Willy @ The Real Estate Project

   The real estate market has changed a lot lately. Housing sales have cooled off a little as interest rates have increased. Buyers who potentially could have qualified for a loan no longer can. Some sellers have had to either reduce their prices, offer incentives or just pull their properties off the market for right now. We've also seen home buyers who were originally looking in higher priced markets now shifting their focus on buying in lower priced areas. This has also caused a sort of migration to other states and cities for affordable housing. 
   In several larger markets where investors had a high interest in rental properties, has changed since there has been a push by local politicians and government agencies to protect tenants from evictions when they don't pay their rent. This had pushed many smaller rental property owners to the point of financial distress and many facing losing their own homes as well as their rental property.  
   Where all this will end up, we don't know. It's anybody's guess of what's around the corner for real estate. Will there be a real estate crash like we saw back in 2007/2008? I don't know. I am seeing an increase in Notice Of Default filings and lenders requesting Broker Price Opinions on properties that are likely to become Bank Owned properties.      
 

   In California and in some other states where growing and the usage of marijuana has become legalized has also caused a lot of illegal grow operations. Where I'm at in California there has become an explosion of both legal and illegal grow operations. Some operations will do their best to make it look like they are a legal operation and keep a low profile, while others will seek out distant remote locations to do business. This makes a problem for those of us who are interested in investing in land. We may drive out to a property and see a MJ grow operation and wonder if it is a legal or illegal operation. There's no signs that are going to be erected to let us know if we should keep our distance. Even legal grow operations are weary of strangers. When you are out there looking at land, proceed with caution and expect to have someone come out to where you may be or even stop you on the road that you are driving down and start asking questions of who you are and what you are up to. These people are more than likely going to be armed also. 
   What can you do to try to protect yourself from harm? Search Google Earth, stop by the Sheriffs or local police office and inquire about the area that you are going out to. Ask them if there have been any problems out there. Also let them know that you are planning on going out to a specific area and plan to be out there for a certain amount of time. Tell them that you plan to stop by afterwards to let them know that you are safe. Check with the County to see if they have an online database that you can look up to see what grow operations are legal and licensed in the area you plan on driving out to. That way if you see a grow operation off in the distance that you don't remember seeing in the online database, then you may want to steer clear of them. And because many of the grow operations are out in very rural remote locations, the road that you will be driving down will be a dirt road. As you drive down these roads you will be kicking up a dust cloud behind you. These grow operations will notice if someone is driving down the dirt road towards them. This is why I said to expect to have someone either come up on you or stop you on the road and start asking a bunch of questions. And if you start flying a drone, you can expect even more suspicion or even have someone take a shot at your drone to try to shoot it out of the sky.  
   Be safe out there when you venture out to go look at properties in rural areas. I've been to areas that 4 years ago would have maybe only had 3 or 4 people out in an area that now will have 20 grow sites.      

That's a very good question. 
Depending where you live in the United States can have different outcomes. 
I'm currently living in California, but because of the train wreck of California politics, I will be moving. 
We also have a new President and Vice President. Both of who are know for their extreme Left thinking policies. Kamala Harris was the AG for California a few years back and when I contacted her office for help on a situation with an out of state company that was hiring agents to perform Broker Price Opinions for them, they would not pay the people. Her office was not interested in my complaint. I got a letter back from them that I wished I had saved it. Because I was a small business and would not be a benefit or value to Ms. Harris's political ambitions, they were basically not interested in helping me. I was kicked to the curb. I'd like to kick her to the curb. 
Enough of my political ranting. Back to the subject. 
With COVID running rampant, government demanding businesses close, people being told to stay home and no one working, no one has any form of income. Bills are not being paid, mortgages and rents are not being paid. Investors of rental properties can not evict non-paying tenants. Lenders have been told that they can not foreclose on properties. But the day of reckoning is around the corner. Depending on where you live, there are judicial and non-judicial foreclosures. This dictates whether a lender must first file a Notice Of Default (NOD) first, giving the homeowner or investor to bring their defaulted payments current or if the lender can skip the NOD requirement and go straight to the foreclosure. 
Home prices seem to be stable and in some areas even increasing slightly. But are we hedging on another real estate bubble ready to pop? Several investors I know and have watched online are all indicating a collapsing real estate market. The market will flood with REO's causing values to plummet. 
If all this comes true, you'll want to have cash to start grabbing up properties. You'll want to get to potential sellers before the lender is able to close on a foreclosure. Let potential sellers know that if they let their property get foreclosed on that it will impact their credit history. Educate these pre-foreclosure sellers about signing over deeds to their property to you to avoid impacting their credit. Some may even be willing to just sign over a deed and walk away. If they are slightly hesitant, offer them moving money. But always enforce that if you take possession of their property that you are also taking care of their defaulted mortgage liabilities. Yeah I know, the majority if not all home loans have a "due on sale" clause. But let me tell you, the majority of lenders will turn a blind eye to that once you start waving cash in front of their face.  
If you are an investor sitting on some properties, and have not defaulted on the mortgage, don't panic and hold on to your property(ies). The values may go down, but they always rebound. Sometimes creating an even stronger growth market.            

