All Forum Posts by: John M.

There used to be a saying "Don't fight the Fed".  Guess this time it's different, lol.

@Jay Hinrichs  I agree Jay!  My plan is actually to move to Vegas in 3-5 years (wish I could move sooner but my job prevents it).  I started going there since about 1990 from SoCal for fun and vacations so i've watched it evolve over the years from a dusty gambling town to an international resort destination and I see huge opportunity there over the next decade - it reminds me of LA around the Sunset Strip and Hollywood in the 80s when it was run down before billions of dollars started flowing in and now those areas are some of the most expensive in the city.  If only I had bought then I could be retired, lol.

How do you like Summerlin?  Are you there part time between Oregon?

@Henry Murray Hi Henry and thanks for posting, I can be a data junkie so this is really great info for someone like me!

I am in the same boat as you, with regard to prices all over California.  So I invested out of state in Nevada (Las Vegas).  Although the cash flow is I think average, the appreciation potential is great, the population is in high growth mode, as well as job growth.  So I think there's a lot of future rent price appreciation potential that other cities may not have which will benefit cash flow. Plus it's right next door and I know the market well.  So for me it ended up being the perfect market to invest in.  

Have you found any particular markets based on your analysis that you like?

@Account Closed  I am a Joe Rogan fan and like Peter Schiff as well (I even mentioned Peter in one of my earlier posts in this thread).  I saw that podcast as well as another one they did a year to two ago.

I do like Peter's common sense approach to economics, however the basis for his entire thesis is that a dollar crisis would happen when investors realize that the Fed can't normalize interest rates.  I do agree that in the next economic slow down the Fed will probably go back to ZIRP (possibly even NIRP), however I don't think this would necessarily cause investors to have some moment of clarity that they didn't have before.  Could it happen?  Sure.  Will it happen?  I don't know, that could be a stretch since he's trying to get into the minds of investors and predict their behavior.  So while I think he makes very good arguments for his case, making bets on human psychology isn't something I am willing to do.  Personally I am planning for some possibly rough times ahead but not the end of society as we know it...

@Neil Quinn  Rent to me is an expense yes, but equity isn't guaranteed and that can easily be wiped out with a 10% or even 5% correction in your local housing market which isn't unreasonable.  Even appreciation isn't guaranteed, markets can go flat for years.  In the meantime you still have potential cap ex that I won't have as a renter (i.e. new roof, new AC, plumbing problems, etc). Then if you want to sell you have broker fees, escrow fees, title fees, etc, that can be tens of thousands of dollars.  In my opinion unless I were planning to own that home for 10 years or more, it doesn't make sense to anchor myself with the debt and the expenses which in totality may not be much of a financial advantage over renting, only to limit my mobility.  Why tie an anchor around my neck and also give myself all that potential financial anxiety and stress?   

@Neil Quinn  I also live in a high COL area, so I don't own a primary residence, but I own investment properties out of state (Las Vegas).  I live way below my means to save money, meaning I rent an older, dated duplex, even though I could more than afford to live in a luxury bulding if I wanted.  Then the money I save goes into buying more properties out of state.  I personally like Grant Cardone's philosophy, "rent where you live, own what you can rent".  Not everyone agrees and I get it, but if I don't want the burden of the debt that doesn't generate income, plus I prefer the freedom to be mobile and I can move when I want, if I have a new opportunity, if I hate my job, if I hate my boss, if I hate my neighbors (and I do hate one of my neighbors), if the economy tanks, etc.  It's simple, I give my notice and I am out, no stress no headaches, no worries about my primary residence negative cashflowing for years (that's called a burden, a liability and a money pit in my book), and free to move on to bigger and better things.  Since I own rentals I still get all the financial benefits of home ownership including appreciation, interest deduction and depreciation (homeowners can't depreciate) and someone else is paying down my mortgage.

Bottom line, nobody should feel pressured that they "must" own a primary residence, if it doesn't make sense for you (it doesn't for me), then don't do it.  

@Yesenia Padilla glad you found it informative, I think it's important for people to understand that real estate isn't without it's risks, especially if you go heavy on the leverage.

It sounds like you have a good start for a newbie, and good you are thinking about leverage.  It's hard to say what's right for each person, since everyone has different economic circumstances.  Personally I use the rule of thumb that if the economy tanked, I lost my job, and my rental cash flow was cut in half for a year would I still be able to eat, pay my bills and service the debt on my properties?  As long as I can answer yes then it doesn't matter if the real estate market crashes and my properties lose 50% of their value or even go to zero (not likely, lol) because as long as I can service the debt, then I can ride out any bad period unscathed.  I think you may just need to take a hard look at your numbers and run a few hypothetical scenarios of an economic pull back to determine what you are comfortable with? 

@Daniel M. Welcome, I am from Sacramento as well and feel your pain of how expensive it is here.   I don't currently own anything in California but own two properties out of state (Las Vegas).  My plan is to continue investing there, I have a good paying job so I live as far below my means as I can to save money and keep investing.  Feel free to connect with me if you want to talk real estate sometime.

 I couldn't agree more Jay - I am not a huge fan of debt myself, I use it very conservatively since I can't avoid it, and eventually I want my properties debt free.  Not everyone agrees with me and I am fine with that, I think Dave Ramsey is a bit extreme but on the other hand there's something to be said for knowing that even in bad times you'll ride it out and survive to prosper again when the tide shifts.  

BTW saw your past BP podcast recently and enjoyed it very much!

 Gotcha.  And I second your thoughts on not buying crappy apartments.  Crap is crap :)