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 21, 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, welcome to the Templar Real Estate Talk Show, my name is Joseph J. Zoppi, real estate investor, consumer advocate, author, and managing partner of Templar Real Estate Enterprises. You can reach us at templarcashforhouses.com or you call us at 973-240-8593 and we could answer any questions you may have, or email us from our website. If you want any questions answered on air, we’ll try our best to do it, especially in these crazy times, I’ve had a lot of calls from people and answered a lot of questions, but if you can’t get in touch with us, you could leave us a message via our messaging on our website.
My company is a real estate investment firm and 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 and gap funding. We work with individuals that want to invest with us in single-family and apartment buildings too. We do not speculate and we’re very protective of our money and our investors’ money, and this is so true nowadays with everything going on, none of our investors have lost any money from us. They’ve all made money and they continue to make money based on sound financial decisions that we’ve made with our investments. I am not a real estate agent. I have individuals on staff that are agents that will sell your house through the traditional Multiple Listing Service, but we’re not a broker.
This show will go through everything that is about real estate, those things that impact real estate. We’ll talk about our rehab, some of our investments, what we went through that were successful and starting things that we did learn through those mistakes that we’ve made with our rehabs or whatever the case may be. We will discuss trends in the real estate market, especially now, the way the market is, things are going to change a lot in the next year or two with the real estate market, so we’re actively looking in tracking where the market is going, but we’re fairly confident it’s not going to be cataclysmic but there’s going to be some real pain that’s going to occur in the market. Real estate is your biggest investment or one of your biggest investments, so it’s important that you know as much as possible about it.
I’ll provide my opinion, it’s only my opinion. I ask everyone to do research in everything that they do, whether it’s with a CPA, an attorney, any business transaction, you need to research it and look at all the different ways and possibilities. Knowledge is really power, and that’s the only way you’re going to be successful in whatever task that you’re doing.
We’ve been having a lot of private discussions with potential investors. We are very surprised at how many people have called us looking to get out of the market and invest in real estate and where we think it’s going. I’m open to any discussions that anyone wants in terms of this. We are putting things on hold obviously as a result of the coronavirus, but we are putting things out for when things kind of return to normal, and I think it’s going to be a long time and I think a lot of people believe that it could be upwards of six months before things really start to improve, unfortunately, but hopefully, I’m wrong. Hopefully, it’s only a couple of months, and we will look forward to the changes that we’ll have to do.
One of the things that I’m going to cover today is mortgage forbearance, what that is, and the other thing I’m going to talk about is the market cycles. Markets, the stock market goes in different phases in terms of people’s fear and greed, and as the market goes up, greed increases and as the market goes down, obviously, anxiety increases, so there’s different phases in a market and I’ll go over those.
One of the things that’s important through all the things going on right now is to really understand your finances and understand where you are with your expenses. I think that’s one of the biggest things that is important, is to figure that out. You need to really take strong stock of where your expenses are, which ones you could cut out, which ones you could eliminate completely, especially discretionary spending like going out, things like that, once things kind of return to normal. We are going to get hit with some huge financial bills, and obviously, it looks like President Trump and the Democrats are all working together which is great in terms of putting certain programs in place, but some of those longer-term problems might take a lot to put in place. They are talking about obviously sending out some checks in the next few weeks for all the different families which is really great, it’s unbelievable that they’re doing that but that’s only going to be a temporary Band-Aid in terms of a bigger problem that’s really brewing, so it’s very important that you start really looking at your expenses, listing them out, and understanding which ones could be cut out, and also, in terms of where you are with your assets, right now, if you’re having a problem paying a mortgage, it’s going to be even a lot more challenging in the future and there is going to be – and they are holding off foreclosures now and who knows what they’re going to do in the future? But they probably will have foreclosures again in the future, and there were certain things that the last economic downturn, they put in place like TARP to help with saving your home. Unfortunately, with TARP, it didn’t go as well as it should have. There were a lot of stories, and I know firsthand of banks that didn’t really play by the rules, and what a surprise, and had one person I knew that wanted a loan modification and he filled out the forms and he sends it in four different times, and four different times, they supposedly lost the forms, and the other thing is that he had a lot of equity in his house, so I just can’t believe that they lost it four times. Sometimes, organizations aren’t always well-run, but every time you send in a check, they receive it, but every time they had received the forms for the loan mod, they supposedly lost it, so just beware that things aren’t always going to go that smoothly no matter what programs the government puts in place or tries to enforce with an organization, and that’s very important.
