Real Estate Trends During COVID with Marc Graves Perspective
Let's talk about real estate trends during the COVID pandemic. I'm Marc Graves with Courtyard Realty, where my job is to be your guide, also brought to you with the Ygnacio Valley Community and mine. So, during the COVID shut down, most people were quiet and not doing much of anything for the first 60 days. Almost like a racehorse coming out of the gate, it seems that in the last 60-90 days, the real estate market has accelerated beyond most people's forethought. It really jumped out there. Housing prices have gone up as much as 23%. This would mean that very realistically if you had a house last year that was worth a million, this year it's worth $1,230,000. That’s a lot. The medium price homes in the Bay Area are right around the $800,000 mark. This means that most of our area is well into the $1 million range with outlining areas into the 6’s. Sometimes even 5’s.
With all of that said, another very prominent part is that interest rates are lower than they ever, ever been. Guidelines for the type of loans that are available are super lax. They're not quite as lax as they were in 2006, where you had stated income and not verified documentation. You could just basically say what you wanted on the application, and they believed you. You do, more or less, need to verify what you're stating. Even stated incomes on some peripheral lenders are available, but 90% of loans, well above a million dollars, are available. Interest rates in the 2.5% range with no points under the $510,000 range are readily available. Just a lot of different things are out there. One of the most recent trends that I've recognized is the availability of flipping a house. That had died away for a while. It became very difficult to find a home that had enough spread in it that you could purchase it, invest the money to fix it up, and then turn a profit. That margin of profit, and between purchase and selling, shrank quite a bit.
Well, that’s broadening out. It seems that the biggest buying pool that is out and hunting for homes, they're wanting things completely done. More than I've ever seen before. Even to the point of paint, landscaping, things that are very traditionally insignificant. Those are all being looked at as much more significant than ever before. So, to find a home that is in disrepair, purchase it, do the necessary repairs and upgrades, and then sell it and still turn a profit in a few months is again, much more common than I've seen in the last four years, maybe even five. So, this is Marc Graves. In summary, flipping a house, sweat equity is what it was called in the old days, you would buy a home, you would do the things you needed to do to it, and the house would go up in value. That was called your sweat equaling equity in the property. That's readily available. Incredibly flexible lending terms, readily available. All in all, other than the stated incomes, I don't think it's ever been easier to purchase a home for less money. When you have interest rates that are typically an attractive stimulator for the economy, like 6%, 7%, and 7.5%, historically, was a good economic thruster. Now in the 3’s, in the 2’s, it's just incredible. The likes I've never even heard of. So again, properties are readily available, styles of purchase, flipping houses, sweat equity are all readily available.
Actually, the cost to get work done has come down. So, it's kind of ironic in a pandemic, where most things you would see shrinking and getting smaller, the real estate business seems to just be a boom. So, my advice is that if you were thinking about buying something, now is a great time. The interest rates can lock in for 30 years or more. Rents are still going up. It looks like people are leaving heavily populated metropolitans, like San Francisco, and moving out. People are able to work from home, so commuting is not near the hiccup that it used to be for outlining areas to seem attractive. Now, a little bit slower pace, a little bit more space around you, and a lot less money to be spent. It's just a fantastic time to buy a house. So, this has been Marc Graves with Marc Graves's perspective. One of many more podcasts to come. Thanks very much. If you liked anything that you heard here, or if you’d like some one-on-one consultation, (925)-336-6272. (925)-336-MARC on your touchpad. Thanks very much. Bye for now.Real Estate Investments with Marc Graves Perspective
Investments. Vehicles for your money.
I'm Marc Graves with Courtyard Realty, where my job is to be your guide, and this is Marc Graves Perspective podcast. So, what I was just going to talk about a little bit today is a vehicle. That's the word that I'm most comfortable with. Something that you put your money in, that brings you to return, that brings you income and makes your money work for you. You could say investment, there are stocks, there are bonds, there are mutual funds, there are RAW, ERAs, there are REITS, medical REITs. Those are typically buildings that are in a high density of medical facilities and hospitals, and companies buy big buildings, rent them out, property management, and make money from that. The people that invest get a return.
