Real Estate "Secure" Investing with better Return On Investments (ROI)

The last 2 years of higher than normal stock market returns is primarily due to one sector - AI and NVIDIA, which as of April 2025, is now seeing declines in market value. Is the market experiencing another Dot.com bubble that will soon burst? Is now a good time to jump into the stock market or is it too late? Like most good things, it's usually too late by the time the "GET RICH NEWS" hits the street, and now with new "political TARIFF policies", the stock market is beginning to crack.

And how soon we forget! Humans have 6 month memories. Most have already forgotten about the Real Estate "Gold Rush" scenario in the mid to late 2000's - just before the Great Recession and real estate CRASH, caused primarily by greed and newbie RE investors. Most have already forgotten about the 2008 stock market crash when stock market values plummeted over 50%. Memories of the 2000-2002 DOT.com market crash have also faded. We say you can get a more stable/safer and typically a better return investing in real estate.

I have switched from fixing and flipping existing older home to building new TINY HOMES.

My current project is a Tiny Home with a 2 car attached garage in Northern California. As of this writing, it is 90% complete. As a consumer with 20% down, the mortgage payment will be under $880/month (PITI less than $1,200/mo). If purchased by an investor and rented, the project will have an estimated 5% yield on its original investment (CAP rate), will appreciate 5% a year and will have an annual $6,100 IRS depreciation tax deduction. (MACRS 27.5 years). With projected future rental income increases, it will have a 10 year estimated annual Internal Rate of Return (IRR) of over 10% - plus the tax deduction. If properly "leveraged", returns can be even higher.

In 2005, I had 15 years experience as a Real Estate Appraiser (now over 25 years) and 30+ years of experience in multiple other Real Estate practices (now over 40 years). I was warning people then that Real Estate was overvalued - exceeding well-known fundamentals. Real Estate and the economy started crashing 2 years later. The stock market followed.

One saving grace of the current restrictions in owning a home may be the Tiny Home market. I currently have been reading numerous articles stating that Home Builders are now building smaller homes and Planning and Zoning officials Nation wide are changing their zoning laws to allow for Tiny Homes/ Accessory Dwelling Units (ADU's). California is one of those states.

The popular phrase: "What goes up, must come down", has a lot of truth. Current real estate prices are once again exceeding fundamentals (and so is the stock market). First time home buyers have been priced out of the current market ( the main driver of the TINY HOME market). Most typical single family home sales today are purchased by relocating retirees with large amounts of built up equity and the upper income folks. Retirees who cashed out of their existing homes and then purchase a similar home in a retirement location for 1/2 the price. These are cash buyers who don't care about mortgage interest rates. According to Redfin, 34% of current home purchases are made up of cash buyers.

Most so called "experts" state that a real estate recovery is dependent upon lower mortgage rates. However, I say that PRICES need to come down (lower rates will just result in higher prices). As of April 2025, the current 30 year mortgage rate is hovering around 7%. Everyone is in shock because rates were under 3% four years ago. However, historical rates were 8% for many years, Todays 7% rates are actually low compared to historical 8% rates of the 1970's and 1980's.

Go to PAST PROJECTS page to view photos and video of PAST project flips - CLICK HERE

I have been reading that household wealth is at an all time high. That is, if you are a retiree who purchased a home 20-30 years ago or purchased a home when mortgage rates were 3% (which has contributed to todays over inflated prices - rate go down, prices go up - and historically the reverse is true). Based on that premise, I'll state again that, since rates have gone up, home PRICES need to come down, Only then will purchasing a home, be once again affordable to the mainstream population.

The fed's and so called economic "experts" have stated that inflation is decreasing/stabilizing; however, the current politically motivated TARIFF program could change that. Tariffs could add thousands of dollars to new home construction.

The truth is, we won't get inflation under control until home prices return to basic fundamentals. That means prices have to come down - more so than rates. TINY HOMES are one solution.

During the Great Recession, overinflated real estate prices fell 50% or more in many locations, It should also be noted that the stock market crashed in 2008-09 and lost over 50% of its value - after a runaway increase in value. Just like during the Great Recession, this country may need another "Greed Adjustment". Some say a recession may be a good thing.

All that being said: Real Estate is still a solid investment, if done correctly - if one has the knowledge and understanding of basic fundamentals. We have that knowledge and adjust our investment strategies accordingly. A safe and steady "good" return on real estate investing is still possible. If participating as a private investor as a mortgagee, the secret is to invest in properties that are highly leveraged/secured and have substantial equity (LTV - the loan should not exceed 65% of the value of the property). If a default does occur, the investor has recourse to recover their funds.

In Q3 2023, a staggering 77,900 single-family homes and condos were flipped across the United States. But what about the profit? The average gross profit on a flipped property stood at $75,500, a 35.7% return on investment compared to the original acquisition price. That's a healthy margin, indicating the potential for substantial returns in the fix and flip market. The TINY HOME market presents another lucrative opportunity. If you want to take advantage of this investment opportunity, we are here to provide you with the proper structuring of your investment dollar. Reach out to learn more.