So again, let’s circle back, you need to look at the different expenses you have, see what could be cut out, what could be eliminated, what could be reduced. Times are good, so in good times, people always bring on additional expenses. It always happens, it’s just natural, and we were riding a strong wave. One of the things that really pushed the economy is the acquisition or the purchase of different things, whatever they may be, and the consumer spending was high and that pushed the economy up, but now, because of the problems, that’s going to be muted to a great extent. One of the things that obviously we all know is that the entertainment industry, the hospitality industry is going to be impacted to a great degree, it just is. No one is going to go back to restaurants for a long time – they will but it’s going to be very, very slow, and unfortunately, with restaurants especially, their margins are so tight and they have a lot of expenses, and that’s why you have such a high failure rate with restaurants. No matter how good they are, the expenses between the overhead as well as the food costs and all those things associated with paying employees takes a huge chunk out of the profitability of a restaurant, so you’re going to see a lot of, unfortunately, restaurant failures. It’s just, it’s going to happen and as a result of that, obviously, those individuals that rely on those paychecks, so they might be looking at other areas to start working. Previously, with the downturn in 2008, 2009, even though it came out quick, business did not stop completely. Right now, business has stopped completely as everyone knows with restaurants doing some takeout or open for limited hours and I sometimes even wonder if the cost to keep the restaurant open for making a few meals is really even worth it sometimes. So it’s going to be really difficult, to say the least.
I think with the markets, we are not going to see the full impact of what’s going to happen for a while, so as I have stated before, I used to be a trader and I had gotten out of the market, but on the last downturn, so I went through two downturns, one in 2000, 2001 and the second one, 2008, and instead of reacting, I was being more proactive, so I used to trade and I could go in and out of a position quickly and really limit my losses, and very good at it, but it is always a grind and you always had to be looking at the numbers, it was just a grind, but it’s going to be tough. The market is going to go down further until everything shakes out. I firmly believe it will go down because nobody knows really what the end result is right now, how much companies are losing, so anybody that really, I think, jumps into the market, I’d be very wary.
I was talking to a friend of mine and he was asking me about it, and I gave my opinion. I said, “Well, eventually, if I was going to market, I would be going into something like an airlines or something like that because they’re going to be so beaten-down,” and I get a text the other day and he says, “Joe, I made $1500, I dumped it into American Airlines.” I was like, “Wow, you were lucky when you jumped in, but you gotta watch it. I wasn’t saying to do it right now, but it’s going to be very difficult,” and really, nobody’s going to really do where the bottom is right now and I’d be very very wary of jumping in right now. I think we have a lot more pain to encounter on the market and where it’s going.
One of the things that you always gotta understand is that you’re not going to time the market and that’s a very difficult thing sometimes for anyone to think of and feel. You always want to be in control and you always want to feel the confidence of okay, I got to that point but one never knows and that’s why I had left the market, is because of that, and I started trading, and then it was just too much of a grind, so I moved everything over to real estate and I’ve been very happy and successful since then, but even with real estate, there’s going to be some impact in terms of the sale of houses, it’s going to be a lot slower, first thing. Second thing is that we will probably see a reduction in the list prices. I think that’s something that’s big. The other thing is that I think there’s a lot of opportunity for investors, whether active or passive in terms of purchasing rentals. I have had an investor friend I was calling up and talking to them the other day, they are from the Lakewood area, so they are Orthodox Jews and the Orthodox community down there has gotten hit hard with the virus and I was just checking in to see how they were doing and he was doing good which I was very happy about that, his family was, and as a result of that, we were talking, he had a couple deals that he lost a few weeks ago, and then he said that they had called back and says, “Well, do you still want to do the deal?” So he probably will do the deal, but it’s going to be at a reduced rate than it was before the reduced price. So there’s opportunities during this time in terms of getting your deals. Obviously, if you’re on the flipside, you’re going to be losing out, but sometimes, cash is king and we’re in a very strong cash position ourselves. We keep a lot of money in reserves for potential downturns or anything that is unscheduled or could occur, and this is one of those things, obviously, I never thought there will be a pandemic but I was waiting for the market to turn, and whenever that would be because I wouldn’t time it and I couldn’t time it, but I knew it was coming towards the top, and I thought we are maybe a couple of years out, a year out, so on and so forth, but unfortunately, that wasn’t the case, but we are very happy of where we are at relatively speaking. Certain properties, we will have to discount but we will still make money. We are getting a lot of calls from individuals that are in precarious situations. We are here to help, we might not be able to act immediately and exclusively based on everything going on, but we will be able to do something with these homeowners, and that’s one of the reasons why we started this organization, is to help individuals in tough situations, especially the elderly. So that’s something that we are very, very proud of and happy about.
