NO CASH FLOW, BUY AND HOLD

So your question is; Number one, should I buy a property right now that I can buy and hold? The second part of that question is currently the prices of the houses in Raleigh Durham. And this could be anywhere. Currently the prices in Raleigh Durham are 250 000, with rents of 1500. Which means that if you purchase that home you're not going to cash flow, and you're thinking that you may even break even. And then you're also saying that you believe that potentially rents will eventually go up. There's a fundamental problem with this whole philosophy of the brrr strategy: the br double, rs triple & r quadruple, at the end of the day there's many of the gurus out there that are selling you on a brr strategy. Now you’re contemplating on taking down a property at the very top of the market.

And you're okay with no cash flow. Well, I can tell you number one; I wouldn't take a property down in the high side of the market even if there was a large amount of cash flow. The reason why is, we're headed off a cliff brother. Hands down we are headed off a cliff. There are so many statistical data points that are showing that the market is going to collapse and fall, that you're going to end up in a situation where you're going to buy a house at the height of the market. The house is going to fall in value and the cash flow is going to go negative on you and when it goes negative on you, you're going to be in a loss in equity and cash flow. So what I always say is; even if there was cash flow in a falling market, your cash flow won't make up for the loss of equity. So get away from buy and hold investing, especially in this market. The risks are way too high and get into buying & flipping. Don't listen to me? You will pay the consequences severely

This is one of the problems I have with people all over this country who tell you to buy and hold in a down cycle. It is a deadly strategy in fact buy and hold investing is one of the riskiest strategies. And I know that this will be a controversial subject. I've been in the business for 36 plus years. I've seen the market cycles fall. I've been in the greatest recession and lost tens of millions of dollars. I know what I'm talking about, staying away from buy and hold investing right now it's a bad idea. So I'm going to give you an example of this, just to kind of help you out here. In the Las Vegas market when the market collapsed, it started in 2006 not 2007, like most people thought it was actually correcting in 2006.

That market fell for about six years, basically from 2006 to 2012, it may be four to five or six years but nonetheless call it five as an average. That market fell for five years. I went to Boulder city after the market fell. I saw condominiums that were listed for 150 000 that would generate rents of probably 12 to 1300 a month, and those condominiums were selling for 50 000. So you could buy a condominium for fifty thousand, rent it out for six hundred dollars a month and cash flow like crazy all day long, and be into the asset for a third of what its value. So what you're looking at is, if the market correction is strong you could buy a house for 150 000, it drops to 50 grand so you lose 100 000 in equity and your cash flow goes out the window. Because what happens is when a market collapses the values of properties drop, and so that means rents can drop. And so they can actually rent a property for less, so your competitor can come in and pick up that asset for 50 000 and he's into it for 50 when you're into 150,000.

He can go ahead and buy that asset for 50 grand a month and rent it for 600 a month. This payment can be 250 a month in cash flow for 350 bucks a month. And you're sitting up there with an asset that you bought for 150 000. You've lost 100 000 in equity and your cash flows are depleted. And heaven help you if you finance that thing at the high side of the market because then you can't service the debt and you're dead in the water. You start bringing money to the table until it erodes through your entire savings. 401k, everything you got in savings because you believe that the market's gonna correct. And in this case it didn't, and so now you lose not only a hundred thousand dollars in equity, you lose most of your life's time savings your IRA your 401ks. And that asset can literally drag you right down to the bottom of the ocean and you didn't even know what happened believe me, i know I've been there I've done,bad idea.