First time home buyer strategies against investors..?

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kjvmartin
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First time home buyer strategies against investors..?

Post by kjvmartin »

A friend bought a basic starter house for $240,000 three years ago. The house is now listed for $480,000 and has received multiple cash offers over asking from investors. We are firmly in the midwest, not a HCOL area. Per our Realtor, who is also a friend, it's basically a cash only economy right now in our area.

Is anyone else dealing with this? I'd need about $350,000 to pay cash for a very basic/inadequate house within 45 minutes of where I need to be. I have $70,000. I make $90k and have no debt but considerable medical expenses. $350k.....This would take me around 10-15 years to save while I'd need be neglecting retirement accounts and forgoing vacations. We've attempted to buy around 20 homes so far with the same result. We are financially hindered by 2/3 of our children diagnosed with ASD, one severe. Even if we had better circumstances to meet our earning potential, which may open up some as the kids grow, it would take us around 7-8 years to likely save enough to pay cash for a house.

So, is this what we're doing now? Are we re-writing the countless online financial guides that say Step 1 pay off debt, step 2 save up to 20%, step 3 get a house? New reality: Step 1 pay off debt, step 2 don't do anything else but save for 5-15 years, step 3 buy a house? I just want to host a BBQ for my kids birthday in our yard. That's the dream.

For any Trekkies, I feel like I'm fighting the Borg. :shock: People are assimilating all the houses indiscriminately for their investment portfolio. I try to compete, resistance is futile. Thoughts?
rich126
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Re: First time home buyer strategies against investors..?

Post by rich126 »

Hang in there. This isn't the new "normal". While things are far from pre-covid housing, things are slowing down a bit in a few areas. One agent told me back east it has gone from 100 mph to 85 mph. Still speeding but not as crazy. I've seen homes in Arizona lingering longer on the market and with more price declines. I'd venture, if someone gets an offer via a mortgage, they would take that before lowering the price :)

At some point things will calm down. And yeah, the vast majority of people cannot afford to pay cash for a home (although at this site, you might not believe that!)
Broken Man 1999
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Re: First time home buyer strategies against investors..?

Post by Broken Man 1999 »

kjvmartin wrote: Mon Jul 19, 2021 5:51 pm A friend bought a basic starter house for $240,000 three years ago. The house is now listed for $480,000 and has received multiple cash offers over asking from investors. We are firmly in the midwest, not a HCOL area. Per our Realtor, who is also a friend, it's basically a cash only economy right now in our area.

Is anyone else dealing with this? I'd need about $350,000 to pay cash for a very basic/inadequate house within 45 minutes of where I need to be. I have $70,000. I make $90k and have no debt but considerable medical expenses. $350k.....This would take me around 10-15 years to save while I'd need be neglecting retirement accounts and forgoing vacations. We've attempted to buy around 20 homes so far with the same result. We are financially hindered by 2/3 of our children diagnosed with ASD, one severe. Even if we had better circumstances to meet our earning potential, which may open up some as the kids grow, it would take us around 7-8 years to likely save enough to pay cash for a house.

So, is this what we're doing now? Are we re-writing the countless online financial guides that say Step 1 pay off debt, step 2 save up to 20%, step 3 get a house? New reality: Step 1 pay off debt, step 2 don't do anything else but save for 5-15 years, step 3 buy a house? I just want to host a BBQ for my kids birthday in our yard. That's the dream.

For any Trekkies, I feel like I'm fighting the Borg. :shock: People are assimilating all the houses indiscriminately for their investment portfolio. I try to compete, resistance is futile. Thoughts?
Yes, the single family home market has a lot of private equity $$$ and REIT $$$ competing with those individuals seeking to buy first home, or trade up. I'm sure it is disheartening for many. I honestly have no idea how this will play out. Homeownership just might not be in the cards for many people, and that isn't something I think is a good thing. I think home ownership builds a stronger community. I don't know what can be done to change things. The RE Goliaths are flush with cheap funds, and have a real advantage at the moment.

I am thankful we are well housed, as are our daughters and families. Their only real estate activities over the last 3-4 years has been significantly lowering their mortgage payments via refinancing.

