MARKET & TRENDS A Look at the Midyear 2024 Housing Market DESIGN The Secret Role of Designers in Spec Homes OPERATIONS Strategies to Maximize Your Investments ALSO IN THIS ISSUE Investor Review
FEATURE Where Are the Investors? SHIFTS ARE OCCURRING IN THE 2024 REAL ESTATE MARKET AS INVESTORS FLOCK TO EMERGING HOTSPOTS AND RETREAT FROM TRADITIONAL STRONGHOLDS.
Investor revIew
Lending Edition in Partnership With
SEPTEMBER-OCTOBER 2024 | thinkrealty.com
PAGE 28 Dare to be ... Unconventional CREATE OPPORTUNITIES WITH INNOVATIVE FINANCING SOLUTIONS FROM A LENDER THAT SHARES YOUR VISION.
SEPT-OCT 2024 $ 5 .95 US :: $ 6 .95 CAN
Resident Expert Workshops + Virtual Roundtables + Interviews + Event Tickets + Event Replays Your Community Spotlight + Think Realty Magazine + Ad Discounts + Savings Program Podcasts + Webinars + REI Articles + Resident Expert Video Courses + Templates + eBooks Calculators + Checklists + Glossaries + Design Guides + Industry Newsletters Everything a savvy real estate investor needs. Now in Think Realty +
thinkrealty.com/join/plus
SUBSCRIBE NOW
2 | think realty magazine :: september - october 2024
2 DAYS 50+ SPEAERS 70+ VENDORS 700+ ATTENDEES
Jo n us for the 15 th er s we br n to ether owner-opertors, execut ves, nd dec s on-mers for the ndustr’s prem er educt on nd networ n conference AAPL Cert f ct on Courses | VIP N htclub Recept on Networ n Brefsts | 15+ Sess ons & Pnels | Pr vte Lender Roundtbles Pced Vendor Hll | Networ n Recept on | After Prt
1011 2024 | | |
thinkrealty.com | 3
PUBLISHER & CEO Eddie Wilson MANAGING EDITOR Carmen Fields FULFILLMENT COORDINATOR Blair Pierce
DESIGNER Kat Hungerford CONTRIBUTORS Luke Babich Daren Blomquist Tara Bogard CV3 Financial Services Dominion Financial Services Nicholas Froman Alex Kaddah Kiavi Derreck Long Taylor Miller Krista Reuther Damon Riehl Jeff Roth John V. Santilli Real Property Management
HEY! LET’S BE FRIENDS! GET SOCIAL. STAY CONNECTED. Like, Follow & Share for the Latest Real Estate News, Trends and Insights from Think Realty Are you following Think Realty on social media? Things move pretty fast in real estate. Don’t miss out on the latest trends, tips, insights and news from your trusted resource for all things real estate investing! Follow. Like. Love. Share. Comment. You can do it all with Think Realty’s social media channels. Join the conversations in Think Realty social communities and connect with like-minded members who range from first-time to seasoned investors. CHECK OUT ALL OF OUR SOCIAL MEDIA CHANNELS AND CONNECT WITH US - AND OTHER INVESTORS - TODAY!
Rick Sharga Jim Tannehill Michele Van Der Veen Shaye Wali
Skyler Wilson Shawn Yerkes
SUBSCRIPTIONS :: The annual subscription for Think Realty Magazine is $39.99 in the U.S. Order online at www.Think- Realty.com or call 816-398-4130. Provide your full name, address and telephone number. DISCLAIMER :: Think Realty Magazine, its owners, con- tractors, distributors and their respective representatives do not provide tax, accounting, investment or legal advice and make no guarantee as to the effectiveness or success of any investment or tax strategies discussed herein. Please consult your own independent adviser as to any questions you have or decision you are contemplating. ABOUT THIS MAGAZINE :: Think Realty Magazine is a publication of Affinity Real Estate Media LLC. Reproduc- tion or use of any editorial or graphic, without permission, is prohibited. We are not responsible for the content of any paid advertisements. For reprint rights; to obtain a detailed state- ment of our privacy policy; and for all single-copy requests, address changes and other subscription inquiries: Think Realty 1118 N Conistor Ln Ste B Box 509 Liberty, MO 64048
@WETHINKREALTY
816-398-4130 ThinkRealty.com Copyright ©2024 Think Realty
4 | think realty magazine :: september - october 2024
Letter From The Editor
How Election Years Can Impact the Real Estate Market “F ollow the numbers and let them help you tell the story.” That is some of the best advice one of my mentors gave me. Interpreting data can be daunting, especially when you consider the many unknown variables that come with an election year. There are multiple opinions and interpretations of data and which trends to follow. These trends can be influenced by various factors, including political uncertainty, economic policies, and the overall feel of where the market is trending. Several real estate topics become particularly relevant during an election year because political outcomes can significantly impact the market. Here are a few notable areas to keep top of mind: 1. POLICY IMPACT. The outcome of the election can significantly impact real estate markets, depending on the policies of the elected government. Investors may analyze candidates’ positions on taxes, housing, infrastructure, and regulations to predict future market conditions. 2. INTEREST RATES AND MONETARY POLICY. Interest rates often fluctuate in response to economic conditions during an election year, affecting mortgage rates and real estate financing. Interest rates have been a hot topic of conversation during the last few years and have the potential to impact housing affordability significantly. Decisions made around interest rates influence mortgage rates, borrowing costs, and overall real estate market activity. 3. IMPACT OF TAX POLICIES. This is a big one. As a homebuyer or real estate investor, it is imperative to analyze proposed changes to property taxes, capital gains taxes, and tax incentives. Changes in these areas can directly affect the affordability of owning real estate and may influence how and when to buy and which investing strategy is most beneficial. 4. AFFORDABLE HOUSING AND RENT CONTROL. There is constant debate and policy reform around affordable housing and its potential impact on landlords, tenants, and the housing market. As a real estate investor, it is imperative to understand each prospective candidate’s housing policies, including affordable housing initiatives and tax incentives. Think Realty’s Government Relations Committee is committed to paying close attention to upcoming policies that may be modified and how potential changes could impact real estate investors. It is important to stay abreast of these topics to navigate the uncertainties of an election cycle, know when to pivot (if needed), and make informed investment decisions.
