All Forum Posts by: Will Barnett

Mortgages that have been underwritten since 2009 seem to be rock solid.  We are in a low supply environment.   Is this low supply a result of a California like effect that has spread to other major metros nationwide?   Are builders not able to build small entry level homes because of high land prices due to limited available space and/or high permits and fees thus not being able to make a profit?  I'd like to get some feedback from anyone with experience in this field.

Wholesalers are sending me 10x the number of properties they were a couple of years ago, and the majority of them are high end flips.  I think we are in the 7th inning and have to wait for sustainable wage growth and oversupply to signal the top.  Even when that happens, it will probably just be a run of the mill recession and nothing crazy like 2008.  I've unloaded part of my portfolio as the prices are just too good.      

Wage growth is not the same as employment.  I'm talking about being able to afford rising home prices. Of course this varies between markets, but overall wages are stagnant nominally, and some could argue they are negative when adjusted for inflation.  

I'm not saying this lasts forever.  I just think wages lag everything else and mark the top.

Prices and rents are going up while wages remain stagnant.  Somethings gotta give.  The lack of new small starter home supply puzzles me.  All of the new developments around me are near mcmansion level.  My theory is that when wages finally begin to rise and we start to see more lower end builds that will mark the top of the cycle.

Commodities speculation has broken the oil market. I know I'll get flamed for stating this, but I can't see it any other way. It is no coincidence that the drop in oil started almost to the day that the CFTC announced it would be investigating possible manipulation in the market. Then you have Henry Paulson and mainstream media market analysts say that futures speculation has nothing to do with oil prices, and up they go again.

It almost amounts to hoarding, which is why India banned agricultural futures because people were starving. Can the US do this? Perhaps a temporary moratorium or maybe some limits on trading are needed. If companies are involved in the production and distribution of oil then of course they should be allowed to trade as a hedge.

The solutions aren't easy but I am pretty sure that regulations on commodities speculation would drop oil prices by at least 15 percent within a week.

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From my experience, cash on cash returns on real estate is 10-15%. So on a 45k investment you cash flow 4500 to 6750 a year. The real advantage of real estate is being able to leverage considerable amounts of unrealized equity, which creates and accelerates wealth.

For example lets say you used that 45k to purchase 4 homes for 70k each but had market values of at least 100k each. Realistically your cash flow from those rentals would only be about 400 a month, but you've instantly gained at least 100k in unrealized equity. So while cash on cash is 12% your total return before taxes after one year is over 200%.

For a monthly cash flow of 2250 you would need an investment of about 270k. A couple of years of the method above might get you there. At least that's what I'm trying to do

So an apartment is valued like any other commercial business, right?

If I wanted to raise the value I would
- increase income (raise rents, vacancy)
- reduce expenses (capital expenses at the time of purchase to reduce maintenance costs?)

If I did this, say in a three year period, is it plausible to refinance into a non recourse loan to pull money out tax free yet still keep the income producing property, with lower cash flow of course?

Sorry for the noob questions but I've only dabbled in single family and am considering going to multifamily in the future, as it seems that's where the real money is made.

I kinda like the big boys like Bank of America and Wells Fargo, maybe even Wachovia. Those guys have to bounce back. It's just a matter of when.