Quote from @Nick Robinson:
@Branden Yang
You think if the market crashes and rising interest rates will promote construction. Look at construction during recession on a chart and let me know what you find out.
I do not buy single family homes as rentals. I was comparing apples to apples. I own $4m in commercial MF. I agree with you that to me MF specifically larger MF is the best investment but at the end of the day it comes down to math and access to capital.
My advice to you, constructive advice not attacking you, would be to study the market and fundamentals of MF more. You will not find 13% cap rate building and if you do that is a building you do not want to be in. Follow warren buffet’s advice “I would rather buy a great product at a fair price than a terrible product at a great price”
Let's assume that interest rates are infinite, we still have private money. We still have competition, someone will lend at 5%, 4% or 3%. You're telling me that a percent point will destroy an economy? Dude, people are lending to the banks for 0.025%. You're telling me that no one would lend money on these deals? I just found 9-10% cap in another area purely on the MLS.
If interest rates are 5%, and cap rates are 5%, why would I buy the building anyways? That's IF interest rates are 5%, so what if someone lends to me for 3%?
As for constructions. If we had no constructions, where are the people who need homes going to live? Where they ganna go? Like they needa live somewhere. Where they going to live? In the streets? In the forest?
If you're talking about construction, there's less constructions than there are demands for housing, less than constructions than there are people turning 18 minus death rates. I know my numbers, why pay 30 million dollars when you can just pay 20 million dollars? I don't know, that's just construction.
Did you know that you don't have to pay construction loans as the BUILDING is being built? Must've been studying the fundamentals more. Did you know that an eight-plex costs as much to build as a single house? Must've been studying the fundamentals.
You're thinking about $4 million dollars. I'm thinking about changing the entire neighborhood, and you don't even need to look at cap rates.
We aren't talking about bigger loans like a billion dollars, because Black Rock is buying properties for 1% interest. I don't care about cap rates, I care about terms the most. Would you rather borrow $1 for 100% interest? Or a billion dollars at -1% interest? TERMS IS EVERYTHING.
I rather buy a 4% cap, and 0.025% interest rates than a 13% cap with 12% interest. I don't know about Warren Buffet's advice, but he doesn't talk about turning everything into gold.
I don't look at recession charts, all I know is that IRR can be 100%, and there could be a depression. You own $4m in commercial MF, I could easily turn that into $16m.
The reason why interest rates don't matter is because prices can just go down and you'll pay for the same amount of loan payments.
I just went to a meeting recently, and I saw someone making a 15-20% cap on town houses, and the town houses are BEAUTIFUL. I'm not talking about single town houses either, I'm talking about neighborhoods. Multi-family. How are you going to make 40 million dollars off buying 2-3% cap rates? Someone is making 40 million dollars off buying 13% cap. I don't even own a property and I can find you a multi-family deal in the U.S.
For me. I'm just trying to find private investors or anyone. I just found an 7-8% cap property. I've been studying the market for 6 years, since I was 11. So I definitely know what a good property is.
