23 Nov Listener Questions, Vo. 2
Every once in a while, we like to answer listener questions that are submitted by The WealthBuilders Podcast audience. In the episode that corresponds to this post, Karen Conrad and Frank Pulley answer questions related to real estate investing. We hope that their answers are helpful to you! (Click here to listen to it on The WealthBuilders Podcast!)
What does it mean for an investor when it says home prices are trending down year after year?
Right now, there are certain pockets of the United States that have home prices that are trending downward. However, in most places, home prices will be trending upward. If you buy a property now and then the price trends down, you’re still in good shape because you have a ton of equity in that property.
Figure out why the property values have gone down. Is it because of unemployment due to a business closure? Could it be because of crime?
Remember that rental rates will continue to go up, even as house prices go down. Continue to make decisions based on potential cash flow.
What can we expect in the real estate market in 2022?
Next year, there is an expected to be an average of 7% appreciation in home prices. In addition, current low interest rates mean that you can lock in a low price on a mortgage! Because of these reasons and the ever-rising rental rates, it’s a great time to invest in property.
How can you find private funding?
Private funding is going around the banks to receive a loan. One of the best ways to find them is to go through your local real estate investing organization. Most private lenders are state specific. Finding these kinds of funds can be as simple as googling ‘private money lending’ in your area. Make sure you check their ratings to make sure they’re the good guys!
What should people know about working with hard money lenders?
Most hard money lenders look at the deal rather than your credit. Look at the points (percentage) they charge up front. For example, 4 points on a $100,000 house would be $4,000. That doesn’t go towards the price of the home; rather, it’s an up-front cost.
Make sure you’re prepared when you approach a hard money lender. Have a bio of yourself, your team members, and the numbers on the project. You need a solid estimate of how much money it’s going to fix a property up, for example. You need to be professional.
Do you have any recommendations on considering the age threshold of a house before you purchase it? (Given the risk of fix-up costs, etc.)
I believe 1970s+. Around 1978, most homes quit using asbestos. However, in good neighborhoods, you can find solid properties from the 50s and 60s, too. You might have to put in a little extra work, such as looking for asbestos, checking furnaces, and fixing other minor details, so it’s up to your commitment level.
How long does a furnace usually last?
It depends! A repairman will advise to repair or replace it if it’s over five years old. I’ve seen furnaces over 30 years old that run fine, but I’d recommend checking out a newer model after ten years.
Is it advisable to enter into a partnership with a friend in the early stages of a property journey? What are the possible pitfalls?
It’s a two-edged sword. You need to partner with someone who has skills you don’t have. Early in the game, you don’t have a lot of contacts, you don’t have a team, and you don’t have the experience. If you bring on a partner who has those things and you can do a lot of the leg work, it could work great. Most partnerships fail due to a lack of communication. Get perspective on what you’re willing to risk with your investments, both monetarily and relationally.
Did you like what you read? Be sure to check out this interview on The Listener Questions episode of The WealthBuilders Podcast!