Posted on: May 11, 2020

While today’s recession has taken most real estate investors by surprise, some people actually saw it coming. Lauren Hardy belongs to the latter.

For those who are not aware, Lauren is Wholesaling Inc’s newest coach. She is also the founder of TMF Real Estate, LLC as well as Hardy Real Estate Investments, LLC.

Lauren also teaches virtual marketing mastery, an advanced online training that helps people know how to select markets to enter, understand the dynamics of said market, and test their potential, among others.

In this episode, Lauren shared her thoughts on the things that’s currently affecting the real estate market. In addition, she also dished out some much-needed guidance on how you can best navigate today’s unpredictable times.

Plenty of practical insights and wise wisdom in today’s episode, so don’t miss it!

Key Takeaways

  • The importance of knowing and accepting real estate and market cycles
  • An indication that the real estate market is going into a downward spiral
  • How people can benefit from the current situation
  • Why now is a good time to educate yourself
  • Why she’s adjusting their pricing and anchoring low
  • Her thoughts on the current situation and its impact on the real estate market
  • What helps her as an entrepreneur and business owner
  • One of the best benefits of going virtual

RESOURCES:

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Episode Transcription

Lauren Hardy:
Hey, what’s up guys? This is Lauren Hardy. Today I wanted to talk to you about my opinions on all the craziness right now with the coronavirus and our economy and what my thoughts are as far as how this is going to affect us as investors. Listen, I am not an economist and I’m not claiming to be one, but I have been in real estate basically my entire working career. So I do have some opinions and I thought it would be helpful to share. I have been getting a lot of calls from very high level investors and we’ve had some really great conversations during our time of quarantine. Everybody’s all over the place with their opinions, but the general consensus is people are alarmed. People are worried. People want to know what’s your prediction. What do you think is going to happen? And I think at the end of the day, really what people are searching for is just some assurance. They’re looking for comfort. They’re looking for, “Hey, what is the bright side out of this? What do you think is going to happen and how can we spin this into a positive?”
My general opinion of what is coming and what could possibly come is I think that we are on borrowed time as far as the recession. It’s been about 10 years since the bottom of, or the end, the tail end of our last recession. Our last recession ended about 2009. So it’s been about 10 years. Historically, California, not just California, excuse me, our nation has gone through recessions every about seven to 10 years since the eighties, so I do feel like we are on borrowed time. But my general outlook on it is I’m not affected. I am perfectly okay with it because I have accepted market cycles. I’ve accepted that recessions are a part of our life. It’s a part of our economy. They are always going to come. It’s just something that is just a part of our lives and we need to accept it and you need to learn how real estate cycles work and you need to learn how to ride the real estate cycle so you can seek the opportunity when it’s there, when it’s put in front of you.
I heard this quote once from Bruce Norris. If any of you guys do not know who Bruce Norris is, he is a legend. He’s based in California. He’s an economist. He’s a hard money lender. He’s been an investor forever, and I learned a lot from him when I got started and I was very fortunate to get my hands on his education and his newsletters that he put out. And he really taught me about market cycles and how to work with them to build wealth. At a time like this, it’s funny, we’re at the peak of the market, and Bruce would always say, “I always know that a recession is near or an adjustment is near when my hairdresser says they want to get into flipping houses.” And it is so true. People who don’t know a lot about real estate, I would say, don’t take this offensive, but maybe the layman or somebody who real estate isn’t their primary business venture that they do. It’s just, “I live in a house. I’ve bought a house before to live in.” Typically, they get in when real estate is hot. So there’s some psychology to that.
The house prices are up because real estate is hot. Real estate is such a great investment. I hear things like, “Well prices will only go up.” Whenever I hear that, I want to barf. That is not true. If you understand real estate cycles, where we are right now in my hometown Orange County, California, the prices are exactly the same as where they were in 2006. So no, prices will not only just keep going up in California. It has been very difficult to find investment properties that make the returns that I want to make. And that’s because real estate is so hot. There is an over saturation of competition in my market and in other major metro markets in the country.
So let me take you back. Our last recession started in 2007 and it ended in 2009. I got into real estate investing … House flipping was my first venture in real estate investing. I got into it 2012, just about 2012. Prices from 2009 to 2012 just stayed pretty flat. There was a ton of distressed inventory. Those were the days where you could go to the courthouse steps and homes were being auctioned off 50 cents on the dollar all day long. If you wanted to be a house flipper, it wasn’t that hard. You just had to raise some money, get some guts, and you had to go to the courthouse steps, you could buy property.
