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 May 9, 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.
Hello, 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. I’m recording this again from my home, so please bear with me in terms of any noises or anything that’s distracting, I apologize. You can reach us at templarcashforhouses.com or you can call us at
973-240-8593. Again, that’s 973-240-8593. We can answer any questions you have, or you can e-mail us from our website. And we can hopefully address any topics you want answered on the air. It depends on how much time I have, but I’m more than happy to do that for 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 and gap funding. We work with individuals that want to invest with us in single-family houses, as well as apartment buildings. We do not speculate and we’re very protective of our money as well as our investors’ money.
I’m not a real estate agent, but I have individuals on staff that are agents that could sell unremarkable house through the traditional Multiple Listing Service. This show will go over everything there is about real estate and those things that impact real estate. We will talk about our rehabs, some of our investments, what went right and what went wrong, how we’re working around those challenges. We will talk to you about the economy, interest rates and anything else that impacts real estate.
Real estate is one of your biggest investments, so it’s important that you know as much as possible about it. Remember, throughout the show, this is only my opinion. You need to do the research for anything and just continue to do balanced research, I always talk about that. I will provide you my opinion. It’s only my opinion. I always tell everyone make sure you do your own research. Look at things from a balanced perspective. When you make a decision on anything always balance it out; the pros and cons of everything. That’s the way we do business all the time. We understand what the issue is, what the impact is, the pros and cons associated with it.
When you’re researching things, again, you’ve got to get different points of view; some that are very pro for something as well as those that are a con against it to try to understand it yourself and then try to make as educated decision as possible. When you see these articles, again, there’s an understanding from the article that the author has a slant usually for something or against something, so they’re going to provide information that’s going to lean in one direction over another. Good articles will try to balance it as best as possible. A lot of times you can’t always get those types of articles, unfortunately.
I had a discussion with a broker I know. A really good broker that is in the Monmouth area. And we were talking about just understanding stuff. When you do research, you’ve got to look at the author and what their slant is on a particular article and understand where they’re coming from, because you need to balance it out. You need to get the pros and cons and you need to do a lot of research. There’s a lot of misinformation out there. There’s a lot of half information out there. Case in point, which I’ll go over later as well, but there’s interest rates, everybody’s saying, well it’s great that the interest rates have gone down and so on and so forth. Well, that’s right, they have gone down.
The problem is, is that the bank’s underwriting requirements and standards and requirements are higher now. So, it’s more difficult to get a mortgage, even though the interest rates are lower. So, you got to look at it from a balanced perspective. You can’t just have an article that says it’s all great that interest rates are going to be lower. It’s the cause and effect and what is associated with that effect. It’s just not a simple, simple statement all the time.
I’d like to say hello to two of my listeners, Barbara and Paulette, hey guys, how you doing? And I also want to talk about private discussions that we’re having with individuals that have been calling us. Again, if you’re worried about saving your home and you don’t know what to do, please give us a call. We’re going to give you advice in terms of maybe certain things you could do to save your home. Your house, your home is so important. That’s where your family is. That’s where people are grounded. And I hate to see people lose their house. Even though I buy houses for cash and a lot of time it’s under a distressed situation, I just hate seeing it.
A lot of times when we do buy distressed house from maybe a distress owner, we’ll say, there is a relief once it’s over that the burden is over. But with that being said, I hate to see people lose their house or say, I just can’t take it anymore, it’s just it’s very tough. And if you think you’re going to lose your house or you’re having some challenges, let’s talk. Hopefully I could give you a things to maybe mitigate this in terms of losing it, or give you a fresh set of eyes or maybe some confidence. I’m going to give you a few ideas hopefully, and you might know all those things, but sometimes when someone else says it it’s a lot better. So that’s the first thing.
There are other things in terms of, in the event that someone does need to sell their house quick for cash please give us a call. We’d be more than happy to work with you. And last thing is, if you’re interested in investing passively, we have certain trainings just overviews of what investing in real estate passively is. It might help you if you’re interested in investing passively. Remember passively, is it that you’re not deciding on the day to day running of the asset that is purchased, whether it’s an apartment building or a single family home, a you’re not actively working on it. You’re, you’re receiving money for it on a weekly or really monthly basis or quarterly basis or yearly basis or at the end when the asset is being sold. So, it’s one of those scenarios.
