Housing Crash 20% or Sign of Housing Slow Down? Listed $95,000 BUT Sells for $78,000 6 Months Later?

Video Closed Captioning:

good morning good afternoon good evening

folks michael’s uber one rental at a

time it is thursday and you know what

that means

the three amigos are back how you doing

dion

howdy doing great ready for round two i

really look forward to thursdays yeah

thursdays are a lot of fun for me as

well how you doing matt

i look forward to thursdays as well i’m

ready to go as much as i can be awesome

well guys one of the things that i

i’ve been talking about you’ve heard me

and we’ve all talked about it is i

believe a housing slowdown is coming not

a crash

and sometimes it’s hard to articulate

what a slowdown mean because everybody

hears the word slowdown and they think

crash i’m like those words are not

connected right the slowdown might mean

less transaction but not necessarily

lower prices so lo and behold we have

this private facebook group that’s

attached to my course right uh how to

get started one rental at a time

uh one of my very early students posted

a picture of a house he just got

just closed on and he gave us some

numbers and so i printed it out

i will show it on the camera

i was going to show it on the computer

and realize that my camera is up here

now so

i guess you can’t really see that

anyways here’s the house looks like a

little cute house with a high-pitched

roof but here’s the important part

the house is listed on october 5th 21

for 95 grand

i’m sure the person that listed that was

probably reaching it was still the

market was kind of hot

so they were probably reaching

uh looks like three weeks later

no nibbles no bites they probably they

brought it down to a price that was

probably more realistic

at let’s just call it 90 grand five

dollars short of 90 grand 89.995

this stayed on the market it went on and

off a couple of different times and our

student closed on march 2nd

for 78

000

that’s awesome

so again

first listing in october closes in march

that’s rough and tough six months yeah

this is what a housing slowdown looks

like

because what you’re not seeing behind

these numbers and the fact that i’ve

done this for so long is

somebody bring something out

and they go for the moon especially in

the market we were just out how many of

us have seen a price in anything in our

buy box that you’re like i can’t believe

they’re asking that and then it’s sold

i’m sure you guys have seen that what do

you think

well actually my brain went in like

three different directions i’m gonna

grab one of them

uh

the danger to investing at a distance

is is when you see a deal that comes out

on the market of 90 95 000.