CARMEN FIELDS MANAGING EDITOR
thinkrealty.com | 5
Inside This Issue
FEATURE PAGE 8 Where Are the Investors? SHIFTS ARE OCCURRING IN THE 2024 REAL ESTATE MARKET AS INVESTORS FLOCK TO EMERGING HOT SPOTS AND RETREAT FROM TRADITIONAL STRONGHOLDS.
DAREN BLOMQUIST
▲ SEATTLE, WA
6 | think realty magazine :: september - october 2024
C O N T E N T S
MARKET & TRENDS Better Times Ahead? A Look at the Midyear 2024 Housing Market Real estate investors remain optimistic about market recovery and potential opportunities. Rick Sharga PAGE 14 Construction Trends During Election Years Historical election year patterns can inform developers’ and investors’ strategies. Taylor Miller PAGE 20 Trends Shaping the Future of the Real Estate Industry Interest rates, new technologies, and shifts in work and living trends are leaving their mark. Tara Bogard PAGE 22
OPERATIONS Adding Value Is Always on Trend Change is constant, and the best way to combat change is to continuously add value. Jeff Roth PAGE 72 9 Strategies to Maximize Investments in a High-Interest-Rate Economy These strategies will help you navigate high- interest-rate challenges effectively. John V. Santilli PAGE 74 Using a Business Operating System to Navigate Industry Trends The Empire Operating System equips real estate investors to capitalize on industry trends and optimize operations for success. Jim Tannehill PAGE 76 Navigating the Uncertainty of Interest Rates and Market Volatility High interest rates and market volatility offer challenges and unique opportunities. Luke Babich PAGE 80 2024’s Top Amenity: Air Conditioning AC enhances living environments and boosts real estate values by providing essential comfort and energy efficiency. Krista Reuther PAGE 82 Why Storytelling Is the Most Crucial Part of Modern Marketing In the constant tug-of-war between bold new marketing ideas and time-tested strategies, it’s important to get the balance right. Skyler Wilson PAGE 84 Always Visit a Turnkey Rental Property Before Buying Always do at least one site visit before purchasing—even if the property isn’t located near you. Real Property Management PAGE 86
Looking for Funding to Flip Your Next Property Renovation Project? Here are four key questions to ask. Shawn Yerkes PAGE 42 What to Know About Mineral Rights Ownership Mineral rights ownership can offer greater returns than just equity appreciation. Derreck Long PAGE 46 Dominion Financial Services Launches Bridge Loan Program It offers 100% acquisition and 100% rehab financing for fix-and-flip projects. Dominion Financial Services PAGE 50 From Paper to Pixels: The Rise of Data-Driven Lending Platforms The shift to data-driven digital lending platforms is enhancing the mortgage process. Kiavi PAGE 54 Combatting Fraud in the Lending Industry Liquid Logics is working to prevent lending fraud with technology that reduces verification times and enhances security. Alex Kaddah PAGE 56 Customer Service as a Key Differentiator Exceptional customer service is an important factor as you consider a lender. Nicholas Froman PAGE 58 Understanding Commercial Property Loans Business owners must understand how commercial property loans work. Taylor Miller PAGE 62 DESIGN The Secret Role of Interior Designers in Spec Home Success Interior designers can ensure style, functionality, and profitability from the ground up. Michele Van Der Veen PAGE 66
INVESTOR REVIEW Dare to be ... Unconventional
Create opportunities with innovative financing solutions from a lender that shares your vision. CV3 Financial Services PAGE 28 How Interest Rates Impact Real Estate Investments An article series on navigating the private lending world Damon Riehl PAGE 34 Turning a Small Down Payment into Big Returns Leverage is a tool for growing your portfolio. Kiavi PAGE 36 The Smart Investor’s Guide to Rental Portfolio Loans Consolidating properties into one portfolio loan can unlock savings and simplify your strategy. Kiavi PAGE 38 Tackling Private Lending Here’s how Devon Kennard is scaling 42 Solutions with precision and professionalism.
Shaye Wali PAGE 40
thinkrealty.com | 7
FEATURE
MARKET SHIFTS
MYRTLE BEACH, SC ▼
Where Are the Investors? SHIFTS ARE OCCURRING IN THE 2024 REAL ESTATE MARKET AS INVESTORS FLOCK TO EMERGING HOT SPOTS AND RETREAT FROM TRADITIONAL STRONGHOLDS.
