All Forum Posts by: Sascha Weinberg

@Chris Pappas Welcome to the site, it will surely help you achieve your goals!

Hey BP,

we all have witnessed what happened during the financial/subprime crisis and how RE prices crashed in quite alot of places around the globe. As it stands right now, we have a) the lowest interest rates ever, b) houseprices that in alot of places are still below the pre-crisis levels and c) rents at a level that I (being kind of new to the scene ;-)) cant really judge on.

But my point is something else. Usually, once interest rates fall so does the P+I for people who buy a house, which makes real estate more affordable for the average Joe. This in turn drives prices of Real Estate, because the demand rises. The demand for rental property is falling, but inflation keeps rental rates from falling. Now comes the interesting part which I would like to discuss with you all.

As of now, it is pretty obvious that the Fed will hike rates next spring and start a new cycle with rising interest rates. THis in turn will make mortgages less affordable, which might stop house prices from rising further or even lead to falling house prices, as demand is falling. First off, is that something people would agree on? If not, what am I missing?

My question (as a soon-to-be buy-and-hold investor), what is going to happen to rental rates? From my point of view, rising interest rates should reduce demand for mortgages (less affordable) which in turn should help demand for rental properties. Although home prices might start to fall, as a buy-and-hold investor this is something I can sit out, falling cashflow would hurt much more.

I am looking forward to everyone´s opinion and hope we can create an interesting debate about the immediate future of the real estate market in the US.

Happy discussing!

Sascha

@Karen M. 

Hi Karen, this is a really good question. I think there is a mayor difference between good debt and bad debt. Good debt makes you money, bad debt costs you money. As @Bill Jacobsen already mentioned, consumer debt is bad debt, as you do not gain anything from that. Mortgages are good debt, as the debt (usually) creates value for you.

As for what % to take on in debt, that depents on your personal risk tolerance. Personally, especially in the current interest rate environment, I would go for a higher rate of debt. Inflation will help you out in the long run and reduce the future value of this debt. Furthermore, a higher debt level gives you more flexibility in terms of acquisition.

Have a good one!

@Sarah Brown 

Hey there, I would send a cleaning team in there on your own expense. If you show the house in the current state, they will run to the door and you don´t only loses them now, even later they probably wont be interested. So either show the house in a good fashion or dont show at all, keep them on record, who knows, maybe a year down the road they are still (again) interested...but dont waste a house tour when the house is dirty.

Btw: Its really bad how some people can live like that!

Good luck anyway!

@Dawn Roof 

Welcome aboard! I think the most important points have been made.

a) Is the rent sustainable and reasonable?

b) Do you know anything about the PM that is going to manage? If the area is so-so, than this might be the most important thing.

c) How do the prices (60k each) compare to other properties around?

Good luck on your venture and keep us posted what you deside to do :-)

@Chris Haydis 

Congrats, I am holding my fingers crossed that everything works out as planned!

@Craig Coulson 

Welcome to the site! As far as average rents go, you can check that at rentometer.com. Just enter the adress and the number od bedrooms and you get the average and median rent in that area. As far as prices go, there are abvious a couple of ways to determine a fair value.

Have a good one!

@David Riehl 

Welcome to BP!

I am originally from Hannover in the north, moved to Frankfurt for the job and bought the house close to Munich (about 10 miles southwest, 1 suburb before Starnberg) just for investment purposes. Havent spent too much time there but my uncle lives there, so at least I have a feeling for the market a bit. My uncle works in Augsburg by the way :-)

Hahaha, was it that obvious? LOL

It´s fun though, at least most of the time! How did you like it in Germany?

I will travel to Cleveland before doing any business at all, thats for sure. But to me he seems pretty legit and hard working and I think he knows the market quite well. Anyway, thanks for the advice!