Learn about Real Estate by one of the premier Real Estate Investors in New Jersey. Each week Joseph J. Zoppi will be talking about investing in real estate including buying and selling houses and apartments. Understand how the economy, the Fed and world events impact real estate and how to adjust to these dynamics.
Templar Real Estate Radio Show for March 14, 2020
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The following program was paid for by Templar Real Estate. The views and opinions expressed on this program are not necessarily those of the staff and management of WMTR. As always, it is advisable to consult a professional before making a major decision.
It’s time now for the Templar Real Estate Talk Show. Here’s your host for the program, Joseph J. Zoppi.
Joseph J. Zoppi:
Hi, this is Joseph J. Zoppi and welcome to the Templar Real Estate Investment Show. I’m a real estate investor, consumer advocate, author, and managing partner of Templar Real Estate Enterprises. You can reach us at templarcashforhouses.com or you could call us at 973-240-8593 and we could answer any questions you’d like. You can email us as well and we could answer the questions on the show or directly depending on if we get touch with you.
My company is a real estate investment firm. We buy houses for cash, we purchase apartment buildings, we do joint ventures with other real estate investors, we loan money for rehabs and provide transactional or gap funding as well. We work with individuals that want to invest with us in single-family houses up to apartment buildings. We do not speculate. We’re very protective of our money and our investors’ money. I am not a real estate agent. There is another individual that has the same name as mine and he is a real estate agent but I am not. I have individuals on staff that are agents that will sell your house through the traditional Multiple Listing Service, but we are not a brokerage.
This show will go through everything about real estate, those things that impact real estate. We will talk about our rehabs that we have done, some of our investments, what went well, what challenges we had. We will discuss trends in the real estate market, we’ll discuss the economy, and we’ll go over anything that has impact with real estate. Real estate is your biggest investment, so it’s kind of important that you know as much as possible about real estate.
I provide an opinion, it’s all it is, is an opinion. I ask everyone to do their research on everything that you do. If you work with an attorney, make sure you do the research. CPA, double check, triple check. I always say that. Even when you read something on the Internet, understand where it’s coming from and the slant that might have on the article for a particular way, and we’ll talk a little bit more about that shortly, but my biggest thing is to look at the numbers and look very carefully, just not take it at face value.
So I got one phrase. Here we go again, so we’ve all looked at this, we’ve all been through this, the markets are down a lot. This is as of today. My recording is Thursday towards the end of the day, the markets have taken a major hit again. I have been through this numerous times just like a number of you during the dotcom boom as well as 2008, it’s an old story that continues to happen and will continue to happen. It’s that simple, that’s if you are in the market. We as a real estate investment firm, we are really leveraged in multiple different ways through real estate. My private investors have lost zero as a result of this and they are very happy. So I’ve gotten numerous calls this week saying, “Joe, I am so happy I’m invested in real estate with a rate of return that I know is going to happen.” So I have a lot of happy investors right now, so we are very happy about that.
Right now, again, you have these institutions, they are always pushing for you to put money in the market. It doesn’t matter what it is, you have your mutual funds, and how do they make money? By you investing with those mutual funds. You have your brokers, you have your IRAs. Your 401(k)s are always, for the most part, in markets usually. Sometimes, in the bond market but a lot of times, the slant is always in real estate. I had a number of calls this week – it was pretty interesting – so I have an ad that is publicized on the radio that talks about when the market goes down at 30% loss, you will lose 60% of your gains if you have doubled your money, and a number of individuals said, “Joe, you know, I heard this and before even the market was going down, where did you get this 30%? How did you know the market was going to go down 30%?” I didn’t know the market was going down. There’s no way of timing the market, but I knew when there was going to be a problem, we were going to take a major hit. That’s just the way the markets go. I’ve traded for a long time with stocks, derivatives of all types and I’ve traded on both sides of the market: when I thought the market was going up and when the market was going down, so I’d always try whatever, which way to figure that out. Sometimes, I get on the wrong side but a trader trades different than an investor, so once we hit a certain loss, we jump right back, we jump out of it, whereas traditionally, investors for the long-term do not do that. Some do but a lot don’t, and as a result of that, you might’ve taken a 30% hit which I think you will be taking right now. I think we are at 20%, maybe a little bit more, so we are in bear territory and I think there’s going to be additional pain. That pain, I think it’s going to be coming down around 30% loss before it rebounds, maybe a little bit more, we are talking 30%, 40% before the rebound, but with that being said, that money is not coming back this year. Maybe it will come back next year, the year after, but the markets aren’t going to move up all the way in. You’re not going to get all your money back. That, I could guarantee.
