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, and 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 are 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!
Finding Opportunities Everywhere – Riding The Profit Wave
I wanted to talk to you about my opinions on all the craziness with the Coronavirus and our economy and what my thoughts are as far as how this is going to affect us as investors. I am not an economist and I’m not claiming to be one but I have been in real estate my entire working career. I do have some opinions and thought it would be helpful to share.
I have been getting a lot of calls from very high-level investors and we have had some great conversations during our time of quarantine. Everybody is all over the place with their opinions but the general consensus is people are alarmed. People are worried and want to know what’s your prediction. What do you think is going to happen?
At the end of the day, what people are searching for is some assurance. They are looking for comfort. They are looking for, “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 could possibly come is that we are on borrowed time as far as the recession.
It has been about several years since the bottom or the tail end of our last recession. Our last recession ended in about 2009. Historically, our nation has gone through recessions every about 7 to 10 years since the ‘80s. 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 and that recessions are a part of our life. It’s a part of our economy. They are always going to come. It’s something that is a part of our lives and we need to accept it. 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.
At the end of the day, what people are searching for is some assurance.
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, a hard money lender, and has been an investor forever. I learned a lot from him when I got started. I was very fortunate to get my hands on his education and the newsletters that he put out. He taught me about market cycles and how to work with them to build wealth.
At a time like this, it’s funny. We are at the peak of the market and Bruce would always say, “I always know that a recession or 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 the layman or somebody who real estate isn’t their primary business venture that they do like, “I live in a house. I have bought a house before to live in.” Typically, they get in when real estate is hot. There’s some psychology to that.
House prices are up because real estate is hot. Real estate is such a great investment. I hear things like, “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 in my hometown Orange County, California, the prices are exactly the same as where they were in 2006. Prices will not only 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 other major metro markets in the country.
Let me take you back. Our last recession started in 2007 and it ended in 2009. I’ve got into real estate investing and house flipping was my first venture. I’ve got into it about 2012. Prices from 2009 to 2012, 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 for $0.50 on a dollar all day long. If you wanted to be a house flipper, it wasn’t that hard. You had to raise some money, get some guts, and go to the courthouse steps. You could buy property.
I got started in 2012 and went straight toward the direct to seller marketing. I did not have the guts to do trusty sales because I didn’t understand them, and that’s a whole different world. I wasn’t ready for that. I went to direct to seller marketing and 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. 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 homes.
They felt that it was fair and I was still able to put money into the home. Fix it up, 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 last couple of years, I have not been able to do that in California, where it makes sense. When I started seeing that my flips and the returns were shrinking is when I knew I needed to get out of California and work out of state markets. Also, where I knew that I started getting a feeling, my intuition was kicking in about where we were in this market cycle. Taking you back and understanding cycles. Let’s say that this last cycle was about several years, and it sounds about right because our last recession was gnarly. That was a doozy.
Prices stayed flat from 2009 to 2012. From 2012, they started climbing up steadily, at some years were quite drastic, and then steadily climbing up. In 2019 was when I decided I don’t want to be holding on to anything too long. 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 now, where everybody is locked in their home, and people are losing their jobs. The stock market is plummeting by the day and I’m holding onto a bunch of real estate. In 2019, I’ve got that funny feeling. I thought, “It has been several years. We haven’t had a recession. I feel like we are on borrowed time. Some of the economists that I follow feel the same way.” I had about three homes that I flipped, where I remodeled and put them on the market.
House prices are up because real estate is hot. Real estate is such a great investment.
They sat on the market much longer and did not sell for what I had thought they would. I thought that they would sell for what the comps in the area sold for. They actually sold for less. That was an indication that, “I didn’t even get like what other people got months ago.” That’s telling me that we are on borrowed time. At any minute now, something in the economy could happen that could throw real estate into a downward spiral.
I was an educated investor who understood market cycles and made the decision that I don’t want to hold anything and I want to unload everything I can, so I can profit and get the cash out. I made a decision to sell a very large asset. I 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 decided not to reinvest in real estate for a bit until I saw what was happening, and instead, I have been doing very short projects where I buy it. Sell it to another investor, so I’m not holding onto anything too long.
I’m a prudent investor and understand market cycles very well. This is how I run my business. How can you guys benefit from the situation? Now, it’s scary and you are probably thinking, “Real estate is the next thing to go. If you know 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, “This is the opportunity.” We were imbalanced for a very long time. The market was not balanced in 2019 and 2018. House prices are out of control. They could not keep going up. The average person could not afford a home where I live. We are on borrowed time. It was time that we saw an adjustment.
