What New Investors Should Know About Buying Property in a Recession
Tamar Hermes is a full time real estate investor and educator. After building successful businesses in the retail and entertainment industries, she turned her attention to real estate with a mission to get more women to become investors and continue to build her portfolio. Tamar has been investing for over 20 years with a focus on appreciation with buy and hold single family homes and duplexes in Los Angeles. In the past few years, she has expanded her portfolio to include passive multi family investments across multiple states, private lending, and Airbnb properties. She bought her first duplex when she was 28.
As an educator and advocate for women to become educated and invest in real estate to grow wealth, Tamar focuses her time empowering and educating women across the country through her masterclass, The Real Deal Formula. She also coaches and consults women and couples privately about the opportunities to build their assets through real estate and supports them to connect with reliable partnerships through her Wealth Warrior Woman Alliance.
Tamar always had a knack for saving money, but it took her years to discover there were other ways to earn income besides working a 9 5 job. She now firmly believes financial freedom is possible through real estate and understands the importance of knowing how to allocate and invest your money and protect assets is a critical piece of sustaining financial independence and creating a legacy.
Tamar currently lives in Los Angeles with her husband of 18 years and her two children. They plan to relocate to Austin at the end of 2020. When she isn teaching, reading, or learning more about real estate investing and self development, you can find her on a hiking trail with her rescue terrier Teena, listening to the BiggerPockets Podcast.
She also loves traveling, yoga, hosting dinner parties with friends, supporting her favorite non profits, hanging out with her Gobundance Women Tribe, and binge watching Curb Your Enthusiasm. She currently serves as the co director of the Los Angeles hermes tray replica
Chapter of The Mona Foundation, which has worked for 20 years to alleviate poverty through gender equality and education around the world.
Tamar first book on real estate investing for women will be published this year.
Before Tamar discovered real estate investing, she attended Pitzer College and the American Academy of Rome. She majored in communications and fine arts.
In addition to growing her portfolio in real estate, Tamar became a certified life coach, holds a real estate license in California, and studied finance so that she could master the knowledge she needed to own her financial destiny.
Buying your first investment can feel nerve wracking. Like with anything new, there is a learning curve.
The good news is that during a recession, you can make some of the best deals of your investing career. The bad news is that it is not guaranteed.
Real estate investing always has an element of risk, and it is crucial to look at the basics of investing first and set the stage for the current real estate market.
Buyer Market vs. Seller Market
For the past 10 years, we have experienced what is known as a seller market. A seller market is a market condition characterized by a shortage of goods available for sale, resulting in pricing power for the seller. It occurs when a low supply meets high demand.
During a recession, the market turns into what is called a buyer market. A buyer market refers to a situation that is the exact opposite, in which supply exceeds demand, giving purchasers an advantage over sellers in price negotiations.
Since COVID 19 has come onto the scene, real estate transactions have slowed, but many areas are still seeing lots of sales at stable prices. Most experts would agree that with the world somewhat shut down, it kind of feels like a recession. But the truth is we are not there yet.
Since the market is due for a correction and many parts of the economy have yet to resume a full blown recession seems imminent in the next six months to two years. We will then be in a buyer market, and it will be time to go shopping.
Things to Remember
While buying in a recession creates a unique opportunity, there are some things you should be aware of when purchasing your first investment property to increase your chances of having a positive experience.
Just Being on Sale Doesn Make It a Good Deal
Have you ever gone to the store and picked up a bunch of extra items that you never intended to buy just because they were on sale? Maybe you bought a used car for a considerable discount only to find out the transmission needed to be replaced three months later?
There will be many real estate opportunities for investors now and likely for the next few years but you need to make sure that the deal works by doing your due diligence.
Stick to your plan. Get inspections, crunch your numbers, and stay on track with your strategies. There can be a lot of extra pressure to act quickly in a recession, with many investors on your tail if you can’t make a deal fast. Do not be pressured into a rush decision.
Always, always, always (did I say always?) do your due diligence and inspect. It is easy to get swept up by low pricing and an eager seller, but it can cause you to overlook details. It is only a good deal if all the numbers work and you can execute efficiently.
Did you know you should be making several offers a day? Did you know you can get more than one offer under contract at a time, even if you cannot afford all of them?
When you get a property under contract, it means you have the right to sell that piece of property or buy it for the negotiated amount of time. If you get more than one accepted offer, you have a few days to do your inspections and decide if you want the deal.
You can also wholesale the property by selling the contract to someone else. Let say you get a property under contract for $50,000. The ARV is $100,0000 after $20,000 of repairs. Someone may offer you $55,000 for the rights to that deal. You would make an easy $5,000 for finding the deal, locking it under contract, and then selling it to another buyer.
When you act as the middle person in an agreement this way, you are known as a wholesaler. Depending upon the spread, wholesalers can make anywhere from $5,000 $30,000 or more on a property. Going through a wholesaler to find your deals in a recession could also be a way to pad your savings.
Don’t be in a rush to get a deal done so you can move on because you are afraid all the good deals will get swept up. A recession in real estate usually lasts for one to two years, so you want to make sure you wrap up the initial agreement well. A deal is only successful once it closes and the flip is completeor the renter moves in with a check in hand.
Moving too quickly can make what was once an excellent opportunity go south. It makes more sense to move slower and be detail oriented as a new investor, because a deal is only as good as its execution. There will always be more deals out there.