in my area a falling down shack that

needs at least a hundred thousand

dollars worth of repairs goes for 300

  1. that’s a house for 300 000 would

need a hundred thousand dollars and work

so you look at a market where 90 or 95

it looks really good there is a reason

why all of the local investors whose

investors who are looking at the market

every day have passed on it because its

value was in the 70s

because a house is worth what somebody’s

willing to pay so in this case luckily a

distance investor didn’t find a bad deal

and jump on it yes

and um

the one thing that can lower housing

prices it’s it’s not it’s not rates it’s

not wages it’s not

war it’s not the only thing on the

planet that lowers the price of a house

is time on market

no matter what happens with comps when a

seller lists something the longer it

sits on the market

that’s what causes the price to come

down

so a slowdown

means that

and it can be prices don’t go up as fast

because people were making over asking

offers waiving contingencies that goes

away so now they’re still going up

that’s the slowdown yeah it doesn’t mean

that they drop it it might mean that

it becomes harder to find the right

deals

if rates go up and prices go up and

rents don’t oh that’s the three factors

then it becomes harder to find the deal

and so someone like me who buys one or

two properties a year i might not even

notice yeah exactly it is just that when

it’s time to look for a property it

takes me you know one week to four weeks

and somewhere in there i’ll find one but

that person that’s buying five to ten

fifteen deals a year

they might notice a slowdown absolutely

they might do two or three transactions

instead of ten

yeah

very cool and matt what were your

takeaways from that uh

look you know

yeah i mean we’re seeing and you know

we’re seeing a little bit of inventory

come on

um

and it’s just stupid price it’s just

that’s where i mean why not right i mean

the whole idea is i just need one i just

need one stupid buyer so let’s put it at

20 you know this is like 20 higher than

it ultimately sells for right why not

yeah they just need one

just need one and two is even better

yeah two you know but yeah but and you

find that and so yeah i saw i’ve seen a

couple

um one came on this week and i’m just i

sent it to a bunch of buddies of mine i

was just like

i want whatever they’re smoking yeah

exactly this is some good stuff that is

that stuff is clearly expensive and they

need to sell the house for that much to

cover their expenses

like it’s the number was insanity and

you know the uh the the cost was

i want to say the house was put on the

market for right around 400 and it’s a

duplex and the rents are 1900 bucks

wow

like

yeah

yeah you know and it’s just like i mean

i guess you can try it but that house

will not appraise that house i mean that

house is and and i’ve actually seen that

house i saw the house five years ago

so i’m pretty sure it didn’t get that

much better with age based on everything

i’m seeing from the outside so yeah i

think you look at it and you say

now is the time better than it ever has

been to do the homework understand what

you’re doing really understand your

market

and then when that one sits other people

don’t go back and revisit so that might

sit for 60 days it might sit for 30 days

it might go in another contract a couple

times because i know it has some

inspection issues yeah i’ll you know and

for me

i actually made an offer on that

property probably six months ago at

three and a quarter yeah and to me it

was worth three and a quarter and it

probably still is worth about that so if

i can get a 75 000 discount over

you know over a list price yeah

it’s 25 off yeah so the other thing i

really i love about this example is it’s

somebody that’s just doing the work

you’ve got to be patient right a slow

down is just that you go from 100 to 80

to 60. it doesn’t go to a high it’s not

a rug pull as meat kevin loves to say

housing doesn’t work that way

right it’s listed on the fifth it has

its first price drop three weeks later

when they get the reach price

and then you close at 78. the second is

he’s he knows the dates that the price

drops that’s why you build your

spreadsheet you have a buy box you build

a spreadsheet you add dates when did it

happen when did it come on when did it

come up when did it do this

all of that data is interesting because

when it’s slow down happens

you’re going to find the motivated

seller because one of two things are

happening in this house right in this

house right here one of two things are

going to happen

one the seller needs out some way they

will eventually accept some price and in

this case the right answer was 78 grand

almost 20 below

what he was asking for because he needed

he or she needed out

the other answer could have been

i don’t need to be out that bad you guys

don’t understand my house is special

i’ll wait it’s worth

90 grand and if i don’t get my number i

will take it off the market and sell it

later those are the only two options

we’ve we we saw that we actually watched

a house

um very close to our own

that went on the market first it went on

the market two years ago at 9.95 okay

it just sold for 1.175

same owners

same owners

they chased the market up oh so they

listed it didn’t get it listed higher

they went 9.95 didn’t get it i know what

the problem is the price is too low

let’s do it for 1-1

and then didn’t get that and then they

were offered 9.95 on the 1-1 and they

didn’t take it

and then they were like i know what the

problem is we didn’t raise the price

high enough and so then they raised it

to 1.25 million

and

and then we’re sitting there and i’m

laughing and i was like this just seems

completely counterintuitive to me i

don’t get it but their position was

we don’t need to leave

and when we do leave we’re going to get

our number now you can die on that hill

you could lenny you better be ready to

stay there plenty have died on that hill

but for them it was we know that there’s

a tight enough inventory that will

eventually get what we need and you know

what they got 1.175 million

which is

nuts

it’s not it wasn’t worth the 9.95

it’s still not worth the 9.95 and the

crazy thing is the people who bought it

guess what cash buyer don’t care gonna

be here three months a year that’s what

they bought the house for

they’re not even gonna move into it

full-time it’s a three it’s a three or

four month a year house

and they and they wrote the check and

they’re just like hey that’s great and

i’m just sitting there going

i think we got to sell our house

actually

[Laughter]

