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 April 25, 2020
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Introduction:
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 Zoppi:
Hello, welcome to The Templar Real Estate Talk Show. My name is Joseph J. Zoppi. I’m a real estate investor, consumer advocate, author, and managing partner of Templar Real Estate Enterprises. I’m recording this, again from my home. I hope the quality of the sound is a lot better or at least a little better than the past couple of weeks. I know it’s just been challenging recording this from home and I’m not in the sound studio and the echoes and everything, I know it’s somewhat distracting. I apologize for that. You could reach us that templarcashforhouses.com or you can call us at 973-240-8593. And you could ask us any kind of questions you’d like you could, also pose some questions to us that I can just discuss over the air.
My company is a real estate investment firm, we buy houses for cash. We buy apartment buildings, we do joint ventures with other real estate investors. We loan money for rehabs and provide transactional or gap funding. We work with individuals that want to partner with us and also, they could learn from us in terms of different ways of investing in real estate passively if they want to go on their own and do so. We’re more than happy to educate individuals and that’s always free of charge and that’s just a benefit that we want to provide to everyone.
We’re not a real estate brokerage, I’m not an agent. There’s another individual that does have the same name as me, but I’m not an agent. I do have agents on staff in the event that you want to sell your house through the traditional Multiple Listing Service. We do not speculate. We’re very protective of our money and our investors’ money. The show we’ll go over everything about real estate and those things that impact real estate. We’ll talk about our rehabs, some of our rehabs that went well and some that didn’t and some of the challenges that we’ve had has we rehab.
It’s very important that you learn as much as possible about real estate real. Real estate is one of your biggest investments, so it’s very important that you do know about it and how it could impact the value of it. I always say, and I’ll reiterate it throughout the broadcast also, is that I’m providing just my opinion, and it’s only my opinion. I ask everyone to do research into anything that they’re making a financial decision about. Whether you’re working with a CPA or an attorney, it’s always good to research it and find out the pros and cons of a particular situation and understand that.
I have always said that you have to watch the author of any article, if you’re looking on the internet and where it’s coming from, what their predisposition is politically so on and so forth, because you might get a certain slant and it might not be really accurate. One of the things I’ve talked about in the past couple of weeks, I’m going to talk about it again right now, is about politics. Even though there’s a real estate show, politics plays a role into everything. What I’m about to say, I’ve been preaching for a while. When we make a decision, we have to have a balanced approach. One of the things I’ve talked about before is that I’ve never been a big fan of our Governor Murphy. But relatively speaking, I think he’s done a good job and same thing with, Governor Cuomo.
I was talking to a good friend of mine and he was listing all the problems with their decisions. He had some valid points, but the issue is, is that you could find fault and everything right now, especially with this pandemic. Things are going so fast and the impact of everything and decisions people make, the politicians, it could be devastating to people and there is no clear-cut decisions. You can make a clear-cut decision, but that doesn’t mean you don’t really know what the impact’s going to be. We were talking about it, myself and my friend, and it’s just not that simple.
The same thing with the President. Everyone’s trying to spin president, he’s not doing a good job.
There are so many things going on and the complexity of the United States and everything with it, from the military, which he still has to figure out and keep an eye on, intelligence, what’s going on with the jobs, where the market is going so far. It’s not an easy job. Kind of what frustrates me also, are the statement it’s made in the media that just aren’t accurate. Way back when I got into a car accident and, it was a head on collision, and I made it through okay and really didn’t get hurt at all. I was home and I was listening to the news and at the time Donald Trump was, was going for president, so he was talking and he was saying–it was the flip remark, because I saw it. He said something about, “Well, maybe the Russians can find Hillary’s mailbox or emails.” I saw his mannerisms and stuff, and it was just a flip remark.
Then I’m hearing on all these different shows that he wanted the Russians to find the emails of Hillary’s. And this was almost on every major station saying that he wanted to do that. And that was not the case, I saw it specifically. Now, this time they’re saying, about that, he said to inject yourself with disinfectant and that was not what he said. He was generally speaking and saying that maybe there’s a means by which we could clean out the body or clean out the cells or something like that. And he said, it was basically up to those individuals that know this stuff, maybe that’s possible to, I guess have light go through you, like I guess, infrared or something like that. And he says, “Well, it’s up to them.”
Now everywhere I see they’re saying, well, you shouldn’t be putting disaffected in your body and things like that and that is just not what he said. I looked at it a couple times, I was like, am I missing something here? And that was not it. So, just understand where the information’s coming from and whether it’s pro this or pro that, or con this or con that, you have to really have a balanced approach to making decisions. Case in point with where the economy’s going, and I’ve brought this up too. Nobody really knows where the economy is really going. They’re guessing where it’s going to go, but they really don’t know.
