Well, it is official. We are officially in a buyers’ Market, hooray, right? That means prices are coming down and we have less bidding wars going on. But should we actually be buying right now? That’s what I want to talk about this week. Stay tuned.

Welcome to short-term rental riches will discuss investing in real estate but with a specific focus on short-term rentals quick actionable items to acquire manage and scale your portfolio. I’m your host Tim Hubbard.

So welcome back to the short-term rental riches podcast, really excited. You’re here today, the economy’s just kind of going crazy isn’t it as interest rates have gone up? It is app acting more than just our local economy, but our international economy as well. It’s also affecting the amount of renter’s we have in the market. The amount of people that can buy properties, it really, really has a lot of impacts but the reality is prices are coming down. It is now a buyers’ Market which it hasn’t been for. Gosh, I’m going to say eight years or so, we’ve been bidding against others. We’ve been getting denied on request, to have things fixed from the seller. So, the tides have turned and I want to talk about that this week, as well as whether or not we should actually be buying, those are two totally different points.

So, we’re going to get in to that. We’re going to get into a little bit of the opportunities. I’m going to just discuss again that every Market is different. So of course, there’s not like a one-size-fits-all answer to cover everything. We’re going to talk about what you might want to do, if you’re underwater. Yeah. If you unfortunately, didn’t lock and alone and you’re not cash flowing on your property. I realized that is a stressful situation. So, a couple little inputs there and then yeah, we’re going to dig in and what this means for just the general economy.

So, what does it mean to be in a buyers’ Market? Well, quite Simply it means that the buyers have the advantage, right? The sellers no longer have the advantage, they don’t have people lining up to buy their properties and multiple offers you remember when people are getting like 3040 offers and some of these hot markets. Gosh, those days are gone. So, it’s now our turn to get a few more of our request fulfilled when we’re buying a property and to get some better prices. So just because prices are going down which they we are going down according to Bloomberg home prices or decelerating at the fastest rate in over a decade across major US, markets a record, 16 percent since July of this year so prices are going down.

Now there’s an interesting thing going on here, right? Our properties can actually be losing value but the price
staying relatively the same. So, what do I mean by that? We’re still in a very inflationary environment? And that’s why rates are going up still and I believe they’re going to continue going up. So, let’s just say we had a property that was worth a hundred thousand dollars. I know that hardly exist anywhere anymore, but let’s just say it did and the price didn’t change at all, but inflation was at 15%. Well, that property stayed the same price for a whole year, that means that lost 15% of its real value.

So, there’s a difference between real value which accounts for inflation and not nominal value, which is just a number, right? And we’ve got to account for inflation. So, it’s very possible that some of these markets might not see huge price decreases but the actual value, the real value of the property is going down at the same time because of inflation. And so, every market different right traditionally. When we look back at real estate Cycles, we see that some markets went up much faster than others and very often, those are the same markets that go down much faster than others. So, I like to invest in markets that are a little more stable, right? It means that yes, we might miss out on some of that giant appreciation that a lot of those really bubble market so we can say had but at the same time we see less impact on the downside.

So, keep that in mind. Some of these markets are really shot up, they’re probably going to be the ones to go down and to go down faster. Prices are dropping properties, are staying Longer on the market, people are backing out of deals. So, should we actually be buying? Well, it depends. It’s actually an easy question to answer. We should only be buying, first of all, if it’s a pure investment. So, if we have no personal investment into it, if this is a property, we’re buying just hundred percent investment. Then it just comes down to the numbers, right? We talk about that all the time.

So, if you can find a property these days and this Market that’s cash flowing, and you’re using a loan at today’s higher interest rates. If you’re comfortable with that property, if you’re excited with that property, I would pull the trigger and get into it because of its cash flowing. Now, there are pressures on the rental pool on the rental demand, that are going to keep going up. We’re going to talk about that here in a second. The other side to this is, if you bought that property today and it cash flow at today’s interest rates and then you refinance in the future at a lower interest rate, not to say that they’re going down anytime soon, but if you do refinance in the future, that means you’re going to cash flow even better, right?