Today I’d like to go over a few things. I spoke last week about insurance policies that would help apartment owners in the event the renter doesn’t pay. I want to bring up one additional point on that, how we’re looking at houses today through COVID. I want to go over a few things in terms of what we encountered this week. Some predictions in the market coming forward, and some mortgages lending, and some of those tighter standards I spoke about. The first thing is the insurance policy. As I stated last week, there’s certain insurance policies out there it’s approximately $25 per unit in the event that an individual doesn’t pay for whatever reason. I said this all last week, but there was one additional thing that is just a caveat. If you get a policy like this, or any policy read the fine print. Even as boring as it is, and it might be tough to read, and you might have to read it in two or three or four sittings, please read the policy.
Right now, certain restaurants they’re not making any money, they’re closed down. A number of them are going to the insurance company and saying, well, we’re kind of quasi out of business for now. We’re not bringing in any money and we want to get money for it as a result of the policy that says, if we lose a certain amount of business, we’ll get paid. And there’s policies out there for loss of income policies for businesses. Well, certain insurance companies are saying, well, it doesn’t take into effect like a pandemic. Now obviously the restaurant companies are fighting that, but you got to really read the fine print.
Sometimes you don’t even know what the future is. Who would have thought about looking at a policy and saying, oh yeah, I guess I got a figure in a pandemic. When we get policies for our houses, we get them for damage to the house, so on and so forth. There are different, additional riders that are put on top of the insurance. Some of them are for storms. So, we will get paid if there’s damage from a storm. But there are certain riders that say, if it’s a named storm, like a hurricane, we would not get paid unless we additionally purchase that additional coverage.
That’s something that, again, you got to understand all the nuances of insurance and the policy and what it truly covers and what it doesn’t cover. Now, obviously, if you have a good agent, they should be able to guide you through a lot of it. But as I’ve said before, do your research. So, go online and do the research and look for different things about things that were not covered that you thought were covered. You see a lot of stories out there and you should be able to research it and find out certain things to hopefully mitigate anything that was missed by the insurance agent.
But again, like with this pandemic, no one’s really looked into that so that could be considered possibly an act of God. They might term it that way, the insurance company, so it wouldn’t cover it. Now I imagine there will be certain policies and coverages for this going forward, and maybe some of it’s going to be very, very expensive. So, it’s going to be interesting on the insurance side how they’re going to figure this in.
The next thing is how we’re handling, looking at houses during this pandemic here. So again, we’ll do a lot over the phone and we will do video walkthroughs. And if we see whatever we see, we’ll give you a price the house. And then if you liked the price, we could send the contract over to your attorney and attorneys we’ll go back and forth sometimes never. And they’ll just say, okay, or they might change a few things. There’ll be a signing of the contracts. And then once that’s done, you set up a closing date.
Most of the time we don’t have to go in the house. We might have to go in the house. Maybe once. When we do that, we would have our masks on, or someone would have their masks on as well as gloves, we would ask the homeowners to step outside. There’s no issue with bumping into each other, getting too close. Now on the flip side, if you don’t have a smart phone or anything else like that, where you could take pictures, send them to us. Well, then obviously we do have to go onsite. I’m working with someone right now where we’re going to probably sell their house through the Multiple Listing Service, and she doesn’t have a smartphone. So, we’re going to have to go in there, take pictures, do a video, and then sell it that way.
Then obviously if someone’s very interested, they’ll, there’ll be an arrangement for a time schedule and they’ll come and take a look at it again, wearing masks as well as gloves, and the homeowner would step outside while the prospective buyer walked around with the agent. We do have certain things in place like a lot of companies, terms of that to ensure the safety of both our staff and you as well, the seller. So, I’d like to close out this segment and I’ll be right back with another segment shortly. Thank you very much.
Joseph J. Zoppi:
Hello. Welcome back to the Templar Real Estate Talk Show. My name is Joseph J. Zoppi, Managing Partner of Templar Real Estate Enterprises. I’d like to go over a few of the things that we encountered this week. I’m always surprised every week on some new thing that comes up. We have a number of inspections going on throughout the state for some of our rehabs. I had brought up one, if I’m not mistaken, last week, in terms of a challenge I’m having with one of the plumbers and I’m in the process of replacing that plumber. It’s delayed the house numerous weeks, numerous weeks.
