All Forum Posts by: Jason E. Smith

Brian,

It’s very kind what you are wanting to do for your mom. I’m sure this is an emotional decision and without knowing your particular financial situation or your mom’s I’m cautious to give too much opinion. I would just be cautious about taking on such a high cost basis this late in the cycle because when we see the next buyer’s market it will probably cut into your equity. And if you don’t have much equity to begin with you could be stuck pulling even more money out of your pocket to sell if you need to or be stuck with a house for many years and sitting on the sideline when deals are abundant.

Jason

Scott, I guess the term “win” is relative. I think in the coming years if you interview those who “won” deals today, they probably won’t feel like winners. I recommend the book “Mastering the Market Cycle” by Howard Marks. And there was a YouTube video just posted this week called “Be Careful! #1 LIE in 2021 Housing Market” on a channel called Reventure Consulting which features the Raleigh market. But without knowing your exact situation it’s tougher to say. If you’re currently living in a bad school district and want your kids in a better school district or some other safety / life choice, you may need to compete in this market. But if you can wait, I think you’ll see a more buyer favored market in a few years. Best of luck!

Jason E. Smith

Eric, Sorry to hear about your pickle you're in. I’m not sure if you live here locally but my wife and I live in Greensboro NC and I can personally say the rental market is very different today than historically. We were renting a house for $950 a month. When we moved in back in 2017 our rent was what most would consider fair market value. The current market rent for that little house we were renting is now $1,500, which if forced to pay I would personally not feel like I was getting good value at that rental price. This year we were notified the owner was selling. We didn’t want the house but in looking at other rentals and homes for sale we decided purchasing the home we were renting was our least worst option. Unfortunately the home appraised for $15k less than the owner wanted, we wouldn’t over pay, he wouldn’t accept the appraised value so we had to move. We found how tight the rental market is and the soonest we could get a suitable place to live was about sixty days out and rents were way higher than I’ve seen since I moved here in 2005. I think there’s a lot of distortion in the market right now. There was a long time eviction moratorium, so there’s a lot of occupied units right now paying $0 a month and not moving. Luckily that just ended so hopefully that helps but it will still take months for those evictions to work their way onto the market. Some owners of Multifamily may be trying to raise rents of paying tenants to help cover the loss of those living rent free. Covid caused a lot of migration that I think we are still trying to determine how will impact pricing. Homes are selling at all time record high prices. There’s many factors that I see causing issues with people trying to move right now, so I think there is some validity to your tenants story. Unfortunately it sounds like everything is verbal right now. One possible option is to be kind to the tenant and pick a date, say 90 days out, to vacate. Then see if offerpad will allow a 90 day extension. Get both in writing and maybe that could save the deal? I’m not an attorney, so I’m just offering potential solutions. One thing I would say is be nice to the tenants because my guess is you just have maybe a one month deposit and if they get mad they could do more damage than you could repair with their deposit. Getting any move out repair expenses can take a long time if you can even get any. If you haven’t seen the place lately, might be a good idea to somehow go visit and see inside just to be sure to know what condition it’s in. Hope this helps in some way and if there’s anything else we can do to help let me know. Best of luck!

Jason E. Smith

Vinh, what flavor of Commerical real estate?  Office, industrial, Multifamily, etc?

Ryan, I agree with Cody. My only contribution would be to ask your lender how much PMI will be and if it will fall off your payment when your LTV goes below 80%. Then use more liquidity for investment property. Especially with how cheap money is today. Best of luck. Welcome to the area! And if there's any introductions you need me to make to help you out please let me know.

Eugene,

I think your question has a deeper meaning than you even realize right now. As you progress in your investments, you’ll find that time is much more valuable than money and your question is focused on compressing time.

I began real estate investing in 2005, which was the perfect time not to begin real estate investing. The atmosphere was very similar to today; risk on approach, frothy real estate market everywhere, lots of money chasing few deals in real estate, low number of days on market, record prices, etc. At that time I was focused on flipping single family homes in Winston Salem in order to build up cash to invest in cash flow properties to exit the rat race. At that time I knew nothing about macro economics, the FED balance sheet, the DOW to gold ratio, NHI, Mueller's market cycle, etc. I was strictly focused on Winston Salem real estate and not one moment of any of my weeks did I spend any time considering macro economic forces. When the financial crisis hit, it was a surprise to me. I watched about thirty to forty thousand dollars of paper equity erode in a few months. I had a few houses I didn’t want, but I couldn’t sell them at break even and I didn’t have the liquidity to cover the losses selling them. So I rented them out to keep my head above water. I remember about 2008 watching an interview with J Kyle Bass and him explaining how he saw the crash coming, tried to warn people and at that time his investors were up 1,800% while I was barely keeping my head above water. In that moment I knew I was on the wrong side of that trade and I didn’t want to repeat that mistake. Since then I’ve learned about market cycles and the importance of being early. I recommend two books; 1) Mastering the Market Cycle by Howard Marks and 2) Economics in one lesson by Henry Hazlitt.

In 2018 I sold the real estate I had left feeling like we were very near the top. Clearly today we can all agree I was early, I’m confident I’m not wrong, just early. My liquidity in 2018 went into the precious metals market. It’s very much a contrarian investment to US equities and real estate.

So in summary, if I could go back to the start of my investment journey, I would take two steps back and learn macro economics and market cycles. I would also find a mentor who was where I wanted to be in thirty years and find a way to add value to their life in exchange for them helping compress time. I hope that helps.

I think your question is very relevant and I think it should get more attention than my one little reply. I’m going to tag a few people here in hopes to create better dialogue. Hope you have a great week ahead and best of luck in your investing endeavors Eugene! God Bless!

@Paul Moore @Robert Ellis @Kevin Stringari @Dan Handford @Ellie Perlman @Vinney Chopra @Vinay Kolluru @Curtis Waters @Ben Leybovich

Daniel, I'll add it to my calendar and try my best to make it.  I'll tag @Sterling Bohannon so he's aware and can join if he's able.  Thank you for coordinating 

Hey Michael, what cities will you be visiting?  We are moving this week so I’m busy but if you’ll be nearby I’ll see what I can do. Safe travels. Thank you!  

So Peter, would you say there is a shortage of inventory?  Or is there a surplus of fiat currency?  

Chris, you will certainly learn a lot on your first deal. And at a young age, I’m assuming being you're just starting college, you have many years of opportunity to continue learning and growing in your investments. Keep in mind, there is still an eviction moratorium in place, so be extra careful selecting your tenant(s). If there’s anything else you want to ask feel free to contact me. Best of luck!

Jason