All Forum Posts by: Robert Rixer

@Carlos Ptriawan Well put. I often like to think of extremes to put it in perspective - if 100% financing was available, everyone and their brother would be buying up property and the prices would be astronomical. People who have no business being homeowners have the ability to buy homes.

There is a balance between making home ownership attainable but not so attainable that it inadvertently brings way too many buyers in to play. My feel is that balance point is 20% down @ 5-8% interest rates.

@Christie Gahan That's a very good point I had not considered. The second part of my question which I excluded was that where I'm originally from, Australia, there is also a similar housing shortage despite no population growth rate - and the same with other Western countries such as Canada and England. It could all be coincidence but I figured there is something larger at play. The number of households theory could be the answer.

@Bruce Woodruff Thank you for the thorough explanation. Apologies if it has been discussed in the past - I live over at the multifamily forum where it hasn't come up so thought I would branch out.

For points 2 and 3, how come this hasn't caused a severe price drop in these places further outside downtown? Maybe it has and I'm looking in the wrong places. Just feels like none of the explanations I hear completely add up - wondering if there's something bigger at play.

It's usually banks limiting their downside risk. If you think about it, the more equity you have in the deal, the lower their risk yet they still make the same percentage return on the capital they lend out. Shop around, either with other banks or go through a finance broker.

There's a lot of grifters and window shoppers out there. They just want to make sure that they only give financials to serious buyers. An LOI is non-binding. Usually we submit LOI's at the low end, subject to being raised once we have all the necessary financials. Sellers understand this and are almost always fine releasing financials.

They're not expecting a highly sharpened number on the first go, just a show of seriousness.

We've all accepted that there's a shortage of housing all across the US. But why?

We have declining birthrates. Sure there's been mass migration the past few years, but nowhere near the levels to move the needle nationwide in a meaningful way. The shortage/high prices seem to be everywhere - urban/rural. It's not just sales but rentals too.

On the supply side, it's not like old houses are crumbling to the ground, conversely there's been a ton of redevelopment and new development activity since the pandemic started. 

So why does there seem to be such a huge imbalance between supply and demand? How did we go from having sufficient housing 5-10 years ago to suddenly having a serious shortage?

My only concern in rural areas is demand for apartment rentals. Having said that, you are local and are clearly in a very good position to make that judgement. As far as the numbers go, I could see construction costing a few extra when it's all said and done. But overall if you're planning to build new and can make the numbers work in year 1, it's almost guaranteed to be a success in the long run.

Sorry for the loss - I'm sure the wider community here will be wanting to know the identity of these syndicators. Best to talk the tax issue over with a CPA but the loss will be reflected in the K-1's and can offset gains in other deals, provided they both flow through to the same entity (or you personally).

If I've learned anything from years in real estate is that no matter how much money you have, there's always someone with way more. Those people bidding $2M cash probably have a similar reaction on another deal to a guy bidding $10M cash.

In the 100% scenario, the seller would be 1st position lien holder - in the 20% carry they would be 2nd position subordinate to the bank debt, which is a major difference.