So one of the things I want to talk about right now is called mortgage forbearance, and I think that’s a really good topic for the way things are. So as I said before, you have to look into your expenses and understand where you are. Now, mortgage forbearance, or we will say forbearance, means to hold back. That’s to hold back – in this case, the bank agrees to hold back on its legal right to foreclose, so what you would do if you could contact the back and say, “I’m running into some financial issues.” There’s a couple of different things when you’re running to financial issues, you talk to the bank. One is loan mod. Loan mod is basically, they will reorganize the loan or reamortize, basically, and all your fees and all the interest that accrued while you were not paying will be put on the backend, so that will basically extend the loan for a number of years potentially, but it’s also going to increase the amount of the loan, so one of the problems with that is that you don’t know if in the end really, it’s more than what your house is worth, so that’s a problem.
So there’s also what’s called forbearance. Now, forbearance means to hold back. So in the case of your bank, they agreed to hold back on its legal right to foreclose, so there will be like a grace period, and then you could enter it – and you enter into this agreement, this forbearance agreement with the bank, so they will freeze everything for three months to approximately a year. After that year is up, you will either pay a lump sum amount for the amount that is due or your monthly payments will increase by X dollars for a certain period of time until you are caught up, and then it will go back to the mortgage payment that you were paying previously. So that’s really good. The thing is that if you know ahead of time that you’re going to run into this, it’s better that you contact them immediately. What they will do is they will talk to you, you’ll explain the hardship, and that’s very easy right now, and how long you think you will be in this hardship, so usually, it’s based on a temporary amount of time. Like I said, a few months to a year. Problem is, you might not know how long you’re going to be in the situation, especially because of the way it is out there right now. Yeah, you could say it’s going to be a year and that might be a safe bet but most people are not going to know. That’s the challenge right now that a lot of people are going to have. After that, they will send you a packet of information and that packet of information will have questions about the assets you currently own, your expenses as well as your discretionary expenses. They will also prefer if you try to take certain measures ahead of time, like reducing certain expenses that you didn’t need or paying things off, which maybe is a good idea, maybe not because like I said, cash is king right now, so you might not want to be paying off certain things. You just want to keep the money. But certain things that you might be able to cancel, like when you have your cable bill and instead of having the sports channel and 10 other channels and/or packages, you reduce that to some basic cable and basic cable and Internet service, or other things like that. So those are some of the things, we are going to also look at what your pay stubs are, anything you’re getting maybe from the governments, any type of government assistance if that’s the case, and then they will review it and then make a decision. Now, if you are proactive and you have enough money set aside or you have enough coming in to pay those mortgage bills, that’s good in a way because that’s not going to affect your credit, but nowadays, all this has to be balanced out. You might say to yourself, well, I don’t care if it affects my credit, I just need to survive, which is the case. So there is not one specific answer for anyone. It’s really based on looking very closely at where you are financially. That’s very, very important.
If you are worried about your credit report, if you go into a forbearance agreement, for the most part, banks won’t report on it and you could work with them on that. Certain banks will, they’ll say you’re making partial payments or in the process of paying back which is a good thing, so it won’t be a major ding on your credit report, but I think with the credit report, it’s not as important right now because things are so extreme and we all have to worry about where we are going with this. It’s just, we are all experienced in this. It doesn’t matter how rich you are or anything, everyone is experiencing it, and that’s simply scary to say the least. No matter how much money you have, they are still being impacted, so you could be the President of the United States or one of the top leaders and it doesn’t really matter because your money doesn’t matter in this situation. It’s what you got, what is bogus that’s floating around.
Again, coming to an end of my recording here, it’s Friday where I’m recording and unfortunately, I couldn’t go in the studio so I’m recording from my home, so ugly quality, I’m not sure how good the quality is. I’ve asked the radio engineer to hopefully smooth out certain things in terms of echoes, I wasn’t really set up for this, but we did not want to go into the studio and record today or yesterday, so if you’re doing it here at home.
The other thing you have to look at, right now, the market is going up a little bit but do not see the market going up for one, two, three, four days and say it’s over, please do not think that way. It’s very important. Look at where your financial position is and whether you really want to liquidate your positions or not.
Well, I want to thank everyone. Again, you could call me any time or you could contact us at templarcashforhouses. Thank you very much, God bless. Take care.
The preceding program was paid for by Templar Real Estate. The views and opinions expressed are not necessarily those of the staff and management of W! . As always, it is advisable to consult a professional before making a major decision.
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Listen to Us on the Templar Real Estate Show on WMTR 1250AM on Saturday at 10:00 AM