Fortunately , like farmers , homebuilders stay on top of their conditions . For now , many have gone to “ building to order ” rather than “ building on speculation ”. The future will dictate what else needs to be done .
Conclusion
13 . – Hedge Funds and other institutional investment vehicles have purchased tens of thousands of houses this market cycle . They have “ crowded out ” traditional homebuyers in many locations , and this has become upsetting to some . When this started , hedge finds targeted yields in the 68 % range . Now that inflation is in the 8.5 % range already and still rising , the yield to the investors is “ walking backward ”. Enough of this , and these funds might start liquidating their houses in substantial quantities . This could strongly impact SFR markets where it occurs . Some signs of this are starting to develop .
# 14 – NNN Lease Properties are commercial properties that are sold to investors who want no involvement and just want a net check every month . Often they have a single tenant , like a Subway restaurant or a U . S . Post Office branch , which is very secure . During a real estate
industry downturn , these properties become more risky . If the tenant vacates , or worse , files bankruptcy , things could become quite complicated . I had a client who owned six restaurant buildings during the 2008 Great Recession that a commercial broker had sold to him . Two stopped paying , and two went vacant . We saved them all , but only because he had cash reserves . That will be important in the days ahead .
# 15 – Homebuilders had ideal conditions until recently as they worked on the “ housing shortage .” Since then : A ) Materials prices went up . B ) Supply chain delays got underway . C ) Mortgage rates began increasing . D ) Fewer buyers qualified , and more became reluctant . Fortunately , like farmers , homebuilders stay on top of their conditions . For now , many have gone to “ building to order ” rather than “ building on speculation ”. The future will dictate what else needs to be done .
Trends give rise to events , and the trend here is the increase in interest rates , probably over the long term . The foregoing discussions are presented to stimulate your anticipation and response to events as they unfold . Good luck , and I hope you enjoy the ride !
MEET BRUCE KELLOGG
Bruce Kellogg has been a Realtor ® and investor in California for 44 years . He purchased about 350 investment properties for himself , mostly with high leverage and taxdeferred exchanges . In the process , he made three fortunes , and experienced three real estate downturns since 1980 . He has transacted about 550 properties for clients , creating fortunes for several . His book , Real Estate Investing Wisdom , is in publication , and he can be reached at Brucekellogg10 @ gmail . com or ( 408 ) 4890131 .
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