All Forum Posts by: Gareth Fisher

I'm in the process of deciding if I would like to acquire another rental property or pay down more debt.    What metrics do you prefer to use when assessing the risk of adding more debt to your portfolio? 

Thanks in advance.

If you have to ask this question... I would say wait.     There are lot of other assets or investment vehicles that can be purchased such as stocks, flipping cars, flipping rvs.   Etc   that are not as much of a long term investment vehicle.

No one can predict a crash.  Period

However there are currently lots of indicators of a recession looming which is different then a crash.

It is and has been a sellers market for real estate....meaning deals are harder to find.

Multis it becomes a little more complex, rents typically don't decrease in recession, depending on your asset class.

So they can be a nice safe haven, they will also protect you against inflation.

However I would first consider looking at your overall finances.   What is your debt to equity ratio, debt to income, where are your cash reserves at.   Are you positioned defensively or aggressively.   

Typically in late cycles risk reward factors would point towards waiting on purchasing any major purchases.  However if its truly a deal and not speculative deal.   It may be worth jumping on.   For example even though the market is over bought.  Boeing was not after the 737 crash.     

I personally am in a holding pattern and am paying off debt to get into a more defensive position.  I am still doing flips but have slowed my growth to one flip at a time.   I am focusing on generating Cash through my contracting business.  To increase my cash reserves.   

A good place to put money right now is in federal bonds.  The TLT  can be purchased through the robinhood app.  JMO

What boom?   Economical data both globally and nationally have been slowing since last summer.

Jen, you are absolutely correct.  Most wholesalers I have met keep the best deals for themselves.  Multis are super tough to come by unless ur looking in the ghetto.  I am still finding sfhs.  Maybe consider an air bnb strategy?  

Hershey is a hot market for it.  

The higher cash flows help contend with the higher purchase price.

Best thing I can tell you, is think outside of the box.  I have a couple new ideas im looking to try. 

This gets pretty complicated pretty quick.  For starters always maximize your employer matches. With your 401k.  You don't have to worry about losing money because of cost averaging. In another words, as you put monthly payments away, if the market goes down you average purchase price will go down, as the market goes up and you make money, your average purchase price will also go up.  If you see it is down, you can buy more decreasing you average cost.   

When choosing to invest in real estate.  I would first look at your debt to equity ratios and debt to income.  Yes buying rentals will increase your income but it will also increase your debt.   Debt is a killer.

Conservative Debt to equity ratios would be 40-60 aggressive would 60-80 imo.    I see no reason to be aggressive right now giving we are in late stages.  So I would look at your overall debt compared to your assets and get that in line first, before investing in more debt.

If you don't own a home currently, buying a duplex and living one half and renting out the other is a great way to start, with out taking on more debt then required.

If your looking to invest just to invest there are plenty of other ways to do with our aquiring debt.  Flipping cars, cell phones, kids toys etc.  Swing trading/ Investing in stocks, Riets, bonds etc.  Starting a side buisiness.  Income and cash are king, developing ways to make cash with little amounts of debt is the name of the game imo.

The easiest way by far to  accelerate your growth is by decreasing your expenses.  I use the mint app to track all of our spending.   Becoming a lean machine this will allow you to maximize income.

 So this would imply Mortgages are stable?  I get that right now things are fairly stable, but couldn't one argue we are standing on a house of cards?

 I concur the average person doesn't understand even basic financial planning.   Recent statistics came out stating something along the lines of 7 million people are now behind on there car payments.   A big part of the markets is based upon consumer spending from what I understand.  I wonder what percentage of consumer spending are folks spending money they should be saving.

I see the same with investors consistently maxing out ltv refis.  Making the basic assumption that the rents and home values will always go up.  Many bears are in the camp that the credit bubble has supplied much of the appreciation we have seen over the past 10 years, and the trend is soon to break down.  I don't hear many investors talking about though.

 I have cash in the bank about 6 months of reserves, including personal and business, what other steps have you taken?

Have you lowered your debt income or debt to equity ratios and how agreessively your buying properties? I'm pretty concerned because I'm young and just started a few years ago.  I know 2 that no 2 recessions are the same and there are a wide variety of opinions.  However the large amounts of debt out there have me concerned after seeing how fast the algos can sell off in the market.

I'm referring to the fact that the most of the central banks in Europe  are printing money at 0% and still can't raise rates due to sinking economical data.  U.S. can't get above 2.25.     Federal Government is in 22 trillion dollars of debt adding 4 billion a day.     

Corporate debt is an all time high.   Borrowing money to buyback stocks.

Car loan defaults are up,  Credit Card debt all time high, school loans all time high.

The present state of the economy many arguing is nothing more then a house of a cards.

Because this will put you in a more defensive position.  You will have a higher income and more equity, with less debt.   50-60 is ideal imo.    Unless they are non recourse loans, then by all means borrow away.