DAREN BLOMQUIST
R eal estate has always been local—and trends in the 2024 housing market are proving that out with substantial market variance in retail market inventory, home price appreciation, and even foreclosure starts. These retail trends, in turn, impact interest from local community developers buying on Auction.com. “Chattanooga has just been flooded with investors from California and other places … there’s not property that you
can buy and afford there,” said Steve Johnson, an Auction.com buyer who lives in Chattanooga but decided to start buying properties across the border in Georgia when he was priced out of Chattanooga. “These smaller, less urban counties and cities—they are gold mines for finding properties that are under the radar for big-time flippers, big-time investors. But there are a tremendous number of people looking for a home.” Atlanta-based Auction.com buyer Sue McCormick told a similar story.
“I wanted to start investing, but Atlanta is a bit expensive,” said McCormick, who decided to start investing instead in Dayton, Ohio, where she grew up. “I started investing in my hometown because it was easier to get into.” BIDDING ACTIVITY AS A RETAIL MARKET BAROMETER Bidding and buying activity from investors like McCormick and Johnson acts as a reliable barometer of local retail market strength.
8 | think realty magazine :: september - october 2024
▲ DAYTON, OH
DOING WELL BY DOING GOOD Even so, many of these geographically flexible buyers are emotionally connected to the market or markets where they choose to invest. “My passion is really going back into the neighborhoods I grew up in and help enhance those areas and make money,” said McCormick, who continues to hold down a regular “day” job even while she invests.
Specifically, the share of buyers in each market purchasing outside of their local market provides insight into which markets are most attractive—and least attractive—to buyers willing and able to invest outside their local market. These geographically flexible buyers are more likely to target markets based on the underlying strength and opportunity in those markets rather than on the convenience and comfort that come with buying in their backyard.
Johnson grew up in Georgia and frequently traveled there for his day job before he retired several years ago. Helping people buy a home they can afford—something his family growing up was never able to do—is a high value for him. “That’s kind of my market because you are helping people who don’t have options and, secondly, you don’t have much competition,” he said. “Those stories (of helping people) are as important as making a profit.
thinkrealty.com | 9
I’m not so wealthy I can afford to lose money. But if you do what’s right, you’ll be taken care of.” TECHNOLOGY-ENABLED INVESTOR MOBILITY Technology has enabled even smaller- volume investors like McCormick and Johnson to invest outside of their backyards. All bank-owned (REO) auctions offered on platforms like Auction.com are online, and investors can buy remotely at foreclosure auction in an increasing number of markets. The increasing opportunity to bid remotely at foreclosure auction is thanks to two key developments in the last several years. First, state law changes have allowed for online bidding in some states. Ohio, where McCormick invests, is one example. Second, Auction.com has continued to expand Remote Bid, a technology launched in 2020 that is now available in more than 1,000 counties nationwide. “The difference with the remote and the online, you don’t have to drive. You don’t have to go sit around at the
▲ SOURCE: AUCTION.COM
STATES ATTRACTING MORE MOBILE INVESTORS Through the first half of 2024, states attracting the highest share of out- of-state buyers on Auction.com were South Carolina (75%), Kentucky (73%), West Virginia (73%), Maryland (56%), and Pennsylvania (48%). However, the absolute share of out-of- state buyers doesn’t tell the complete story because some states are inherently more conducive to out-of-state buyers
when there are major metro areas straddling state lines. The better measure is the change in the share of out-of-state buyers so far in 2024 compared to 2023 (see Figure 1). States with the biggest percentage increase in out-of-state buyers were South Carolina (up 114%), North Carolina (up 69%), Nevada (up 61%), Kentucky (up 51%), and New Mexico (up 40%). Other states in the top 10 for the biggest increase in share of out-of-state buyers
courthouse,” Johnson said. “With Remote Bid, I can buy anywhere.”
TACOMA NARROWS, WA ▼
10 | think realty magazine :: september - october 2024
(down 40%), Indiana (down 35%), Arizona (down 35%), Ohio (down 31%), and Iowa (down 27%). States with the lowest share of out-of- state buyers so far in 2024—typically markets that have not been attractive to geographically flexible buyers for several years—were California (2% out-of-state buyers so far in 2024), Washington (3%), New York (8%), New Jersey (10%), and Idaho (10%). TOP 25 COUNTY TRENDS County-level data provides even more precise insight into which local markets are most attractive and least attractive to geographically flexible real estate investors. At the county level, it’s beneficial to look at the share of buyers who live outside the county, not outside the state. Those buyers still typically represent geographically flexible investors, given the median land area for a U.S. county is 622 square miles. Among the top 25 counties for auction sales volume so far in 2024, a little more than half (13) saw an increase in the share of out-of-county buyers, and a little less than half (12) saw a decrease in the share of out-of-county buyers. Those with the biggest increase in the share of out-of-county buyers were
▲ SOURCE: AUCTION.COM
were Mississippi (up 35%), Tennessee (up 34%), Alabama (up 30%), Montana (up 20%), and Illinois (up 20%). Georgia,
more focused on market strength and opportunity are pivoting away from those states (see Figure 2). States with the biggest percentage decrease in out-of-state buyers so far in 2024 compared to 2023 were Washington (down 62%), New Jersey (down 51%), Michigan (down 48%), California (down 46%), and Idaho (down 40%). Other states in the top 10 for the biggest decrease in the share of out-of-state buyers were Virginia
where Johnson invests, was No. 11 on the list with an 18% increase.