Then I find out that his license was suspended because basically he didn’t renew his license and then it was reactivated, but it’s still going through the process. The Consumer Affairs is not really open right now, so it’s a slow process. I’ve decided to move on and use one of my other plumbers that I use. Then I find out this week, to make matters worse, to some extent, is that this township is not doing anymore inspections until the COVID pandemic dies down, or there’s not a state of emergency anymore. They’re doing inspections for houses owned by individuals, but not houses owned by companies. Which is just crazy. We’re not a big company and even if we were, all companies have to pay their employees.
As a result of it you delay inspections costs us more money, or a big company, and it hurts everyone involved. There is certain things though from exemption perspective, says that they will do it. And so, we’re kind of lucky. With this house, we had decided in the past that we were going to rent it out. I have a signed contract right now for someone to rent the house once we finish rehabbing it. I also have someone under contract, tentative contract to purchase the house, so there are a couple of ways that I will get rid of this house. As a result of it, I could demonstrate to the township that I have someone that wants to rent it or someone that wants to buy it and they’ll give me an exemption and they will do the inspection. But for other companies then they’re stuck just holding the bag. They have interest rate payments that they have to pay, they have property taxes, so it’s just, it’s just a big mess. Again, I don’t know some of the thought that’s put into this or lack of thought, and it’s just, well, it’s a company and they must have a lot of money. That’s not necessarily the case.
I read an article that up to 50% of the malls could be closing by the end of the year. So, if you think about it, if that is the case, or maybe it’s a high percentage, maybe not 50%, we’ll say for argument’s sake, those malls have stores in it. Those stores have businesses and those businesses obviously, maybe cannot make it. So just because you’re a business, doesn’t mean it’s always a hundred-million-dollar business. It could be a small business of one person, a two-person, 10 people, whatever the case may be. When these politicians make these decisions they just make it in this vacuum that, oh, it’s a company and they must have lots of money.
Now for us we have a lot of reserves in place because we’re conservative to some extent, we’re aggressive in other ways, but we always make sure we have lots of cash on hand to weather any storm, whatever it may be. Right now, we have more than enough money and I’ve told my contractors and staff members that I’ll pay you for the next year, even if we had no new business. And that’s just through thoughtful working on the business and ensuring that we’re not outlandish about what we pay for certain things and we’re just splurging and throw money around. That’s us. But there’s a lot of companies that don’t have the money and they’re getting hurt by these policies. It’s just really a shame. I don’t know what else to say about it, it’s just really a shame.
Another thing that occurred this week, we have this one apartment building where one of the tenants keeps taking packages. We had it on camera, we had some issues with one of the cameras we couldn’t get some clear video of it, so we had to change a few things with that. But on the flip side what we’re going to probably be doing is they have these storage bins that have locks on it and if you get a delivery from UPS, FedEx, any of the carriers, they could put the package in the box.
There’s a special lock that they could use to unlock it and you give them the code when you order something online. Or you go on to their site and you could modify the order, no matter if it’s coming from Amazon or whoever, and they’ll be able to unlock the box and put package in there. It’s good for apartments, but it’s also good for single family houses if you’re concerned about your package. Some of them are small security boxes and some are a little bigger. Esthetically, some of them aren’t bad looking relatively speaking. It’s something I’d recommend. We’re looking into it right now and we’re probably going to put one at that unit that housing unit there just to mitigate some of these issues while we try to talk to the police and try to resolve this.
The tenant laws within Jersey are a little more forgiving on the tenant side than on the landlord side. And that goes into one of the other things I like to talk about. We do criminal background checks when we bring anyone we’re going to rent it out any of the apartment buildings, any of the apartments. Depending on different parts of the country, they have certain things where you can’t do criminal background checks, which is really crazy. California is one of them. California is not really known to be landlord friendly and they have a number of new laws in place. Now, some of the laws that they currently have are statewide. They have rent control or rent caps on all their apartment buildings out there and rooms out there. And also, in terms of evictions, it’s very, very tough to evict the bad tenant.
