All Forum Posts by: Collin Van der Veen

Thanks @Ian Halter! I would love to chat if I am able to find a property. I appreciate it.

Thank you @Joe Rodriguez and @Anthony Thompson. I really appreciate the help.

Anthony - I have sent you a PM and would love to chat. 

Joe - I may take you up on your offer to chat about house hacking. Thank you very much.

This is super helpful @Masashi Borges-Silva! Thank you very much!

Hi all - I am looking for an investor-friendly agent in the Providence, RI market. I hope to purchase a 2-4 unit property / house-hack, and it would be great to get some local market expertise!

Thanks!

Collin

Hi all - I am looking for an investor-friendly agent in the Providence, RI market. I hope to purchase a 2-4 unit property / house-hack, and it would be great to get some local market expertise!

Thanks!

Collin

Hi all - I am looking for an investor-friendly agent in the Providence, RI market. I hope to purchase a 2-4 unit property / house-hack, and it would be great to get some local market expertise!

Thanks!

Collin

1. Cash Flow

The extra profit left over after all of the expenses on a property have been paid. Your wealth really starts to compound when this profit is reinvested back into your portfolio.

2. Appreciation

The natural rise in value real estate tends to experience. While prices may rise and fall in the short term, real estate almost always tends to increase in value in the long term.

3. Debt Pay-Down

When you purchase a property using debt, part of the payment you make each month to the lender is the repayment of the principal balance. As you pay down more of this balance, your equity in the property increases. When you rent out your property, your tenants do this for you.

4. Tax Benefits

The U.S. government gives numerous tax benefits to purchasers of real estate. Depreciation, for example, allows many investors to earn positive cash flow each year, but owe nothing in taxes.

If I make $100,000 per year from my job, my buddy earns $100,000 per year from a business he owns, and you earn $100,000 per year from real estate, who do you think keeps more?

That’s right, you do.

Happy Thanksgiving, all.

Could we be heading toward another housing market crash like the all-too-memorable one that occurred in 2008?

Short answer: No.

This housing market is nothing like the one that sparked the most devastating recession since the Great Depression. Below are 4 reasons why.

1.) Mortgage Quality

Subprime debt was arguably the single-biggest driver of the GFC. Pre-2008, lenders handed out mortgages more easily than the candy on their desks, and as a result, borrowers received loans they had no business paying off. The typical homebuyer today, however, is extremely creditworthy, with a median credit score of 773 (down from a recent high of 780).

For additional context, a mortgage granted to a borrower with a sub-620 credit score is considered subprime. In the lead-up to the GFC in 2005, the proportion of these mortgages peaked at 14%. Today, we are sitting at under 2%.

2.) Mortgage Types

Combine risky borrowers with sketchy mortgages, and you’ve got a recipe for disaster. The RE bubble in the early 2000s was inflated in many ways by zero-money down mortgages, NINJA loans, interest-only mortgages, negative amortization loans, and various other financial “innovations” that placed incredibly risky assets on banks’ balance sheets. These precarious lending practices are far less common today.

3.) Consumer Debt to Equity Ratio

Thanks to the massive price appreciation that has occurred in recent years, US homebuyers are sitting pretty on a sizeable nest egg of tappable equity. Total mortgage debt in the U.S. is now less than 43% of total home value - the lowest figure on record. Likewise, just 2.5% of homeowners have <10% equity in their homes, highlighting the cushion US borrowers have against going underwater.

4.) Supply & Demand Dynamics

Today’s housing supply is remarkably low by historical standards. Prior to the bursting of the RE bubble in 2008, inventory was ~3.7M. Compare this to the beginning of 2022, when inventory sat at ~860K - a record-low. While this figure has ticked up recently to ~1.3M, it still represents far fewer homes than can meet the current level of demand.

Speaking of market demand, the US population has grown by about 30M people (~10%) since the GFC. At the same time, millennials, which represent the largest generation in the US right now (~85M total), are at peak home-buying age. Compare this to the ~65M members of Generation X that comprised the core pool of buyers 14 years ago.

The upshot? We have far more housing demand now than we did in 2008, and significantly less supply.

This market, therefore, is highly distinct from the one that drove the US off a financial cliff in 2008. While it remains to be seen exactly how market conditions will evolve, one can safely assume we will not experience 2008-caliber market mayhem.

In July, US home prices declined by 0.1% month-over-month, representing the first drop in the Zillow Home Value Index since 2012.

The upshot?

Real Estate buyers in many markets have regained negotiating leverage.

After reading Chris Voss's “Never Split the Difference,” below are 6 of the most important principles buyers and sellers can arm themselves with at the negotiating table:

1.) Mirror your counterpart:

In a negotiation, mutual respect is everything. By repeating the last 3 words (or most important 3 words) of what your counterpart has said, you will cause them to elaborate, deepening the process of connecting and building rapport. Underlying this tactic is the simple principle that people naturally fear what is different and take comfort in what is similar.

2.) Label your counterpart’s emotions:

Studies have shown that when negative thoughts are spoken aloud, the mental processing of those thoughts moves from the part of the brain that generates fear to that which governs logical thinking. Once you understand the position your counterpart is in, repeat their emotions back to them with a neutral statement of understanding (“it seems like [x]”, “it sounds like [y]”), and then give them space to elaborate.

3.) Don’t fear “no”:

“No” is the starting point for authentic negotiation. At the end of the day, everyone is driven by two primal urges: the need to feel safe and secure, and the need to feel in control. If you satisfy those desires in your counterpart by getting them to answer “no” at the beginning of a negotiation, you have a foot in the door.

4.) Use calibrated questions to create the illusion of control:

Open-ended “how” or “what” questions have the power to progress a negotiation without eliminating your counterpart’s sense of control. They are ways to disagree without being disagreeable. Instead of explicitly saying “no” to a proposal from your counterpart, for example, you can respond by saying “how am I supposed to make that work?”

5.) Leverage humans’ predictable irrationality:

Certain tactics, such as the creation of artificial deadlines, or the establishment of extreme anchor values, can cause people to respond in an impulsive and irrational manner. Likewise, people will take a greater risk to sidestep a loss than to realize a gain. Make your counterpart aware that inaction is potentially costly.

6.) Find the black swan:

Black swans are pieces of information that, if discovered, would change your whole approach to negotiation. While it is important to be guided by what you already know, it is imperative to not let those preconceived notions blind you to what could potentially be discovered. One’s listening and calibrated questioning should thus be geared toward uncovering, adapting to, and exploiting key unknown variables. After all, the world did not demand an iPhone from Steve Jobs - he uncovered that need - society’s black swan - without us even knowing we needed it.

 I actually just started "Never Split the Difference." Will check those other two out!