STATES WITH A DECLINING SHARE OF MOBILE INVESTORS On the other end of the spectrum are states with a declining share of out-of-state buyers, an indication that geographically flexible buyers
thinkrealty.com | 11
with investors from across the border in Desoto County, Mississippi, and about an hour northwest on Interstate 40 in Madison County, Tennessee. On the other hand, county-level markets that lost traction with geographically flexible investors in the first half of 2024 (see Figure 3) were led by Cook County (Chicago), Illinois, where the share of out-of-county buyers was down 49%, followed by Maricopa County (Phoenix), Arizona (down 48%); Tarrant County (Fort Worth), Texas (down 39%); Fort Bend County (Houston area), Texas (down 39%); and Dekalb County (Atlanta area), Georgia (down 32%).
DAREN BLOMQUIST
Daren Blomquist is vice president of market economics at Auction. com. In this role, Blomquist analyzes and forecasts complex macro and microeconomic data trends within the marketplace and greater industry to provide value to both buyers and sellers using the Auction.com platform. Blomquist’s reports and analysis have been cited by thousands of media outlets nationwide, including all the major news networks and leading publications such as The Wall Street Journal, The New York Times, and USA TODAY. He has been quoted in hundreds of national and local publications and has appeared on many national network broadcasts, including CBS, ABC, CNN, CNBC, FOX Business, and Bloomberg..
▲ SOURCE: AUCTION.COM, TOP 40 COUNTIES FOR FORECLOSURE AUCTION VOLUME JAN TO JUN 2024
mostly from other markets within California. For instance, in Sacramento, California, 59% of out-of-county buyers are from Los Angeles County in southern California while a combined 18% are from the Bay Area counties of Alameda, Contra Costa, and Santa Clara. The story is different in middle-America markets like Shelby County/Memphis, Tennessee, which attracted out-of-county investors from Broward County, Florida, and Alameda County, California—along
Sacramento, California (up 196%); Suffolk County (Long Island), New York (up 108%); Shelby County (Memphis), Tennessee (up 106%); Clark County (Las Vegas), Nevada (up 93%); and Los Angeles County, California (up 73%). The increase in California counties may be somewhat surprising given that only 2% of California property buyers on Auction.com are from out of state. But some California markets are attracting more geographically flexible investors,
12 | think realty magazine :: september - october 2024
ARE YOU TRYING TO REACH REAL ESTATE INVESTORS? Try advertising with us. Digital • Print • Newsletter • Webinar • Podcast CALL, TEXT, EMAIL TODAY. (816) 398-4130 • sales@thinkrealty.com
Let’s Stay in Touch!
Lender Solutions for Construction Risk Management
Services
Construction Progress Inspections Construction Cost Analysis Plan and Cost Reviews Cost to Complete Consruction Reviews Annual Commercial Portfolio Reviews
inspects@cisinspects.com
cisinspects.com
707-838-1679
Speed to close. Power to scale
NREIG provides customizable insurance solutions for real estate investment properties. Coverage for all phases of occupancy Monthly reporting Make changes as needed No minimum-earned premiums Force-placed alternative option for lenders
Know your interest is adequately protected. Visit NREIG.com/PL to learn more or refer a borrower.
Offering a simpler, more reliable, and faster way for real estate investors to access financing for investment properties.
• Fix and Flip / Bridge Loans • New Construction / Infill Loans • DSCR Single Asset Rental Loans • Rental Portfolio Loans • Cash-Out Refinance Loans
Visit kiavi.com
NMLS ID 1125207
thinkrealty.com | 13
Market & Trends: SIZING UP 2024
Better Times Ahead? A Look at the Midyear 2024 Housing Market REAL ESTATE INVESTORS REMAIN OPTIMISTIC ABOUT MARKET RECOVERY AND POTENTIAL OPPORTUNITIES.
RICK SHARGA
M ost real estate investors are optimists, anticipating better times ahead. That was borne out recently in the Summer 2024 RCN Capital Investor Sentiment Survey, where 60% of the respondents felt that today’s investing market was as good or better than it was a year ago; 61% believed the market would be the same or better in the months ahead. All this optimism even though the housing market today seems to be, to put it kindly, in a bit of a slump. Is there a reason for all this optimism?
Let’s take a look at where the market is today and think about where it might be headed in 2025 to get some answers. HOME SALES CONTINUE DOWNWARD SPIRAL After peaking at over six million sales in 2021, the number of existing homes sold has dropped precipitously to just over five million homes sold in 2022 and right around four million in 2023, marking the lowest number of homes sold in the United States in the past 25 years. Forecasters were
hopeful the market had bottomed out last year, and most predicted a lift of 10-15% in the number of sales. Instead, June marked the 34th consecutive month where fewer homes were sold across the country than the year prior, at an annualized rate of 3.89 million sales. It also continued a troubling counter-seasonal trend of home sales falling during the spring and summer months instead of increasing as they have traditionally. Affordability, or the lack thereof, is the main culprit behind these lackluster
14 | think realty magazine :: september - october 2024
sales numbers. Mortgage rates effectively doubled in the first half of 2022 (the only time in U.S. history that mortgage rates doubled in a calendar year, according to Freddie Mac), and haven’t dropped much below 7% since then. This made purchasing a home much more expensive and also locked millions of potential home sellers out of the market since they simply couldn’t afford to sell a home they’ve financed at 3.5% and trade it in on a more expensive home with a 7% mortgage. These factors have kept the inventory of homes for sale at or below a three- month supply—roughly half of what would constitute a balanced housing market—and tilted things dramatically in favor of sellers. That, in turn, has resulted in home prices rising by almost 7% in the past year despite higher mortgage rates, according to Fannie Mae. The combination of higher prices and higher interest rates means most prospective homebuyers across the country simply can’t afford to buy a house today. According to a recent analysis by the Atlanta Federal Reserve Bank, purchasing a median-priced home today would eat up almost 42% of the income of someone making a median salary. That’s well above the 28-30% most experts believe is the upper percentage limit of household income that should go toward housing. New home sales have fared slightly better than existing homes for several reasons. First, they’re more available. There’s roughly a nine-month supply of these homes for sale. Second, prices have dropped a bit: June estimates from the U.S. Census Bureau show new home sales prices down 2.6% year- over-year. Third, builders have been offering major concessions, including paying points at closing to buy down the mortgage rate for the buyer.