I had brought up that, you know, there’s three different types of recovery they’re talking about, one is V-shaped, one is U-shaped, and one is L-shaped. They’ve done different polls in terms of how quick the economy’s going to come back and based on a V-shaped recovery, which goes straight down, and then there’ll be a sharp trough, and it’ll move right back up and they’re saying maybe 24% of the individuals interviewed for this poll thought that that was the case. And it would be between six months, the recovery to 12 months. then the U-shaped is more where it goes down and then it plateaus and flattens for considerable amount of time. And then moose moves up and they’re looking at a recovery of 12 to 24 months, I forget the percentages on that. And lastly was more of an L-shaped recovery where it’s gone down and it’s going to stay down for a considerable amount of time, maybe in excess of 24 months.
Nobody really knows, as I said, and I think everybody’s in a wait and see attitude with this, and we don’t know where housing prices are going to go. We’ve had a number of, houses on the market and some have come off, but the prices haven’t changed that much relatively speaking, because we’re all in a wait and see mode. And I think a number of houses aren’t going to come on the market because there’s that fear because the Coronavirus and individuals coming through your house, so I think a lot of people are putting it off. Now for us, we’re thinking that there potentially could be 10, 15% pull back in the next six months. A lot of investors I’ve been talking to feel the same way and being a little more conservative in terms of where we think we’re going to be able to sell those houses and obviously purchase those houses as well. That it is the challenge to really look forward in terms of an environment like this, because things have just really basically turned off and now, we’re going to turn it back on.
The other thing that we have to understand is that, you know, everything’s regional, so obviously in the Northeast got hit the hardest. The recovery and what’s going to happen, it’s going to be considerably different than possibly in the Central United States or Southeast. It’s very regional, so when you read these articles that say things are better or things are worse, you need to understand where they’re coming from and are they pertaining to nationally, are they looking at it really from some of the regions like Arizona, like I said, Southwest, so on and so forth. That’s something that any time you’re looking at articles, you need to understand that. We’re going to have to see, I think the Northeast where we are, and Jersey New York is going to be really hit hard and there’s going to be a pullback.
Hopefully it’s not going to be for too long, but you know, the economy is going to be impacted because of the hospitality and leisure industry, who’s going to be going back to movies, who’s going to be going to restaurants possibly. And, you know, maybe they will. But between that and hotels and conferences, things like that, everything’s going to be virtual for a while. I was talking to another individual because sometimes in these types of situations where people contract and businesses contract other ones push forward and grow faster and push harder, that’s what we’re doing right now. I’m going to close off on this segment and I’m going to continue that very shortly. Thank you very much.
Joseph J. Zoppi:
Hi. Welcome back to the Templar Real Estate Talk Show. My name is Joseph J. Zoppi and just before, last segment, I was talking about growth and contraction and how certain companies will, in tough times, contract and take a step backwards, other ones will push forward. That’s what we’re looking at right now is to grow our company even more. One of the challenges obviously is to look into the future and try to determine how to best navigate through these uncertain times. Right now, I was in discussions with another individual, we’re looking at a joint venture, it’s still early in the discussions, but we’re talking about different things to even grow our business even more, through this joint venture.
One of the things we talked about was where people are going to be and how are they going to work in the next six months or so. I think that’s something that everyone has a question about. I was saying that before about the restaurant industry, the hospitality industry, who’s going to go to restaurants, who’s going to vacations. Again, some of this is going to be regional, like I said before, whereas for us in the Northeast, it’s going to be more extreme. Whereas in the South that might not be as bad and maybe some parts of Central United States as well. But that’s something that I think we all need to think about when we’re taking our next steps in terms of our business, in terms of our lives and where we think things are going to be.
There’s certain things where there’s going to be these challenges with mortgages paying mortgages right now, a lot of the mortgages are still being paid, and those are being paid by the stimulus checks that have been received by individuals. Right now, we also have forbearance, which I’ve talked about. Forbearances where you’re able to delay mortgage payments for a period of time, maybe three months or so. I think things are going to shake out with that, maybe they’re going to extend it even further, so that’s going to be a good thing.
The other thing is, right now the CARES Act which did the different funding for businesses, an additional round was approved, and it was just signed by, the president. That’s proximately $484 billion, which includes like $310 billion for Paycheck Protection Program and that’s to augment your salary. Then there’s $75 billion in relief for hospitals and additional $25 billion to support additional testing. That’s a good thing. I know a number of individuals that have started to receive their loans as well from the SBA, that was worked in with the CARES Act.
Ourselves, we were able to get some initial money like we requested and we’re waiting on her other loans through the SBA. I’m hoping in the next two weeks we’ll hear something ourselves for the different loans we’ve provided. Those loans are at really, really competitive prices, very good prices, so it’s very reasonable, the interest rate to say the least, and we’re going to be putting it into establishing and growing our business even further. I know a lot of individuals are going to do the same thing. Now on the flip side, you have certain companies like restaurants, where they’re going to need it mostly to survive, but they can also use it to grow their business. I think it’s going to be challenging, but they can do it. One of the restaurants I like to go to, it’s a really, really good Italian restaurant, Viaggio’s in Wayne, they’re looking at different things in terms of continuing to boost their clientele by their different email blasts and different programs they have for meals and things like that. And they to try to push it hard just to pay the bills, but I think they will be successful at it.
