November Latest Updates & Insights
COASTAL CAPITAL INSIGHTS
Each month Coastal Capital strives to bring you the latest updates and insights into the California real estate market for both investors and brokers. We always welcome new investors who enjoy above-average returns that are not correlated to the equity markets. As always, we appreciate both new investor and broker referrals, as the network builds it brings more value to all through diversification.
Please note that you can add on to your existing investment in any amount. While an initial investment requires an investment of $100,000; existing partners in the Fund can add on in any amount from $2,500 or more.
Mortgage rates this past month have been all over the map. Mid-month they jumped on the Federal Reserve’s decision to keep raising rates and commitment to tame inflation. We saw the conventional 30-year rates jump up into the low 7% range. Now at the end of the month with the latest tempered inflation data we are back under 6%. We expect in the near term to see continued volatility in rates as they react to each new release of economic data, especially unemployment and inflation.
Supply of housing continues to be an issue for most California markets. At the end of October, the Golden State still only had a three-month supply on the market, up from two-months last year. There are two strong reasons for this. First, new housing starts are down huge thanks to a lack of construction workers and the skyrocketing cost of materials. Many builders have chosen to pull back given the uncertainty in cost of both labor and materials (and we can’t blame them!) Second, 90% of existing homeowners took advantage of locking in long-term, low rates earlier this year at 3% or less. Upgrading to a larger mortgage at a much higher rate or just giving up their low monthly payment is now extremely costly in comparison to their existing payment. Many or foregoing moving and are happy to wait a while or just make some upgrades.
Reading the latest financial headlines, you would think that housing prices are going to fall off a cliff. In frothy markets such as Phoenix and Las Vegas values have come down 10%-20% since earlier in the year. These markets saw large swaths of speculator purchases in the last few years. Companies such Zillow, RedFin and iBuyers were purchasing millions of dollars of SFRs sight unseen. These corporate investors are now dumping inventory. Redfin alone expects to reduce its portfolio to just $85 million by the end of January 2023 and should have all its inventory sold by the end of second quarter.
Here in California, we had minor speculator activity coupled with an incredibly robust economy that will keep demand high, especially for the lower range of the market at less than $1,000,000. For the near term we are expecting housing prices to remain relatively flat to a small decline. 2023 will be nothing like the last housing bubble!
Home prices declined by 30% during the Great Recession of 2008-2009. Now, the housing market is solid foundation this time around. Given all the recent doom-and-gloom news coverage about a potential housing pullback, it is worth reviewing the fundamentals of this current cycle versus the last.
- 20M+ more jobs today with zero net job losses in recent quarters.
- Absence of high-risk subprime mortgages with current borrowers needed standard underwriting & affordability metrics
- Fewer new single-family home construction suppressing housing supply.
- Currently experiencing historically low mortgage delinquencies and foreclosures
Last cycle jobs were scare with much higher unemployment. Today we have a robust labor market currently with nearly twice as many job openings as there are people searching for jobs! We’re definitely not in 2008 anymore!
Specifically, to our Fund we are still experiencing incredible demand from long term residential income property owners. Landlords continue to collect premium rents, especially throughout Southern California, anywhere near the Bay area and Tahoe region. We continue to see a high percentage 1st position trust deeds flow across our application desk. Experienced landlords continue to snatch up premium properties with all cash offers.
Our small business owners continue to seek capital outside the banking network who has shut them off in the second half of 2022. More and more are utilizing the equity in their primary residence as an effective line of credit that was previous available from their primary banking relationship. The majority of new monies flowing into our Fund come from our existing partners. Please note that you can add on to your existing investment in any amount. While an initial investment requires an investment of $100,000; existing partners in the Fund can add on in any amount from $2,500 or more.
We love California’s beautiful Central Coast and wish we have more brokers referring trust deeds from this area! For this financing event a mother and daughter team were seeking capital to get their small business off the ground after a successful test market launch. This SFR in Pismo Beach shines with pride of ownership and is only a few hundred meters from the Pacific. We were able to use the equity in their beautiful home to get them the shot of start up cash.
We wish them the best of luck building their dream of owning a business and truly achieving the American dream. Thanks to our business broker who knew who to call to get them funding in a week.
- SFR 4 BED / 3 BATH
- Pismo Beach, CA
- Position: 2nd TD
- Rate: 12.55%
- CLTV: 64%
- Appraised Value: $1,180,000
Looking for a way to get more from your retirement savings? A self-directed IRA (SDIRA) could be the answer. We constantly get asked on how to set this up and asked the firm we recommend providing some insight with our investors:
What is a Self-Directed IRA?
A Self-Directed IRA (SDIRA) is quite simply, an IRA. All IRAs abide by the same laws and possess the same capabilities. Unlike other IRAs held at banks, brokerage firms and other institutions, with a SDIRA, you’re not limited to stocks, bonds, or mutual funds.
What are the benefits?
A SDIRA gives you the opportunity to build a more diversified and resilient portfolio. It allows you to take advantage of alternative investments such as real estate, precious metals, private equity, notes, and more. A custodian/administrator is required to do the record keeping for the assets in your account, but nothing moves in or out of it without your direction. You decide how much, when, and most of all, what to invest in, giving you the freedom to invest in what you know best.
Investing in Real EstateWith a Self-Directed IRA
Real Estate is a popular investment among SDIRA holders because it is a tangible asset that people know and trust. With a SDIRA, you can invest in a wide range of real estate assets: residential or commercial properties, developed or undeveloped land, condos, hotels, mortgage notes, and more. Depending on what type of account you choose, earnings can continue to be either tax-free or tax-deferred.
The level of control and flexibility associated with a SDIRA does come with its own set of responsibilities. For example, investments made with your SDIRA are owned by your SDIRA, not by you personally, making self-dealing prohibited. Click here for more information on SDIRA rules.
The first step is to decide what type of account you want to open. Then, establish how you’ll fund it. Make sure to consult with a legal and/or tax advisor before you begin can help you to answer these questions. If a SDIRA sounds like it could be the answer to your retirement questions, get your copy of the Self-Directed IRAs Basics Guide.
Brokers Always Welcome
Coastal Capital is always looking for referrals from brokers and open to new investors in the fund. Please share this email or connect us directly.
Asset Based Loans on Business Purpose Real Estate
- Loan Amounts: $25,000 to $500,000
Exceptions required for larger amounts
- Origination Fees: 1 to 3 points with a minimum of $2,000
- Serving Location: State of California Only
- Purpose: Business or Investment Purpose Only
- Types: SFR, Multifamily, SFR Additions, Fix & Flip, Light Commercial & Retail, Land.
- Fix Loan Term: 6 months to 18 months
- Rates: from 10% up to 15%
- Loan to Value: 65% without exceptions, higher available
- Loan to Cost: Up to 80% with hold back for exceptions
- No minimum credit score. Low FICO credit score okay
HOW TO REACH THE TEAM AT COASTAL CAPITAL