Real estate vet offers tips to recession investing

Posted on April 3, 2009 by IC N in Residential
Tags: , , ,

Over the last eight or so years, many investors purchased property using high-leverage loans. However,
as property values have decreased they find themselves owing more than the property will sell for.
Consequently, without staying power, the property quickly becomes a bad investment.

Another difference in this recession versus others is the uncertainty of the future. In the past the majority of investors were very optimistic, but I am not sensing that this time. So as a result, our investment models are changing.

What opportunities does a recession hold for a real estate investor? In today’s market, there are still opportunities available. In our company, we are looking more closely at all of our deals before making an offer and an ultimate purchase. The numbers must be very good due to the uncertainty of where the bottom is.

I believe too that studying and understanding your market is more important than ever. There are a number of projects throughout Middle Tennessee that are sitting due to bad timing. Unfortunately I happen to own one.

What pitfalls does an investor need to avoid in a down market? I have found several pitfalls to avoid in a down market. Pitfall No. 1 — Not doing due diligence. Keep logic in first place, not emotion. Pitfall No. 2 — Avoid leverage. In other words, put yourself in a strong equity position. Pitfall No. 3 — Don’t pay too much to thinking time will take care of you in today’s market. It won’t. And remember, you make your profit when you buy.

You have a lot of real estate investments. What strategies are you employing right now? During this time, our company is employing several strategies especially with our existing properties.

First of all, with the existing labor market, more subs are available. So we are doing quite a bit of updating on our properties. I have found that as a result, we can become more competitive in the rental market.

Retention is another key strategy. I am holding the line on rent increases to help ensure long-term tenants — some of whom have already been with us 20 years or longer.

One final strategy which is crucial regardless of the economy is providing maintenance in a timely manner.

Where are the best investment deals in the Nashville area right now? There are deals everywhere. However, our company is concentrated primarily in the west and east sectors of Nashville. Although for our purchase to resale investments, we will buy anywhere in middle Tennessee.

Define your objective: Are you buying for renovation and resale or are you buying to re-wholesale or are you buying to keep long term.

What residential areas have suffered the greatest drop in value? We are finding the areas that are suffering the greatest drop in value are some of the newer overbuilt subdivisions, especially the higher-end markets.

In addition, there are a number of new unimproved residential developments in and around Nashville that have seen a 50 percent decrease in value.

When is the housing market going to rebound? In our company, we believe that prices in today’s market have actually been reset and we should anticipate a stronger market in 2010 with appreciation rates ranging in the 3 percent range.

Background
Hal Wilson
Age: 65
Position: Associate broker
Company: The Wilson Group
Address: 304 42nd Ave. N
Phone: 615 385-1414
Web site: www.wilsongrouprealestate.com
Years on job: 22
Years in Nashville: 52
Education: Father Ryan High School, University of Tennessee, Nashville, numerous industry related courses.