... Around four million in 2023 [marks] the lowest number of homes sold in the United States in the past 25 years.”
buyers took advantage of the low rates, along with millions of homeowners who refinanced into much lower-rate loans. Now all of those millions of homeowners are locked in by those rates and are sitting on the sidelines rather than selling their homes, keeping inventory levels suppressed. Although there will always be people who feel like they must sell (e.g., households where there’s a birth or death in the family, a marriage or divorce, a job transfer or job loss, or a retiree ready to downsize), these numbers simply aren’t large enough to meet market demand. And this demand is based purely on demographics: The country has the largest number of young adults between the ages of 25-34 in its history—the prime ages for household formation and first-time home purchases. Builders, who were largely AWOL for a decade following the Great Recession, have finally started ramping back up. Despite headlines describing lower housing starts, builders broke ground on 5% more single-family homes in June than they did a year ago (the overall decline is almost exclusively fewer multifamily housing starts).
Still, even new home sales forecasts have declined recently, from an estimated 700,000 sales this year to below 650,000. This lower number would still represent over 14% of total sales in 2024, which is a higher percentage than usual. YOU CAN’T BUY WHAT’S NOT FOR SALE Sometimes numbers can be misleading. Recent reports show the inventory of homes for sale in July was up 40% from last July. Technically, that’s true; but it’s mostly an indication of how extraordinarily low inventory was last year. According to Altos Research, there were roughly 635,000 homes for sale in mid-July, up 40% from July 2023, but down from nearly one million homes for sale in July 2019, and almost 1.2 million in July 2015. The market has been undersupplied since the onset of COVID-19, when the Federal Reserve cut the federal funds rate to zero, and the mortgage industry responded by cutting the rates on 30-year fixed-rate loans to historically low levels, sometimes as low as 2.5%. This created a boom in demand, far outstripping supply, and led to home prices escalating rapidly. Millions of
thinkrealty.com | 15
Permits are also up year-to-date. But due to under-building for years, even at higher construction rates, it will take several years for new home supply to catch up to the market need. Minor adjustments to the supply-and- demand balance can make a meaningful difference. Florida and Texas have seen more supply come to market over the last year than most other states and, in both cases, have seen home price appreciation slow down—and even seen prices decline on a year-over-year basis in some markets. That’s a hopeful sign from an affordability standpoint. Most economists who follow the housing market believe mortgage rates will begin to come down once the Federal Reserve executes its long- awaited cut to the fed funds rate, perhaps as early as September, allowing mortgage rates to drop at least modestly from 7% into the mid-6% range. OPPORTUNITY AMID THE DOOM AND GLOOM Despite all the gloomy news, all is not lost for real estate investors. According to a recent report from ATTOM, the number of homes flipped in the first quarter increased for the first time in three quarters to reach almost 68,000 sales. Gross margins also improved for the third time in the past four quarters to almost 30%. Demand is still there for move-in ready homes that are priced appropriately. Although millions of prospective homebuyers have been temporarily priced out of the market, they still need to live somewhere and have become prospective tenants for investors who own rental properties. Asking rent for
16 | think realty magazine :: september - october 2024
the single-family rental homes owned mostly by small-to-mid-sized investors has increased by just over 3% this year, according to data from Corelogic. So perhaps one of the reasons real estate investors tend to be optimists can be found in the old saying that a savvy investor can find opportunities in any kind of market. We’re probably seeing that play out in real time today—and it’s a positive trend likely to continue in 2025.
RICK SHARGA
Rick Sharga is the founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm. He is a frequently quoted source on real estate, mortgage, and foreclosure trends in major national media outlets. Sharga has several decades of combined experience in the real estate and mortgage industries as well as consumer and B2B marketing, including roles as the executive vice president at RealtyTrac; executive vice president for Carrington Mortgage Holdings; and CMO of Ten-X and Auction.com, the leading online real estate marketplace; and the executive vice president of market intelligence at ATTOM, among other executive positions. Sharga is a board member for the Asian Real Estate Association of America and the National Association of Default Professionals. He was a founding member of the National Mortgage Servicing Association and was twice included in the Inman News Inman 100, an annual list of the most influential leaders in real estate.
thinkrealty.com | 17
Scan the QR Code to register for your account.
18 | think realty magazine :: september - october 2024
"You've been talking about cabinets for a month, would you like a suggestion?"
"You need to call MFS Supply for a free quote on kitchen cabinets!"
"I have another suggestion about your recently played music..."
