In this video, we delve into the dynamic world of real estate investing and explore the potential risks that come with it.
We break down common pitfalls that investors may encounter and share valuable insights on how to navigate these challenges successfully.
Whether you’re a seasoned investor or just starting in the real estate market, this video is packed with practical tips and strategies to help you mitigate risks, make informed decisions, and safeguard your investments.
Join us as we discuss key aspects such as market fluctuations, financing hurdles, and unforeseen obstacles, offering you the knowledge and tools needed to thrive in the ever-evolving landscape of real estate.
Don’t let uncertainties hold you back – empower yourself with knowledge and make informed decisions on your real estate journey.
Hit play now and ensure your investments stand strong in the face of risks!
Transcript:
Chris Funk 00:00
The crazy thing is all the appreciation that we’ve seen in the last five years, which is when I stopped buying, and I went out and bought 100, houses, another 100 houses, you know, I’d be in a way different position today, but you never know what you’re gonna get into it. Part of my fear of the market is what I actually did for that hard money lender that that private lender that I wound up partnering with to buy the multifamily? Well, before we did that, he was an owner finance guy. And he had been owner financing in the early 2000s. And he got a bunch of foreclosures back in 2008, a whole bunch, and I would go out and sell those for him, I would either wholesaling or I would go out and find an owner finance buyer for him put the deal together, and then he’d pay me for buying the buyer. And it was so difficult, because he owed so much on these houses. And I was trying to explain to him, Look, your numbers don’t work. I don’t know why you bought this.
And I don’t know why you paid this price, but I can’t sell it for this right now the markets in the gutter. And time after time after time, you know, I would just try and sometimes I could make it work I could get it sold the number he needed by adjusting the down payment or the interest rate or just pushing for more buyers until eventually I found somebody but there was a lot where he’s, he’d throw in the towel and say, okay, rent it. You know, I need to get 1400 a month for this thing to cover. I’m like, Look, do this $800 Rent neighborhood. What do you want me to do? You know, and he was getting smoked. He had probably 20 or 30 houses like that. And I saw him each time I booked one, he tells me I’m losing 500 a month on this house. Next one, I’m losing 650 a month on this house.
Next one, okay, I’m losing 50 bucks a month on this one. But he had to get a move to do something with it. And I saw that guy just get completely taken to the cleaners. And so when I started seeing prices appreciation in 2018. But man, this can’t go on forever. I don’t want to be like that guy. Yeah, I don’t want to buy a bunch of stuff, have the market crash? And then I can’t get what I need out of it. So but there are some things you can do. You know, he had all the five year balloon style loans on his properties. Yeah. So his interest is only fixed for the first five years. Yeah, yeah, you know, if you do that you’re in danger. If you get a 30 year loan, right off the bat, your rental, you might pay a little more interest. But then you don’t really care what the market does. And if you do rentals, instead of owner finance, you don’t care what prices are you just care that someone will
Chris Bounds 02:40
rent it from you. Yeah, so I think that’s a vulnerability that I do get that rental properties and in general are more wealth building plays, not cash flow. And then general owners finance is a bit more of a cashflow play, but otherwise, it’s depreciating asset. But the vulnerability to owners finances is the foreclosure and also mitigating the downside risk from an insurance perspective on the property condition whenever you foreclose, because if it flooded, and you didn’t require flood insurance, and you foreclose, like, yeah, you got the property back, but mount one. Yeah, exactly.
Chris Funk 03:22
Yeah, there’s a lot and I’ve been on both sides of an owner finance deal that goes bad. I’ve been on one where it had appreciated so much, and they quit paying. And I asked her if they wanted to just deed it back to me in lieu of foreclosure. And they said yes. And I said, Fine, kept as a rental. And I got all that appreciation. And it was I was I was sad that they lost their home and they had to move and couldn’t make it work. But financially is a is a big win for my balance sheet. Because you know, it had appreciated so much and they had paid my loan down so much that I’ve been on the flip side. I’ve got one right now we’re in month number 13 of this guy’s third bankruptcy case, he has paid me in over a year, and I sold it to him at the top of the market. So now I got to foreclose and, you know, yeah, probably worth half of what he owes me. I’m gonna get smoked on that deal. I’m always 100 grand, but maybe I’ll rent it out for 20 years and not lose anything.
Chris Bounds 04:20
I’m does if you can sustain it Time heals. Most not all but most wounds in real estate. But you do have to be able to sustain it.