I got started in 2012 and I went straight towards the direct to seller marketing. I did not have the guts to do trustee sales because I didn’t really understand them, and that’s a whole different world. I wasn’t ready for that. I went to direct to seller marketing and I just started with marketing to sellers with direct mail, and it was not that difficult to get a deal honestly. I didn’t have to send out that much direct mail and I would get a bunch of motivated sellers calling me and we could work out a price that would enable them to get out of their home and they felt that it was fair, and I was still able to put money into the home, fix it up, and put it back on the market and make a solid return that was fair given the amount of risk that I took on that project.
In the recent couple of years, I have not been able to do that in California where it makes sense. When I started seeing that my flips, the returns were shrinking and shrinking and shrinking is when I knew I needed to get out of California and work out of state markets. But also where I knew that I started getting a feeling, my intuition was kicking in about where we were in this market cycle. So taking you back in understanding cycles, let’s say that this current, this last cycle was about 10 years. And it sounds about right, because this recession, our last recession was gnarly okay? That was a doozy. So it’s been about 10 years. Prices stayed flat from say 2009 to 2012.
From 2012, they started climbing up steadily. Some years were quite drastic and then steadily climbing up. And in 2019 was when I decided I don’t want to be holding on to anything too long so I stopped remodeling homes. I would buy homes and sell them to other investors. I never wanted to be holding on to anything too long because I didn’t want to be in a situation where the music stops and I’m still dancing. Essentially, I don’t want to be in a situation where we might be right now, where everybody’s locked in their home, people are losing their jobs, the stock market is plummeting by the day and I’m holding onto a bunch of real estate.
So in 2019, I got that funny feeling. I thought, “Okay, well, listen, it’s been 10 years. We haven’t had a recession. I feel like we’re on borrowed time.” Some of the economists that I follow feel the same way. I had about three homes that I flipped, where I actually remodeled them and put them on the market. And they sat on the market much longer and they did not sell for what I had thought they would. And I thought that they would sell for what the comps in the area sold for. They actually sold for less. And that was an indication that, wow, okay. I didn’t even get what other people got six months ago. So that’s telling me that we are on borrowed time and any minute now, something in the economy could happen that could throw real estate into a downward spiral.
So I, as a educated investor who understood market cycles, made the decision that I don’t want to hold anything and I want to unload everything I can right now so I can profit and get the cash out. I made a decision to sell a very large asset, a home that I owned and it was something I bought at the bottom of the market and I sold it at the top. I made that decision and I decided not to reinvest in real estate for a bit until I saw what was happening. And instead, I’ve been doing very short projects where buy it, sell it to another investor so I’m not holding on to anything too long.
I’m a prudent investor and I understand market cycles very well. So this is how I run my business. How can you guys benefit from this situation? Right now, it’s scary and you are probably thinking, “Oh my gosh. Real estate is the next thing to go if this coronavirus puts us into a recession. Real estate is now going to be unattractive,” but that’s the layman who’s going to say that. An educated investor would say, “No. You guys, this is the opportunity.” We were in balance for a very long time. The market was not balanced in 2019, in 2018. House prices are out of control. They could not keep going up okay? The average person could not afford a home where I live. So we’re on borrowed time. It was time that we saw an adjustment.
Now is time to educate yourself. If you are interested in real estate investing at all, this is the time to educate yourself. And when you start seeing that prices are going down, first of all, in this period, I know that I’m anchoring all my offers lower and I’m telling sellers, “Listen, Mr. Seller, now is not the time for me to give you my highest price. Now is the time where I have to be a smart investor. I cannot risk my money and other investors’ money who believe in me and offer you this top price. I have to forecast that your property will lose 10% of its value in three months.” And that’s what I’m doing. All of our prices, we are anchoring low. We are adjusting our pricing and we’re going to see where this market goes and I’m not going to hold on to anything too long.
When I do prices have hit their bottom, there’s really no way to know that. But if you follow the market, the stock market, if you follow real estate cycles and you understand how they work, you will get an idea. It will start to feel like we’ve bottomed out. And at that point, I still will keep my offer prices very low. I won’t be that competitive and I shouldn’t have to because there is going to be more distress on the market. There will be more sellers that want to sell. Now, real estate isn’t as hot. It’s not as popular. They don’t have as many owner occupant buyers knocking on their doors. There is going to be a place for investors again.
