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by | 07, Nov 2022

Buying The Dip: Real Estate Investing

Can you buy the dip when it comes to real estate investing?

For those of you who aren’t familiar, buying the dip simply means getting in while prices are low. The economy is suffering so stock prices are down. You buy the stock at that cheaper price and wait for it to go back up to sell.

Right now a lot of people are positioning themselves for the recession. This is a time for caution… but also opportunity.

The best investors out there will recommend utilizing times of economic uncertainty to invest and get in while things are low and slow. That way, when the economy picks back up again, you stand to make a pretty sizable profit.

Now of course, risks MUST be assessed and mitigated. But here’s the question you might be wondering? Can you buy the dip in real estate?

Find out on this week’s episode of Multifamily Investing Made Simple, In Under 1o Minutes.

Tweetable Quotes:

“In the last five years, there’s really been no incentive for a seller to offer any kind of creative financing solution.” – Anthony Vicino

“That’s the great thing about this asset class is it’s a cash flowing machine, why would you want to sell?” – Dan Krueger

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*Transcript*

Buying the dip

[00:00:00] Anthony: Hey, welcome to the podcast where we talk about real estate. Um, sometimes it’s, that’s manager

take two. It’s real bad. No, they can’t. Hello and welcome to the podcast. This is Multi-Family Investing Made Simple, the podcast where we take the complexity out of real estate investing so that you can take action today. I’m your host, Anthony Fino of Invictus Capital. Joined as always by Dan Weers, the Cookie Monster.

Kruger, I

[00:00:48] Dan: knew you had, I knew you had a middle name because you went to the old intro. Yeah.

[00:00:52] Anthony: That’s how bad I saw your pictures. So if there was ever a reason to follow us on social media, it’s so that you can [00:01:00] get glimpses into Dan’s life, um, and see one his daughter who’s very way cuter than he is. Um, but Dan is pretty damn cute too when he dresses as Cookie monster.

So go, go follow him on Instagram and you can see Yeah,

[00:01:11] Dan: periodically. Uh, Liz chooses the things that I wear like on Halloween. Oh, you did choose

[00:01:17] Anthony: that? I did not. That was not, I, I a hundred percent thought this was a Dan led decision.

[00:01:22] Dan: That should not surprise anybody. . Um, yeah, so occasionally you’ll get to see what happens when Liz gets to pick things like that.

And it’s always more fun than if I would’ve picked, Yeah, I would’ve been like

[00:01:33] Anthony: an accountant. One. One of the things I really enjoy about, uh, Liz’s Instagram, yours is when Coco appears, because one of the things I love most about Coco. How big a child’s head and feet are in relation to the rest of their body.

Oh my God. Her feet are like as big as mine. They’re like bananas. It’s, it’s, it’s hilarious. I’m like, Dang, that kid’s got big feet . Yeah. We, we get, we gotta get that checked out. I don’t think it’s amazing. [00:02:00] Has nothing to do with real estate, but, uh, there you go. So today we’re gonna talk about how to buy the dip during a recession in real estate so that you can get those 100 x returns.

How’s that sound? Sounds amazing how I like the new Emeril Lagosi. Lugosi.

[00:02:16] Dan: Don’t think that bam ba. Just say Emeril. Emeril. He’s kind of

[00:02:19] Anthony: like an Oprah. That is, I know. Bam. Okay, let’s do this. Can you buy the dip? It’s an interesting question. Can you buy the dip during a recession in real estate? Is there such a thing?

How do you, And at the core of it is the heart. The question is, how do you position yourself during a recession in real estate to excel? So let’s start. Can you buy the dip? What’s that mean?

[00:02:40] Dan: Yeah. What’s by the dip me? Right? Theoretically, if there’s some sort of issue in the markets, like in the stock market, for example, Things go down a bunch.

It could potentially be a good time to, to buy if there’s gonna be some sort of, uh, spring up in, in the prices. So I think a lot of people think, yeah, what? Just do that with real estate, right? I mean, we see house prices coming down and then they should be going [00:03:00] back up. But multifamily a little different of an animal, single family houses.

Um, assuming you are good at timing markets, which I don’t think anyone who knows what they’re talking about suggests you try to do, but single family home, I think yeah, you could larger multi-family. Maybe, maybe not. It’s not quite as, uh, black and white of an answer, I don’t think.

[00:03:20] Anthony: Yeah, because one of the things you said before we started recording that I thought was interesting and probably like really worth pointing out here, is that, and when there is a dip in real estate that, like in 2007, 2008, I think that was probably the last real big dip we saw, right?

And yeah, if you go buy that dip like you’re gonna be doing, you’re gonna done pretty good. But the problem is that where we’re at right now, the, I think the market fundamentals are such. though there will be a dip in valuations. I think because debt service coverage ratios have been, uh, sufficient because banks got really burned in the last, the last go around.

So they’re making sure that there’s enough cash flow in these businesses to, to be able to, to last. [00:04:00] I don’t think that there’s gonna be a lot of sellers forced to sell. Yeah. And if they’re not forced to sell, why would they sell in a dip?

[00:04:09] Dan: Right. Exactly. I mean that’s, that’s the great thing about this asset class is it’s a cash flowing.

