@Karl B., yeah the common sense thing is to build more, but they brought up a real good point on this weeks podcast if you had the option of purchasing an partment complex that would equate to 108/ unit or build a new one for 175/ unit? And add to that lets take that 175/ unit apartment and. Make it section 8 or some other “affordable housing” does it sound like a good investment idea?
@Lake Lutes, oh of course for the 1-2% of us that have chosen a different life or even for those here on BP that have chosen to learn about a different life. This is Intended to illustrate the dangers of where we are headed because the 1-2% will probably not be enough to prop up the US economy or the world economy. It’s a catch 22 in almost every situation. The Gen X population is choosing to stay in the workforce longer tying up those higher end jobs that pay more while the up coming generation is forced to accept the lower paid jobs. All of the work stuff will be based out on the 3rd horseman. Employment post. Because, all of these “horsemen” tie in together. Stay tuned 😎😎 I love rocking the boat to get people to think!
Hello All,
The first horseman, a conqueror with a bow and crown, rides a white horse...
The title is more or less to grab your attention; however, if left unattended it could be the end. This is going to be a 4 part post for the month (1 each week) of what "I" think will cause the economy to crumble if something doesn't change. Affordability, Inflation, Employment, and Education.
Affordability. in this weeks BP Podcasts Ken Mcelory (one of my favorite guys to listen to) has been talking about this housing affordability issue, and to be quite honest its a catch 22 situation. on one side of the coin you have businesses and their wages and on the other hand you have workers and their needs.
Now in a post I made prior I discussed why I am here in REI, because my education is not worth anything. (the following is my opinion) During the last recession it shook a lot of businesses to their core, and this past COVID thing did the same thing but worse. I don't think employers ever got back to where they were before the Great Recession started with decent wages per education levels, and it just got worse after.
Now this would not be so much an issue if inflation stayed where it is supposed to be, which is around 2% with it regularly being around 2.5 %. If you listen to what the FED pushes out inflation is only 5-ish% NOW and inflation is measured by the CPI. In the trading world everyone knows the CPI (consumer price index) is a load of Bull-ish and is highly manipulated, but if its high we buy the dollar, and if its low we sell the dollar that's really all we care about it.
the CPI is measured by what a basket of goods a 100$ (I think) can buy. https://www.bls.gov/cpi/factsh... ( if you care to see the math portions of it.)
So those that live in California and the north east you basically get one gallon of milk and a slice of bread. In the Mid-West you guys can buy an island and a private jet with your 100$ and us here in the south we get on gallon of milk, a loaf of bread, and ONE egg. Those of you in Hawaii and Alaska you guys might be able to get a lick of ice cream if its on-sale.
So, with the joke above everyone gets it might smile, but if the CPI remains true a 100$ in the Ca should be the same $100 in Fl. So, Dub-TF?!?!
Enter the Chapwood index http://www.chapwoodindex.org/. It is not backed by any institution and uses 500$ instead of $100, but it does make sense as to why 100$ is different in other parts of the US.
I live in Houston, Tx so I am going to use an example from my area.
Okay, so from a quick google search of "gallon of milk in 2000" we got a result of 2.78$. so now we go to the based on the CPI milk should only be 2.83$... Well it must be nice to live in Kansas where you plant your chocolate milk cow and reap the rewards of cheap chocolate milk, but everywhere else this is a different story. In Houston according to the CWI (Chapwood Index) our inflation rate is an average of 8.9% so now lets figure out how much our gallon of milk runs. 2.78 * .089= .24. So our price has increased basically a quarter. so 2.78+ .25= 3.03$ how accurate is this? tak a look yourself. https://www.heb.com/product-de... (if you dont, know, but here in the United State of Texas we Use HEB coupons as cash!) a gallon of milk is 3.38$ so we are still not there yet. Its more like 20% inflation, but the point of the exercise is to illustrate the ineffectiveness of the true CPI. All of this is multiplied largely when it comes to housing. if you grasp the concept of the change in a gallon of milk you can grasp the change of prices where the gallon of milk will live after its bought.
"Well, get a better job" How nice must this be right? Well lets talk about that. Everyone remembers when McDonalds caught all sorts of He** for coming out with their "budget" of how their salaries are fair for their line workers. saying stuff like paying 700$/ month for rent and like 100$/ month on groceries and stuff like that... Wages are not keeping up with inflation. Every year if you don't get a raise that is at least the same if not higher than your city/ area listed on the Chapwood index you're falling behind. Plain and Simple. if you do then great you're keeping on PAR to remain the same of where you're at currently if you get more then now you're getting ahead in life. (which is all the more reason to get into REI) :).
