2021 Housing Market Projections, Achieving ROI, & Local Memphis Investor Interview

How do you achieve your ROI goals in today's property investment market? Hear our projections for the housing market for the rest of 2021, and Glenn speaks with Amy, a Memphis-based investor, who describes her experiences of managing tenants for her own real estate investments.

2021 Housing Market Projections & Achieving ROI in Today's Real Estate Market

Richard: So in this segment, we're going to talk about 2021 and where we are now nearing the end of the second quarter. How do you think things are going to go for the rest of the year guys? And how do you see mortgage rates changing and the demand for property?

Brett: Personally, I think that what we are now seeing is a cooling. Not a major cooling, but a little bit of a dip. In the first quarter, we would write 40 offers and get 3 accepted. Now, we are writing 20 offers and getting 8 accepted, so we are starting to see a better advantage for our investors. I still believe the best time to buy is going to be October, November, December, and January.

Aaron: It's been such an odd year for us. I've seen in my own neighborhood recently, in Germantown, an increase in the number of days on market. In my neighborhood in particular, which we would consider a move-up neighborhood, a move-up neighborhood would be your next step up from an entry-level house. Where we live would be like a very nice house. I'd say that we live in a very modest home in Germantown, in one of the more affluent communities in the Shelby County and Memphis area. There are more houses on the market right now. There are for sale signs that don't have those little sliders across the top that say contract pending or sold, or under contract, and those houses have been out there for several weeks.

Brett: The reason being is because almost everybody tried to get their property purchased and get it closed. They get settled in and have two or three weeks for the kids before they are back to school. So the good news for homeowners that are looking for a home, is that there's a lot of inventory now. Not a lot, but there's more inventory than there has been in 6-months for real estate investors. As the owner-occupant market cools, the investor market will cool. I don't know why investors do this, but many property investors, not good investors, but some of these investors follow the leader too much. In other words, they follow them right off of a cliff. 

Richard: So, like lemmings?

Brett: Right. Exactly. So, why wouldn't you wait until the property market takes a little dip and wait to buy in October, November, December, and buy a better deal. I'm hoping these so-called experts that just put out their discussion about how property values are gonna continue to increase, and they predict the next five years is gonna be a substantial increase. I tend to think they're wrong. After all, what drives the market up? It is demand. The demand is eventually going to stop. I believe that the hedge fund groups are the ones that drove the demand for property. Once that took off, then homeowners panicked, they started buying, and they ended up overshooting prices, and real estate prices snowballed. But now all that's coming to an end. So I predict we're going to see some normalcy back in the housing market. I think the so-called experts, who probably have never held a real job, are wrong in my opinion. 

Glenn: Well, and keep in mind that when they talk about the market in general, they're not really talking about real estate investors, as that’s a totally different game. I would never dissuade one of my investors from buying, but I told several of them to wait, until Q4. Wait until the winter or once thanksgiving hits. That's our time to start looking through the end of the year because then you're gonna have more opportunity because fewer owner-occupants are going to be buying.

Brett: When the market is hot as soon as wintertime gets here, what do investors do? They just go silent and cool off. It's the holidays they are going to enjoy time with their family and will pick back up buying properties come April when everybody and their mother is trying to buy. A smart real estate investor needs to be buying between Halloween and February 1st. That's when you need to be buying.

Richard: So if you feel cold, go and buy a house!

Brett: Yes exactly, that should be the new rule. If you're chilly, go and buy an investment property.

 

Experiences of a local Memphis Real Estate Investor

Glenn: Amy, welcome to the Behind the Curtain Podcast. Here we talk about real estate investing in the southwest Tennessee market, and Amy is an investor that's been working with me for a few years, right here in Memphis, Tennessee. I've helped her find a few properties, she's one of the rare local investors that I have. So Amy, tell us a little bit about why you chose to invest in real estate versus stocks and bonds of Wall Street.

Amy: First, I just wanted to thank you for having me on your podcast today. I'm really grateful for this opportunity.

Amy:  So you asked why I was interested in investing in real estate versus stocks and bonds? I'm really attracted to something that I can see and hold, and look at, Numbers on the spreadsheet are not very interesting to me and I don't understand them, at least not how they go up and down. I know that everybody needs a house and I know what I would like to have in a house, so to be able to go and look at those sorts of things and meet and interact with actual real people, that’s just a good fit for me. You know, you said I was local, I do like to go and put eyes on my property and I talk to all of my prospective tenants before and throughout the rental process. So I really enjoy that active aspect of a real estate investment.

Glenn: Well, you know Amy, part of my job is to find the right properties for you. You and I have looked at many properties together that you didn't make a bid on, or that we bid on that you didn't win, and that's just a part of my job for every 10 that we look at. We might find one that works for you and those are the ones that count. So what kind of real estate have you invested in Memphis?

Amy: Well, so far I have two single-family homes and I have a duplex. You found the duplex for me and it wasn’t something I’d asked you to look for, however, it's been my most profitable unit by far. So I'm definitely interested in acquiring more multi-family housing as well as single-family homes. I've never flipped anything, but I'd be interested in doing that because I really enjoy puzzles and decorating and looking at tile, and all that kind of stuff. Rather than split, I think I'd redo and then hold. So yeah, I would repair and hold.

Glenn: So how well have they performed for you?

Amy: Thus far, extremely well! I've never had any vacancies. I started in early 2017. I've never had more than two or three days, that it took me to clean out the property, worth of vacancy. I've been extremely fortunate to have, never had any missed rent payments. I mean, part of that is doing a good job, screening tenants, but all of my properties in Memphis have been profitable and in demand.

Glenn: Did you have any issues as a result of COVID? Do that impact your tenants? 

Amy: I did have tenants that lost their job, but they were all able to get the $600 payment, and while I gave options to help out my tenants, nobody took me up on our offering. They all continued to pay their rent on time. 

Glenn: Well that's outstanding.

Amy: Yeah.

Glenn: What are you looking forward to in the future in terms of real estate? How many more investment properties do you plan to pick up? What's your long-term objective in this?

Amy: Well, you know, eventually I'd like to quit my day job and live off the somewhat passive income. I have been inactively managing it. It's not like I have to go into the office every day. But that's the passive part of it I would say. So I would love to have maybe 20 houses or 20 doors.

Glenn: Right now you have four doors basically? 

Amy: Yeah. 

Glenn: Now, are you self-managing or using enterprise for your property management?

Amy: Well, since I am local to Memphis, and I do enjoy the interaction with the tenants and all that comes with it, I am self-managing.

Glenn: And how has that going for you? Do you have any issues with it?

Amy: Yeah, some days are better than others. Things don't break when it's convenient. So, I've been staying on top of a lot of preventative maintenance, and as I said, I really thoroughly screen tenants before I rent out. So I’ve not had any issues with any tenants. So, it's really just been routine maintenance. Air conditioners break, so getting those fixed when that does happen - but it hasn't been bad. It's been manageable, of course, but it's a thing of scale. I might need to look into services with EPM to help with the volume. 

 

Learn more about real estate investing at:
https://epmrealestate.com/podcast/2021-housing-market-projections-achieving-roi--local-memphis-investor-interview