All Forum Posts by: Juan Pardo

Someone correct me if I'm wrong, but isn't this the beauty of buy and hold? Meaning, not being bothered by short term volatility? If we've done these things

- Bought correctly

- Secured long term, low interest debt

- Accumulated and planned for reserves

Then what is there to be afraid of? We play for long term appreciation and cash flow, short term doesn't matter as much as long as we've done our part. Sure, vacancies and less cash flow are scary, but as long as we've done the things above we should be able to ride it out.

 I don't think it takes any better skills at all. I think it takes more access to capital, less aversion to risk, and willingness to let time be your friend. That's really about it. If houses are selling for $100k, have historically appreciated even marginally, and drop to $50k, it doesn't take much genius to gamble that they'll go back to $100k if you're willing to wait it out and can afford to pick them up.

All a bull market really tells you is who is capitalized and who is not. All of us like to think we're investing geniuses (geniuii?) because we've (hopefully) made money in RE, but making money in this field is really little more than mathematics, hard work, and some external luck. I like to think I'm really smart because I've done well in this field but I haven't done much of anything that lots of people dumber and smarter than me have also done with varying degrees of success :)

There's a saying that everyone thinks they're a genius in a bull market. But everyone also thinks they're a genius in a bear market. I doubt I could count the number of times I heard people saying 5 years ago "I'm waiting for the market to crash and keeping cash on hand so I can buy distressed properties". Personally, I think it's downright crazy to sell all your stuff waiting for a crash. Where do you put the money? In the market? If you expect a crash, it will crash too. In gold? You can't very well eat gold. In Bitcoin? 

I've said this here before and I'll say it again: economics is junk science. At its foundation is a lot of theories and assumptions that all depend on the ability of man to make rational, repeatable choices on a regular basis. If history tells us anything it is that man is completely irrational and will often act contrary to self-interest. What you then end up having is a bunch of predictions that a monkey with a dartboard could just as easily make.

Anyone who tells you they know where the economy is heading is either delusional or full of crap. All anyone can do is make their best bet with the weight of available knowledge and evidence in the present. I personally believe that more people would rather live in houses than on the street, and that the government would rather protect property rights than allow anarchy to flourish. With that in mind, there is/will likely always be a market for providing someone a place to live. Historically speaking, hard assets tend to survive and evolve through fiat currency, so there's also some evidential basis for trading dollars for 2x4s.

As for the US, despite our profligate government spending, we have a lot going for us: the world's choice of reserve currency; an abundance of natural and human capital, the ability to be largely self-fed, a moderate climate, a history of stable government, a history of protection of property rights, and a reasonably low level of violence (historically speaking, not Norway speaking). Real estate has some national characteristics but is largely local in nature. And even when local residents find themselves short of cash, we have another huge advantage on much of the rest of the world: liberal property ownership rights. Most nations have strong limits on how much and the nature of what type of property foreigners can own. We have virtually nothing - anyone from the Chinese to the Russians to the Saudis to the Mongolians can own rental property in Phoenix or civic centers in Kalamazoo. There is so much foreign money flowing into the US (much of it just trading our off-shored dollars via trade deficits and corporate taxation shenanigans) that the RE market is busting at the seams.

BP members often tend to live in a bubble. We laugh at people buying property for 5% return but fail to realize that for people in many other countries, 0-5% return is much preferable to investing in their own nation, with shaky currency, unstable governments, and insufficient resources and means to support the population. 

These posts make me LOL. No one can time the markets. What you can do though is read statistics and realize trying to time the market is a losers game. Also even if you are right (unlikely but let's pretend) in past recessions real estate hasn't even crashed the two aren't directly correlated outside of 2008 which was real estate specific. We have mortgage delays and eviction bans right now. In my market chicago demand for 2-4 units is at an all time high and the people affected by covid were not the kind of people buying investment properties regardless. We haven't seen any significant tenant issues either some minor issues here and there with people asking to leave but no evictions or missed rent. It's been pretty business as usual from real estate standpoint. 

If you are selling your properties the most likely result will be losing on closing costs and having to pay more close costs when you buy next at a statistically higher price at least by inflation. To think you can time the top and the bottom is a fallacy. 

@Juan Pardo what do you see unfolding? something like the Great Depression in the US? 

and what are you doing to prepare for it?

They want to have cash and be ready for price drops.

Well, if it's anything like 2009-2011, besides some defaults and banks forcing sales, there weren't price drops.

The prices stayed flat and sellers just didn't want to sell.

Of course, that got followed by 2013-2017 which more than doubled pricing.

Hence, I've decided to raise my offer from 40% to 45% on the dollar.

@Juan Pardo I don't think that link is working I tried to fix it, but I couldn't. You can search for that topic on google and find it though. Its an interesting article thanks Juan.

Hey everyone. We are selling our primary residence and moving into a travel trailer behind my parents house.  We live in one of the nicest neighborhoods in town. I have a family of 6.  A kid in high school and all the way down to an 8 year old. After looking at our bills we are just spending to much money.  We are developing a long term plan to develop some passive income.

We have around 250K in Equity. We will be paying off a 3 unit a car and some Bill's.  By the time everything is paid off we should have around 200k liquid. 

With the net cash flow and our jobs we should be saving around 7k a month. 

My wife is the driving force behind this plan. This is pretty hard for my kids and I, but our plan is to have 3 rentals paid for in cash before we move back into a primary again.  This also may sound a little crazy but I think the realestate market / stock market is going to be going into a recession in the next 1 or 2 years.

 Just wanted to know what some people might think that have more experience / knowledge with our plan. Thanks.