Every guru in the real estate market looks brilliant when they have only known an upcycle.– Aaron Amuchastegui
How to Pivot Your Post COVID Investment Strategies for Auctions, Foreclosures, Commercial, and more w/ Aaron Amuchastegui
As we look ahead to 2021, I am thrilled to be having some leading real estate experts on the CarrotCast to help us anticipate what’s next. We’ll be talking about monetary policy, micro and macroeconomics, multi-family property shifts, and what investors can expect the market to look like going into 2021-2022.
Today we are talking to Aaron Amuchastegui to discuss foreclosures, the moratorium, and how to shift your post COVID investment strategies to remain successful during a frenzied market.
Read the Full Show Notes Below…
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While the foreclosure moratorium is helping homeowners hold onto their home during the COVID pandemic, it is also forcing investors like Aaron Amuchastegui to shift their entire strategy.
By remaining flexible and adapting to the current market situation, he is able to find deals and opportunities in other places.
Today we will dig into the data and show you exactly how he’s doing it.
Aaron is an investor, entrepreneur, husband, and homeschool dad. Using his killer time management skills, he is able to balance his career, family, and free time. He has flipped thousands of houses and more importantly, he has been through an entire real estate cycle.
His perspective and insights are unmatched when it comes to looking ahead on foreclosures and what the moratorium will mean for the upcoming market shift.
Where We Are Today
There are experts out there who appear brilliant at what they do. And while many of them are, many have only been involved with real estate for the past 4 years. They only know the upcycle. They haven’t seen a down market or had to adapt their strategy to make money even when the market is falling.
Investors like Aaron are in a much better position to offer insight as to where we really are today. At the moment, pisces are inflated and properties don’t stay listed for long. It is a frenzied market, which isn’t sustainable.
Looking To The Past To Anticipate The Future
Back in 2009 when Aaron was deciding where to buy, he dove straight into the data. Today, just like the early 2000s, properties are flying off the shelves. Just like in 2005, new construction homes are being sold before they have been completed.
With unemployment benefits decreasing and the foreclosure moratorium coming to an end within the next few months, the demand is certain to drop, decreasing listing prices across the board.
Aaron believes that unlike 2008, people today have more equity. They aren’t refinancing to buy toys or make ill-advised purchases. Back in the day, people were financing 100% of the purchase price when buying, putting them in the hole almost immediately. Today, interest rates are much lower and people aren’t making the same mistakes as they were when the bubble burst.
What Happens After The Moratorium Is Up?
Because of COVID and the skyrocketing unemployment rates, the federal government has issued a foreclosure moratorium to protect homeowners until the end of the year. Only 25% of properties that should be foreclosed on are actually being put up for sale. These are properties financed with commercial and conventional loans.
In the past, investors had to think fast when potential foreclosure hit the market. They only had 3 or so weeks to get things in order to buy a property before the bank took over. Today, they have several months. This creates a big opportunity for investment buyers as well as an opportunity for homeowners to sell before losing their home to the bank.
Once the moratorium is up, the banks will once again be foreclosing on properties. In markets where we typically see 5,000 foreclosures per month, this number can easily jump to 20,000. This sudden availability of lower priced homes will aid in driving down prices and decreasing demand for the average property.
COVID and The Real Estate Market
There are exciting reports out there showing the insanely high number of buyers out there, however, these reports should be taken with a grain of salt. COVID has allowed many people to work from home, which means they no longer have to pay the high price of living in a city.
Many people are fleeing these large areas and moving to homes outside of the city at a fraction of the price. For example, in Austin, a property will sell for over $1 million on average, but outside of the city, houses are available for as little as $100k. As people flee, homes in these metro areas will become more affordable.
As the owner of hundreds of rental properties, Aaron is taking advantage of this inflated market while he can. If his tenants move out, he is selling his property, confident in knowing he will be able to re-buy it for less money in the next year or two. In the meantime, he is putting those profits away, ready to buy again when the time is right.
COVID has also caused a number of unique foreclosures to hit the market. Commercial properties are being foreclosed on, with banks selling low in any effort to recoup their funds.
Sadly, there are bars, restaurants, medical buildings, office buildings, and even buildings on college campuses being foreclosed on. Many investors are buying these commercial properties from the tenants, then leasing back to them at a much lower price.
Finding Time For It All
Aaron is a big proponent of the 4 Hour Work Week. By prioritizing his day and sticking to a schedule, he is able to balance work, home, and the needs of his family.
He embraces this philosophy so much so that he and his wife have introduced the 5 Hour School Week to homeschool their children.
They teach them through travel and real-world experiences, that go well beyond the 4 walls of a classroom.
Aaron is proof that even in uncertain markets there is an opportunity to be found. As someone who avidly invested in foreclosures, Aaron has had to rethink his investment strategy. Because he is following the data and staying in-tuned to what people need, he is finding opportunities and coming out on top time and time again.
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