This is the first time in my 5 years of real estate that it's not a buyers or a sellers market. Everyone knows the basic economics of supply and demand. If there is more supply than demand, price goes down. More demand than supply? Price goes up. Well it's now causing this crazy limbo of demand decreasing because people can't afford new interest rates, but also supply is decreasing because for people to sell they have to buy a new place.. And they can't afford a new place with the new interest rates.. You see the cycle that's arising? Well it's even worse in the investing world. There are 2 types of people right now. Those who think doomsday is coming and are hoarding cash for the next 2008 crash. (No Buyers) Or the people who don't want to give up their 3% interest rate to get cash for a crash that isn't coming. (No Sellers).
I'm not some psychic with a crystal ball that knows what's going to happen. And if someone is claiming to be, stay away from them. People who claim absolutes right now are gamblers. Personally? I'm on the cash hoarding side. 1) because no one is selling so I don't really have a choice. 2) Fear is the ultimate motivator. When there is uncertainty, there is fear, and when there is fear people act irrationally. Like selling a property under market value.
So here is the game plan for the next 6 months. Make a list of 10 properties you're interested in. Underwrite them to 10-12% cash on cash, 8% cap rate, however you define a good deal. And make connections with the owners. Get to know them and their business. One of the ten is going to get anxious and cash out. You want to be the first person on their mind when they decide to sell.
If you're in need of a deal analyzer. Join the mailing list! I'll send you a free copy of the spreadsheet I've used in all of my deals. Follow me on twitter @ImIsaacJohnson
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