so

yeah matt you say this often it’s only

math right yeah okay

but there are there’s there’s

kindergarten grade school high school

college right

when we first look at real estate we

think if i buy cash i don’t have

leverage so i’m i have the safest

position and possibly the best cash on

cash return because i don’t have any

leverage but then we think if i do a

smaller down payment we learn the math i

can gain appreciation on four times what

i put into this because

the bank isn’t getting the appreciation

on the leverage

and then we go

what’s my cash on cash return versus my

cash on equity return so cash on equity

is where biggerpockets just did that

thing of don’t use cash on cash use cash

on equity so they’re trying to explain

that there’s another another level above

that

um that you basically just referenced

and most investors do i look at my

market i know what’s good i’ll buy the

great deals and then that person just

bought a negative cash flow terrible

deal i never would have done so our

brain says that’s a bad deal

north colorado dawn uh in my live stream

the other day basically kind of said

something similar i can’t believe people

are paying this price

the next level of math

is when we recycle capital there are

people who don’t look at the cash on

cash return of the amount of capital

they’re investing they’re looking at the

cash on cash return of that original

investment

if they buy a hundred thousand dollar

house for twenty thousand down

eventually it gets paid off they take

that out and they they take the and the

house is appreciated to two or three

hundred thousand they sell it they ten

thirty one that two or three hundred

thousand into the next property they’re

looking at with a twenty thousand dollar

investment i’m getting a cash on cash

return of six hundred percent that’s

right because the numbers have scaled

they can buy a bad deal and there are

people who do they look at the math that

way

so when we see it

we always talk about the crystal ball of

knowing what’s going to happen in the

future with real estate we don’t have a

crystal ball to see what’s in the mind

of the other buyers and the other

sellers and what their position is so as

an investor when we see somebody else

that took a deal we never would have

taken

there are factors we don’t see

and until that goes away

we’re not really going to see the big

housing slowdown people expect it it

gets harder and harder to find a place

so we talk about people that want to

have their starter home and sell it to

their their next home

but when there’s limited inventory and

they need to because of family size

growth or they need to move the parents

in or whatever the change is

we’ll start to see deals happen more and

more where it looks like that person’s

losing a ton of money

we would lose money if we did the down

payment we would need to buy it

but if they’re recycling capital

and they’re looking at the math that way

i think we’ll see that happen more and

more yeah

i mean that that that house sold in

2013

for 5.85

and it just sold for one one seven

one one seven five a double yeah

so that person who had it has all of

that capital that just came in to put

somewhere else and could

buy what looks like a bad deal because

they’re basing on whatever it took to

buy the five something when they got it

instead of what they’re actually getting

when they sell i’m not saying that’s

smart or the right way to go i’m saying

some people do that

well and it just also shows you too it’s

like these people that bought this house

are out of market

yeah of course right they’re at a market

they don’t they’re not sitting there

going man

that’s crazy for that area

only all of us silly locals are right so

and we saw that a lot like when we put

our house before this one on the market

um that we moved that we sold that i’d

redone we had 13 showings the first

weekend this was two years ago before

covid we had

all these showings and the crazy thing

about it was is that with those 13

showings 12 out of the 13 were people

that were out of state

and so it’s just again what’s really

amazing to me is i think it’s amazing

that people that are even looking to

make the most expensive purchase that

they’re ever going to make in their

lives

don’t do enough research in the market

that they’re buying to really understand

is this historically a oh my word number

that

maybe i’ll never touch it again because

1175 i mean hopefully they’re

comfortable there

because i mean it was on for 1.25 for a

year

yeah and didn’t never sell so clearly

they never got to the one one seven five

yeah

so again what this video really is for

me folks is the housing slowdown is

coming you’re only going to see it if

you’re doing the work it takes daily

discipline write down the dates things

happen

the real estate market does not rug pull

you it takes days weeks and months for

you to see

so track what’s happening track when

things change when they come off and

they go and again you will be able to

get deals and the best thing about this

when you do the work

is you will find the motivated seller

this person clearly got motivated

they clearly want it out

because if they didn’t they just would

have took it off the market

that would they only had two options by

being on the market from february or

october 5th

until sometime in february would close

march 2nd

you learned something you just learned

so pay attention daily discipline look

at your buy box don’t get distracted do

the work talk to more people the housing

slowdown is where you’re going to get

your great deals but it takes work

don’t be lazy

dion how can people find you

right here on youtube dion talk

financial freedom live streams are

tuesday afternoons 4 p.m that lasts as

long as the questions do that’s so

awesome and matt lumberjack lander on

youtube sunday mornings 11 30 a.m

eastern time

for the live stream and lumberjack

landlord on instagram

very cool thanks guys thanks ciao

Leave a comment

Your email address will not be published.