Rental Properties!!!
     There are many rental property owners who own 5 or less properties. Many of these property owners have loans on those properties because they took out a loan to buy the property or they leveraged equity to purchase other properties to use as rental properties. And because of the COVID-19 pandemic, many renters don't have the ability to pay rent. As a result, rental property owners now also don't have the ability to pay and loans on their properties. The rental property owners can't evict tenants since they are protected due to the current pandemic conditions and government intervention. 
     All of this leaves rental property owners in a very bad position. One that could cause many to just walk away from their properties and leaving the lenders to deal with the tenants. Lenders are not in the real estate business, but in the money lending business. So this leaves lenders in a situation of potentially hiring property management companies until the properties can be foreclosed on and sold at the trustee sale.
     Unfortunately you have a tenant who is stuck in the middle going from one day to another not knowing what the future will hold. There could come a day when they get notice that they are being evicted and no longer protected by the government. And even if a rental property owner is able to hold out, the property owner is going to want to be paid for all the back rent that will be due to them. And the tenant is not going to have that pandemic eviction protection to keep them from getting evicted. 
     It's going to be interesting to see how all this works out.   

You may have seen a lot of ads for investing in mobile homes. 
Is it possible to make a living flipping mobile homes? It depends on where you live. Areas where there are several mobile home parks can be lucrative if you are willing to get out and hustle. You're going to want to stay away from areas where the mobile home is on owner owned land. The reason being is when a mobile home is attached to land, it is considered. So unless you have a real estate license, there is a good chance that you can not sell that property. Mobile homes on leased, rented land or in parks are considered personal property and therefor can be sold just like if you were selling a car or bicycle. 
Some things that you are going to want to become familiar with:

• assignment contracts
• sales contracts
• mobile home park rules

When it comes to mobile home park management, they can be a real pain in the ass. I recommend not even mentioning that you are an investor and plan to flip some mobile homes within their park. You only want get the park rules so you have something to work off of when dealing with a potential buyer. Because depending on where you live the parks can have certain income requirements to be able to rent space in their park. In the Los Angeles area many parks require potential renters to have a monthly income 3x's the space rent. 

Contract assignments are typically straight forward. You're just a middle man who will collect a fee from the buyer (usually another investor) for a mobile home. You'll want to understand the assignment contract. You may or may not want to let the seller know that you will be assigning the contract to another person. Check your county or state on the rules when it comes to disclosure. Because you don't want to make the seller think that you misled them. Your contract fee can be as little as a couple hundred dollars to a few thousand dollars. You set your rate as to what you want out of the deal. But don't be so greedy that it will kill the chance of a sale. 

Sales Contracts: Let's say you buy the mobile home, do some repairs and now you want to sell the home. Get to know what is required as an owner to sell your mobile home. Many states or counties have certain disclosures that have to be completed by you and given to the buyer prior to closing the sale. You'll also want a copy of the park rules to give to the potential buyers. They typically need to get pre-qualified first before they can move forward with the purchase. Have the buyers put a security deposit in an online escrow account. So that once you know that they have been qualified then they can increase the escrow account with the remaining funds to complete the sale and release the funds to you. Another thing that you will want to get very familiar with is where or with who the sale needs to be recorded with. California has an online site with the State to record mobile home sales/transfers. 

Contract assignments are great for those that don't have the money to buy a mobile home and are looking for quick cash. Those of you that have the funds to buy a discounted mobile home have the ability to make the most amount of money. But everybody has to start somewhere. Start with assignments and get to know the game of flipping mobile homes. After that the sky is the limit. I've bought mobile homes and do "seller financing" for buyers with limited cash. I like the consistent monthly income and you can actually get more for your home because those buyers don't have the bargaining power to ask for a cash discount. 

Happy hunting or fishing and go find some mobile homes to flip or sell. 
Remember this is work and get good with marketing. Good marketing will have sellers and buyers contacting like there is no tomorrow. You'll actually have more buyers and not enough homes to sell them. That's my experience. So I'm always on the hunt for more inventory. 

     Real estate has been going through some massive changes in the last 12 months. So the question that has been brought up, "what is the future for real estate agents?" More people have been getting into real estate thinking that it is a way for "easy money". As a result the real estate market is flooded with agents. In time a few will drop out once they realize that the "easy money" is not so easy to obtain. I personally know 3 that have already dropped out of real estate. The sad thing is this one agent tried so hard to make real estate work that he lost his home to foreclosure. One agent had a cleaning business prior to getting their license and has since gone back to running their cleaning business. And the last agent is a teacher who thought that working as an agent would be great for additional income when students were out of school for Summer break. This Summer that agent is now teaching summer school.