"And you can save money with Think Realty!"
thinkrealty.com | 19
Market & Trends: ELECTIONS AND CONSTRUCTION
Construction Trends During Election Years HISTORICAL ELECTION YEAR PATTERNS CAN INFORM DEVELOPERS’ AND INVESTORS’ STRATEGIES.
TAYLOR MILLER
P redicting the economic behavior of any industry is typically a tall task. However, forecasting the construction industry’s economic fluctuations during an election year is a much less daunting undertaking. With plenty of data to analyze, certain patterns are obvious in the months approaching an election and the months after a President is voted into office. ELECTION INFLUENCE ON CONSTRUCTION DYNAMICS The construction industry is particularly tethered to the political climate due to several factors such as tax policy, interest rates, regulation changes, and
policies surrounding immigration and labor laws. Historical trends reveal that election cycles often bring a mix of uncertainty and optimism, affecting investments, project timelines, and economic forecasts within the construction sector. Understanding these trends can help developers effectively navigate the challenges in the construction landscape and
in construction spending. Developers and investors tend to adopt a wait- and-see approach, postponing major investments until after the election. This trend is driven by the desire to avoid committing resources in an uncertain political environment. For example, in 2012, total construction spending in the United States exhibited a significant dip from August to October, according to data from the U.S. Census Bureau. The same data set shows a similar trend in both the 2016 and the 2020 elections. However, all 2020 data must be taken with a grain of salt due to the slowdown ushered in by the COVID-19 pandemic.
capitalize on the opportunities presented by election cycles.
PREELECTION CAUTION: ANALYZING THE SLOWDOWN In the months leading up to an election, it is common to observe a slowdown
20 | think realty magazine :: september - october 2024
POSTELECTION SURGE: OPPORTUNITIES UNLOCKED Conversely, the period following an election often witnesses a surge in construction activity. Once the political landscape becomes clearer, pent- up demand and deferred projects are typically released, leading to an increase in construction spending. This increase in construction spending is particularly noticeable when the election results are perceived as favorable for business and economic growth. For example, in December 2016, total construction spending in the U.S. reached $1.181 trillion, a significant rise from previous months and years. According to the Federal Reserve Economic Data, this increase was driven by heightened confidence in the economic policies anticipated from the incoming Trump administration, which included promises of deregulation
societal and economic factors must be considered in an investment strategy.
shifts toward fiscal conservatism can lead to tightened budgets for public construction projects, impacting the overall spending in the sector. As evident in the data from the 2012 and 2016 election cycles, under relatively ordinary social and economic conditions, construction spending can be predicted to a degree. The data from the 2008 and 2020 election cycles tell a different story, however. Developers and industry stakeholders can make decisions based on historical trends, but every investment is a roll of the dice. You never know when a global pandemic or an international economic crisis will unfold. The data from these election cycles vary from the others due to the 2008 housing crisis and the COVID-19 pandemic. Construction spending saw a significant downturn in the spring and summer of 2020 after the pandemic started. By the first few months of 2021, contractors began replenishing their backlog of projects that had previously been postponed. The construction sector never truly recovered until well into 2022. The data from this election cycle, as mentioned previously, must be taken with a grain of salt. Construction spending before the 2008 election cycle was already on a downturn from the Great Recession. The housing bubble began to burst in 2007, which led to a steep decline in housing prices and a subsequent slowdown in residential construction. After the election, the credit crunch severely restricted access to financing for both residential and commercial construction projects. As banks tightened their lending standards, many ongoing and planned projects were delayed or canceled. These individual events serve as a reminder for developers that even with some of the most reliable data, external
HAMMERING IT OUT Election years bring a complex interplay of uncertainty and opportunity for the construction industry. Historical trends indicate that although preelection periods may experience a slowdown in construction activity due to political uncertainty, postelection periods often witness a surge as clarity returns to the market. The construction economic outlook during election years is shaped by various factors, including policy proposals, regulatory changes, fiscal policies, and overall economic confidence. Interpreting this data and basing investment decisions on these trends is a worthwhile strategy, but developers must proceed with caution as external social and economic events like a pandemic or financial crisis may offset anticipated construction spending.
and infrastructure investment. Similarly, following the 2008
election, the Obama administration implemented the American Recovery and Reinvestment Act (ARRA), which significantly boosted the construction sector through increased infrastructure spending and economic stimulus. The data shows an uptick in construction projects can almost always be expected during the postelection period; however, the type of projects that will see the most spending is highly dependent on the candidate’s campaign promises. Policy-driven fluctuations are evident in various election cycles. The Obama administration’s focus on infrastructure development led to significant federal investments in construction projects. The Trump administration’s emphasis on deregulation and tax reforms created a favorable environment for private-sector construction. In contrast,
TAYLOR MILLER
Taylor Miller is a project specialist and marketing coordinator for Owner Builder Advisors, where he helps developers and owners navigate the construction process. He has been actively involved in the construction and inspection industries since 2016. He also manages marketing campaigns, social media, and document generation/
compilation for both formal and informal application processes.
thinkrealty.com | 21
Market & Trends: MARKET DRIVERS
Trends Shaping the Future of the Real Estate Industry INTEREST RATES, NEW TECHNOLOGIES, AND SHIFTS IN WORK AND LIVING TRENDS ARE LEAVING THEIR MARK.
TARA BOGARD
R eal estate investing has seen significant changes over the years due to various economic and societal factors. Let’s explore three key influences shaping the current real estate market: interest rates, technology, and the rise of remote work.
