All Forum Posts by: Jesse Ottesen

We did well.

I've done it for single-family residential. In 2020 I used the HELOC on my house in New York City to buy a house in Buffalo New York for all cash. In 2023 when the interest rates went up and my minimum payment tripled , I sold the house for a profit. I worked in the mortgage industry when rates were at 20 and 21% and my first mortgage was a bargain rate at 12 7/8. I also remember when cap rates were always nine or higher. As long as you realize that we can see numbers like that again , and you have the reserves to cover it you'll be fine .

I agree!

In August 2023, we sold our Buffalo NY SFR. We never refinanced it as intended, we just kept paying down the HELOC with the rent we received. By the beginning of 2023 our monthly payment started rising as the interest rate kept increasing. By the time we closed in August my interest payment had tripled from where we started. During the three years we owned it we continued to improve the property with a new furnace and some new windows. Since we used always used the Heloc for all expenses we never really put much cash into the deal until the last 8 months when the interest rates went up and we kept it vacant for a few months prior to closing. We got the house on the market in early June and in 8 days we received 11 offers all above asking price. Our final sale price was $205,500. With the improvements we made we had about $150,000 in it. Considering that the only real cash we put in was the $8,000 in carrying costs and sale prep it was a good cash on cash return. We did have several very long weekends of sweat equity in it also. My biggest lesson learned is that being 7 hours away from the property, I was always stressed when winter storms were coming and I couldn't do anything about it. If I can get over that I might go back and invest in the Buffalo area again. PS. I had a great investor friendly Realtor.

As many Syndicators encourage us to go all in now before Cap rates start to compress, were any of them around in the 1980s and 1990s when Cap rates were 8 to 9% or commercial mortgages were 13%?  From an investing standpoint, 2023 feels a lot like 1975.

I got in to my first syndication in February 2022.  The GP team had both seasoned and newer partners.  They have followed their business plan and increased rents above their forecast.  Cash flow has been good however vacancy rates have dropped.  The LPs have only ever received one distribution because the GP team wisely held further distributions because they realized that when the rate caps expire, we are going to have a huge cost to by new rate caps or possibly a cash in refinance.  I did receive good bonus depreciation. However, I think I stand a very good chance of either losing all of my investment or getting a cash call to try and hold on to the property.  Even good syndicators have a rough time with Black Swan events.

In the Oct 20, 2023 BP Money Show, Mindy and Scott did a good job of warning listeners about relying on predictions of mortgage rates dropping back down anytime soon. I don't think they took it far enough.  In 1974 my parents bought their first house with a 4% mortgage.  That was the same year when a 60%/40% stock/bond portfolio would have yielded you a -17% return. Very similar to 2022 with 4% mortgages and a -16% return on the 60/40 portfolio.  As the Fed tried to curb inflation in the second half of the 70s, mortgage rates rose from 4% to 21% in 1981.  It took nearly 40 years for rates to come back down.  I purchased my first home in 1990 with a 12.875% mortgage which I refinanced as rates continued to fall twice over the next 10 years.  I agree completely with Mindy and Scott to not get in over their head.  But, if you find a property that you want to buy and you can afford, historically any single digit mortgage is a good deal!

There's lots of advice on what could happen if I move my SFR with a mortgage into an LLC. Has anyone actually ever had their mortgage called after moving an SFR into an LLC?

I’m planning on doing it in Buffalo New York, but I am cautious of having my loan called.

@Annie R.

Annie,

If you use the search function and type in ‘bad Turnkey experience’ a bunch of posts will pop up.

@Annie R.

One of my coworkers bought a turnkey SFR in Mississippi several years ago. Every month he gets a check for about $250 and no headaches. He might just be lucky because I've also read posts with negative reviews of turnkey properties. He's never even been to Mississippi, that's pretty hands free!

As far as comparing RE to the stock market, last year I was up 45%, this year to date, I’m down almost 5%. I’ve had days where my stock portfolio drops over $100k in a day, that doesn’t happen in RE. It’s all about diversification. Also, I can always sleep in one of my houses, stock certificates don’t even make a warm blanket.