So, How do I get a better Job so i can afford to live. Well society tells you to go to school and get a degree. Great! What do you want to major in? "Hmmm I like everything" Great General Studies it is for you. Fast forward 4 years and welcome to the higher education realm. You passed go and you collected a bill of 200$. Student loan debt of 70K$ (being modest) "eh that's alright ill find a job to cover that" Well you better because if you got a sally mae loan the federal government will hit your credit score each number of times you took out a loan. So lets say 4 years of school two semesters a year that's 8 times hitting your credit report for not paying 1 month. well if I cant pay ill file chapter 11. Well, you cant bankrupt your way out of student loan debt. less that 1% of filings allow this.
Well lets find a job. lets use a popular job board like indeed. So, when we do we get a lot of postings. (especially now due to our labor shortage which will be discussed here in a second) we will say that the average wage POSTED (not payed) is 20/ hr. 20/hr is ROUGHLY 40k a year. NOT INCLUDING TAXES. with taxes you're looking at clearing roughly $28,000/ year. Well, now you're a BS/ BA degreed individual clearing 28K$ a year which is the equivalent of making 14/ Hour. ;) way to go hot shot! degree really paying off now isn't it?? ( I used being taxed at 30% and not doing a state income tax as Texas does not do that)
Lets mix things up a bit. (enters COVID-19). it F***** everything up and the governments response is giving out $1000/ week for unemployed benefits (again here in Houston) and 3 stimulus payments, and now monthly child stimulus checks. So, now i have been forced out of work and the government is paying me 52K a year to sit on my ***!! this is the life. Okay COVID step back. Employer calls Susie Q wanna come back to work making the same wage? "Uh, no I got a pay raise to not work AND I DONT HAVE TO PAY RENT! Bye Felica"
Well, now me Mr. employer does not have any workers to work so I cannot produce the same which means I have to charge more for what I have, and now we have forced inflation instead of forced appreciation.
Lets add a little more to the mix.
Lets buy a house on my 28,000$ after tax dollars. you go to the bank and because you have a pulse AND a JOB (because were not trying to graduate a class like that of 2008!) you get cleared for 250,000$. Now, for those in Cali and NE enjoy your VCR box, in the Mid-west you now can buy the country of Romania, and us here in the south we get a decent sized house. Those of you that live in HI and Alaska...that's some nice air to breathe. Just for simplistic sake your monthly mortgage will be around 1000$ your take home from work is $1120 after taxes! (remember 14/hr) (14 * 80= 1120). Soooo, now the majority of your check is going to mortgage not including car and other stuff. not including your student loan payments
Well, i will just rent! I have to make 3X the amount of monthly rent with my pre-tax dollars so I can afford up to a 1000 month rent and my expenses will be cheaper across the board.
Before, too much longer you will not be able to afford the rent because it will go up around 3% a year, and you don't make enough to save for a house. If you think you're going to get a raise, the average MIGHT be 5% a year. Well if not... i don't know what i will do :( "UNCLE SAM I NEED HELP"
This is why this Affordability thing is something that needs to be discussed. Because, unless I live under a rock in the middle of the ocean and my best friend is a sponge this is the trap most American's fall into my self included.
Man, here is what we have here in Texas. They can terminate the lease at anytime, but they must pay rent on the unit (or even partial rent enough to cover the mortgage ) until you are able to get the unit relisted. Check with your states landlord laws if youre able to do this. And see what about the security deposit too.
Ayo girly don't let anyone step on your dreams or goals. In episode 108 of the bigger pockets podcast Grant Cardone said "if you think you can achieve your goals, you did not set them high enough!" Aim for the moon and shoot for the stars!
Yeah almost! But, she likes the idea of moving into the new house! LOL! The house were looking at buying (that's posted in the story) has a built in Mother-In-Law suite up stairs. I amgoing to pitch out to her to rent out the bottom half and Air BnB the top half since its in a great neighborhood next to an airport. We are also next to a University and next to a few hospital systems. So, we have a few options we must discuss first. From student housing, travel nursing, to the Air BnB thing. I think its a great stepping stone for a first time "move in Rent" (instead of Move in Flip).
So, I have been on the fence about making a weekly "Journal" about my progress in REI. But, I have decided to do it, and if people don't like it, I think it will be interesting to read in a few years. (for myself)
But, for those of you who might want to read this, here is a little back story about me.
I grew up in the middle of nowhere, Tennessee, where we had dirt roads and outhouses (yes, they still exist). When it would rain hard, the school was canceled because the roads were washed out. My family was poor with poor spending habits with the traditional consumer mindset. The whole time I grew up, I was told, "grow up, go to college and get a good job" or "go to the military because employers value military experience." I was also a good quiet little church boy and followed the rules.
So, what happened? I dropped out of school and enlisted in the military.
Fast forward 4 years, I got out of the service and found out my wife was suffering from long days and lonely nights with a bad spending problem, and we decided to part ways. So, there I was, fresh out of the military while the whole country was still suffering from the Great Recession. I was expecting to walk on to any company to find decent work. After all, all employers value military service!
