Welcome to the last video of the year 2020 by Fernando.
Today, as the title implies, he would like to make a year-end review and predictions for 2021 in the residential market.
It’s been a crazy year in the residential space and the Storage Stud believes that more craziness will take place.
For Fernando, 2020 was an interesting year. A lot of surprises and turmoil happened in the residential business. When Covid-19 hit the US, there’s a huge prediction that it would negatively affect the housing market. They say that prices will drop.
A lot of people also compared this pandemic event to the 2008-2009 recession. For Fernando, there are a lot of factors he considers differently when he compares the two events.
For one, the 2008-2009 crash happened because there were a lot of “bad loans” hitting the street. The lending requirement that was placed at that time was not properly done. Basically, people can get loans with no documents and no proof of income.
This is not the case for 2020. It is actually quite the opposite. The lending system became very strict. Instead of prices going down, the prices actually went up. Fernando thinks that one of the main reasons this happened is because of the shortage of inventory.
A lot of sellers refrained to put their houses or property on the list because they don’t want other people coming into their homes for fear of getting affected by Covid-19.
There are a lot of other issues about what happened in real estate this year that Fernando touches on in this video.
But the most important thing that he wants to share is that he is still looking for deals. He’s reaching out to anyone that thinks that they might be in a tough situation that they need to get out of, without letting the bank dictate their life. If somebody is going through a short sale he and his team are willing to help these people in any way they can.
Fernando O. Angelucci is Founder and President of Titan Wealth Group. He also leads the firm’s finance and acquisitions departments. Fernando Angelucci and Steven Wear founded Titan Wealth Group in 2015, and under his leadership, the firm’s revenue has grown over 100% year over year. Today,
Find out more at
https://www.TheStorageStud.com
https://titanwealthgroup.com/
Listen to our Podcast:
https://thestoragestud.podbean.com/
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Hello, everyone! Welcome to the last video of the year. I thought it would be pretty good for us to do a 2020 in review and then a predictions for 2021. See what's going on. So, it's been a crazy year in the residential space and I think we have some more craziness abound coming for us. So first, let's look back. You know, 2020 was very interesting year. There was a lot of surprises and a lot of turmoil. If you will. In the residential space specifically, when the novel coronavirus, hit the United States, there was this huge prediction from a lot of the big houses that thought this was going to affect the housing market pretty substantially, in a negative way where it would, it was going to cause prices to drop. A lot of people were comparing this with the 2008, 2009 crash.
I think there was a lot of factors that were different than 08, 09. One of the biggest ones was the, one of the major reasons that, 08, 09 crash happened was because of the lending. The lending requirements that were in place at time and how people couldn't get basically no dock loans, no proof of income loans. There's just a lot of bad loans hitting the streets. That was not the case in 2020, it was actually quite the opposite. Lending was very strict. And the biggest issue was, we saw actually the opposite happened where instead of prices really tanking, prices started going up. And one of the main reasons I think that happened was because of the shortage of inventory. You know, when you don't know if someone on the street has coronavirus, it takes a while for symptoms to show, you're not going to want people walking through your home.
So, a lot of listings that potentially would have hit the market, those sellers refrained from listing their properties. In addition, there were many people that were hit financially. So, as opposed to, you know, selling their home and then trading up or selling their home and then trading down and incurring all of those transaction costs, they just decided to stay put, and actually spend money on home improvement as opposed to moving. And we saw a lot of that. I've been hearing it from many of my contractors that they're so busy, they're booked out four or five months, lot more retail level construction, as opposed to investor construction. So, a big uptick on the retail side, which is good for the contractors because they usually make anywhere between 30 to 60% more when they have a retail client, as opposed to investor client that kind of demands the proper pricing.
We know our pricing line item by line item. So, that was very interesting. Another thing that we noticed was, there was kind of this disparity more than ever. We're seeing that there's kind of two Americas here. There are the haves and the have-nots. So, you know, some of the have-nots were those that, had jobs that were affected by the pandemic. They couldn't go to work. They couldn't make a living, you know, all of a sudden, either new homes that they purchased, they couldn't afford or what they were planning on buying a new home and no longer could qualify. We saw a lot of offers falling out because the lender came back and said, this person does not qualify for this loan anymore because of losing their job or what have you. So, that was really interesting.
