All Forum Posts by: Mark Ferguson

@Mark Ferguson keep in mind buy and hold investor got wiped out in 08 melt down by the hundreds of thousands... its a complete misnomer that buy and hold will insulate you from a crash .

If this was the case I would not have ended up owning 214 homes that were all rentals that I personally foreclosed on.

Better markets like we are talking about your statement is basically correct.. but markets like Vegas PHX Atlanta, FLA those buy and hold investors got wiped out just like the appreciation investors...

And why do you ask.. Well many renters are in the construction trades.. construction went to nothing in many markets all those folks lost there jobs and defaulted on the rent.

Tenants in SF are not by and large construction workers ( maybe own the construction company but they are not the labor force).

So in your market your statement could very well be correct.. ergo don't sell them to move to a market that got crushed in the down turn you take on risk when you don't need to for a very small increase in cash flow which is not going to really change your lifestyle.

and for what its worth some of this happened in Denver as well.. One of my best friends had to let 2 shopping centers go back to the lender because of 50% vacancies and he could not handle years of negative cash flow... One of them was brand new and never had a tenant.

Think of the new crop of syndicators that has bought in the down turn a guy like Ben who post a lot here he only thinks its a deal if its 09 or 2010 pricing.. and whatever it is that he may have bought was probably from failed landlords.

when the crap hit the fan it affected all asset class's with the top teir markets like we are talking about being somewhat insulated.. the high cash flow markets got crushed and I lived it I know.. !!!

Thanks Jay, I am curious what you thought of the investors that lost it during the downturn? Most of the ones I know were over leveraged and didn't have much cash flow. But, I was not nearly as involved at that time as you were. I buy so that I can absorb a 30 percent or higher decrease in rents and still make money.

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Originally posted by @Tommy Dang:

@Mark Ferguson, those guy who go bankrupt because overleverage, and not have much cash preserve. If you have 20 units, pay off 10 units, and have cash preserve, then you should have a lot of cashflow, then cash out refinance a few and buy more, and keep repeat. When you have more units you can cash out finance every 1 year or 5 years.

Do you want to buy 20k properties 20 -30 years ago now worth 60k, or you want to buy 80k properties now worth 1.5M.

@Jon S. we have it all here, greater boston , education, bio,hospital,tech,financial,entertainment, you name it.

Tommy

I never said I was buying 20k properties. I'm not sure where that idea is coming from. There are lots of cash flow opportunities in the 80k to 120k range.

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Originally posted by @David Nolan:

This is an interesting thread. There are lots of suggestions of where and what to buy but the two most knowledgeable contributors, i.e. @Account Closed and @Jay Hinrichs are not only passing on investment advice around real estate, they are passing on advice on wealth creation based on their actual EXPERIENCE. Have these two guys succeeded? I would say so. So what are they actually telling anyone who cares to listen to their comments on this thread? Not where to buy, but WHAT TO DO! This is the most valuable advice anyone who wants to succeed in real estate can take. It may not be exactly what @Mark Ferguson wants to hear, but it is good advice based on real life experience from guys who know what they are talking about. If it were me in this situation then I would be listening to them and seeking more counsel from either or both of them, one on one if possible.

Good luck Mark with your endeavours.

Thanks Bob and Jay for the insights.

I appreciate everyone's input. However, Bob siad I shouldn't sell because I would be destroying future apprecitation potential and Jay said I should be a hard money lender or invest in Forrest land. They aren't exactly giving the same advice.

I listen to everyone here and their opinions. So far it seems to be a cash flow verse appreciation argument and I am a cash flow guy all day long. I hope for appreciation, but that is not my main goal.

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Originally posted by @Tommy Dang:

@Jon s. @Jay hinrichs all good points, spot on, but I don't see you mention about boston, Massachusetts, appreciation and some cash flow.

@Mark ferguson, I am consider a newbie, but cash flow won't make you weathy you should know that, go for appreciation and some cash flow, like boston.

buy quality good appreciation , not quantity cash flow.

Tommy

I have to disagree. Unless you are simply talking about wealth on paper. There were a lot of dot.com multi millionaires who ended up being worth nothing. They had net worth in the hundred of millions and what did it get them? Nothing. Therents were a ton of real estate multi millionaires betting on more appreciation in the mid 2000's who went bankrupt too.

However, the real estate investors who invested for cash flow survived the busts and even made money through the down turns.

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check this out. http://www.bloomberg.com/news/articles/2015-06-08/...

Denver millennials need to make $2,000 more a year to afford the median home in denver. In San Francisco they need $60,000 more and in San Jose $80,000 more! About 10 percent of people in San Francisco can afford to buy the median procedures home there compared to 57 percent in the entire US.

I'm not saying the market will collapse, but i certainly would not invest there assuming prices will forever increase. Because prices are so high now, a 50 percent increase would make it impossible for anyone except the extreme rich to buy there. There is such a huge gap between what people make and what houses cost that it doesn't seem sustainable to me. Especially compared to new York city.