RIPPLE EFFECTS OF RISING INTEREST RATES ON REAL ESTATE In 2023, the U.S. economy experienced a significant rise in interest rates, which notably impacted the real estate
market. The higher interest rates led to a decline in home prices and retail sales, a rise in unemployment, and a squeeze on corporate earnings. Moreover, despite continued pressure on the real estate sector in 2024 due to the absence of interest rate cuts,
22 | think realty magazine :: september - october 2024
the commercial real estate outlook remained largely unchanged. These changes present a challenging scenario for real estate investors who rely on financing for new investments or refinancing existing ones. Despite these challenges, savvy investors may find opportunities by adopting more conservative strategies or exploring less interest-rate-sensitive sectors. REAL ESTATE INNOVATION THROUGH TECHNOLOGY ADVANCES The advent of technology and digital transactions has revolutionized the real estate industry, making processes more efficient and transparent. Digital transactions have expedited the buying and selling of real estate. Platforms providing extensive property information have made the market more accessible, and technologies like virtual reality have enabled remote property tours, a feature that has proven especially useful. EFFICIENCY AND SPEED. Digital transactions have made the process of buying and selling real estate much quicker and more efficient. Buyers and sellers can now complete transactions online, which can significantly speed up the process. Documents can be signed electronically, reducing the need for physical paperwork. TRANSPARENCY. Technology has increased transparency in the real estate market. Online platforms provide extensive information about properties, including pricing, location, features, and photos. This information is readily available to anyone with an internet connection, making the market more transparent and accessible. REMOTE ACCESSIBILITY. Virtual reality and 3D tours allow potential
buyers to tour properties remotely, which was particularly beneficial during the COVID-19 pandemic. This technology can also benefit investors who are looking to invest in properties in different locations. BIG DATA AND AI. The application of big data analytics and artificial intelligence in the real estate sector allows for more accurate property valuations, better prediction of market trends, and personalized customer experiences. Machine learning algorithms can analyze vast amounts of data to make predictions about which properties will increase in value, while AI can automate mundane tasks, freeing up time for real estate professionals to focus on more complex tasks. BLOCKCHAIN TECHNOLOGY. Blockchain has the potential to revolutionize property transactions by providing a secure, decentralized ledger for transactions. This could make transactions more secure and efficient and reduce the potential for fraud. Furthermore, the application of big data analytics and AI in the real estate sector leads to more accurate property valuations and better market trend predictions. For IRA investors, these technologies can make identifying and purchasing properties faster and more efficient. REMOTE WORK CONTINUES TO SHAPE THE URBAN LANDSCAPE The COVID-19 pandemic has prompted a significant shift toward remote work, leading to a noteworthy urban- to-suburban migration. This trend has resulted in increased demand for suburban and rural properties, as remote workers seek out larger spaces and quieter environments.
Conversely, the demand for urban commercial real estate has decreased as companies reduce their office spaces due to the rise of remote work. These trends present a mixed bag of challenges and opportunities for real estate investors. Although urban commercial properties may offer less return on investment than in the past, residential properties in suburban and rural areas could provide profitable opportunities. The dynamics of the real estate market continue to evolve in the face of changing interest rates, the rise of new technologies, and shifts in work and living trends. As investors navigate these waters, staying informed and adaptable is key. By considering these factors and adjusting strategies as necessary, investors using an IRA for real estate can continue to find opportunities and success in this ever-evolving market.
TARA BOGARD
Tara Bogard is the senior vice president of business development for Digital Trust and has more than 10 years’ experience in the self-directed retirement plan and alternative asset space. She has played an integral role in creating exponential growth in the firm’s assets under custody. Bogard holds a master’s degree in business with a focus on organizational communication from Murray State University and a bachelor’s degree in organizational communication, also from Murray State University.
thinkrealty.com | 23
24 | think realty magazine :: september - october 2024
Lending Edition in Partnership With
SEPTEMBER-OCTOBER 2024 | thinkrealty.com
PAGE 28 Dare to be ... Unconventional CREATE OPPORTUNITIES WITH INNOVATIVE FINANCING SOLUTIONS FROM A LENDER THAT SHARES YOUR VISION.
Etiam Scelerisque Mollis Enim in Pulvinar Etiam SED IN DIAM SED ERAT ELEMENTUM TINCIDUNT. PELLENTESQUE LACINIA MAGNA AC BLANDIT LOBORTIS. PRAESENT SED ENIM ERAT. To find private money you can trust, start with AAPL. AUTHOR NAME
Our members are the most-trusted private lenders in the business. They’ve pledged to follow the industry’s only Code of Ethics, enforced by the oldest and largest association for private lenders.
Find your next financial partner today at aaplonline.com/directory.
26 | think realty magazine :: september - october 2024
Investor Review
Finding Safe Money for Real Estate Investments I n today’s competitive real estate market, leveraging private money can be a game-changer for investors. However, ensuring that you find safe and reliable private funding is crucial. Here are some strategies to consider. First, it’s essential to establish a solid network. Building relationships with potential private lenders—such as friends, family, or local investors— can yield opportunities for funding. Attend local real estate investment groups and networking events to connect with individuals who are willing to invest in your projects. When reaching out, be transparent about your investment goals and how their support can help you achieve them. Another important aspect is due diligence. Before accepting any private money, thoroughly vet your potential lenders. Look for those with a solid track record in real estate investment. Request references and check their previous dealings to ensure they have a history of successful investments. This helps establish trust and demonstrates you are serious about managing their funds responsibly. Additionally, clarify the terms of the investment. Ensure all parties are on the same page about interest rates, repayment schedules, and exit strategies. A well-documented agreement can prevent misunderstandings and protect both you and your lender. Make sure to discuss the potential risks involved and how you plan to mitigate them. Transparency is key; keep your investors informed about the progress of the project. Regular updates foster trust and confidence, making it more likely investors will want to work with you in the future. Finally, consider diversifying your funding sources. Relying on multiple private lenders can reduce risk and provide a more stable financial foundation for your investments. By building strong relationships, conducting thorough due diligence, and maintaining transparency, you can find safe private money that will help you scale your real estate investments effectively.