There are certain things I cannot guarantee. That’s a guarantee. If we get a 30% hit, we’re not going to do 40% – forget it. Markets do not go up as fast as they come down. So with an X amount of weeks, you might be down 20%, 25%, so that’s just the nature of the market and when it rebounds, sometimes, it will rebound fast but there’s only going to be so much follow through and that’s it, whereas when the markets go down, you start seeing lots of follow-through, and the numbers are very big when there’s losses, just very big, and that’s why as I said in previous weeks, as a trader, we used to like the markets to go down because the numbers were so big, whereas going up, it was incremental, whatever that was. It could be 1%, 2%, 3% so on and so forth, but when it goes down, it goes down fast.
We had an event on April that is closed out. It was for private investors. I’ve exceeded the amount and we are going to have another one in March – excuse me, so the one in April has been closed down, another one in March is closed down, and the one in April is now open, so you will be hearing more about that shortly. That has to do with investing in real estate, partnering with us, getting consistent returns, using your IRA, 401(k), and the equity in your real estate to invest with us in real estate. We had a lot of demand for this, we are also having private discussions, one on ones, so if you’re interested in a one-to-one discussion, please give us a call, we will meet somewhere and we will talk either at your house or some other location, or office or somewhere else, and we could just chat, and there are no hard tactics with us. That’s just not the way we do work and we do business even when we are purchasing houses, we don’t do the strong-arm. There is none of that involved.
When we bring on a private investor, we bring on a person that we are very comfortable with, that we could be their friend. That’s how we do it. We want to feel very comfortable with the person, we want frank conversations, but that’s just the way we do business, it’s not about the money and just bringing on a private investor to bring on a private investor. So because of that, I sleep really well, my investors sleep really well and like I said, we have gotten numerous calls this week, texts, emails saying, “Joe, I’m so happy,” we are really, really pleased with that.
Another one is we are having another lunch and learn, it’s April 17, it’s for active real estate agents and brokers. It’s going to be at 12 noon at the Marriott Courtyard on Route 46 on Parsippany. It’s right near TGI Friday’s. It’s going to be about how to increase your commissions, profit-sharing, how to earn profits from flips that we are doing, and we are looking for exclusively real estate agents that want to hustle and want to grow their business. Again, there are certain things that we look for, we don’t want to just bring on people to bring on people. As I said last week about Uber, originally with Uber, Uber transformed the cabbing industry or limousine industry – we’ll say ridesharing industry. So 10 years ago, you wouldn’t have thought of using someone else’s car or your own car being used and having strangers in your car driving them around. Things have changed and has continued to change, and some of the things that you’re going to be doing in real estate, and you’re partnering with certain companies, is really going to change the way agents to business, and as a result of that, they will be able to make bigger commissions, profit-sharing, things that will really make a positive impact in terms of how much they are making.
So I’m going to go over a few things today, I’m going to go over certain things that we encountered this week. I’m going to continue to go over the markets and as well as some rental trends. So I don’t know if I’m going to be able to get in touch or complete everything here but we will see.