So, my opinion, if it’s a good deal to you and it makes sense on the numbers and you’re excited about it, then whole the trigger. But on the other side of that, I do believe prices are going down and they’re going to continue to keep going down, of course, in some markets, more than others. So, there’s some opportunity here for us to get properties at a discount. At least, at a discount. If we look past over the last years, now, people are getting squeezed, right? As inflation goes up to purchasing power goes down, so anyone that’s on a fixed income, they’re getting squeezed right now. We also have a really large baby boomer generation in the US and the retiring or they’re at that stage or they’re wanting to retire soon.

Now at the same time that prices are dropping in the real estate markets are also dropping in the stock market. I’m sure you’ve seen that it’s dropped like almost, you know, 25 to 30% really, really quickly and a lot of these baby boomers that we’re going to rely on that income that they have their stock market. It will majan they potentially just lost like 30 percent and so what are they going to do, right, if unless they find another job, they’re going to need a little more money. Now, the good side for a lot of these baby boomers is they actually own their properties and they have a ton of equity in them still. So, if push comes to shove and things continue, tightening and inflation continues going up. And this segment of our demographic needs more money, will better believe that they’re going to be forced to sell a lot of those properties.

And they’re going to be selling them at a discount and fortunately. So, one other thing that we’re seeing and the rental market specifically the short-term rental market is that the reservations are getting longer, right? 50% or more of Airbnb’s reservations or for a week or longer and 20% of them are for a month or longer. Now we got to think if a less people can buy a home there’s got to be a lot of people that are going to sit there on the sidelines, waiting to buy a home for when interest rates come down. But at the same time, they’re very likely not going to want to sign a year-long lease. Right?

So, I really believe that that is going to put more demand on a medium term stay on Airbnb or wherever you have your short-term rentals listed. I also think we have more demand coming to medium term stays just because of the way Society has changed, right? People can work remotely much easier than they ever could. So, I think those two pieces are definitely going to put more demand on medium term. Stay I’m just going to throw out a forecast here and say that right now Airbnb has 20% or more of all their bookings are a month or longer I would say in another two or so years. We might see that number at 30 or even up to 40% for month-long stays. So, I think there is a lot of opportunity there as well. Keep that in mind. There’s a lot of other pressures going on here.

(We covered a lot of topics on this podcast and a quick action will bite size format. So, you of the tools to acquire, and improve your short-term rentals on your own. But if you want to go deeper, I have a special invite for you. Join us once a month that are rested investor Clubhouse, where we go in-depth on an individual topic, everything from analyzing properties to improving operations and our bottom line, we cover it all the clubhouse members and myself are sharing best practices to earn. The most Revenue with the least amount of headache and I would love to have you there as well. That’s restmethods.com forward slash rich. As your shaped, by those we spend the most time with. So, if you want to take your STR to the next level, come join us. I hope to see you on the inside.)

to get to the renter side. So, if you are under water, if you didn’t lock and alone, I’m really sorry. You just got to kind of hang on right now. I wish you would have heard my episode I did a year ago in November of last year, a whole year ago and the title of that episode was why you need to refinance now, and actually, put now Now in capital letters. So, if you didn’t listen to that one, you can go back and check it out, but unfortunately, it’s a little too late now. So, if you’re underwater, the good news, the flip side of this is, if it’s an investment property, rents are very likely going to keep going up because as in interest rates, go up the amount of people that can actually purchase a home goes down and that means that there are more renters, right?

And so, we’ve effectively inner a renter’s nation. There are more people that rent then there are that own a couple interesting stats here and not to pick on California. A lot of, you know, I’m from there originally, but numbers are really high there, right? Real estate prices are really high from the National Association of Realtors. They said that in Q2 of this year, only 16 percent of Californians could afford to buy a home at the medium home price. That’s a lot, right? And that’s actually down from five percent the year before, so, if we look at California’s having guy, She’s almost what 40 million people in the population. If it dropped 5% that just means that two million people. Two million people, one year over the next cannot buy homes that they could have maybe a year ago and that’s because of interest rates of interest rates.