LINDA HYDE PRESIDENT AMERICAN ASSOCIATION OF PRIVATE LENDERS
thinkrealty.com | 27
INVESTOR REVIEW FEATURE
INVESTORS WITH VISION
SPONSORED CONTENT Dare to be ... Unconventional CREATE OPPORTUNITIES WITH INNOVATIVE FINANCING SOLUTIONS FROM A LENDER THAT SHARES YOUR VISION.
CV3 FINANCIAL SERVICES
I n today’s real estate market, you need to be able to pivot on a dime to seize opportunities as they emerge … or else they disappear. Whether you’re a real estate investor seeking the next big opportunity, a lender balancing risk and reward, or a broker navigating the complexities of today’s market, one thing is clear: Conventional wisdom is no longer enough. It’s time to embrace a mindset that challenges the norm, pivots with agility, and dares to be unconventional. EMBRACE THE CHAOS We all face the chaos of fluctuating markets, unpredictable timelines, and shifting demands. Rather than resist these elements, the bold see them as opportunities. The real estate market is a realm where
uncertainty reigns. Adaptation isn’t just a skill—it’s a necessity. At CV3 Financial Services, we understand that today’s unpredictable landscape demands partners who can think and act beyond conventional limits. We are here to help you turn chaos into opportunity. THE POWER OF UNCONVENTIONAL FINANCING Think outside the box. It’s a mantra that every real estate player knows well. Do you have flipped properties sitting unsold? Untapped equity in your rentals? Projects dragging longer than expected? Opportunities to transform a teardown into a dream home? These scenarios aren’t anomalies—they’re daily realities. And they demand a capital partner ready to say “yes” when others might refrain.
It is a matter of necessity to have diverse financing solutions at your fingertips for a myriad of scenarios— because today’s unconventional circumstances demand unconventional solutions. At CV3 Financial Services, we pride ourselves on being “Your Unconventional Lender.” Our innovative, flexible financing solutions go beyond the traditional DSCR and fix-and-flip options. We offer innovative, tailored lending solutions designed to meet the real-world challenges of today’s market. EQUITY RELEASE. Unlock the equity in your completed properties that are on the market. Cash out now to fund your next venture. CONSTRUCTION COMPLETION. Access the funds you need to bring projects across the finish line, no matter the obstacles.
28 | think realty magazine :: september - october 2024
PORTFOLIO REFINANCING. Refinance your portfolio to improve cash flow, reduce costs, and free up capital for new investments. FIX AND FLIP. Leverage our specialized financing to turn undervalued properties into profitable sales with 100% rehab financing. DSCR. Choose short-term, interest- only ARM or 30-year principal-and- interest rental property financing with variable terms to fit your needs. PARTNER WITH A LENDER THAT DARES TO INNOVATE The real estate market is not for the faint of heart. It’s for the bold, the brave, and the unconventional. Innovative financing can help you adapt, thrive, and succeed in a dynamic market.
Embrace the chaos and thrive with unconventional lending solutions designed for today’s real estate challenges.”
BROKER PARTNERSHIPS THRIVE AT CV3
By partnering with us, you gain access to a wealth of resources and expertise that can transform your business. Let’s work together to offer the best possible solutions to your clients: 1. DIVERSE FINANCING OPTIONS. Every client’s situation is unique. We offer loans designed to accommodate a wide range of investment strategies. 2. FLEXIBLE PRICING. With competitive guidelines and no point/low point options, we ensure you can offer your clients the best choices. 3. EXPERIENCE MATTERS. With decades of experience, our team of experts handle all loan processing and underwriting in-house. 4. EXCLUSIVE MARKETING PLATFORM. Our broker marketing platform helps you grow your business, elevate your brand, and attract more repeat customers. 5. SCALE YOUR BUSINESS. Expand your clientele to reach real estate investors with unconventional financing options. 6. INCREASE CLIENT SATISFACTION. Our brokers report Customer Satisfaction Ratings of 98%. Higher satisfaction builds trust and loyalty and leads to more repeat business.
In a world where conventional solutions often fall short, being
unconventional is a strength. We’re not your typical lander—we’re partners in your success. Together, let’s embrace
the chaos, think outside the box, and dare to be unconventional.
CONTACT US TODAY Ready to explore how our
unconventional approach can work for you? Navigate the unpredictable real estate market with creative solutions from CV3 Financial Services as your capital partner, and transform uncertainty into opportunity.
7. LOYALTY MEANS BUSINESS. Our “Inner Circle” customer loyalty program rewards you for continuing to trust CV3 with your business. Become an Approved CV3 Broker Today
(844) 721-3733 www.CV3financial.com/think- realty-unconventional
thinkrealty.com | 29
Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88Made with FlippingBook Online newsletter