All Forum Posts by: Eric Li

@JingJing He, good point on the rent-control angle. that's on my radar to look into, but curious if you have any resources or summaries of key, relevant rental laws that you've come across?

@Christopher Giannino, guess I need to learn from your experience! Will do my homework to analyze, buy right, and jump on good deal. appreciate it!

@Andrew Muff, appreciate the call out about the stock market hitting down payments. To hedge against that risk, my down payment is pretty conservatively invested and not too stock heavy. I think you're probably right that I should act if I find a deal / cash-flowing property.

@Patrice Penda, great point about getting into the game so I'm in a better position to act if a downturn does hit. And love the tip about buying a house that needs repairs to build equity and shelter against a recession.

Gotta get my butt into gear, thanks for the push folks.

@Nathan Platter, it sounds like we are indeed alike, and that action is key once I've done my homework and planning. Thanks!

@Christopher Giannino, I agree I can save a lot each month via house hacking, even if a downturn were to hit, appreciate the push!

@Logan Allec, sounds like the right game plan, especially with 3.5% funding. Will be buckling down to find those deals and opportunities.

@Michael Guzik, shout out to a fellow Texan (I grew up in Houston). I think it's a great idea to aggressively look for deals that cash flow and to learn, network, and gain from that experience like you said.

@Steve DellaPelle and @Mike H., great idea about keeping my eyes open and being ready to move quickly when I spot a great deal. Thanks.

@Account Closed, you're right I can't impact any of those assumptions, and I agree sitting out could mean missing out on growth.

Thanks so much for the great advice folks. After all this, I think I'll be hunting for a good deal and getting my financing lined up so I can jump when I find the right deal.

Hey Joe, thanks for your input! You're absolutely right that compared to SF, Oakland is relatively depressed. At the same time, median home prices have about doubled in the last 4-5 years (see Trulia trends) largely driven by how crazy SF house prices have gotten. When a downturn hits, I expect all of SF housing to take a hit, with Oakland included in there.

Definitely agree that appreciation is icing on the cake and that cash flow should be the priority. With that in mind, it still seems like buying a better house or one at a lower price point in a recession is the right move since lower price point means lower mortage, PITI, etc in a world where rents would not be hit as much in a recession.

But, you're right I cannot predict the future, so if I think rental market is strong, that is a case for acting now rather than waiting for something unknown ahead.

Saj, good push there. Sounds like your position is that strong migration trends, limited housing supply, lots of companies in the area means house prices are unlikely to fall right? What else do you think ensures a drop isn't going to happen?

My hunch about a drop comes from the fact that the last 3 downturns resulted in 10-27% drops in housing values (see data). We've also gone quite a bit past the last peak in 2008. The tech sector is a lot more established now however, so that would insulate the bay area unless there's a shock to the tech sector.

What do you think? Am I way off? What do you think I'm missing?

Hey Cara, I wish I had a crystal ball too =). I can't predict when exactly a recession will hit, but I am pretty confident one will hit in the next 2-3 years. I definitely agree that a recession matters less if I have it rented out, it's cash flowing, and I don't need to sell. 

But, when I buy makes a big difference since buying now towards the peak of the market means my $ gets me less house, in a worse location than if I waited, and I get less appreciation if I buy at a higher price point now vs later.

What do ya think? Best to join in the market now and evaluate as market changes?

Hey everyone,

Last year, I started looking at multifamily property in Oakland to house hack so I could live cheaply / free while building equity. While the cash flow and numbers can work with the right property, I think a recession is 1-2 years away, so buying now could have some drawbacks since I only plan to stay in the area for ~5 years max.

Below is how I'm thinking about it, but what do you think? Am I off base, have I missed something?

To test my thinking, I created a simple model that projected total cash flow and equity over 5 years if I:

1. Bought a good, cash-flowing MFH now and recession hit in 2019
2. Waited and bought an MFH in 2019 during a recession
3. Waited and bought an MFH in 2020 during a recession

The model assumes that a recession results in a 10-20% drop in housing prices which rebound over 1-2 years. If I don't buy, I would rent for $1300-$1400 / mo by living with a roommate (what I actually do now).

Based on the model, I think waiting to buy makes sense for a few reasons:

• Buying during a recession is 15%-40% better from an equity and cash flow perspective when compared to buying a deal right now. This is driven by better rent:price ratios during a recession, not buying high and going through the rollercoaster of house value fluctuation, etc.
• I can afford a house in a better location once house values fall in a recession

Obviously, waiting to buy obviously only works if I am still employed and can get a mortgage approved in a recession. I think I can make that work given my work situation and how much I can save each month to meet higher down payment requirements when lending tightens up.

Thanks in advance for your thoughts!

Eric

Hey everyone,

Last year, I started looking at multifamily property in Oakland to house hack so I could live cheaply / free while building equity. While the cash flow and numbers can work with the right property, I think a recession is 1-2 years away, so buying now could have some drawbacks since I only plan to stay in the area for ~5 years max.

Below is how I'm thinking about it, but what do you think? Am I off base, have I missed something?

To test my thinking, I created a simple model that projected total cash flow and equity over 5 years if I:

1. Bought a good, cash-flowing MFH now and recession hit in 2019
2. Waited and bought an MFH in 2019 during a recession
3. Waited and bought an MFH in 2020 during a recession

The model assumes that a recession results in a 10-20% drop in housing prices which rebound over 1-2 years. If I don't buy, I would rent for $1300-$1400 / mo by living with a roommate (what I actually do now).

Based on the model, I think waiting to buy makes sense for a few reasons:

• Buying during a recession is 15%-40% better from an equity and cash flow perspective when compared to buying a deal right now. This is driven by better rent:price ratios during a recession, not buying high and going through the rollercoaster of house value fluctuation, etc.
• I can afford a house in a better location once house values fall in a recession

Obviously, waiting to buy obviously only works if I am still employed and can get a mortgage approved in a recession. I think I can make that work given my work situation and how much I can save each month to meet higher down payment requirements when lending tightens up.

Thanks in advance for your thoughts!

Eric