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Originally posted by @Jon Q.:

I only own a few rentals in the Bay Area and don't actively invest here, but rents have skyrocketed...and will likely continue to rise as SF becomes an international city attracting entrepreneurs from all over the world...

As an investor I see more than tripling and incomes not coming close. I wouod be worried that San Francisco is pricing itself past the affordability balance.

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Originally posted by @Mike F.:

Originally posted by @Mark Ferguson:

It surprises me how many people are investing for appreciation. Cash flow is so freaking awesome.

I don't know what to really say with statements like that from someone like you. You've had a lot of success to still be saying things like that, I don't get it.

Net worth is awesome, cashflow is meaningless. The only thing that matters in the end is a high net worth. Cashflow is akin to your salary at a job.

You'd rather have $7500 a month job?

$1,300,000.00 in cash?

You should think about start paying off your mortgages, start with the mortgage with the smallest amount, when that one is paid off apply the new extra cash flow from that one to the next smallest dollar amount mortgage... in the mean time sell the worst 3 properties you own and use that as seed money to start buying in Florida. In a couple of years your net worth will be 2 million.

1.3 million in cash is not the same as 1.3 million in equity. Come one, cash flow comes with no work from me. My properties are managed and I get checks every month without working. Comparing it to a job is ridiculous. Not to mention you can't count on appreciation. How many people went bankrupt in the 2000's thinking that prices would always go up? All they had to do was buy anything and make money.

If you saw the point to this thread you would see that I think I could make much more than 7,500 from my 1.3 million. More like 20k a month pretty much guaranteed for life. And it will go up over time. The 1.3 million in cash would be eaten up in 6 years if you used that same 20k a month.

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Originally posted by @Jon Q.:

@Mark Ferguson
I live in the San Francisco Bay Area. Because of the high prices, investors here are buying properties were they don't plan on generating a return for the first 5 years. They have a very long-term investment period (ie. 10+ years). Rents are increasing so quickly, particularly if you can buy a non-rent controlled property, that after 5 years, the properties cash-flow + appreciate rapidly. San Francisco rents and prices are the highest in the country for a reason...DEMAND. Oakland is the hottest rental market in the country.

Primarily Reasons for high demand:

+Strong Population Growth

+Strong Job Growth

+Strong Export Market (primarily tech, but other high-value services)

+Attractive Climate

+Limited space to build

The risk versus reward is not there for me.

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Originally posted by @Matt R.:

@Mark Ferguson

I really don't know how Trump made his money. He says he bought casinos for cash flow and invested in RE for appreciation. Your take on appreciation would not be normal in LA I think but probably normal in most areas.

Speaking of appreciation the top 3 in Cali since 2000 are:

LA 138%

SF 116%

SD 115%

Those are also the top 3 for the nation. So folks who invest in those towns are likely motivated by appreciation historically both in value and rents. I doubt that same level appreciation motivation exist nationwide. James, Bob, Jay are all Cali dudes so that is their experience. Jay knows dudes who have 100 SFRs in cash flow country and they could give a you know what about appreciation.

That is a really interesting stat. So if they have to pay 10 percent in selling costs when they sell. That bumps the returns down to 128, 106 and 105 percent in 16 years? That is actually a pretty horrible return over 16 years, at least real estate wise and simply looking at appreciation.

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Originally posted by @Matt R.:

@Mark Ferguson I think very few areas have appreciation historically built in. Most areas after inflation is factored do not appreciate. This is a matter of being a product of ones environment. Greeley as far as I know is not an appreciation market historically. ( minus your forced appreciation part) Greeley being partially tied to oil had a run up? It seems your appreciation was partially based on circumstances that might not repeat vs Denver proper or like LA perhaps. Now that oil futures are $50 a barrel into 2020 moving chips to another table might not be a bad idea today. Since your goal is cash flow almost any other area around will provide more of that. The point I think Jay, Bob, James make is cash flow is not equal to total profits in the long run. Trump defines REI as an appreciation game (NYC) and most investors are not in LA or NYC etc so REI is a whole another ball game.

My two pesos from 1000 miles away:)

Appreciation looks great on paper. Didn't Trump make most of his money through development and forced appreciation as well (besides inheriting it)? And you may be right about Greeley, but we have had a steadily growing population basically forever. Our prices tend to follow Denver trends although they are lower. Since the gas prices tanked, our market has not dropped at all, in fact it has risen.

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All Forum Posts by: Mark Ferguson

Mark Ferguson has started 247 posts and replied 2799 times.

Post: Should I sell my Colorado rentals and invest somewhere else?

Post: Should I sell my Colorado rentals and invest somewhere else?

Post: Should I sell my Colorado rentals and invest somewhere else?

Post: Should I sell my Colorado rentals and invest somewhere else?

Post: Should I sell my Colorado rentals and invest somewhere else?

Post: Should I sell my Colorado rentals and invest somewhere else?

Post: Should I sell my Colorado rentals and invest somewhere else?

Post: Should I sell my Colorado rentals and invest somewhere else?

Post: Should I sell my Colorado rentals and invest somewhere else?

Post: Should I sell my Colorado rentals and invest somewhere else?