Anyway, that's another popular one, and I like it. One that I have never seen beat yet, is real estate. A rental property is simple, easy peasy. You buy a $500,000 house or a $600,000 house. You rent it for $3,500, $4,000, or $3,000 a month. It's not really as significant. Almost invariably, you don't see the rents ever go down. Historically, anyway. I'm not saying that they can't, but historically, it's very rare. The price of a home goes down because there's some sort of calamity. You have a meltdown. What typically happens is people lose their homes, decide they don't want to buy, they still need to live somewhere, and so rentals go up. So, in a market like 2007 and 2008, when the bottom fell out of the price of a home, a home that was worth a million dollars was soon worth 600. The rent only went up.
In Jimmy Carter's era, interest rates went to 14%, 16%, 17%, 18% interest. So, real secure treasury notes were paying 9%, 10%, 11%. You had a million dollars. Maybe you were making $11,000 a month as a retired person in a retirement community, doing great. Reagan comes in and gets the interest rates all the way down into the 7’s, and all those people who had their money tied up in treasury notes end up with instead of $10,000 or $11,000 worth of income a month, 3 or 4. That’s horrible. Their monthly obligations didn't change, and their income stream shrunk significantly. All those same people who've had a rental, their property values went down. So on paper, they were worthless, but their monthly income stream remains solid. I've helped a lot of people who have lost some of their retirement, or their 401k has gone down dramatically, and we bought real estate, rented it out, and they made all of that money back. I'm thinking of one person in particular. We bought three properties in Antioch.
Some of the most aggressive pricing I've ever seen. Now, they’re worth three times that amount, and nothing but gone up has her rental income derived. I don't suppose I could have said that any more awkwardly, but nevertheless, it's still true. So, it was just a really good thing to pay attention to it. It’s so easy. All the stuff I do is very simplistic and very easy. It's not a real complicated geometric maze. These are just simple, easy, time tested principles. Buy low, sell high. “Get into the pool.” My stepfather used to say, “Just get in the swimming pool. Just get in the water and start swimming. You'll be fine. It’ll just get better and better.” That’s what happens. I haven't talked about leverage, all the depreciation, and all of the different things that just add to that, but what I have tried to speak to is this simple principle that rents tend to stay consistent and, or go up. Very rarely do they go down?
Property values fluctuate much more dramatically. Even though in my opinion, those are real safe bets, too. You just need a little longer time. Typically, there's not much that in 10 years is worth quite a bit more. In California, the statistic is anywhere from 5 to 8% appreciation cumulatively throughout the years.
So, the problem is that if you have to sell in a down market, you can get caught off balance. If you're able to ride the storm out, especially if it's an investment property, the rental income remains consistent. You wait out the 2007, 2008 ERA. By 2011, they were almost exactly where they were. They were definitely on their upswing. By 2015, they were higher than they were. Now in 2020, they’re so much further than they were.
It’s just a strong, strong investment. As I said, it's a vehicle. How do you get from one place to another? You get in a vehicle of some type and get there. In an airplane, a train, or a car. What do you do? You put your money in a vehicle that gets you from one place to another. From stagnant to profitability.
This is Marc Graves, and that's been Marc Graves Perspective on the benefits of using rental properties for income. I can go into a lot of other things at another time, like how your property manage that, keep the costs down, and all of the little objections that maybe some naysayers may have about it. I'll talk about those, but for right now, I think it suffices to say that rental income is a great way to go. All right. Well, thanks again. This has been Marc Graves with Marc Graves Perspective. If you'd like to chat voice to voice, my telephone number is (925)-336-6272. (925)-336-MARC on your touchpad. You can find us on social media, Instagram, Tiktok, Facebook, Youtube, and talk to you soon. Bye for now.
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Marc Graves
Broker
Courtyard Realty
925.336.6272