All Forum Posts by: Cecile Poyet

If rates move up, then hold on baby!

Old enough to remember, October 1979!

@Cecile Poyet go listen to podcast from August 18 2016 (in fact i was just listening to it yesterday). sure the market my go down a little in the next few years (I think maybe 2020, but like everyone said, that's just a guess). but so what? if you can find a property that give you, lets say 12% COC return, why wouldnt you buy that? you can wait until the market goes down and maybe get a better deal, but in the mean time, where are you going to be parking you cash? i'd rather get that 12% today than waiting for a year, 2 years, 3 years... and when do you get in at that point? you just keep waiting then the next thing you know the market will be back up and you've lost your chance. Like @Russell Brazil said, if you don't sell it, its fine.  in fact your tenant will be paying off mortgage for you while the market recovers.  the person that sold it in 2012 in your example didn't understand the market cycle.  if they held onto it, the property would have probably been much more than their purchase price at this point.  the value will go back up eventually.  you don't need to sell it, as long as you are making a good return.  

Have a goal, where you want to be in 3 years, 5 years, 10, 15, 20.... then back into what return you need to achieve those goals.  buy properties that gives you return higher than your target.  then, when market goes down, you can buy with even better returns.  when the market goes up... well then your property would have appreciated so you are getting better return on those!

Short answer: no, the market is not 'about to CRASH' 

Longer answer: the guy has some good points, and places are struggling, and will continue to struggle.  And other areas will flourish.  And some places are way over-priced, and others are quite cheap.  And, yes, overall the market feels a bit toppy (to me).  But there are plenty of opportunities still out there, and there will be good deals and bad deals at all points in the cycle.  And you aren't investing in the overall market, you are going to pick a project, an that will be your experience.  As @Joe Villeneuve correctly pointed out in a post of mine a while ago: 

"There's never a wrong time...just a wrong deal."

A couple additional things for you to consider: 

• An interesting datapoint may be to look at other options. In a very comprehensive analysis of "The Rate of Return on Everything, 1870–2015" from the Federal Reserve Banks of San Francisco Working Paper Series, researchers concluded that housing returns were close to equity returns, but with much less risk, which may help to assuage buyer's fears of making a bad choice.
  The whole paper is interesting (at 123 pages!) and is available at:
  https://www.frbsf.org/economic-research/files/wp2017-25.pdf
  PS: Your holding period won't be 145 years :) but there is less volatility in real estate over any period considered, and the point is: where else are you going to put your money?  
• Check out a guy who started at the total 'wrong time', @ Clint Macklin .  Here's his podcast interview with @ Tim Emory : 
  https://icorockies.com/real-estate-investing-podca...
  Short answer: he started at a tough time, but worked hard, figured it out, and is doing well (and you can too).  
• And...uh...not to point out the obvious, but: what's going on in San Fran is not what's going on in the rest of the nation.  Full stop on that one.  

Good luck!  You are off to a good start by asking a lot of questions!  

 It depends on your local transfer taxes, title fees, and other market specific expenses.  But 3% is a closer estimate than the 7% you had.  There is never anything wrong with being conservative with your numbers, but especially in this market, I'm finding it pays to get as close to actual as you can as to not price yourself out of deals.  Then again, if 10k moves the needle one way or another, the deal might be too tight anyway.  Best of luck.

 Closing costs seem a bit high for the buyer side on a cash deal.