Oklahoma City, OK · Member since 2017 · 36 posts · 19 votes
For those of you who don't want to know about me and instead want to get to the point of this post move on to "2".
1.)
My name is Lukas Zupan - I'm a real estate investor in OKC, and I also own a RE photography business that specializes in 3D Tours. I have been in this game for 3 years now and I love studying real estate and learning, and since I started, I've overcome false beliefs and acquired new mindsets. (including realizing I should have and more importantly *could* have bought most if not all the houses I wholesaled while I learned) Still, I regret none of it and I carry on learning! I was 8 years old when my family moved from Vegas to Oklahoma City when our land-lord collected rent for a few months on our apartment complex at the time (2008) and skipped to Brazil. Or that apparently was the story, and I have since realized that also happened to many people. Much of my memory of that time makes more sense now, however...I was certainly not an 8-year-old real estate investor just chomping at the bit to get houses for pennies again. Now, over 10 years later I realize that all the markers are in place to betray another correction is imminent, and..."overdue".
2.)
Boom. Personal blurb complete. The reason I am deeply interested in your personal story surrounding the market crash/correction of 2008 is that my perspective of market cycles is largely from second-hand experience. While I'm interested in your experience of market cyles in general, (you Veterans out there!) and I don't mind mentions of historic trends and crashes prior to '08, I would like to keep the specifics more related to our most recent cycle.
There is no right or wrong answer, just feel free to share whatever comes to mind about your story around that time. I look forward to chatting!
Now, over 10 years later I realize that all the markers are in place to betray another correction is imminent, and..."overdue".
There is no right or wrong answer, just feel free to share whatever comes to mind arund that time.
While I have no real opinion on an 'imminent' correction, reliving the GRC makes me cringe overall.
I had 36 rentals and just purchased my 3rd primary residence with 2 small kids. Thankfully it had a mother in law apt to help weather the storm when my wife was laid off. The state provided a 20hr/wk unemployment comp pkge to help us eat and I hadn't had a w2 since '02.
About 1/3 of my tenants either bought a house with the $8k credit or consolidated and lived with family, friends. At first. Then the foreclosure started hitting and my applicant quality rose significantly. While A class overbuilds were offering 2 months free, my b class townhouses were filling fast and rents were rising. My rural c class apts suffered with slow and no pays and vacancy.
Then the credit crunch. My lines of credit and credit cards froze and or went to penalty pricing. Couldn't finance any commercial assets period. Prices were attractive but cash was king. Thankfully none of my commercial loans' 5yr call times hit from 09-11. They would have called for sure as the regulatory environment in Washington was completely uncertain. Banks just love uncertainty LOL.
I remember writing credit card checks to pay my property taxes. I remember saying crap, that line froze, try another one.
Now I have fat reserves, fat equity and don't mind purchasing with cash .I use private lenders vs commercial loans and you couldn't get me to blanket collateralize multiple properties if you paid me. Helocs have fine print and gotchas. 401k loans are due right after you get paid off. But keep on borrowing if you want to.
While most others are partnering, syndicating, refinancing to max leverage, I'm ok to zag. I will have a good chair when the music stops and won't miss a single nap.
Zero connection. I'd like to keep in that way. I've never been married, but I do want children in the future.
I think it's important for guys to share their story, so someone like myself (and more importantly a younger guy in his 20s) doesn't make the same mistakes, and is more informed.
I don't think anyone saw the 2008 crash for what it really was until it was too late. I pretty much lost everything and had to pull myself up by my bootstraps and rebuild. I didn't end up living in my car or moving in with my parents like some people did but I've got stories. I'm in a much better place now.
@Lukas Zupan That’s a good way to put the Detroit market ! I am, i had two very desireable area houses get bought out from under me during that time ($25K now going for $400K and up) and it put me in an area people weren’t looking at which is serendipitous now. As my neighbors aged and houses were walked away from, I bought 4 and have 6 empty lots and want to keep going. I need to learn to refinance and get a local company to believe in my area being profitable because it is. I love this city
We were in the midst of building our company and fortunately, had a great relationship with our bank plus a decent W2 income so we just kept building our company but for a few years, we paid bargain-basement prices for houses.
