All Forum Posts by: Michael Rossi

I completely disagree with this. If I bought a brand new $100,000 Mercedes convertible today and sold it to Brian tomorrow for $5,000, does that mean that the Mercedes is only worth $5,000? Of course not! Just because I was foolish enough to sell the car for $5,000 does not mean the car is only worth $5,000.

I had a woman call me once asking me to buy her house. I told her that I wasn't interested without even asking for the details. A couple of months later, the woman called me back and practically begged me to take the house. I went to look at it. It needed nothing to be rent ready. A nearly identical house just across the street had recently sold for $52,065. I didn't really want the house and I told her that I would give her $20,000 cash. She took it. Does that mean that the house was only worth $20,000? Of course not. It simply meant that in the woman's mind, she was desperate to sell, even though she didn't even bother to put it on the market. Logical? No. Reasonable? No. Did I buy that house at 38% of market value? YOU BET I DID!

As for the entitlements, unfortunately, the problem isn't only Section 8. Whether you're renting to Section 8 or not, you're still exposed to the entitlement programs. The termination of Social Security, unending unemployment, food stamps, government retirement, medicare, medicaid, and all the other million entitlements will still affect everyone in the rental business.

BTW, I am only writing month-to-month leases in ALL MY RENTALS at this point (including Section 8). The risk of hyper-inflation means that I want to be able to adjust the rents on my schedule!

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I can't honestly say that I was ever nervous buying a rental. I have confidence in the numbers and my ability to manage them.

I have been nervous about other things, such as my first few evictions; speaking in public, etc.

0 Votes

Rich,

I share your concern about the rental business, however my primary concern is quite different. In my area, we are not seeing over-capacity (yet) and in fact are seeing near record demand. Rents are high and still creeping up and occupancy rates are very high. A side benefit of the terrible economy is that new apartment complex development has almost come to a standstill. That is certainly offsetting to some degree the number of foreclosed homes which are coming on the market as rentals.

I am not extrapolating my local market to the national scene. I agree 100% with your analysis on a national level and think there is reason to be concerned about overcapacity and lower rents.

My biggest concern, however, is not about capacity. My biggest concern is about entitlements. There is ABSOLUTELY NO QUESTION that the country is broke. The United States is insolvent, except for the Fed's ability to print money out of thin air (which is continuously worth less and less). My point is that it is ABSOLUTELY INEVITABLE that the entitlements will end - it's a mathematical certainty. Ironically, the beginnings of this can be seen in the Universal Healthcare Program currently being proposed, which would cut $500 BILLION of Medicare entitlement spending, albeit to create another entitlement. How the government can cut $500 Billion dollars from a program that is already broke, but will continue to operate and expand, is beyond me.

The point is that at some time relatively soon, the US government won't be able to keep this ponzi scheme going. At that point, the government will be FORCED to DRASTICALLY cut entitlements. When Section 8, food stamps, medicare and medicaid, Social Security, free cellphones, unlimited unemployment, and other entitlements are cut, how will renters be able to afford to pay the rent? They're already doubling and tripling up - are we going to have 25 people living in one bedroom apartments? Talk about overcapacity, when entitlements end, there will be overcapacity EVERYWHERE!

I don't want to be mis-understood - I'm ALL FOR ENDING ENTITLEMENTS, but it should be done in a controlled manner. A sudden forced stoppage of entitlements due to an economic collapse is likely in the relatively near future and that will be disasterous for the country and the rental busienss.

2 Votes

Unfortunately, that won't help. The tenant will simply buy a couple of those re-freezable ice bags. They'll keep one in the freezer and one on the plastic cover. Problem solved - the heat will flow like the thermostat was set on 100!!!

Worse yet, since tenants are lazy, they won't get up to move the ice block once the temperature in the apartment gets high - THEY'LL JUST OPEN THE WINDOWS - GUARANTEED!

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OK, maybe my last post wasn't as helpful as it could have been. Here are 2 points:

1. Tenants couldn't care less how much gas they use IF THEY AREN'T PAYING THE BILL! I can drive all over my town on the coldest day of winter and tell you EXACTLY which landlords pay the heat - because the windows will be open.

2. If you do ANYTHING to make the tenants mad, they'll turn the heat up to 90 degrees and open the windows! Why not? THEY AREN'T PAYING THE HEAT!!!

NEVER BUY A BUILDING THAT REQUIRES YOU TO PAY THE UTILITIES!!!

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I'm not sure that I was clear in my last post. I would like to clarify:

NEVER BUY A BUILDING THAT REQUIRES YOU TO PAY THE UTILITIES!!!

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NEVER BUY A BUILDING THAT REQUIRES YOU TO PAY THE UTILITIES!!!

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There may be an isolated pocket of good news here or there, but unfortunately the housing market is HORRIBLE (if you're looking at sales and price) throughout the United States. Sales of both new houses and existing houses are at multi-decade lows; there is a HUGE inventory of unsold homes; there is a HUGE inventory of foreclosed homes that the banks are holding "off the market"; and there will be record foreclosures in 2010 followed by another new record in 2011. Inventory is going WAY UP and prices are going WAY DOWN in the future, subject to the market manipulation that is (and will be) going on by the socialists in Washington.

A big problem with Oregon, is that taxes are out of control and the socialists there are in the "tax the rich" mode. The rich will respond by moving and they'll take their jobs with them.

Yesterday, I spoke to a friend that runs a multi-million dollar business in Oregon. We were talking about the current economic situation. He said that his family is seriously looking at moving to a state with a better tax situation! This is a family that has lived in Oregon FOR DECADES and has a lot of roots in the area. When they leave, they will take a bunch of jobs with them and Oregon will lose the taxes associated with them personally; their business; and their employees - not to mention all the money that the pump into the local economy.

Will things pickup a little with spring? It always does. Is a small pickup over a record low that spans decades good news? Not hardly. It's just a glimmer of sunshine before nuclear winter sets in! The ONLY thing that has kept housing prices where they are now is government stimulus, which is scheduled to end in April. Absent government stimulus and with an ever-increasing number of jobs lost, real estate prices are headed lower - MUCH LOWER!

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Peter is absolutely right. The USNews article is pure fiction. It's not how much appreciation we'll see, the real issue is how much DEPRECIATION we'll see.

There is a HUGE overhead of unsold homes. Banks are holding MANY foreclosed homes without putting them on the market. 2010 will likely set a record for foreclosures and 2011 will be MUCH worse. Prices are NOT going up - they're going down - WAY DOWN!

Have things stabilized at this point? NO! The only thing that has happened is that the government has spent BILLIONS of dollars propping up prices with their home-buyer programs. That can't last forever.

1 Vote

How many have you wholesaled so far? If the answer is zero, then I would concentrate on doing one and see how much work that is. Can you do 6 a month? YES, IF YOU'RE WILLING TO WORK HARD ENOUGH TO DO IT? The real question is whether that's a good use of your time?

5 Votes

All Forum Posts by: Michael Rossi

Michael Rossi has started 45 posts and replied 4385 times.

Post: I'm concerned about rental market. You??

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