And it's pretty sad. But then on the opposite side, you have kind of the haves, the people that had recession, or I guess I should say pandemic resistant jobs. Those that can work from a computer, those that, you know, worked in the financial sector and the healthcare sector. These are all the types of people that, you know, they did really well, real estate investors, they did really well during the pandemic and because of that, we saw them going out and looking for housing specifically, the biggest things that I have heard from the street where people looking for more space, because now their kids are at home going to school while they're at home, trying to work in the space they had at the time, just didn't work. So, now they're looking for homes, they have an office, homes that have a dedicated playroom that's away from the office.
With those factors in place, what we started seeing is multiple bidding wars. So, we kind of had a double hit here. First, there was lower inventory. So, with lower supply price naturally goes up. But then on top of that, now you have a lot of these people that are financially capable and are looking to get out of their current situation into a new home. We were seeing properties as soon as something hit the market. It was selling within two weeks. Multiple, almost every property that I put up for sale this year, we had over 10 offers on every property, both on the retail side, as well as on the investor grade style properties that needed rehab. We saw a lot of homeowners that were willing to buy properties that were not in, let's say perfect move in condition. And they were willing to buy it, get into the home and then slowly do the repairs over time.
So, that was very interesting. On the end, on the backside of that. One of the things that I'm concerned about is the number of people that are not able to afford their mortgage are unable to afford their mortgage. Now, on this go round, I think the banks learned some pretty big lessons from 08, 09 and to not come in guns of blazing, cause then they know that they're going to be painted as the bad guy. And then further regulation is going to come down on them. So, this time around the banks have been saying that they're willing to work with people and really to, you know, take the missed payments that they had on the mortgage and attach it to the back of their loan. Now, of course, they're most likely, still going to have to pay interest on what they didn't pay.
They're probably going to have to pay late fees. And then, another thing that a good friend of mine, Eddie Speed was talking about with me, a few weeks back is, you have these modifications of these loans that the banks are claiming they're going to do for the homeowners. But, what they're not saying is the modification process also requires approval. It needs underwriting. And if all of a sudden you no longer qualify for a loan modification because your job has been permanently, you know, permanently deleted, you know, say a restaurant went under that you were working in, or, you know something that was very high touch business, retail for example, those, you know, those people, even though they didn't have, even though the bank said that they're willing to modify their mortgage, now they have no income to show when they go get underwritten by the bank.
And they're not going to qualify for these modifications. I think another thing that the banks learned from the last crash was to kind of stay under the radar. So, I think what's going to happen is these banks are going to slowly start bringing the foreclosures to market, as opposed to having everything hit at the same time, they're willing to hold these assets. But, they don't want to be in the news. So, as opposed to foreclosing on, you know, 8 million people at once, they're gonna trickle it in, you know, a couple of months here, a couple months there, different markets to try to stay below the radar. So, that's going to be very interesting. I personally am sitting on a lot of my cash for the residential side and the small multi-family side. I think there will be deals, to be had for real estate investors.
Just not anytime soon, we're still seeing pricing climb. It's climbing at a slower pace now, than it was, but it's climbing nonetheless, so, the derivative is going negative, but the prices are still going up, but they're just kind of starting to round out a little bit like this. So, I think there's going to be deals to be had for real estate investors that can act quick, can pay cash, help people out of short sale or potential pre-foreclosure situations, help them, you know, avoid these massive hits to their credit. But, I don't think that's going to come around until, you know, late 2021, if not early 2022. And again, it's going to be disproportionately those properties that are, that someone that was affected by the pandemic would have, so, you know, starter homes, homes in areas that are very retail driven.
You know, you may be even a little bit of step up homes. The luxury market we have been seeing has been doing pretty, okay. A lot of these high income earners that weren't affected, they're looking for homes, they're trying to find something bigger, something with additional office space and, and play rooms. We have noticed somewhat of a migration out of inner cities and city centers and more into suburbs and even rural communities. Another thing that has been interesting with the local municipalities is, because of this drop in economic activity, the cities are not collecting as much as they would have on taxes. So, what we're starting to see is property taxes are going up. There's a lot of motions to try to increase sales tax and a lot of these other revenue generation models to kind of help the cities keep functioning.
I personally live in Chicago, Illinois, and we're seeing it. Some of the properties that I own last year, the property taxes went up 30 to 50% in one year. It was ridiculous. And that's kind of the reason why I decided about two years ago to start selling all of my residential and multi-family properties. So, now we're on it. We're going to sit here and focus on transactions only. So, brokerage wholesale, lease option, anything that we can control the property without actually taking the liability on that property or taking title to that property, that's what we're focusing on. And then, only approaching projects that have a large, large margin so that we can be safe in case the market moves on as faster than we expect. So, that's kind of what I see going forward for 2021. I personally am holding cash.
