by John R. Burley
Right now, today, I hear so many people complaining about how they cannot find any good deals. Some of them go out of their way to tell everyone and find more data on how it cannot be done, all the deals are gone. Some of them have been saying this for the last few years (imagine if they had bought those deals a couple of years ago)!
The reality is that we are on an up cycle right now. Prices are higher, demand is higher, availability is lower. That is how it is. However, it does not mean there are not deals out there. There are always great deals out there for the well-trained investor. Reality Check – the deals are there; you just have to know where to find them and understand return vs price. Our students have been buying deals and making great returns, right now, today.
The first thing to do is to understand that it is NOT the price, it is the return. I see so many people stuck in a paradigm, a limited view of the market that they can not see the great deals right in front of them. When we and our students invest (NOW), we understand what less than 2% of investors understand: We look at the return, not the price. We do not focus on the beginning process, prices being higher, rather we focus on the end process, Great Returns. And that is what we are getting right now in 2022!
Yes, we pay more for properties than we did a year or two ago, however, the rents (Income) have literally exploded in the last few years. This along with historically low interest rates mean that there are many, many good deals (even on MLS) that will give us the result, a great return, regardless of the price. I learned decades ago from one of the great Private Equity Managers of history, “It is not the price, it is the return.” Over several decades I have learned that most investors do not truly understand this most fundamental investment principle. Sadly, most people run around complaining about the price and do not even see the returns available.
Second, value is “in the eye of the beholder.” I see so many “local” people who just see the bad: it is too expensive, there are too many people buying, I cannot find a good deal, etc., etc. What they fail to see is that they are limiting themselves greatly. Because while prices seem high to a limited “AZ only” point of view, to other people (especially those moving here in record numbers) our prices are super low, our rents are super low, interest rates are super low, and there is a phenomenal buying opportunity with lots of upside.
Lots of people from AZ are looking to smaller, historically lower priced (thus low appreciation) areas as a cheaper place to invest. Throughout my career I have invested in over a dozen different states, so I am very familiar with this process. And while yes, I could get solid cash flow numbers, there was very little growth. Remember, cheap housing values are in large part cheap because they do not go up!
The fact is, more people from outside of AZ see us as cheap and a great deal (that does go up), than people from AZ who go to the Midwest or the South where it is
cheap and does not go up(much). The key is to stop looking at things from (only) your point of view, but rather to look at them from the people who are moving the markets. That viewpoint is the one that matters. That viewpoint is, “I want to buy or rent AZ Real Estate NOW, compared to where I am. The prices are super cheap and I am willing to pay top price for it.”
MLS still offers value if you know the criteria that will add value, although, many do not meet snuff. The rest we are finding are off market deals, either at a discount or with creative financing – Subject 2, Mirror Wrap, Owner Financing. The great thing is that as we find our deals, we literally have waiting lists of fully qualified residents willing to pay top of market for them!
I look to markets that offer the following: Value Today, Positive Cash Flow, Potential for Growth. And we certainly have that in abundance here in AZ.
The lesson is, there is way more to a market than just the “local opinion.” Lots of factors move markets and one of the biggest ones right now in AZ is the “non-local opinion.” People are moving in at unprecedented numbers from places like CA, OR and WA, with lots of money that want a home now and are willing to pay for it. There are lots of opportunities to sell, owner finance or rent for great returns, you just have to “see” it. And remember, “It’s NOT the Price, It’s the Return!”
At the upcoming AZREIA meetings we will be focusing on how to “see” the value, how to find the deals, and how to get the money to do even more deals. Plus, we will share some recent deals to show you how the numbers stack up today. I look forward to seeing you soon.