All Forum Posts by: Matt Williams

@Todd Powell I’d be curious where that property was.

I get asked about Airbnb (short term rentals) all the time. People have looked at me like I’m crazy when I suggest that perhaps they aren’t a great primary strategy from a wealth building standpoint. It can be awesome income, but it is fragile income. Long before COVID-19 hit, I told people that asked me about these that when you go through any economic downturn, what’s one of the first things to go? You guessed it, leisure travel. And if this is your primary income source as an investor, when you go through a recession, your’s is the income that is negatively impacted the most.

I’m not telling you to NOT get into Airbnb short term rentals, but I am suggesting you think twice. They’re awesome. Lots of people have killed it with these. But I just see them as the most fragile form of income, particularly if your goal is to build consistent and stable long term revenue and wealth as an investor.

I have way too many thoughts to post about the economy, and what may or may not happen as restrictions are removed and industries are opened back up. So, for this string, let me just keep my thoughts to one arena: mortgages.

Even if the economy booms from pent up consumer demand for all kinds of goods and services, and experiences... even if real estate also seems to have a ton of pent up demand with a litany of buyers just ready to purchase real estate.... even if all that happens (totally different discussion as to whether that will even happen), there is trouble on the horizon with respect to mortgages.

We are already seeing a lackluster interest in mortgage backed securities. If that continues, it does not provide a steady stream of renewed capital for banks and lenders to lend back out. Furthermore, we will not know for a while the financial toll that forbearances and deferments are going to take on Servicers. My prediction though is that some major Servicers are going to be hit too hard with short term losses during the next few months. My point is, even if there’s a consumer demand for residential real estate, if there’s not much money ready to be lent out, there is going to be a significant negative impact on the real estate market. This could be compounded if there is a lack of mortgage money available for those that want and/or need to refi when they come out of forbearance/deferment period, which would most likely bring additional inventory on to the market place.

I’m all for being positive, but we need to be aware of what could come too. It is entirely plausible that issues within the mortgage sector could have a major impact on real estate, regardless of how the economy is going.

This is a tricky one. What some people do is obtain the mortgage in their own name, and then later file a quitclaim deed to get the property into the name of their LLC. Keep in mind however, you are still responsible for the mortgage. Also look closely at the Promissory Note of the mortgage to make sure you can do this. It's not uncommon, and is allowed more often than you think. Oh, and if you do this, you must be the sole member of the LLC (I believe).

I get asked about Airbnb (short term rentals) all the time. People have looked at me like I’m crazy when I suggest that perhaps they aren’t a great primary strategy from a wealth building standpoint. It can be awesome income, but it is fragile income. Long before COVID-19 hit, I told people that asked me about these that when you go through any economic downturn, what’s one of the first things to go? You guessed it, leisure travel. And if this is your primary income source as an investor, when you go through a recession, your’s is the income that is negatively impacted the most. 

I’m not telling you to NOT get into Airbnb short term rentals, but I am suggesting you think twice. They’re awesome. Lots of people have killed it with these. But I just see them as the most fragile form of income, particularly if your goal is to build consistent and stable long term revenue and wealth as an investor.

I have way too many thoughts to post about the economy, and what may or may not happen as restrictions are removed and industries are opened back up. So, for this string, let me just keep my thoughts to one arena: mortgages.

Even if the economy booms from pent up consumer demand for all kinds of goods and services, and experiences... even if real estate also seems to have a ton of pent up demand with a litany of buyers just ready to purchase real estate.... even if all that happens (totally different discussion as to whether that will even happen), there is trouble on the horizon with respect to mortgages.

We are already seeing a lackluster interest in mortgage backed securities. If that continues, it does not provide a steady stream of renewed capital for banks and lenders to lend back out. Furthermore, we will not know for a while the financial toll that forbearances and deferments are going to take on Servicers. My prediction though is that some major Servicers are going to be hit too hard with short term losses during the next few months. My point is, even if there’s a consumer demand for residential real estate, if there’s not much money ready to be lent out, there is going to be a significant negative impact on the real estate market. This could be compounded if there is a lack of mortgage money available for those that want and/or need to refi when they come out of forbearance/deferment period, which would most likely bring additional inventory on to the market place.

I’m all for being positive, but we need to be aware of what could come too. It is entirely plausible that issues within the mortgage sector could have a major impact on real estate, regardless of how the economy is going.

Investment Info:

Single-family residence fix & flip investment in Lake Oswego.

Purchase price: $560,000
Cash invested: $300,000
Sale price: $1,150,000

This project was a home originally built in 1936. When we bought it, the home was about 2,100 square feet with an unfinished basement. Between finishing the basement, and an addition we did, the home ended up being about 3,218 square feet. This was a total gut job where we redid everything. A couple fun things included taking an old second-story deck, doing an addition in that space, we created an entirely new Master Suite. We also made a bunch of other structural and floor plan changes.

What made you interested in investing in this type of deal?

We like to take on projects that most investors wouldn’t pursue. Ones that will inevitably be a more high-end home when completed. Projects that require a much more significant scope of work than what most investors want. And projects that have opportunities to finish or add space not currently there. This home consisted of all of those opportunity elements.

How did you find this deal and how did you negotiate it?

Our realtor knew this home was about to hit the market. We made our offer the first day it was on the MLS.

How did you finance this deal?

Combo of institutional money and private money.

How did you add value to the deal?

Way too much to explain. But we did a Master Bedroom addition, and created a walk-in closet and Master Bathroom where the old master bedroom was. We finished the basement adding a Family Room, two bedrooms, a new bathroom and Laundry Room.

What was the outcome?

We sold it and did very well on it.

Lessons learned? Challenges?

I was surprised that it took nearly four months to sell. Primary reason we got from buyers that passed was the fact that two bedrooms were on the second story, and two in the basement.