In San Francisco, they also outlawed these criminal background checks, as well as the Oakland, it’s called The Fair Chance housing law. It’s designed to prevent homelessness, but having a criminal come into your house, into your apartment and living next to one, how safe are you going to feel? And that’s the problem. It’s scary. With that being said, there’s no recourse for the most part and if you do do a background check, you get punished with fines and it’s pretty bad. They said that you could run a criminal background check if the person was a registered sex offender. So what happens if he’s not a registered sex offender? But if you do a background check and you realize he is. Just because not everyone registers as a sexual offender. So, that is a major issue.
Now there are other towns or cities that have this Fair Chance Law as well Detroit, Chicago, Minneapolis are some of the other ones. But there are certain nuances associated with it. For example, first murder, arson robbery, criminal sexual conduct, or kidnapping are acceptable if the crimes happen more than 10 years prior to the application. Basically, you can accept them or have to accept them as a result of that. That’s kind of scary, even 10 years ago. It’s a long time and it’s not a long time. What happens if you’ve been in jail for 10 years? Does that mean that after that you come out and you read about these stories that there was a murderer, he came out, they let them out early and then he killed again. So, it’s just a very, very scary and it’s just it’s a shame to say the least.
The other things I’d like to talk about is predictions for next year and this year. So right now, buyers are very motivated. The buyers that are out there looking for houses, they’re very motivated. The reason is, is that it might be because of a life event. They have a new job, so they need to buy a house. They sold their house, there’s a number of situations. Maybe there’s a first-time home buyer because they just got married. So, there’s those cases that are always going to be out there and as a result, there’s not a lot of inventory currently for houses. Because of that, prices are staying very strong on that. And a lot of people expect it to stay that way for a while.
Now, a number of other houses are not coming on the market because someone’s living in there right now and they just don’t want to put it on the market so they’re not selling it. But vacant houses are getting scooped up very quickly. Prices are saying very strong. There are even some that are in there bidding wars, so that’s a good thing. On the flip side, next year I think we’re going to have a pull back of the prices. I think things are going to settle in, in terms of additional foreclosures and loss of jobs, things like that. So, I think there’s going to be an uptick, both in foreclosures, as well as a price decreases.
My strong recommendation is if you’re going to sell, it’s better to sell now than later, because you don’t know what it’s going to be like in six months. And that’s something a lot of my investor friends and brokers are talking about. We know what it’s like now, but we don’t know in the future. And I could just about guarantee the prices are not going to continue to go up riding into the end of the year. If you want to sell your house either for cash or put it on the Multiple Listing Service, do it as soon as possible. I would just move as lightning speed on that. I would not dilly dally on any of that.
The other thing I’d like to talk about is a loan mods. There are a lot of individuals that have loan modifications right now. And I expect, as I said before about the foreclosures, and I think that’s going to be impacted by a few things. One is people that have lost their job. And the second one is based on loan mods. So some of these loan mods people are just making it with the loan modifications. And loan modifications is basically they worked it out with the bank where a lot of their back fees and everything that was owed is put on the back of the loan, which extends the loan out maybe another five years, 10 years and instead of owing $200,000, it’s now $220,000. We could have a double whammy if prices decrease and someone that has a loan mod can’t make the payments. And as a result of it, they might owe more than what the house is worth.
That’s something that’s going to really, I think, impact the industry as well as a record number of probably unemployment. So next year could be a really rough year. And maybe going into the end of this year, as well as next year could be really tough. I think we’re going to have some real challenges with that. The other thing is, as I said before, mortgages, banks are tightening their standards so it’s going to be more difficult to qualify for a loan. The other thing is that HELOCs which our Home Equity Lines of Credit, any new applications out there have been closed down for both JP Morgan Chase, as well as Wells Fargo. So, if you want to unlock some of the equity in your house, can’t do that. They said, they’re going to open it up once things settled down, but right now, no way.
The other thing has to do with a hard money. Hard money is used by investors. We don’t really use hard money for the most part, we use private investors’ money and we have lines of credit. But a lot of investors use hard money and hard money is high interest rates and multiple points, so you’re talking normally like 10% interest, two points. Now the underwriting requirements have increased and they’re stricter, so now the interest rate has gotten bumped up, maybe from 10 to 12%, maybe still two points, but then you have to have a year’s worth of interest already prepaid. So not only the points, but prepaid interest as well. So, it’s going to make it even tougher on home investors in terms of investing in rehabs, things like that.
So that’s all I have today. I’ll have enough time. Thank you very much. Please stay safe and God bless. Thanks.
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