We didn't have any real issues with vacancy, just made a few hand-shake agreements with folks that couldn't pay the rent then found someone that could. In that time period, the tenants were quite often homeowners who had been foreclosed upon. We also experienced an influx of tenant candidates who moved to Oklahoma City because the city was not hit hard by the Great Recession.
We're not members of the 'sky-is-falling-in' club but it does feel like the market cycle is due an adjustment and we are positioned to take advantage should that occur.
@Michaela G. very impressive. I always enjoy hearing your real estate stories in Atlanta & the vision & risk you took that most would never touch and are all wishing they would have invested 🤘🏾
@Lukas Zupan apologies the tagging isn't working so hope you see this. First thanks for starting this thread. Well done for being so curious and thoughtful! I am sure you are going to be an outstanding investor.
I was fairly junior on the client side of the investment industry. I had just paid off my student loans so didn't have debt but didn't have much cash either.
Back in 2005 I was reading about the housing bubble in the publication "Gloom Boom Doom" by Marc Faber (I think he may be less respected now after some calls that didn't work out as well). He was outlining the no doc loans even then. I know it seems very early that anyone was noticing, but I specifically remember this because it was when I was in a different foreign country, before I moved to the UK.
I recall a co worker at that time telling me to "shut up about the U.S. housing bubble, U.S. housing never goes down". Being the only female in 100+ people, being young, working in a foreign country, I shut up. It's a recurrent theme that I have been too conservative, not trusting my instinct, not being bold enough etc. I have done ok but could have done so much better if I had trusted myself more.
But I don't feel great about having an early sense that things were going to blow up-it was a horrible global meltdown and like they said in the movie the Big Short, suicides rise significantly with each increase in the unemployment rate. Many human lives suffered. I found it very hard to watch the Big Short, because I had seen the actual movie in real time, unfolding. When the family in the movie got evicted, I lost it.
Things were already cracking by 2007. Here in the UK there was a massive bank run (Northern Rock) with people lining up to get their cash out of the bank. I started hearing about the funds that were shorting sub prime (similar to the ones in the Big Short movie). We started hearing about bankers leaving Lehman Brothers already in early 2008, that things weren't right there with the risk management. Everyone points at Lehman, but AIG was right there with them in terms of systemic risk. A "conservative insurance company".
By summer/autumn 2008 each Sunday night was a roller coaster: which bank was going under, which clients would be impacted. UK pension funds had their cash frozen in Icelandic banks. Firms were moving money from one bank to the other, trying to get ahead of the next failure. Given that I was supporting family members financially and I was so conservative, I hoarded what meagre cash I had. I delayed having children (this is probably the most significant life impact for me).
I had just bought an affordable rental investment abroad with cash and it did ok during the crisis but looking back, I would have been much better loading up on Florida property in 2009. I also recently found my notebook from when I lived in Boston in the 1990s and saw 3 family properties for sale for $150k that are now $1 million. Again a senior colleague told me not to buy, and I listened. "You want to travel the world now, you don't want to be bogged down by property"
So, looking back at my life I have definitely been too frugal, too conservative, too meek especially compared to the people on biggerpockets who have done very well. Now that I have more guts, many markets are richly or overvalued! Argh!
Anyways, for me it was traumatic just to watch other people suffering and I think we are still feeling the ramifications via global populism and anger at institutions. (Not criticising this phenomenon just observing).
Coming back to Marc Faber, I followed his and other people's advice too closely and had a lot of opportunity cost loss by going into emerging market equities (especially China) and gold. Stupid.
In terms of where the next crisis might come from, I agree with other posters that the U.S. housing market is probably not going to the epicentre like before. But, most developed economy governments around the world are now running at 100% debt to GDP or more and interest rates are already low, so the tools to react to a future crisis are diminished. I also am trying to better understand how much hidden debt China has (at the local level) which could be a systemic underpriced risk.
On the other hand people have talked for years about how Japan is going to default any day and the Yen will drop etc etc and it just never happens, so I don't know what to think about high levels of government debt.
On a micro level, I personally don't feel super comfortable taking on a 30 year loan on a property in a flood zone. A lot of the FEMA maps possibly understate ongoing flood risks and I'm not sure that insurance companies will offer affordable coverage in the future. They may for the next 5 years but you have to take a longer view than that. The government then backs up some of this risk, but then we come back to the government debt levels and what will happen when there is a new liability for them to manage on top of Medicare, military etc. I am not saying the sky is falling, I am just saying I think flood risk is not currently rationally priced by the market. So I started with 2008 but wanted to end with what are future risks that may not be fully priced by global markets.
