All Forum Posts by: Rob Cee

Very good post @Tony Castronovo.  I'm a believer that you can learn a lot more from hearing about the war stories vs. the successes.  And most people are very willing to talk about their successes, but no so willing to talk about their losses.  Great job with this thread Tony.

This was a really excellent thread.  Some incredible posts by @Brian Burke and @Jared K.   It would interesting to hear more stories of syndications that went bad and why they went bad, how much did investors lose, what they asset class was, etc...   I would like to hear some horror stories.  Even a syndication where there is no principle loss but a zero return could be looked at as a significant loss.  Having a decent chunk of money tied up for 5 years and have it make 0% those 5 years would suck.  I'm sure there were some syndications started in say 2005-2007 that had some major carnage.  

RE markets from 2009-2012 were largely flat and since 2012 have been mostly going up and some places straight up.  Not many people have been losing money in real estate for a while now, so there are probably not a lot of bad syndication stories lately.  Apartments especially have seen such a huge run up since 2011, it seems like it would have been hard to lose money on a apartment syndication started say after 2009.  I think another important factor in choosing a sponsor I didn't see mentioned, would be their record with the asset class they are syndicating though prior market cycles.  How did things work out for them through prior cycles?  Someone who has been syndicating successfully in one asset class though multiple market cycles would get big points in my book.

Maybe try asking the employees of your local home depot or lowes?   Busy investors may not want to share their handymen for fear they will get busy when they need them.

Having a been a airbnb traveler, I have even seen people even put old vans with mattresses in them on airbnb and charge $35 a night. Old van that doesn't run cost $500? That's a pretty good ROI. I have also seen old RV's on airbnb sometimes for $75+/night. You can probably find some really cheap used RV's and get a nice ROI. But your tiny house is much nicer!

I think rent rates and vacancies were very different in different areas during the downturn.  I think outlying areas got hit much harder with rents falling and vacancies then closer in places.  Places in CA like Riverside County, Victorville, etc...  And I know further out suburban areas of Phoenix and Vegas must have taken a hit in rents, vacancies and being forced to rent to crappier tenants.

Also the next downturn could be different as there was not a ton of building of apartment units leading up to the 2008 downturn (there was a lot of SFR building, but not as much multifamily). But this time there has been a lot of apartment unit supply added in certain areas in the last few years (Austin, Denver, Seattle, Houston come to mind). Seattle metro area where I live is seeing the biggest building boom in apartments since the mid to late 1980's. So if there were a tech crash in these tech heavy markets, you could see some rents falling. If you look at the rent charts from the tech crash 2001-2003, rents were flat or fell for years in tech heavy markets. But of course recovered quite well in a few years.

Its also fascinating how the complete opposite of what everyone thinks, including the experts, can happen.  Oil prices tanking are a perfect example of this.  I remember in 2005, all these experts were so sure of "peak oil".  Some the smartest oil experts in the world were calling for $200 a gallon and more for the foreseeable future. There were all kinds of books out like "Twilight in the Desert" talking about peak oil.   There was all this armeggedon talk.  They were talking $10 a gallon at the pump by now, skies being quiet with no planes, societies becoming local again because shipping and long distance transportation cost prohibitive.  But the complete opposite happened in 2014 as oil prices crashed.  No one was calling an oil price crash, I mean absolutely no one.  So some things may happen in the near future that absolutely nobody is talking about right now.

Its interesting as well that we haven't seen a big tech slow down since 2000-2002.  Tech was probably mostly recovered by 2004, so it has been over 12 yrs now that tech has been doing really well.  Places like SF Bay, Seattle, Austin, Boston and Denver are very tech heavy places, and all have boomed tremendously in the past 3-4 yrs.  Some see tech now as an industry that could never have a deep downturn.  I was in tech in the 90s and through the crash.  And it's hard to believe now, but there was a lot of hopelessness, unemployed engineers, and a big over supply of software engineers in 2002.  I'm very curious if this type of scenario could happen again, and what the effect would be on the sky high RE markets in SF, Seattle, Austin, Denver, etc...  LinkedIn stock tanking by 43% in one day got me thinking about those days again.

I agree that the ingredients this time are very different than 2007. This time loans have been very solid for 8 years now, big down payments in many cases, many cash purchases, low levels of building SFR's (virtually supply being added), super low SFR inventory in many markets, etc... As stated by another person, 2004-2007 was RADICALLY different with all the zero down, stated income whacky-a** loans going on. There is none of that now, it's the opposite, lending is back to the 1950's. I also think 2004-2006 RE was seen even more of a can't miss investment than it is now, there was truly a gold rush fever. I also think banks will be very slow to foreclose this time, they will extend and pretend again + all the new consumer friendly foreclosure rules (2008 they dumped REO on the market all at once which tanked prices)...this will prevent large amounts of inventory piling up.

But I do wonder if the economy every really truly recovered from 2008, or was it just entirely due to the Fed keeping zero interest for 7 years & pumping trillions in through QE (this monetary policy last 7 years is totally unprecedented as far as I know, never been tried before in USA history, so we are in uncharted waters from this respect).  Were real estate and stocks merely 100% propped up by the Fed for the last 7 years?  Japan has been trying unsuccessfully with low rates and QE for over 25 yrs to re-inflate stocks and real estate since their crash in 1990.  Could this be the future of the USA?  Stuck in ultra low rates and low inflation?

It's interesting in the Seattle area where  I live, I swear there are dozens and dozens of real estate investing monthly meetings and groups.  And more seem to pop up weekly.  You hear people talking real estate at parties, in cafes, etc...  People are once again hearing stories of friends and neighbors having large amounts of equity.  These to me are signs things are getting heated up.  I doubt 15 yrs ago there was more than 1 or 2 RE investment groups in all of Seattle.  This all adds to more and more regular people seeing real estate as a way to make a lot of money.  And add to that the tremendous amount of Chinese investment the past few years in every type of real estate asset in the U.S.  A lot of money has been chasing RE starting in say late 2012.  

The easy money seems to be gone from real estate.  2009-2012 there was a lot of upside with little downside.  2009-2012 there was a classic "margin of safety" and you were buying assets for their "intrinsic value" as Warren Buffet likes to say.  But today RE seems a lot less attractive to me.  You have to search a lot harder for lower margins, lower cash flow, lower cap rates, lower returns, less upside potential, and more risk of downside.  Rehabs are much more extensive (gut rehabs, additions, etc..) in flips than they were a few years ago.  Apartments take a lot more searching to find a decent deal with less upside and lower cap rates.  

I do agree that good flippers who are in and out in 6 mos can always find deals and make money in any market (except maybe a free falling market like early 2008).  

 This is a very good post by @Ann Bellamy. I invest with hard money brokers who lend my money out on flips and other projects. And you can see this same dynamic with some hard money brokers. They will push the ARV/value or have their in house appraisal push the ARV/value because they want to make the loan. They do not get paid and make the points unless they fund loans. They might fund less loans if the were more conservative with values. So as an investor in hard money loans you have to be very wary of this practice of pushing values. Because with a default in a market downturn a hard money investor can get hurt bad on a loan where the value was pushed and bad comps used.

@Dave Lee how is your rehab coming along?  Did you hire a new contractor?