In the last couple years, there wasn’t really a place for investors. It almost felt like as an investor, it was hard for me to justify to a homeowner, “Hey, I think you should sell your house at a discount. Well, why? Oh, I don’t know. If you want to sell fast.” They didn’t necessarily have to sell to me. If they had time, if time was on their side, I absolutely agreed like, “Yeah. You should probably put this thing on the market and get top dollar,” because I can’t recommend to anybody to not do something that’s not in their best interest. In a recessionary type market, in a bear market, you’re going to have more sellers that aren’t going to have time to deal with selling their home because they have a distress situation or they just … Selling homes will be harder. Instead of houses selling in five months, it’s going to take eight months. And that’s a long time to deal with your house being on the market and deal with showings and deal with all that. You’re going to have a lot of people not being able to get their financing.
Overall, I think that I want to portray to you guys that my opinion is generally optimistic about this time. I’m always naturally an optimistic person and I think that that’s what helps me as an entrepreneur and a business owner is that even when it’s bad, I have that foresight of it’s bad right now, but it’s going to get really good. We are going to get back to a place where deals will be made. You will find really good deals on the market and that’s when I’m going all in. That’s when I’m going to raise money. That’s when I’m going to buy rentals. That’s when I’m going to buy apartment buildings. Not right now. I was not having those opinions in 2019. 2019, I was like, unload, sit back, see what happens. Buy and sell really quickly so I’m not holding on to anything too long.
I’m seeing right now that, hey, if we do go into a recession, it’s not the worst thing in the world. Short term, it’s tough, but also too, remember that everybody’s in it. Remember recessions are a fact of life. They are going to happen. We can’t constantly go up and up and up. Real estate is not always going to go up. Whenever I hear people say that, it’s ridiculous. We’re not going to keep going up and up and up. It’s a cycle. It’s a circle. It’s like the circle of life. It’s going to go back down again. What goes up must come down. So when it comes down, that’s when you buy. When it goes up and it stays up, when you feel like you’re at the peak, that’s when you sell.
If you understand real estate cycles, this should not scare you. This is where you just sit back and you go, “Okay, it’s a fact of life. It’s going to be …” If you guys have investments right now in the stock market, yeah, it’s a hit. You took a hit. But if you were smart, you have some money in savings. You weren’t planning on living off of those stocks anyway. Maybe those were longterm investments. So you could sit back for … You don’t need that money for five years. Don’t worry. It’ll go back. Don’t stress.
I think I’m just trying to share with you guys that this isn’t really doomsday. You still are alive. Your family is hopefully healthy, hopefully doesn’t have coronavirus. You’re still alive. I still have my children. My children are healthy. They’re at home and they’re driving me nuts, but they’re healthy right now. My family’s healthy. We still have food in the kitchen. Maybe that’s just my perspective of it’s not that bad. This is just a part of life.
So I just, I don’t know. I wanted to share my opinion. I wanted to also point you guys towards some good resources. So I do love Bruce Norris. I think he still has a blog and a podcasting and some videos. So I really think you guys should check that out. Some of his stuff is amazing and follows our industry very closely. But yeah, just get educated. Learn how cycles work, especially for the newbies out there that are interested in getting into real estate. Learning how cycles work right now in your beginning years of real estate investing will absolutely benefit you. So then in the next recession, you will have the foresight to know what’s coming and you will make the same decisions I made. You won’t get stuck with the music stopping and you’re still dancing. So get educated and remember a plugin for my virtual stuff.
One of the benefits to going virtual is that if you live in a market that is getting hit more than say other markets, if you are a virtual investor, it won’t be a big deal because you know that you could just go to another market. And that’s how I am. If one of my markets is getting hit really hard, I know that I can close shop and be in another market and closing deals within 60 days. So that’s why I really push virtual investing. That’s why I became a virtual investor was because I was in that situation. My market did become nearly impossible to find a good deal through this cycle, this last cycle we were in. So I closed up and I went to a market where it was less competitive. It was easier to make money and it was the best decision I made. And that’s how I’ve stayed in business. So if you guys want to learn more about the virtual stuff that I do, go to www.wholesalinginc.com/virtual. I have a coaching program. If you’re interested, submit your information in there and we’ll get in touch with you.
Anyway guys, stay positive. See the opportunity. I hope you guys have a great peaceful time in your quarantine at home.

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