I kinda liked Seven of Nine, myself, Borg or not! And Captain Jean-Luc Picard was a hoot in the episodes as a Borg.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
supalong52
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Re: First time home buyer strategies against investors..?

Post by supalong52 »

I wouldn't sweat the investor angle too much. There are many political undertones to that sentiment which don't necessarily reflect reality. A bogeyman if you can call it that. ​I do wonder what the real numbers are in terms of regular homebuyers versus investors, whether corporate or foreign, but I think the fear is greatly exaggerated. It's like people in the 80s worried about Japanese investors.

The only thing you can do to differentiate yourself from an investor is to write a nice note, and try to create a connection with the seller. Not sure that matters much though. I think the frenzy will die down soon. You still hear stories about people buying with 3% down. If you have a solid 20% down, then you are going to be in decent shape.
DiMAn0684
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Re: First time home buyer strategies against investors..?

Post by DiMAn0684 »

supalong52 wrote: Mon Jul 19, 2021 6:34 pm The only thing you can do to differentiate yourself from an investor is to write a nice note, and try to create a connection with the seller.
This has been discouraged by seller's agents for a while, and Oregon banned this practice few days ago: https://www.pdxmonthly.com/home-and-rea ... d-realtors
rage_phish
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Re: First time home buyer strategies against investors..?

Post by rage_phish »

Use one of those companies that makes a cash offer for you?
Hypersion
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Re: First time home buyer strategies against investors..?

Post by Hypersion »

Over bid and then renegationate when it appraises for a lower price.
mikejuss
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Re: First time home buyer strategies against investors..?

Post by mikejuss »

Why do you need to pay all cash? It's a little hard to believe that someone who has $480,000 in cash wants to live in a house that costs only that much. If that's the way the real-estate market is going at moment, I'd wait until 20% down is the accepted norm again.
Hypersion
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Re: First time home buyer strategies against investors..?

Post by Hypersion »

mikejuss wrote: Mon Jul 19, 2021 7:55 pm Why do you need to pay all cash? It's a little hard to believe that someone who has $480,000 in cash wants to live in a house that costs only that much. If that's the way the real-estate market is going at moment, I'd wait until 20% down is the accepted norm again.
You are up against investors who are offering fast all cash offers to the seller.
lazynovice
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Re: First time home buyer strategies against investors..?

Post by lazynovice »

I think the cash offer thing is slowing down around us as well as the waiving of contingencies. Keep saving and wait for it to slow a bit near you.
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TRC
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Re: First time home buyer strategies against investors..?

Post by TRC »

I would sit on the sidelines till the market simmers down. It eventually will.
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kjvmartin
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Re: First time home buyer strategies against investors..?

Post by kjvmartin »

mikejuss wrote: Mon Jul 19, 2021 7:55 pm Why do you need to pay all cash? It's a little hard to believe that someone who has $480,000 in cash wants to live in a house that costs only that much. If that's the way the real-estate market is going at moment, I'd wait until 20% down is the accepted norm again.
I don't think they're being bought mostly by people that want to live in them. That maybe somewhat the case. My friend is able to live/work remote from anywhere, so he is pocketing his equity and moving way out to the country where he will pay cash for a $250,000 house there with $250,000 to spare. Great deal.

The person buying his old house is a company. I don't know if it's an REIT or private. It's a cash market right now, for whatever reason.

https://apple.news/AjPK9MtXFQO-gcyeJvaGXBg is behind a paywall I think, but explains how it's going in a completely different area than mine.

We did write a letter, but we were told that they usually get about 10+ letters and don't even consider or read them when it's a full cash offer over asking on the table.
lazynovice
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Re: First time home buyer strategies against investors..?

Post by lazynovice »

Just Google Real Estate Market Cooling Off and see how many results you get from the last week.

Either way, you don’t have the cash to make an all cash offer so you either have to find a lot of cash, relocate to a less expensive area, or wait to see if it cools down.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
Freetime76
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Re: First time home buyer strategies against investors..?

Post by Freetime76 »

I don’t think it’s an either/or situation like you described. Truly, I’d wait it out.