I'm looking for deals. I'm reaching out to anyone that thinks they might be in a tough situation. They need to get out without letting the bank really dictate their life. So, if somebody is going through a short sale or, you know, got to receive the Lis pendens for a pre-foreclosure or foreclosure, we're trying to help these people in any way we can. Either purchase their property or partner with them to renovate the property with them and split the profits, doing lease options or lease backs. Maybe they can't afford the house. So, we'll buy it, we'll rent it back to them and then, you know, potentially sell it to them later on, one that once they become more financially stable and can get a purchase loan to cash us out. These are kind of the strategies we're looking at, right now.
But on the, as far as the real estate investors go, I, in the early into the pandemic, maybe Q1, Q2, I saw a lot of cash buyers and a lot of real estate developers and investors kind of sit back, pull all their chips off the table. You know, we have about 6,100 buyers on our list for residential properties in the Chicago land area. And we started getting less and less responses to our properties. That being said, the ones that had properly planned had a bunch of cash sitting around, they were still making offers and on all of our off-market properties. We were receiving probably 10 to 20 offers on any given property, usually in, you know, much higher than what we put them out to the market for. There's a couple properties that we sold 10, 20, $30,000 above what our asking price was. I personally don't see how these investors can, you know,
Take that small of a margin and feel comfortable, but that's why I'm not the end investor on these ones. I usually just source the deals for those investors. Maybe they have, maybe have really good crews that can keep those margins down or had other ways of cutting costs. So, that was very interesting to notice how, you know, kind of half of our investor base went radio silent, but the other half that didn't all of a sudden they were dropping their margins to be able to get deals just because, they can't find anything. Anything that comes available usually is sold within one to two weeks. So, we had a deal that we sent out two days ago and it was, we got a contract on it within 25 minutes of the email blast going out, sight unseen. They didn't even want to see the property. They just wanted to lock it up because they were having such a hard time getting inventory for their fix and flip and they're buying hold portfolio. So, it's very interesting. We'll see,
What the future has in-store. 2020 was a very interesting year. It was a very good year for us. We focus on processes. We focused on systematizing our business, hiring people to replace the bottlenecks. There's a lot of talent in the market right now. Usually talent that we would have to pay, you know, 30, 40% more for were able to pick up just because, you know, they lost their job. They don't know what to do or where to go, and they just want to put some income on the table. So, a lot of people are now becoming more and more interested in working for, you know, entrepreneurs and working for investors in the real estate game. So, it's been really good for us. I do feel for the people out there that haven't had, you know, as good of an experience, it's really tough.
But, this is one of the reasons why I went into real estate. Why I became a business owner was when I read Rich Dad, Poor Dad when I was 16 years old. One of the few things in that book that stuck out to me was when you tell someone you're gonna become a business owner or a real estate investor, the very first thing they say is, well, that's gotta be super risky. And what Robert Kiyosaki said. And what I echo now is I think being an employee is even more risky because at least as an entrepreneur, I can go make money when I need it. I can hustle. I can put in more hours, I can cut costs. I have the control of whether or not I make money, whether or not I have a job, but when you leave your fate to your boss or a group of bosses, and they may not be as good at planning as you are, you know, that your fate ultimately is in their hands.
For example, the restaurant industry on average, the restaurant industry cross Chicago had 13 days worth of expenses and savings. So, that they would only be able to weather a 13 day hit. We had six months of savings in our business to cover literally all expenses. So, you know, it's one of those things where it's tough to see people go, but it also came down to, you know, did you plan for the worst? Or did you just think things were going to keep going the way they were? So, it was really tough to see that I had a lot of friends that were impacted, but I think, this is going to spur more people to go into entrepreneurship and real estate investment specifically. It's a really great asset class, a good way to make a living and provide for future generations.
So, that's kind of my end of the year predictions for next year and review the previous year. I hope you guys have a Happy Holiday and a safe holiday, and hopefully we'll see you guys on the other side and this will all be a dream. Thanks a lot! Feel free to drop any comments below, any questions or any topics you'd like us to cover. Make sure to subscribe, hit the like button you know, hit the little bell for all the notifications, all that jazz and feel free to reach out. If you have any questions for me specifically, you can drop those in the comments. You can reach out to me on my social media. You can check us out on our websites. So, until next time. Thanks guys.
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