Right now, I have my township pet peeve for this week, so like I said, we deal a lot with townships. There is always usually a pet peeve when it comes to that. We listed a property in West Orange and we needed to get a CO for them because they had a potential buyer. We thought it was a definite buyer, so we went down, it was $100 for the CO and we later found out that before the inspection occurred, the potential buyer decided not to purchase the house, so we spent $100 and we spoke to the inspector. The inspector said, “Well, you got two options. You could use it next time when you got a buyer or you could get your money back. Getting your money back is a little bit of a pain in the neck because the money has to be approved by the town council and this takes weeks and weeks, and weeks,” so we said, well, we are going to sell it and let’s just keep it on account. So five months went by, finally had another buyer, went down to reschedule the CO and they said, basically, “Well, no, you have to pay another $100.” We say, “It was done for the other one,” and they said, “Well, no, that’s just tough luck.” Of course, I don’t take that easily. We just don’t roll over and we are pushing very hard with the township even though they don’t want to give us the money back, so we are going through this with them. We have a couple of options up our sleeves which I’m not going to talk about right now but they said, “Well, it was a pain in the neck, the inspector wasn’t supposed to say that to you.” They gave us a bunch of excuses and they said, “Well, it was also six months and it was only supposed to be for a couple of weeks.” I was like, nobody said anything to us about any of this. Now, all of a sudden, these are the excuses. A lot of the townships just have this cavalier attitude but if they went to a store and spent $100 and the store said, “Well, tough luck, you’re not getting anything for $100,” I don’t think they would be so cavalier about it. That’s unfortunately the way this is sometimes with municipal governments, that it’s just, they really don’t care, and that’s something that I still get crazy on. That’s really a major pet peeve of mine, and we fight a lot of times; we just don’t rollover and stuff. It doesn’t mean we always come out ahead, but I will not give up on certain things and we will push it if we have to.
Another thing that’s happened this week is we had put a house under contract. It was a couple of weeks ago and we agreed to a price and once we do that, we do our title search, so on and so forth. One of the things that came up on the title search was a bunch of liens. Those liens had to do with some medical things, dentists and doctors, and a few other things. So what we do normally is we will negotiate for the seller to drive down those liens because most of the time, people just say, “Okay, I’ll pay the liens out of the proceeds of the house,” so we pushed very hard and we have an allegiance to the seller and we worked very hard to reduce those liens. Certain things, we can’t negotiate, one of them is like a mortgage, so if it’s a primary mortgage, we definitely can’t. If it’s secondary, depending on the situation, we have been able to reduce that number sometimes. The other thing we cannot reduce is town taxes. So if property taxes are due, they are due, as well as water, but anything else, there is a chance we could negotiate down. We negotiated down HOA fees, medical liens, a lot of medical liens, and some other liens as well, but we don’t have to do that. But we want to make sure that we maximize how much our sellers are getting. That’s very important to us.
Another situation with an agent, so an agent was selling a property and this property was colonial, four bedrooms, two-and-a-half baths, nice property. It’s been abandoned and there was no electricity on and there was like, three feet of water in the basement, so it seems like lately, I’ve been getting so many houses with water in them. I’ve never had so many. The agent says, “Put your best offer in,” so we didn’t know everything that’s going on because there’s no electricity. We have no idea what’s going on in the basement. Obviously, with three feet of water, forget about the furnace, forget about the water heater, and I think the electrical panel is fine – we hope – but we are not sure about that as well. So we gave them an offer and we had to take into account a lot of different things, and there were a lot of unknowns associated with it. We did that, the agent told us kind of where we needed to be. We said, “We cannot be at that number,” and we said, “But if it falls through, then we’d be more than happy to give it,” and the number we were originally planning – because originally, they said there was like, five other offers going in. It seemed like two or three of them were higher than ours. He came back to us and said, “Joe, we still want to go with you even though you have a lower number,” and the reason for that is one thing, is because he knows when we sign on the dotted line, he’s going to get the money in the end. We have the money to purchase it, whereas other individuals will put in an offer and they can’t deliver, or they could deliver but it’s not on a timely basis, it might take, instead of a month, it might take two months or three months, so one and so forth, so it’s very important for an agent to be confident that the individuals they are working with can deliver. We had that all the time.