Set things come in waves, and it will slow down. People will use loans to buy (they are now, though maybe infrequently or not in some areas). Focus on what you can control: save what you can to be in a better situation, look for the outlier property that nobody wants, enjoy what you have. If the prices really are 10X your annual income, I’d not suggest buying that house - move further out or relocate altogether or rent and enjoy knowing exactly what your housing costs in your budget (I.e. calling the landlord for repairs).

Historically, the housing market in most areas sits for a while and then jumps for one reason or another. Although prices are “jumping” now, it won’t continue at this rate. Although inventory is limited now, it will increase at some point - maybe when interest rates go up and people start freaking out that it’s almost 4% :shock:

Right now? It’s not worth the insanity. You’re better off being secure with your cash ready than stressed - although a good BBQ does reduce stress :wink: Wait 90 days, 6 months maybe not even a year. Next season may be (much) tamer. It may not be that long - many markets are slowing.
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Nate79
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Re: First time home buyer strategies against investors..?

Post by Nate79 »

Sounds like you are going to be a renter for a while. Pile up cash and maybe the market will cool back to normal in a few years where you will be able to make an offer and have 20% down at least.
brianH
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Re: First time home buyer strategies against investors..?

Post by brianH »

supalong52 wrote: Mon Jul 19, 2021 6:34 pm I wouldn't sweat the investor angle too much. There are many political undertones to that sentiment which don't necessarily reflect reality. A bogeyman if you can call it that. ​I do wonder what the real numbers are in terms of regular homebuyers versus investors, whether corporate or foreign, but I think the fear is greatly exaggerated.
Yes. It generates clicks to frame it as "those evil institutional investors", but that's not a major factor.

To answer the question posed: offer more money. Investors (institutional or otherwise) cannot pay as much for a home as someone that plans to live in it, because they have to build in large profit margins.
bberris
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Re: First time home buyer strategies against investors..?

Post by bberris »

Hypersion wrote: Mon Jul 19, 2021 7:48 pm Over bid and then renegationate when it appraises for a lower price.
I think the point of the cash offer is that it does not entail a financing contingency. Some of them don't even have an inspection. So it is next to a dead certainty that the sale will close.
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jfn111
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Re: First time home buyer strategies against investors..?

Post by jfn111 »

Hypersion wrote: Mon Jul 19, 2021 7:48 pm Over bid and then renegationate when it appraises for a lower price.
I hate when people do that. :annoyed
daleddm
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Re: First time home buyer strategies against investors..?

Post by daleddm »

Gotta at least try to look thru the situation longer term ... and recognize the hype. Todays WSJ has a list of 50 of the hottest housing boom markets, and there's not three places on there I'd want to live (having been to virtually all of them). A lot of rust belt and sad places that might well be on there due to investor buy-ups or some other artifact. So you moved to Billings MT to hide from the virus. Or Waco, Yuma, Akron, etc. Now what.
tim1999
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Re: First time home buyer strategies against investors..?

Post by tim1999 »

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kjvmartin
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Re: First time home buyer strategies against investors..?

Post by kjvmartin »

daleddm wrote: Wed Jul 21, 2021 8:48 am Gotta at least try to look thru the situation longer term ... and recognize the hype. Todays WSJ has a list of 50 of the hottest housing boom markets, and there's not three places on there I'd want to live (having been to virtually all of them). A lot of rust belt and sad places that might well be on there due to investor buy-ups or some other artifact. So you moved to Billings MT to hide from the virus. Or Waco, Yuma, Akron, etc. Now what.
Not anyone can just move, but many of the markets you are listing are quite tough as well

https://www.wsj.com/articles/montana-bo ... 1626773400
Topic Author
kjvmartin
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Re: First time home buyer strategies against investors..?

Post by kjvmartin »

bberris wrote: Wed Jul 21, 2021 7:00 am
Hypersion wrote: Mon Jul 19, 2021 7:48 pm Over bid and then renegationate when it appraises for a lower price.
I think the point of the cash offer is that it does not entail a financing contingency. Some of them don't even have an inspection. So it is next to a dead certainty that the sale will close.
Yes indeed. Inspections are not welcome in bidding wars. Those who are buying with cash are typically better at looking at the houses during the showing and performing their own cursory inspections. They may have contractors on staff.
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