 
     So what are some of the changes that I have seen recently: 

• There are many more of these so called 100% Brokerages.
• There are a growing number of  "real estate companies" where the business model is not as a "brokerage" and agents are employees and may not always need to be licensed or be a part of a local REALTOR Association. Their business model is similar to that of commercial real estate and business brokerages.  
• There is a grass roots push to end all local REALTOR Associations and operate only under one Statewide Association. In California that would be California Association of Realtors.
• It was announced within the last couple of months by Gary Keller that Keller Williams would be restructuring how they do business. They intend to change their business model to that that would give a client that "one stop shopping" experience and thereby be able to provide services at a reduced cost. Saving clients possibly thousands of dollars when buying or selling a home. 

     I'm asked this question all the time by investors. I even ask myself it. No one knows for sure what is around the corner. Real estate is a constantly changing environment. Market values can increase and decrease within 30 days. Seasonal changes will also affect real estate.   
     From my experience, real estate goes in 7 to 10 year up and down cycles. Other influences like Presidential elections and local elections can affect real estate. Uninformed voters have voted in taxes thinking that they were doing the right thing or having been mis-lead into thinking that they were voting for something that was going to benefit them. Case in point, the recent increase in sale tax in Los Angeles County. This is something that the "people of Los Angeles" voted for. As a result some cities in LA County now have a sales tax that is over 10%. Other cities are not far off from that. And then you have the politicians in some cities and at the State level who recently approved to add a real estate transfer tax to all real estate transaction. This was done in the name of reducing and providing homes for the homeless and those who are considered "low income" aka "Section 8" recipients. 
     The new real estate tax that will be added to all real estate transactions is surely to affect real estate here in California. And as a result will affect those who invest in real estate. This added tax will also have an affect on market values. I'm not sure which way the values will go except maybe upward as sellers will attempt to cover this new expense that they will have to pay for. I'm sure many sellers will try to shift the costs to buyers. And as a result this may push buyers to request increased assistance with closing costs from sellers. Anyways, when it comes to investors, they will surely increase their asking prices and also look to doing business in other states.    

Things to think about when considering real estate investing In Land:

1. Why Land ?  Land is not going anywhere anytime soon.
2. What To Look Out For. When looking at land there are a few things to look out for. Like access to the property. Is access via a dirt road or a paved road. If access by a dirt road, is it a maintained road by the County or by other owners in the area. Walk the property and look for any corner markers. Look for anything like a wash that goes through the property that could  make the property only partially usable. Look where the utilities are if there are any. Bringing power in to a property can be quite expensive. All these things can affect price and desirability later on when it comes time to either sell or build on a property.
3. Do Research On The Property.  Always check with either a title company or with the County on the land use ability. Sometimes the zoning may only allow a specific usage. Title companies can also provide you with an easement map that will show where the utility right of ways are and any other easements that may be on the property like set backs for a road.
4. A long Term Investment. When you buy a large parcel of land or even a smaller city lot, your investment is typically a long term investment. Land does not sell quickly and usually requires extensive marketing.
5. When You Want To Buy. Depending on the price and size of the property that you are thinking of buying should determine whether or not you should use a title company and escrow for the transaction. You always want to make sure that the person selling the property has clear title. Meaning that there is no cloud on title.  And what I mean by "cloud on title" is that there are no liens on the property or that the person selling the property is the only person on the title and no one else. I have seen instances where there were several people who had a percentage ownership interest in the property. To become the full owner you would need to get all the other people to acknowledge on the purchase contract that they are giving up their each and own percentage ownership in the sale. The more complicated the deal, the higher the price, the larger the land and any question as to ownership should entice you to use a title company and escrow in your purchase. Now with all that said, it is possible to buy a parcel of land for a couple of thousand dollars or less and have the Seller deed the title over to you and you go down the County clerks office and record the new ownership.
6. When You Want To Sell. If you didn't do it when you first bought the property, get a file started. Know where the Deed to the property is and have it in that file. Determine an asking price. To help you with that ask a Realtor or look on Zillow for recently sold properties that are like yours. Always use Sold properties as your comparables for determining an asking price. I've seen far too many people going by what other people were listing their properties for only to sell far less than what they were asking for. The price at what market values are are what people will pay for a property similar to yours in your area. If you price too high, you will never get any interest in your property. Be open to Seller Financing. I have sold more properties with Seller Financing than any other way. Your Seller Financing can be short term (3 to 5 years) or long term (10 to 20 years). Use low down payments and low monthly payments and balloon payments. Market your property for sale everywhere you can think of. Craigslist is a good source for buyers. Just know that you don't have to list your property with a Realtor, but offer a commission incentive to a Realtor to bring you a buyer. There are many online sources where you can market your property for free.