All Forum Posts by: Dan DiFilippo

Hey Greg! I'm a broker here in Fayetteville, NC. We analyze our deals pretty much the same way as everyone else. It's just about being confident in what your expectations are. This market is very unique compared to the rest of the country. I have made the argument that Fayetteville is one of the absolute best places to invest in real estate (particularly if you're buying and holding or BRRRR'ing) and will be for years to come. There are a number of reasons for this. I won't bore you with all of the economics of it (though feel free to message me and we can arrange a call to discuss further), but the primary points are this. Boomers are retiring and moving South. Also, the high cost of living commercial urban areas are being hollowed as economic viability all around the nation declines. These two realities have both been in effect pre-COVID, but have since had their timetables advanced. Boomers who have had work interruptions are now figuring they'll retire a couple of years early (or simply finish their careers remotely) and get a price advantage by front-running the real estate market selling their home. Alternatively, younger people who can keep their jobs, but leave their cities. I cannot stress enough how the "strong" real estate investment markets around the country are going to lose their economic drivers. This won't happen here.

I-.....ugh.  Not how any of this works.  Prices don't double every 20 years.  And it's even less founded to suppose that there will be some sort of explosive "catch-up" appreciation (yes, what you're describing would be appreciation) in real estate.  Real estate is an extremely complex market.  It cannot be evaluated across both a range of markets and across an extended period of time.  There are altogether too many things that change.  Lending practices, demographics, geopolitical power balance, global trade positions, etc..

Well that is how debt collapsation works.  That's what happened particularly in 2008.  The monetary base is up over $10T (and about half of these are inert bank reserves, which are literally not impacting the economy at all), but there is over $120T of existing debt.  And that's just the financialization.  Those are just the debt-based assets.  Just look at real estate *alone*.  All of the real estate in the US is worth some imputed $29T.  It's a perfect example of a market that can't fit into the money supply.  If everyone tried to sell their real estate all at once (and this is theoretical and the math is inherent imprecise, but the basic principles apply), all real estate prices would have to depress to 1/6 of their present values.  And that is assuming that real estate could fully saturate the economy and be the *only* economic activity while those transactions were occurring.  In reality, people would still be eating and driving, and spending money on other things, which means that real estate would not get the benefit of the $5T in existing (functional) monetary base.  So it would actually become even more devalued.

As I mentioned, the monetary base is a sliver of the money supply.  And even the money supply is not something that we can accurately account for.  But the Federal Reserve handing out bank reserves doesn't do anything because banks aren't lending (as you said, standards are very tight) and economic activity is slowing.  We're seeing more news of people having their credit limits cut.  And what's even worse is that they're taking US Treasury's out of the system in order to put these useless, undesirable bank reserves in.  And we know these Treasury's are needed *in* the system because yields are at all-time lows (meaning they are valued at all-time highs).  It's complicated, but they are used as collateral to facilitate inter-bank and commercial lending.

So yes, when markets crash, the money literally does vaporize.  Because it never existed in the first place.

Sounds like Kiyosaki's narrative.  He's gone a bit nutty lately, but his conclusions are correct.  And he follows the right people.  He just doesn't really understand the economics.

Also, bear in mind, the real estate market is not uniform throughout the country.

I am a broker in Fayetteville and I think it is a strong market with good prospects.  I like to approach this from a macroeconomic perspective.  I think over the next 15 years, we are going to see a lot of the American housing market get turned upside down and shaken out for loose change.  I have other posts expounding upon this summing up to dozens of pages and several thousand words.  Main points would be these:

1) The world is in economic decline.  This will cause a lot of commerce to be shut down.  Expect many cities to become somewhat Detroit-ified.  

2) The federal government will go to war era measures to debase the currency in a bid to rescue its (and state and municipal) balance sheets from insolvency.  This should be a tailwind for real assets.

3) As the retire, Boomers will be selling their large houses near the urban centers and moving to low cost suburban areas with cheap real estate and low taxes.  See: parts of Florida, parts of Texas, The South, The Southwest, some rural areas broadly speaking.

4) Unique to places like Fayetteville is the military. The soldiers on Fort Bragg (largest base in the world station-wise) keep the economy of the entire area thoroughly stabilized. It also creates uniquely opportune investing conditions. The soldiers are constantly turning over properties, so there are usually properties available to flip or BRRRR. But the transience of military life also means that there is a demand for a large supply of rental properties on the margin compared to other markets.

Regarding Fayetteville specifically, we've had prices run up over the last couple of years, but we've also had rents surging.  I think there is still confusion about where the numbers are settling, but we still beat the hell out of other domestic markets.  And if you put stock in my macro fundamentals, then it doesn't really matter.  If I'm correct, then the appreciation is only beginning.


I could go on about this in much greater detail, so please feel free to PM me if you'd like to message more or even get on the phone and chat.

@Marc Estepa I'm local here in Fayetteville. If you want to message me to arrange it, I'd be happy to discuss further in person. It's a huge discussion involving major life choices for sure. Helping people understand the ways to think about investment (real estate and otherwise) is probably my favorite part of my work (broker).

I always recommend this to new investors.  Don't start by "building a team".  If you're new and you don't know what you're doing, I think you're much better off finding a broker on whom you can rely and tapping into their network.  Benefit from the fluency of their relationships with their preferred vendors.  It will be immensely more forgiving this way.  Reshuffle as many times as needed going forward.

@Łukasz Juraszek it doesn't work if you don't consider the future value of present money. Virtually any deal will net you "outsized" yields if you pay in cash. But the real cost of paying cash for a $500,000 deal is $2,000,000 worth of additional deals all financed at 80%.

TL;DR - The rent rules only apply in reference to 70-75% LTV deals.

@Gail Greenberg find a house that's worth about $200,000. At our interest rates, your mortgage will be around $1,000, just figuring. Then insurance and taxes depending on your area might run another $400/month. Then we'll just throw in some capex and repairs and other opex and just call it a total $2,000/month in costs. So here's the trick. The property you buy; you just have to rent it out for $12,000.00/month. And there's your six figure passive income from one property.

Now, obviously, I'm not being serious here. But I would say a lot of investors take a very uninformed approach to what they are doing. Interest rates are low right now. Money is trying to move into real estate markets. I think the sellers have smelled out the BRRRR strategy because I've noticed distressed homes starting to go for more and more recently.

Often I'll have a comtact call me and explain that they're "really interested in multi-families and BRRRR's" of course this is because multis have good numbers (on paper at the very least) and BRRRR's enable the turning over of capital. But as you are probably aware, these are already immensely popular. The market gets crowded. The 80% return flips are just gone. BRRRR isn't what it used to be. And more than this, if home values start going down, a lot of people are going to be under water in their homes. You gott start thinking long tern. That's when you make your principal payments. There is no way to establish obscene amounts of money/income in a very short period of time.

@Justin TahilramaniI'm inclined to agree - I think you make some good points. I actually have a very unpopular prognosis for appreciation in the Fayetteville market over the next decade.  For one, it's kind of perverse, but I think that if the military downsizes, it will actually have the effect of *increasing* the station.

I am not sure I'd really know the best way to even discern this, but I wonder about some way to examine dollar flows throughout the city and see if you could track the dollars that come from Fort Bragg and watch just how many times those dollars change hands before leaving the city.  I have to imagine that we would find it to be one of the highest volume *and* highest internal circulation urban economies in the world.