7/14/2022 - slice of RE life

Not using this as a conclusion to the current market changes - - I feel those changes have yet to truly be absorbed in the system as mortgages originating today - will probably close deals weeks/months from now. Just chiming in to report what I see in my tiny sphere of interest.

Metro Atlanta - my world is 3bed/2bath units under 350k. Could be townhome, or SFH.

The units I bought last summer for around 247 hit an apex of 335k. Sales data being reported in the 2nd half of June show units where asking was $325k-$328k-- final sale price was 335k. Still brought somewhat over asking.

Today - I see stuff that would’ve usually been under contract in 3-5 days…sometimes being sold in 20-22 days. Starting to see drops in asking prices - 5-10k. In my $335k complex - there’s 3 for sale----2 are asking $330k - yay them. ONE unit got listed for 290k - and went pending in a day. Geez - they wanted to sell quick but 40K under the other units? Boo on them. Will be interesting to see if the 330k units sell, or drop in price - - my feeling is $310-315 is around the corner.

Rehabs: I’ve never done a “flip” but I really want to start. I dunno if I’m being too conservative - -but I just think it’s murky to forecast a Retail Value - in 3 or 6 months from now as the rate increases digest - and maaaaaaaaaaybe jobs get softer. That being said…I just got rejected on my 6th offer this summer. Asking was 215k. Not the prettiest place - it was a gentrifying neighborhood of Marietta GA. I offered $220k - 5 over asking and at that I feel the profit margin would’ve been far LESS than the average rehab. Well they went with another offer. We speculate they offered the same money - BUT the agent said they waived any inspection or due diligence. The last offer - - I went 6k over asking and someone beat me by 20k.

Our theory is that if the homes weren’t too bad - sweat equity buyers bought them. In one case it seems a contractor who could do the work himself beat me out.

So, while I don’t want to see my units go down in value - I’m truly hoping to have some buying opportunities in coming months.

FWIW…

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12 days later… things look quieter.

A handful of townhomes - under 330kish - are on market for 31-32 days right now. Unless they get lucky with a buyer soon, if there’s another rate hike, I can’t imagine how prices don’t get cut.

On my personal “what am I worth today” calculations I always penciled in a value for houses at 8% under the going rate at what might have been the apex.

Hopefully that is enough cushion.

Hi eweppl,

“On my personal “what am I worth today” calculations I always penciled in a value for houses at 8% under the going rate at what might have been the apex.”

We have rarely lived in a place we can do this type of valuation. Even with Zillow and other sites that give a price estimate, our addresses just get a “Nothing comparable” or other “I don’t know” answer.

What I did on our last place is take the land price and added the building costs as I paid them, essentially cost basis. I just carried that as the value for our net worth calcs.

When our insurance company sent an appraiser to estimate replacement cost, I used 2/3 of that value for the house.

When we sold that place, the proceeds went into our current build. The amount rises with each draw.

Does that help you?

Gene
All holdings and some statistics on my Fool profile page
http://my.fool.com/profile/gdett2/info.aspx

Thanks for the insight.

The units I have a sort of cookie cutter townhomes - metro bedroom communities so on any given month there will be 1-3 transactions. For instance - last week of June and 1st week of July, 2 identical units to mine sold – I just take those prices, minus 5-8%, and pencil that value in for an idea of where I stand. Mine are end units – I feel that would command a bit more - but I don’t count that, I figure that is more cushion OR a nice gratuity at the end :slight_smile:

Hi eweppl,

That is sort of what I thought. I can’t do that. Here is a couple of link to Google Photo pages I am putting photos on.

General photos of the land and maps:
https://photos.app.goo.gl/3NC9sbPMxjzUZBc76

Construction: From bare grass on October 5, 2021 to current.
https://photos.app.goo.gl/YdH6e5w4rwz5rknG9

Shop Construction
https://photos.app.goo.gl/rpaeujz6VqhrpZ2z7

Gene
All holdings and some statistics on my Fool profile page
http://my.fool.com/profile/gdett2/info.aspx

2 Likes

Wow, thanks for sharing. Truly truly such a different world vis a vis the properties.

Also very much appreciate the detail on your investment holdings, I’ll certainly be looking closer.

NLY…I take it you still feel ok about it?

Hi eweppl,

“NLY…I take it you still feel ok about it?”

Right now it is our 14th largest position, down 20%.

We have owned it a long time, Nov 2000. I sold some and bought some over the years.

When I started selling in late 2020 and 2021 to make cash to build our house, I sold mostly growth stock and left most of our dividend stock alone.

In 2020, NLY was 0.87% in Nov 2020 vs 2.58% now, but I sold some in Dec 2021 when I was preparing to close my traditional IRA (Jan 2022) and I bought shares in Jan 7.36, Feb 7.03 and Apr 6.68 this year.

While it has risk, I am Ok with it because of our circumstances.

Does that help you?

Gene
All holdings and some statistics on my Fool profile page
http://my.fool.com/profile/gdett2/info.aspx

3 Likes

Yes it helps, thanks for the great explanations.

As someone who needs 5-6% average yearly returns - NLY is tempting for me.

Update:

Some of the units that were selling for $320-330… are now still there after 25-30 days.

Either that means there needs to be a lucky run in sales…or some price drops.

Also I see more units on the market…

Sadly, the few rehab ones I nibble at haven’t come down. Go figure.