All Forum Posts by: Josh Sidhu

This article presents different datapoints and graphs to consider when thinking about the future of the economy.

https://www.biggerpockets.com/blog/gdi-weakness-paints-picture-of-a-weaker-economy-than-we-think?utm_source=Iterable&utm_medium=email&utm_campaign=Newsletter%20%7C%2012/07/23

A couple of the reasons I am a bit more bearish on the future of the economy and the housing market. The main points the article highlights are one the difference in the GDP and GDI numbers and secondly the U.S. personal saving rate and how it correlates to home sales.

GDI has fallen dramatically and is showing a larger spread between GDP. In theory GDP and GDI are supposed to be equal to each other, this discrepancy in numbers could potentially mean a couple of things. Companies are increasing their own profit margins while keeping employee wages relatively the same. It also insinuates weaker job creation and lower wages, as companies have smaller and smaller budgets to provide employees. The positive GDP suggest consumer spending is at a healthy level, the problem with this however is with the lower GDI this isn’t sustainable for long.

The low saving rates corroborates with all of this. The U.S. personal savings rate has been reported at 3.92% (Avg of the last 23 months) meaning after taxes and personal spending people are only saving 3.92% of their income. The last time the rate was below 4% was during the financial crisis of 2008. Consumers are having lower and lower savings, I think even with a drop in interest rates we won’t see as big of a flurry for new home buyers as what some people are claiming.

Sources:

https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=survey&_gl=1*1ywdb5a*_ga*NDEzMjU5MjUxLjE3MDMzNjE3MjQ.*_ga_J4698JNNFT*MTcwMzM2MTcyMy4xLjEuMTcwMzM2MTk1My40My4wLjA.#eyJhcHBpZCI6MTksInN0ZXBzIjpbMSwyLDNdLCJkYXRhIjpbWyJjYXRlZ29yaWVzIiwiU3VydmV5Il0sWyJOSVBBX1RhYmxlX0xpc3QiLCIzMTYiXV19

https://apps.bea.gov/iTable/?reqid=19&step=3&isuri=1&1921=survey&1903=76&_gl=1*1g241j8*_ga*NDEzMjU5MjUxLjE3MDMzNjE3MjQ.*_ga_J4698JNNFT*MTcwMzU3MTQwNS4zLjAuMTcwMzU3MTQwNS42MC4wLjA.

An interesting read: https://www.biggerpockets.com/blog/federal-reserve-to-lower-rates-six-times-says-ing-economics?utm_source=Iterable&utm_medium=email&utm_campaign=Newsletter%20%7C%2012/07/23

I’ve seen a few headlines of this, where some economic analysis “experts” are predicting large interest rate cuts. As this article mentions ING Economics released a report about a week ago claiming the Fed will cut rates 6 times over 250bp over the course of 2024 – 2025. I personally don’t see Inflation coming down to the Fed’s target of 2% anytime soon despite what some reports may claim. Just from day-to-day life from gas and grocery prices these days compared to a couple of years ago, prices are significantly higher today. Reports claim the inflation rate today is around 3.1-3.2% but I definitely think the average consumer feels this to be much higher.

What do you you’ll think, is inflation at an accurate spot according to the reports and will we face heavy cuts potentially in 2024?

@Jake Andronico

Assuming an already existing mortgage on a property is an interesting strategy and not one I had previously thought of. Will have to do more research on it. Thanks for the suggestion!

@Julien Jeannot

Hey Julien, I appreciate the suggestions!

 @Nicholas L.

Hi everyone!

My name is Josh I am a new member based in Washington. I'm just trying to get started on my real estate investing journey, I graduated about a year and a half ago and was fortunate enough to get a job right out of college. I have been living at home to save as much money as possible to build capital for an investment. I have roughly 70k saved up now and am on my journey to learn more about finding good real estate deals.

I have a couple of ideas in mind for my first strategy. The first would be to get into a duplex using Fannie Mae's new loan option of putting 5% down and renting out both sides of the property. A lower risk investment, however, I will end up paying a premium for the property being it will be a turn-key rental.

The second would be to get into a fixer-upper property, pay significantly lower than market value for the property, and rehab it. Ideally, even get a property with an extended backyard where I could build a detached accessory dwelling unit (DADU) on the same property. This approach would require more money and potentially have more risk as far as getting the right team of contractors to rehab and build out the additional unit but at the same token a higher-yielding investment. 

I would love to hear any feedback on my strategies, if there may be any better approaches I can take, and any tips on finding good deals.

Thanks!