pretty hot today. I think we were in the 80s at least. Here, if it’s really cold or rainy, less people look at properties. I’m not sure it would affect serious investors or potential tenants.
Nobody wants to move between Thanksgiving and Christmas, but that is prime time to buy (banks want to clear their REO properties and will make deals) So do your make ready and have the house prepared to be rented on January 1.
Haha - I am just waiting for the huge dump of snow to happen.
I was thinking Banks would want REOs sold off for auditing reasons, but most around me work through Realtors - it was my understanding that you try not to go through realtors, but it’s my only option to get an REO. So whats the rule, or how do you approach?
In REI you make your money when you BUY. You get it when you sell or refinance.
So, if no one buys during this time, then most other sellers are MOTIVATED. So you can snap up great deals all over. For Rehabbers, this is perfect.
If you buy now, close in January and take 2-4 months to rehab, well then look at the time of year you just are going to market. That is right, April to May. The Spring market.
SO, got any leads for me? I am snapping up properties these days, I can and will take as many as possible.
I don’t believe you make any money when you buy a property (it’s tough to directly make money by spending it, unless your trading blind kids $1 for $100). I know that’s going against the grain of the guru buzz words. I certainly understand the theory, but I don’t measure money in equity. I measure money in dollars and cents. Equity takes a while to convert to cash, it cost real dollars and cents to convert it, and it slowly fades away in a declining market. Therefore, it is not the same as cold hard cash and shouldn’t be measured as such.
I have 34 houses that are fully rehabbed and sitting vacant. They range in prices from $6.7 million to $225,000. If you added up the apparent equity it would seem that I have all kinds of money. The fact of the matter is that my real cash is almost all tied up in properties that I’m losing money on every month. In another 3-5 months I’m sure most will sell, but until that time I am paying interest on depreciating assets. Every month I still have employees to pay, an office to run, taxes, insurance, interest on a fully extended LOC, vehicles, marketing, properties to heat up and maintain, etc. etc. etc. These very real expenses cost well into the 6 figures every month.
I am still capable of buying and renovating single family houses now, but I won’t because carrying costs will eat me alive until spring. It also costs me an average of $8,940 MORE to renovate a house than a smaller competitor. This includes a Project Manager, sending my Investment Analyses/Estimator out before I purchase anything, Bookkeeper and Project Coordinator to look over any pay contractor invoices, Research Associates to find the property, etc. etc.
So for the rehabbers that works fast during the renovation to avoid more than necessary carrying costs, it won’t matter because the property will still be sitting empty for a few more months in a cold winter. In 4 months you could renovate the freakin’ Taj Mahal, the one in India, not Jersey.
Ok, well if you do not believe you make money when you buy, then I have a 750K property. I will sell it to you for 1M. How does that sound?
will you make money on the property?
If you honestly think you can rehab the Taj Mahal in a few months, by all means step up and do it. Large scale rehabs require planning, permits, inspections, etc.
So, let any builder know you are giving them the plans to a house, and expect it built and ready for occupancy, with all permits and inspections passed in that amount of time.
If you don’t want deals, pass them to me. I will make the money!
Equity is not the same as money. Sure it can be converted by “selling or refinancing” but equity is not money. Plan and simple.
I might make money from buying your 750k property for a million, depends what I know and you don’t. I might lose a lot of money on it because you knew something I didn’t. Unfortunately, buying a property under valued, doesn’t automatically mean you make money. That is my point.
4 months for a residential rehab is a loooong time. My large scale commercial rehabs take about that long after we change the zoning. Planning takes about 2 days, permits take half a day, inspections just have to be juggled along the way. Residential project planning takes about 30 minutes, or the time it takes to eat lunch, which ever comes first.
I don’t hand plans to builders and say “build it”. That could be why your experiencing such a long renovation with your rehabs. My project managers are well paid for making sure subcontractors are there and busy. Outside GCs and builders take their sweet a$$ time because they aren’t worried about MY bottom line.
Well, then I will add you to my buyers list so I can sell my properties over market value.
If a permit takes a day, then I am not sure what city you live in, but in Chicago where every single politician is on the take (proven by all of the arrests and investigationgs presently ongoing), it doesn’t happen that fast.
Anyway, point being if you are passing on deals, then send them my way. I will do them. This is the time of year to buy. More motivated sellers right now.
you do have a good point desparate sellers get even more desparate in the winter time hence the increased chance to purchase a property at a nice property 70% or below and be able to in time fix flip or fix rent and refi. Wala! Money!
We’re almost on the same page. I agree, a buyer’s market is the time to buy, even more so in the winter months. The problem is that a rehabber will quickly get maxed out because only investors are buying. There is a surplus of motivated sellers and few motivated buyers.
When you buy properties in a buyers market, especially in the winter when it’s very difficult to resell, your equity is diminishing with every passing day. As it is a pretty heavy buyers market throughout my state, buying more properties can wait until I can resell them in a reasonable time (Spring). I might miss out on a couple to someone who bought them first, but it’s so slow that I can take my time browsing to purchase the properties a month or 2 before spring. Since the market values in my state are decreasing, it’s wise to not hold on to the property any longer than you have to. Therefore, the beginning of winter means a guaranteed wait of a few months, even if you finish the renovation in a weekend.
I will make more money if I wait to buy the vacant property that no one else wants in March, than I would buying it today. They might be gone before I get to them, but probably not.
I would gladly pay over market value for properties in some cases. Such as farm land next to a highway when I know there is going to be a new exit built and you don’t. Or if I knew if the property was eligible for a grant to cover 100% of my expenses.