Question for other accredited investors: what are you doing now?

[Jack B.]

I bought most of my rentals at the bottom of the market or near bottom, other than 2 of them that I had to buy 1.5 years ago due to 1031 exchange that I needed to do for a long list of reasons.

I have capital to deploy, but am more interested in using existing capital in rentals already so that I keep my other money for other opportunities (plus once I buy an investment property, it's difficult to get that money OUT tax free).

So what are the other accredited investors here doing. I'm primarily looking for opinions from people at the accredited investor level.

I'll be selling one rental in a couple months after nearly 5 years of holding it and buying either 1 or 2 replacements in Seattle area or buying 4 replacements in Las Vegas OR spreading it around the country.

One thought has been turnkey rentals but I've read terrible things about them.

So for now I'm just buying 2-4 more with the sale of one, but not going in to buy 10 new houses with capital on hand until the market crashes. I'm dollar cost averaging....not timing the market, there is a difference.

[Russell Brazil]

Originally posted by @Charles Kao:

@Russell Brazil What is your take on some of the syndications purchasing with extremely aggressive financing? Just saw a deal with 5 year interest only adjustable rate. Feel this type of deal has only one strategy and would not survive a market correction of any degree.

 Way more risk than Id be willing to take on.  Little risk for the syndicator who is likely into it for zero of his own investment capital and is taking a free equity stake.

We are in a rising interest rate environment....and while contrary to what many people think, interest rates do not affect the national housing market the way people inherently think....they do affect certain asset classes.  And one of the asset classes that should have some sensitivity to rising rates (especially if there is not correlating inflation) is these large commercial/multifamily properties.  So if you are going 5 years into this with out any debt pay down, what happens if the asset hasnt increased enough in value to offset sales costs.  The investors percentage has been diluted by the syndicators equity, now they are selling at a loss possibly.  Maybe the cash distributions during the hold period are enough to compensate for that risk.  But it would need to be a very high cash distribution rate to compensate for taking the risk of an interest only loan in a rising interest rate environment on an asset with sensitivity to those conditions.

Im a believer in long time buy and hold on the small scale regardless of whether we are in a rising interest rate environment or falling interest rate environment....Im even a user of adjustable rate loans....but Im not a user of an interest only loan.

Really one of the only reasons Id consider a syndicated deal would be so I can invest with someone I know and trust and like, and can be into a syndication at about $50k, or about half what I typically put down on a single family Id buy.  Like @Ben Leybovich who is buying value add, but solid low cap rate assets.  And for those reading who dont understand cap rates, Ive been saying it a million times lately....cap rate (or yield) is an indication of the risk of the asset (or market).  It is NOT an indication of the return.  Im already a relatively low risk investor, but if Im putting my money with someone else, in a rising interest rate environment, its going to be on a quality asset in a quality market.  Im not buying some 12 cap on an interest only loan in a class D maket run by some scheister.