I bought my condo (primary residence) towards the tail end of 2018. Probably the best financial decision, and over the past 11 years, the value has about doubled.
Oh boy, that was a fun one. If you have time to read this tragedy below these are the cliff's nodes.
I'm a millennial and, as has been stated, that crash shaped many/most of us as a generation. For my part, I was 19-20 and saving up for my first house when it started. Nobody in my family had lost their jobs or much money as none of us worked anywhere near that sector and none of us had any investments to speak of. I really felt somewhat insulated from it.
After the first big dip I scraped together the sum of my life savings and decided to buy a house right around my 21st birthday. I picked up a little 3/1 block house for 118k and the seller paid my closing costs. Also took the 8k Obamahomeowner credit. It was easy to qualify for the mortgage since I had perfect credit and no debt, had been working since 14, and everything hadn't completely crumbled yet.
Fast forward a year or so...
The second dip hits. I was laid off from my IT job because our client, Colonial Bank, went insolvent due to their shoddy mortgage business unit. The company offered to keep me on as a contractor for part time work servicing another client called Iberia bank. Well, thats not the end of the world at least, right? Right...?
So I'm driving from a bank site back to our office one day and an uninsured driver smashes into me, totaling my Buick and messing up my back. It took over a year to get my insurance and workman's comp to pay out and cost me 1/3 of my claim because they blew me off until I hired a lawyer, longer to recover form the injuries. Real glad we pay these companies to be there for us when we're down and out.
So, no income, no car, barely any IT jobs to be had at that time and I couldn't get a job anyways due to physical limitations. I tried to get some .gov assistance, they gave me a food stamp card of $25/month. Thanks guys.
Unemployment checks only go so far and don't kick in for a while. Disability checks? Hah, try being a young 20s male and telling a doc your back hurts and you want free money. When you just bought a house your reserves aren't what they used to be. Now my credit cards and mortgage were in default. The bank was very eager to foreclose on my house, and seek a deficiency judgement in spite of the fact that I had been paying PMI (Spare me the "PMI isn't for you" speech. I'm aware. Thats a load of crap.), and there wasn't much I could do about it besides delay them at every turn.
The next year or so is really blurry, but I managed to sell some belongings and do enough side gigs to stay afloat. One day I finally up and got a break - a new job. After calling Fifth/Third bank almost daily for months I convinced one of them to give me realistic loan modification terms (you should've seen their opening offers) with the new job in mind. Saved my mortgage while the foreclosure date was already on the docket. Success!
Life improved after that. Injuries heal(ish), belongings can be repurchased, and I ended up living in that house for another 5 years and putting a lot of time into updating it before selling it for 135k in 2015. The rest is history.
@Lukas Zupan Was a junior in college for civil engineering in Fort Myers/Naples, FL where business was booming prior to 2008. When I started engineers were getting 20k signing bonuses, when I graduated I was working 4 part time crappy jobs for 1.5 years and plenty of engineers with 15+ years experience couldn't get a job at McDonald. My girlfriend (now wife) started lookink at property to live in because we thought it might be the only time we could afford it. Made soooo many offers, but was always trumped by cash buyers, even when we offered more. Learned a valuable lesson. In a down economy, cash is king. Finally found an off market deal that was about to be listed and got the realtor to agree not to take any other offers. Previous owner paid 265k and did a bathroom reno, we paid 82k (which maxed us out at the time). In the mean time, my now wife and I got good jobs in our respective fields, we started paying off debt. Once we had that under control we decided to give it another try and decided to buy rental properties. She did property management as part of her job and I was in land development, so we had a lot of connections and personal experience. Original plan was to buy a house, live there for 2 years and fix it up, buy another, rent our previous one for 3 years, sell it and not have to pay capital gains, repeat. Bought another short sale a street over a few years later. Did a complete reno. We both became frustrated with our jobs (like everybody who works for someone else), and started looking for options. One presented itself after a couple of years so we got out of real estate and into business ownership. Just now getting back into rentals 7 years later, but now for much different reasons....it seems prices have gone up slightly since I was last involved ;). On in all I was lucky to be able to start at the worst of times. I got a ton of knowledge and perspective with out having to lose a whole lot.