If you were interested in real estate investing at all, this is the time to educate yourself. 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, “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.”
That’s what I’m doing. For all of our prices, we are anchoring low. We are adjusting our pricing and we are going to see where this market goes and I’m not going to hold on to anything too long. When I do see that prices have hit their bottom, there’s no way to know that but if you follow the stock market and real estate cycles and you understand how they work, you will get an idea.
It will start to feel we have bottomed out. At that point, I still won’t 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 of years, there wasn’t a place for investors. It almost felt like, as an investor, it was hard for me to justify to a homeowner. “You should sell your house at a discount. Why? I don’t know. If you want to sell fast.” They didn’t necessarily have to sell to me. If time was on their side, I agreed like, “You should probably put this thing on the market and get top dollar.”
When you’re a prudent investor, you understand market cycles very well.
I can’t recommend to anybody to not do something that’s not in their best interest. In a recessionary type and bear market, you are going to have more sellers that aren’t going to have time to deal with selling their homes because they have a distress situation or selling homes will be harder instead of houses selling in 5 months, it’s going to take 8 months. That’s a long time to deal with your house being on the market, with showings and all that. You are going to have a lot of people not being able to get their financing.
Overall, I want to portray to you that my opinion is generally optimistic about this time. I’m always naturally an optimistic person. What helps me as an entrepreneur and a business owner is that even when it’s bad, I have that foresight of like, “It’s bad 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 good deals on the market and that’s when I’m going all in. That’s when I’m going to raise money, and buy rentals and apartment buildings.
Not now. I was not having those opinions in 2019. I was like, “Unload, sit back and see what happens. Buy and sell quickly, so I’m not holding on to anything too long.” I’m seeing now that if we do go into a recession, it’s not the worst thing in the world. Short-term, it’s tough but also, remember that everybody is in it. Remember recessions are a fact of life. They are going to happen.
We can’t constantly go up and up. Real estate is not always going to go up. Whenever I hear people say that, it’s ridiculous. It’s a cycle. It’s the circle of life. It’s going to go back down again. What goes up must come down. When it comes down, that’s when you buy. When it goes up and stays up, when you feel like you are at the peak, that’s when you sell.
If you understand real estate cycles, this should not scare you. This is where you sit back and you go, “It’s a fact of life.” If you have investments in the stock market, 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 long-term investments, you could sit back. You don’t need that money for five years. Don’t worry. It will go back. Don’t stress.
I’m trying to share with you that this isn’t doomsday. You still are alive. Your families, are hopefully healthy and doesn’t have Coronavirus. I still have my children. My children are healthy. They are at home and driving me nuts but they are healthy now. My family is healthy. We still have food in the kitchen. Maybe that’s my perspective of like, “It’s not that bad. This is a part of life.” I wanted to share my opinion. I wanted to also point you toward some good resources. I do love Bruce Norris. He still has a blog and podcasting some videos. You should check that out. Some of his stuff is amazing and he follows our industry very closely.
Get educated. Learn how cycles work, especially for the newbies out there that are interested in getting into real estate. Learning how cycles work now in your beginning years of real estate investing will benefit you, then in the next recession, you will have the foresight to know what’s coming. You will make the same decisions I made. You won’t get stuck with the music stopping and you are still dancing.
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 a hit more than other markets, if you are a virtual investor, it won’t be a big deal because you know that you could go to another market. That’s how I am. If one of my markets is getting hit hard, I know that I can close shop, be in another market, and closing deals within 60 days.
If you are interested in real estate investing, this is the time to educate yourself.
That’s why I push virtual investing. I became a virtual investor because I was in that situation. My market did become nearly impossible to find a good deal through this cycle we were in. I closed up and I went to a market where it was less competitive. It was easier to make money and the best decision I made and that’s how I have stayed in business.
If you want to learn more about the virtual stuff that I do, go to www.WholesalingInc.com/virtual. I have a coaching program. If you are interested, submit your information there and we will get in touch with you. Anyway, stay positive. See the opportunity. I hope you have a great peaceful time in your quarantined at home.
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About Lauren Hardy
Lauren Hardy is a Virtual Investing expert and Real Estate influencer who owns multiple companies in the real estate industry including real estate investment, coaching, and software companies. She is also a Wholesaling Inc coach and co-host of the Wholesaling Inc Podcast.
Her experience in the last decade has been focused on real estate investing and creating products and services to serve the real estate investing community. If you are interested in investing in real estate virtually, house flipping, or virtual landlording, Lauren’s your girl.