And so if you’re getting checks every month, and theoretically, you know, if you were to sell, because interest rates are, are, are going up and, and buyers can’t afford to pay as much. Like, why would you opt to sell this year if you could wait a year or two and you know, cash your checks while you wait?

That’s what the majority of owners do in this type of market. So we don’t really see a dip per say. We just see a. Um, a lot less transactions. Yeah. And, um, and that’s good. I think that’s, that’s a benefit. We don’t have the volatile, um, nature that the, the public markets have or even the single family home market because most of the people who are buying and selling single family homes are getting in and out, not because they’re cash in assets, but because they live here.

They want to now live over here, and so they’re gonna, they’re gonna execute on that transaction. But if you own something that just spits out cash flow every month, you.

[00:04:59] Anthony: [00:05:00] And, and this played out like in 2007, 2008, where we saw foreclosure rates on multi-family assets. Like it was, it, it, it moved in a marginal way.

It was like sub 1% still. Yeah. So it’s like crazy low. So I, I don’t think that we’re gonna see in this recession these crazy buying opportunities. However, I do think that there is going to be opportunity during this recession, during this period of time to pick up assets in a very creative way to get good deals.

I think that’s a completely different topic because in the last five years there’s really been no incentive for a seller to offer any kind of creative financing solution, right? Because they didn’t need to. They could put the property up and then like an hour later they’d have 50 bids. Overpriced. Right now with banks, maybe those interest rates being a little bit harder to, to get the loans to work, the numbers don’t really pencil out.

There might be opportunity to go into these assets and get the asset on seller financing. Where maybe you’re coming in with far less than you would [00:06:00] in the eyes of a bank and you’re carrying less risk because the, the seller’s the one that’s holding the bag at the end of the day. So I do think that we will see.

More creative solutions.

[00:06:10] Dan: Maybe I’ve yet to actually be in this business during a time where that was like feasible option. I mean, we’ve always kind of thought like, Oh, that would be a cool thing to, to throw in the mix and see if we can throw a little seller carry back in a deal. And there’s been no incentive for a seller to, to do that.

I mean, You know, for the last several years, bank terms have been great. There’s been no need. Mm-hmm. , um, you know, if you’ve followed Bill Ham at all, he wrote a book called, uh, Creative Cash. Right. Is that That’s Right. All about this. And he, he got started way before us. And you know, way back in the day that was, you know, one of the only ways to get deals done when the bank debt, uh, was drying up.

So it’s

[00:06:43] Anthony: gonna be interesting to see what happens. Yeah. Yeah. It is muscle that we’ve never had to flex, cuz we don’t, we don’t have it. So we’re gonna have to figure out if we can learn it. To get deals done, but I, I think there could be some really interesting situations. Maybe you have a really old seller who’s like, doesn’t need to sell his building, but um, you know, he doesn’t want to work anymore and so maybe you work out some [00:07:00] kind of like master lease option where you come in, you take over the property and you get the cash flow, He gets a bit of it, and you effectively get into an asset for very, very low.

There’s, there’s a lot of ways you can imagine these scenarios playing out, but I do not as assumptions, do loan assumptions, but I do not think that there’s gonna be a dip that you can. Bye. I know people keep saying like, valuations will correct. I’m like, um, maybe they, they will maybe a little bit. We’ll see.

We’ll see what happens. Yeah. I think it’s just

[00:07:25] Dan: gonna get a little quiet for a little, so I’m fine with that.

[00:07:29] Anthony: I was talking to a, a developer today who is big here in the Twin Cities and has, Oh God, they probably have like a thousand units. They’re, they’re small but big in the, in the sense that they only have four people on their team, and he is like, Yeah, I think you just, I think we’re gonna see transactions.

And just nobody’s gonna sell. Cuz why would you, like, if the valuations dip, why would you sell? Mm-hmm. like, doesn’t make any sense. And I

[00:07:52] Dan: got the same feedback from a, a broker who’s a good friend of ours that we’ve known for years. Uh, first time I talked to him probably about a year, and I kind of asked him like, [00:08:00] what’s the volume like, you know, the last couple months.

And he is like, you know, I got some, some good ones locked up there over the last couple months, but for the last like 30, 45, maybe 60 days, just buckets.

[00:08:11] Anthony: So, I mean, we’re not gonna. Nope. Sorry guys. Yeah. I’m no deals here. Yeah, so shoot, that’s how you buy the, during a recession. Um, you don’t , Sorry. Uh, Hopefully, Hopefully.

Yeah. Got you guys. Hopefully this, this podcast brought you a little bit of value. If it did, you know, the best thing that you can do to help us grow and, and keep spreading the word, which we’d really appreciate is just to share this with somebody. Um, share it on social media where, wherever you listen to this, um, just shout it out to the world.

Say, Hey, this, this, this podcast, uh, it’s. You know, Doesn’t have to be glowing. Doesn’t have to be glowing. Is that great? But it’s pretty good. I like to, I like to make mediocre referrals on social media for my friends. I’m like, Hey, this thing over here is not completely terrible. It’s not a total waste of your time.

Yeah. Set the expectations low. So the people coming in like. You know, because listen, [00:09:00] listener, you’re, you’re listening. You know how we are. But like most people, they don’t understand our energy. So it’s weird. Set the bar low. Uh, just tell ’em it’s tight. And uh, that’ll do it for us guys. We appreciate you and we’ll see you in the next episode.

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