Keep going up the ability to purchase a home goes down for a lot of people. I looked up Sacramento where I’m from originally, just for fun facts. The average home price, there is lower than it is a lot of other places in California, but the average payment, right? I was over three thousand dollars for someone to be able to qualify to buy a medium home price in Sacramento. They’ve got to make well into six figures like a hundred twenty thousand dollars a year and as we know most people are not making that kind of income. So, it’s sad. A lot of people are getting squeezed. They really are rents are going up and their purchasing power is going down.

If they’re on a fixed income now to add even more pressure to the rental demand Construction, Permits are down. People are not pulling construction permits right now because costs are going up and the sales prices are going down. So, that’s a bad combination for a developer, right? That means if a less Supply goes out into the market, we’re already in a shortage situation. That means there’s going to be even more pressure on rents so sadly for a lot of people there. Getting squeezed right now. With inflation, going up and rents going up at the same time. The other side of this is that we’re now in Buyers’ market.

So, for those of you that have some cash laying around, we’ve got some really good opportunities coming up. I believe, for those of you that don’t have the cash line around, well, good news, thirty to forty percent of the homes in the US are owned outright, there’s no loan on them so that creates a lot of opportunity for seller financing. You can work out a deal directly with an owner that wants to sell their property or maybe needs to sell their property.

Sadly, if They need some more money just for General living expenses. So that is the flip side. I know there’s a lot going on here, it’s a pretty complex situation. The macro economy is complex. There’s a lot of things that affect it, right? But I think the reality is and the thing that we need to understand is that if interest rates continue going up, things are not going to get easier and we are still in a very high inflationary environment so I don’t think that interest rates are going down anytime soon.

So, what opportunities do we have? Well, if we’re underwater and we have a property where it’s not quite cash flowing, if we can hang on, if we can borrow some money, from a family member, work with someone just to get by, maybe your rents will go up a little higher. If you can get out of that property right now, it might not be a bad idea. I know that’s not a fun situation, but this is kind of the reality right now. Now, on the other side of this, if aren’t a position to purchase properties? Well, I think there’s going to be a lot of good deals especially for those properties. That did not have fixed loans and an underwater. Those people are going to be forced to sell a lot of our demographic. Baby Boomers segment. Might be forced to sell if the stock market and a lot of the retirement savings continues to go down. Credit card spending is going up, savings or going down.

This is just this is not a good combination for the economy as a whole, right as Faster. We just want to make sure that we’re prudent with whatever deal we get into. That doesn’t mean there’s no deals to be found right now. There’s always deals to be found again that varies by market. But if you’re getting ready to pull the trigger on a property, just make sure you’re comfortable with the numbers today. And you have fixed long-term financing. If you’re using financing and one last thing, there’s a big impact to the US raising our interest rates, right?

A lot of countries outside of the US Odette in US dollar. Or so, if US Dollars get more expensive, that means that their debts are going up, and this is all driving the price of the dollar up among other things to quite a complicated subject there, when we get into exchange rates, but you know, having lived outside the US for over 5 years. Now there is a lot of international opportunities. So, I want to talk about that in a coming episode. I just really excited, just signed for a nice lot here in Medellin where a partner of mine. And I am going to be doing a development, so we will get into that in the near future but until then, yes, we’re in a buyers’ Market. Doesn’t necessarily mean you should be buying I think if you find a good deal.

Wow, go ahead and pull the trigger. But I also think there’s some more deals coming up. I hope that gave you a little insight. I hope I didn’t freak you out, and I hope you’ve been listening to the podcast for a while and you’ve gotten yourself into some conservative investment. So, until next time, I hope Have a wonderful week and I will talk to you soon once you get on the fast track to Financial Freedom through short-term rentals what all starts with the properties you acquire. But you want to make sure that you acquired the right properties, I want to give you my ebook. That will show you how to do just that. There is no charge. It’s my gift to you for being one of our subscribers. Just go to restmethods.com. That’s REST methods.com

RELATED PODCAST EPISODES

• Episode 135: Future outlook from the biggest hotel chains in the world
• Episode 115: What’s Slimy And Smells (Good) But 100% Necessary For Your STR?
• Episode 106: Why you need to Refinance now (Inflation)
• Episode 82: On The Ground Market Research (Finding The Right Property In A New Market)
• Episode 13: What is the Best Real Estate Market?