We had an attorney contact us, it was a couple of weeks ago, and he said he had a property. The owner, he was going to foreclosure and he was able to push the foreclosure out. It was in the family for like, 30 years. It was a two-family and it needed work. What he wanted to do, because we do a lot of different creative types of transactions, he said, “Joe, what they want to do is stay in the house, they want to pay rent, like, $500, and they want you to rehab the house. They want you to purchase the house, rehab the house while they are still in it, and then they want to buy it from you.” I looked at it, I said, “We can’t do it that way.” First of all, the $500 was going to cover probably – monthly, it would’ve covered maybe the property tax, maybe. It would be a little short, then we’d obviously have renters insurance and we’d have to have the costs of carrying the property, and then we had to do the reha, and I said, “We can’t do it.” The other thing is with rehabs, we take out insurance for the property. So it would be a combination of renters insurance and in case they get hurt or anything happens and we’d have to do a rehab insurance, so that would be a problem right there because if we had rehab insurance – you can only have one or the other – we have rehab insurance, it’s expensive, which is fine, so we always take it into account when we do our work, but we can’t have anyone living there in the event someone gets hurt. That’s how the policy’s written. I said, “We just couldn’t do it,” and no matter, it was impossible to do.
So I got in touch with him, I just followed up with them the past couple of days, I said, “Yeah, how did it go?” Because the house was going to be taken away and he said, “No, fine, we had like, four offers on it and they were all pretty good offers.” So someone decided to do it. Now, the risk from an investor perspective is a great deal. Now, anybody that wants to do that, I just couldn’t do it. From an insurance perspective, you’d be violating the insurance rules for that policy, as well as if you rehab the house and then they can’t get a loan, then what do you do? Do you kick them out of the house? And then, to evict a person, it could take a year, it could take a while depending on how the deal was formulated. It could take months upon months, upon months, so anybody that wanted to do that, the numbers were not there. So there’s always someone out there to do it but the risk involved and it’s just not prudent.
So I’m going to just go over a couple of quick things with you in terms of the market. There are three different types of markets in terms of bear markets. There is one that is a structural bear market and on average, you’ll see drops of almost 57%. There are cyclical bear markets and you’ll see a drop of 31%, and a structural bear market is created by just imbalances with financial bubbles. Very often, by price shock, inflation, things like that. Cyclical bear markets are typically a function of just the economic cycle. Interest rates go up, recessions, profits fall, things like that. The next one is event-driven, and that refers to things like water, oil, price shock, certain things in emerging markets. Each one affects differently in terms of how it’s going to go down, what caused it. This is obviously looking like an event-driven one, but what is a little concerning about it is it’s not just one thing. There are two things involved. There was the oil in terms of Russia and OPEC, in terms of fighting for regulating the amount of oil that should be produced. As a result of that, everybody is producing more which put a major shock to the system, as well as the coronavirus, so that’s like a double whammy. The problem is that with all that’s going on, this could definitely, definitely drive us into a major recession. You don’t know. I don’t know if it will or it will not, but these two things together are really, really bad.
One of the other things that people are not talking about as much is corporate debt. So over the years, because loans were very cheap, a lot of companies were loading up on debt because they would be purchasing back their stock, so as a result of that, now, the stocks have come down, they have high debt, so there could be other ramifications with this.
The other thing that’s also lurking in the back and shouldn’t affect now but I’ve always talked about, and it’s talked about sometimes but not that much, is loan modifications. So the problem with the loan modifications is that with banks, so you are behind on your mortgage. You might be a year behind, they start hitting – you might be years behind and they start hitting you with all these penalties, and penalties upon penalties upon penalties, so then they say, “Okay, we will restructure the loan so you don’t have to pay as much.” First of all, when they reduce it, it’s not a lot. The second thing is they take what you owe and they put it on the backend, so you owe even more money. That’s a major issue.
So I’m coming to a close to our show right now, thank you very much for everything. If you need to get in touch with us, please contact us at Templar Cash for Houses. Thank you very much. Bye.
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