WRONG!!! (btw my first job was at the big blue home improvement store making 7.25/ hour) I went to my city's police department expecting to be welcomed with open arms! WRONG!!! I was told yes, we value your military experience. Yes, it says "XYZ" on the website, but in reality, we want our applicants to have a college degree now! Our applicant pool is too deep now! Okay fine! Now, remember I am a high school dropout. So I went through hell to just enroll. I enrolled and made straight A's, and fast forward 5 years and a BS degree later.
I am expecting what was promised. I went to the military since "employers value military experience," and I went to school because that's the only way to get a good job! WRONG AGAIN!!! I don't live in some poverty-stricken city. I live in Houston, tx, the 4th largest city in the US! So, what do I do?
I find a cute girl, and she tells me about a group of FOREX traders in the area and to check them out. So I do and instantly fell in love with it. The problem was I didn't have enough capital, so I went back to school to get a better job and trade more to make more. So, in comes the acceptance letter for the University of Houston's Psychology Ph.D. program, my ticket to financial freedom. I killed it up to the point of my Ph.D. stats class.
The stats class had a project... Compile the data of your choosing and run it through SPSS. DONE! I chose psychologist's salaries (the whole reason for me going back to school in the first place). I was shocked the median income for a Ph.D. psychologist here in HOU is 70k. At this point in time, I met my wife, and she told me, an ADN Nurse with 1-2 years of experience makes that much. WTFFFF?!?! an associate degreed individual making more than a doctorate level person absolutely not!! So, with the only classes left to take for my Ph.D. was conducting my official research to base my dissertation on and the dissertation defense, I drop out. :( (ABD Status) (ABD= All But Dissertation)
Hmm, so what's the avenue to take? I had a trader friend of mine approach me and ask me to be a trader with his firm, and I turned him down as his company would take anywhere from 90-98% of the profits from my work. So, that's not gonna work. I decide i am going to be a Nurse then, because if you cannot beat 'em, join 'em! So i am currently enrolled in Nursing School!
I go back through my old trading files of books and literature from other traders and found an E-Book of rich dad poor dad. "well, this book is too old to be relevant," so I closed the file and a few days later, my wife tells me about a radio show who had a guest who was a trader and how he talked about the book rich dad poor dad. Was this God showing me the path? I don't know, but I do know the book is old, so let's give it a quick read, and if I don't like it, I can stop reading the book!
I read the first chapter that night and was hooked! Now, as a Ph.D. and a well-disciplined trader, I know when I feel emotions rise, I need to slow down and look at whatever is getting me emotionally riled up from a different angle. So, I finish the book with a massive guard up. I loved the book because it described everything I went through, from struggling when I got out of the military to struggle to find gainful employment!
And the craziest thing was this book was written a long time before I experienced the problems I was experiencing. I research RK, and I personally conclude the Rich Dad Poor Dad story is fake. Still, the parable makes the material relatable, so who cares if the story is fake? The message is not.
So, being very wary of the Rich Dad Company, I bought a rich dad advisor book, "tax-free wealth." I read Tom's book, Ken Mcelory's book, and now my interest is peaked. I needed to read another author's viewpoint about REI that is not affiliated with the Rich Dad Company.
I hoped on amazon once I finished Ken Mcelorys ABCs of REI and found the BRRRR book by The David Greene. I noticed some of what he was saying was also said by the people of the Rich Dad Company.
Hmmm, maybe there is something here. I need more evidence lets watch a video... in walks, BiggerPockets Podcast preaching the EXACT same message as the Rich Dad Company, and the two are not affiliated. Same message from people on the podcasts. I am sold. I bought Brandon Turner's "the book on REI," the Book on REI with no and low money down, pre-ordered MF millionaire VOL 1 & 2. I started listening to every podcast I could find that somewhat applied to my situation. I went "PRO" here on PB and have done to close 100 deal analyses.
My wife, because she does so well professionally, is risk-averse, and I told her about a strategy that Bryce Stewart did and a few others. "hey, let's buy a house and live in it, like a normal couple. Let's fix it up like a normal couple, but instead of selling it, let's refinance the home and buy a second NEW home and rent out the first one and repeat the process" she liked the idea. Because she will buy a home she likes, and once she gets tired of it we "trade" it in and still make money from it.
So, the following is the first deal we are moving forward with:
https://www.biggerpockets.com/...
*This link comes directly from our calculators, based on information input by the member who posted.
PS. I am no longer quiet, I no longer follow the rules, I no longer comply. I follow my own road, because society has lied to me too many times and its time to carve my own way to the top!
@Greg Smith, i think this is an amazing idea, as this is my plan as well. Just make sure that you do not over leverage yourself and make sure you payback your HELOC ASAP, so that way you can have access to that cash again. i think the inventory supply is a common theme around the US. Just make sure you stick to your numbers, and dont "marry" a property. if the seller or if the numbers dont work out pass on it and keep looking.
