It’s Buying Time
This week in the midst of moving a mile a minute, I paused as something interesting struck me. In the 12 months since last June I have purchased three properties. I went down the list, and thought critically about a commonality between each purchase. All three properties either had a design I loved, were in key locations, financials made sense, AND most strikingly there was zero competition from other buyers. I just walked in, dictated my terms and price and closed.
I am writing this as an answer to a question I receive daily, which is: “how is the market?” And by sharing my activity this last year since the rate hike, I hope to most sincerely share my opinion. Which is…it’s buying season!
I want to share a bit of detail on each of these purchases, but the theme is clear: right now amidst a high interest rate market, it’s an excellent time to be a buyer. No, not every property is ripe for the taking, and some including my own listings still get multiple offers. But if you go on the hunt, you can come back to camp with some amazing prizes.
So this baby buying frenzy you could call my 12 months following the rate hike last May 2022, speaks to the type of housing market we are in. I chose to share this story as a tool to answer that ever popular question. And being cautious not to give folks a boilerplate answer—something I picked up at a sales meeting, but my own personal behaviors in relation to the current market.
So the first of the three I got was with a pal of mine named Mike. In May last year I saw a lovely Spanish Revival style duplex, but I was too late as it was under Contract. Like anyone who falls in love with something… you keep an eye on it, in the event it should ever come on the market again (kind of like someone you want to date but who's already taken). Anyhow it did eventually become available again, and of course it was due to the buyer backing out after seeing what monthly payments would be on a 6.5% interest rate payment. We saw the same payments, but knew how desirable a duplex in this West Adams pocket would be, and how big and bright and stylish the units were, so we jumped on it, Closed, rehabbed and after all the expenses we pay, Mike and I take home near $800 each—per month. Not retirement money, but a place we bought for $875,000–after putting 225K into is now valued at $1,300,000. We are thrilled. It’s one of my favorite properties, and I still scratch my head on how easy it was last June to buy it.
I have spoken to this property last year in a blog around the same idea, but was mainly speaking to my buyer clients capitalizing on the market that many are hesitant in. Read here.
Another acquisition I led, also not alone but with a group, was on another investment property this time in Silver Lake. And that’s the shocker to me on that one—Silver Lake—which I thought had gotten way out of reach on the numbers for me. But not in this market. Here was an 8 unit bungalow style building perched above Sunset in the most trendy section of the neighborhood, which was sitting available on the MLS with vacancies ready for repositioning. Yes, it is taking some heavy lifting to get it turned around, but the value is there and I doubt in a low interest rate environment this would have been available to me.
On a call with a prospective buyer two days ago, discussing these acquisitions as examples, he mentioned that I must be buying these under the expectation the rate will drop and I’ll ReFi. The answer was no—though sure, that would be great—but the value of units and housing in the US is so strong, all these pencil out even if rates remain where they are.
For example, my third purchase was of my actual new home 12 months into this rate hike cycle, that I closed on in late July. Again, yes the rate is high—or higher then what it was—but it’s a great big place and after fixing it up, both units should cover the high interest payments. This property I got for $1,520,000 and the neighbors bought theirs for $2,125,000 before the rate was so high in early 2022. It’s another head scratcher to me, on how I was able to walk right in. I in fact didn’t have the money to buy it, needed a longer escrow and to draw out down payment money from elsewhere to close. That’s another fact of the market for buyers, no longer do you need to bend over to Sellers demands. Things like no Loan Contingencies, waiving Appraisal , zero credits (FYI, I got $60,000 on this one in Victoria Park), longer closings. All sorts of terms Buyers would never have agreed to before are on the table now.
All three properties are deals that were unattractive to others as they likely felt the rate was unmanageable and they should wait for it to drop. We spoke to that concept in my most recent blog—and the truth is once rates drop it will be back to bidding wars. Read here.
So in closing, if you were to ask me “how’s the market?”, my answer is above, and summarized as this…it’s a great time to seek out a good deal.
Any guidance you may want to put this in motion, of course please let me know. And any stories of your own, which might assist me in explaining the market, I would look forward to hearing about.