- Sam Primm says waiting to buy an investment property is not a good strategy.
- If you know the numbers and understand what you’re doing, you always have a chance, he said.
- Stick to high-demand properties, avoid expensive renovations, and consider wholesale.
The real estate market navigates shifting waters between waves of demand and supply, and prices reflect this ever-changing trend.
The average selling price of homes sold in the United States hit a record high of $525,000 in the second quarter of 2022, according to the US. Federal Reserve Economic Data. at the same time, mortgage interest rate It also hit a 14-year high. The average 30-year fixed-rate mortgage he hit peaked at 5.41% in July. Freddie Mac Historical Data Shows.
in the meantime, inflation Supply chain issues are also pushing builders out due to rising construction and material costs. Monthly new housing starts plummeted in July, According to the U.S. Census Bureau.
While some investors wait on the sidelines for signs of stabilization, Sam Prim and his business partners have already purchased 53 properties this year, according to final documents seen by insiders. 52 units are single-family homes in St. Louis, Missouri. The 53rd property is an apartment complex with a total of 19 units.
Primm has dabbled in all areas of real estate since 2014. he sells real estate, has bought and resold homes, and also holds many units that have become landlords. He also teaches real estate investing through mentorship programs. faster freedomand hosts a free podcast with his business partners called “Extraordinary Wealth for Ordinary People: Real Estate Investing and Passive Income Tactics.”
In his view, waiting to buy an investment property is not a good strategy. It’s all about timing the market, not trying to time the market, he said. As long as you know your numbers and understand what you’re going for, there’s always an opportunity for his perspective.
In an interview with Insider, he shared five tips for investing in the current real estate market.
top 5 tips
Don’t try to do anything drastic while the market is volatile and changing. Instead, stick to the fundamentals, he said.
one of the things he does shy away from luxury properties The price above $1 million is because fewer people can afford it, and fewer buyers. Sweet Spot is a property that fits the needs and budget of first-time homebuyers, he said. For the St. Louis market, this means single-family homes sell for $200,000 to $400,000 after rehab. He noted that in a market like California, that price point can be quite high.
“You want to be as normal as possible,” Primm said. “You need a rectangular ranch property with three beds and two baths. You can do more or less, but the majority of buyers end up buying those properties.”
His experience has shown that single-level ranches are most in demand. This is because it suits older buyers who don’t want stairs, and couples with young children who don’t want to worry about blocking stairs. He added that he would need a garage like that.
Additionally, he noted that demand for properties with pools has surged since the lockdown.
“Before, it was like, ‘Oh, I have a pool to deal with, that’s a hassle,'” Primm said. People love pools, so sell them on day one. ”
If you plan to keep and rent the property, $300-$500 positive cash flow per monthTo estimate your cash flow, subtract six major ownership costs from your rent. This includes mortgages, home insurance, property taxes, property management, maintenance and vacancies. He noted that the industry standard for calculating the cost of vacancies is about 5% to 10% of rent.
Look at comparable homes in your area to determine what your market’s rents are.
Consider wholesaleThis is when you have to enter into a contractual agreement to buy a property at a certain price, sell that property to another buyer at a higher price, and then enter into a contract.
He said this is a great way to avoid refurbishment where materials are expensive and transportation times are long. Please Confirm. This clause allows the contract to be terminated if a buyer cannot be found.
If you would like to participate in a rehabilitation project, Upgrades are limited to quick fixes It will take less than three months, he pointed out. This means things like painting or replacing floors and countertops. Avoid rehabs that require tearing down walls, redoing plumbing or electrical systems, or properties that need radical modifications. This is because the market can change relatively quickly. If you’re in 10 to 12 months of rehab, the property could be worth less by the time you’re ready to sell, he said.
In addition, inflation is driving up material and consumable costs. Primm estimates that his project materials have increased by 15% overall over the last year. Problems with his supply chain are also causing delays in deliveries. For example, he says that normally a window that would take him two to three weeks now takes him six to eight weeks.
“If you do a $20,000 or $30,000 cosmetic rehab quickly over 30 to 45 days, you’re in and out quickly, minimizing your risk,” Primm said.
He noted that it would be worth bringing in a structural engineer to check the property before it closes. You can also do things like check your basement for cracks.
Paying attention to details like how old your home is can save you time and money. For example, if the house was built in his early 1900s, he said it probably has knobs and tube wiring that need replacing. If built before 1970, may contain asbestos and lead paint. On the other hand, if it’s less than 50 years old, the electrical system is probably all up to date, he added.
Prioritize building strong relationships and open communication Contractors, banks and lenders tighten their strings when the economic environment slows. As the market changes, it becomes more difficult to borrow money. Especially if you have a relationship with a local bank, you are more likely to be notified in advance of any changes. It can even increase your chances of continuing to get loan approvals.
If you’re buying a home for the first time, take an FHA loan, he added. This way you only pay a 3.5% down payment on the property instead of 15% or 20%. This is a great option when interest rates are already high.