I am not sure if this will help, but I know that the Biden Administration has let the Eviction Moratorium expire this past weekend; however, they are discussing the expiration provisions. I don't know much about Section 8, but I would assume the conditions outlined will include the federal funds allocated to Section 8. I really like what Ms. @Jennifer Donley said about just bluffing and getting the paperwork filed, and I really like how she said to pass on the Attorney Fee to the tenant. This is one of those situations I have nightmares about, which is filing for eviction while the tenant has nothing to lose and trashes the place, so you're out the money, the repairs, and the time it took to get through all of this.
Hello All,
If you click on my profile you will see I use the Stock Market to raise funds for my REI. I want to share some insight on trading your way to success.
I cut my teeth on FOREX trading and moved to Stock Investing much later. Trading is seeing a massive boost lately because its very appealing to the younger crowd like my-self. I have always been fascinated with "Charts", and I just love looking at them and analyzing them. Trading is very rewarding and very dangerous. The barrier for entry is super low, and the risk is as high as one could get.
I started off my trading carrier with 100 dollars in a FOREX trading account and turned it into a 15,000$ account in a matter of days. I thought I was a trading genius (like most rookie traders) and on one fateful afternoon I entered a "Buy" on the pair USD/CHF. (US Dollar/ Swiss Franc) some volatile news came out and I got margin called. My trading terminal flashed red and my 15,000 dollar profit dwindled to a mere 100$ in a matter of 5- 10 minutes. My terrible trading habits caught up with me, like the practice of over leveraging my money, not using "Stop-losses", being cocky and the lot.
Did that stop me? No! 10K dollars in trading education and 7 years later I arrived at a place where I am comfortable. Trading education is very unlike Bigger Pockets. Trading education is super expensive, because everyone wants a quick dollar. Very rarely does an educator talk about the Psychology of trading. Clicking the Submit button is super easy, but withstanding the ups and downs of Price Action will shake even the most experienced non-trading professional.
I am doing a trial with my self, and I have decided to mirror what i did regarding learning how to trade with real estate investing by taking a full year of learning and what I have grown in that year will be my down payment on my first REI property.
In the BP podcasts its very rarely discussed, but I want somewhat of a velocity of money now while I am learning. I want that money moving always, and I do not ever want my dollars sitting still. As of 29-Jul-2021 the inflation rate sits at 5.5 or 5.6%, and the problem of this is illustrated by asking yourself "How much gas can I get today compared to this past March?" Robert Kiyosaki illustrates it best when he said "currency is derived from current, as in moving water. When the water sits still it becomes non-potable very quickly, but if it has a strong current it is safe to drink, because there is no germ that can grow without sitting still"
When your money sits still in a savings account it weathers in the storm of inflation. Its value becomes less and less. Sitting your money in a brokerage account and trading is risky, but when one does this they at least open up the possibility of a potential gain. When one keeps their money in a savings account they are ensuring a loss at a rate of at least 5% a year. Talking to all the W-2s out there: I'm not saying empty out your savings and go on a stock market shopping spree, but take some time to learn about business investing and buy good quality stocks until you're ready to buy your first or next property. You don't need a stock broker to do this, because there are no classes in any university (to my knowledge) that teaches stock trading. Warren Buffet says it best "Wall Street is the only place where someone rides to in a Rolls Royce to get advice from someone who rides the subway"
Once you have grown the amount to an amount that suits you pull it out and dump it on a down payment of a property of your choice, and continue to let inflation benefit you. Think of your brokerage account and equity in your properties' equity as a savings account instead of a dumpy bank account. If you need cash take out a HELOC/ HEIL or liquidate your positions cash out.
"what if the market crashes?" It will, and so what? you only record a loss if you sell out of your position. Trading stocks is not like FOREX where the trend can last for months or years and if you're on the opposite side of it you're going bankrupt.
The US is the Financial Capitol of the world. There is only one other (and only one other) market in the world that can support the weight of the world's economy and that is the UK. Many ask about the Euro and I say it depends on how optimistic you feel about Germany supporting the World Economy as they are by far the "Bank" that backs the euro with other countries in the EU somewhat supporting it with others draining it.
The US holds something like 52% of the Worlds GDP, and if we fall the World Economy falls, so the Market might dip AKA "Crash" but the US will not allow the Stock Market reach zero. we cant afford that and the world cant afford that.
Brandon Turner says it all the time "the real estate market might dip or soften but overall I truly believe real-estate will continue to appreciate" this is the exact same concept except on a lager scale.
Yes the velocity of money slows down as your dollars sit in a property, but its growing as the government keeps printing more dollars for stimulus.
Bottom line is keep that dollar moving. Trade it, slave it, but what ever you do just don't save it!