The next thing I’d like to talk about is mortgages and if you don’t have a job. I was interviewed for a national magazine on mortgages and what happens if you didn’t have a job, would you be able to get a mortgage? And the answer is yes, you can, but it’s going to be even more difficult than it currently is. That’s one thing. One of the things that any bank or any type of company that’s going to loan money is what they require is your ability to pay. And if you could demonstrate that, then that’s good and that’s something that’ll ease their mind and based on their underwriting requirements, you can still get a mortgage.
Now you might say, well, how can that be if I don’t have a job? Well, there’s other ways of having an income, even though you don’t have a job. You could have a large portfolio of stocks, bonds, alimony, child support, annuity payments, pensions, VA benefits, or even royalties. But with that being said, you still need to have good credit and that’s a big thing. If you don’t have good credit, then you’re going to have an issue. The other thing that’s going to help besides having good credit is you could have even a co-signer or co-borrower to help you. Depending on the bank or a loaning company, whether it’s a different type of like a credit union and so on and so forth, for a co-borrower, they might have certain restrictions. Certain restrictions might be the co-borrower has to live with you. Other ones might be, they don’t have to live with you, but you need a larger down payment, it really depends.
Each institution is really different in terms of the way they underwrite it. One of the things with underwriting requirements, so as this pans out the underwriting requirements for all mortgages going to be higher and stricter, because nobody knows where the economy is going. Anytime there’s a concern or there’s unknowns, requirements change and underwriting requirements change because of that. Now for mortgages right now, I think really what the requirement is you have to have like a credit score of like 700 and 20 or 25% down payment, which is considerably high. But they’re being very conservative because they don’t know what’s going to happen and that’s understandable.
That doesn’t mean it’s going to always be that way, but maybe for the next two months, three months, four months, it might be that way. Especially I think going through the summertime frame, there’s going to be a lot of apprehension. And that apprehension is because we went through Q1 quarter one, and now we’re right now in quarter two. So, quarter two nothing’s going on or relatively speaking, a lot of businesses aren’t doing anything. So, Q2 is going to end in June, so in July, they’ll start reporting on Q2. That’s right in the middle of the summer, so I think there’s going to be an understanding of where this economy is going. It depends because we might say, well, May is going to be slow, June is slow, but July starts picking up and if things start picking up, again, mortgage requirements, the underwriting requirements will be eased a little bit dependent on that. And that goes into where everyone is seeing the economy, whether it’s a V-shaped, U-shaped, or L-shaped. So that’s going to change. It might be tougher now, but as the summer progresses and into the fall, it might be a lot less and that’s a good thing.
Now, there’s also some other ways of qualifying for mortgages if you don’t have a job or the restrictions are not as strict. And that has to do with VA loans and also there’s a Freddie Mac Home Possible Loan. The program qualifies a buyer which will have a yearly income that is equal to, or less than the area median income, where the property is located. Median is the middle in terms of where the prices are. It’s not an average, when you average something it’s different than median. Median is if you have 20 houses in an area, the price in the middle, so you’d have 10 above and 10 below, and that price in the middle is the medium price. That’s one approach. The other one, like I said before is a to use a co-borrower and again, that’ll help you get a mortgage.
Now, there’s, there’s a couple other things. When you get a mortgage, a lender looks at your debt and income, and that is very important. That’s your debt to income ratio, or they sometimes call it a DTI. It’s your total monthly recurring debt payments divided by your total monthly gross income. The calculation tells the lender how much you could pay and DTI is calculated as a percentage because it’s a ratio. Lenders favor 50% or less, so as you progress and go lower and lower, your chances of getting a mortgage are a lot better. So again, even if you don’t have a job, if you have an income stream, you could qualify for a loan. Again, on the flip side, the higher the ratio, the less chances or harder chances in terms of getting a loan.
But, if you have money coming in through alimony, child support, things like that, there’s a better chance that you could get a loan. I’m not going to say it’s not going to be tough, it’s going to be very tough, but if you’re still looking to get a mortgage right now, then that’s a possibility, as long as you got a standard income stream coming in that’s the most important thing. While this is going on, the biggest thing to really do is to try to drive down your debt and make sure that, you pay off your bills as best as possible, as quickly as possible. Even if you have the option for delay in them, if you could afford it, please pay it.
The other thing that’s really important right now is any monthly payments you have, try to renegotiate them into lower payments, either with your cell carrier, your internet provider, cable provider, any type of monthly bills that you get. That’s what we did as well. We went to a number of our vendors, and we said that we wanted to negotiate a better deal. Just about every one and gave us a better deal. There’s nothing wrong with asking to get a reduction in terms of the service price for certain things. Think of it this way, it’s better that they reduce the price a little instead of losing you as a customer. The same thing goes with credit card companies in terms of asking for a better interest rate and, even doing some balance transfers, if you could.
I’d like to thank you very much for everything. Please stay safe. God bless and I’ll see you next week.
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Listen to Us on the Templar Real Estate Show on WMTR 1250AM on Saturday at 10:00 AM