All Forum Posts by: Sam Cherry

Rapidly rising interest rate environment crushed many investors because of balloon payments.  If you have a balloon cross collateralized loan (which weren't really available  40 years ago) I would be very concerned right now.   

As I said we are transitioning from a falling interest rate environment to a rising rate environment.  These are normally 40yr cycles.  

Interest rates rise=falling housing prices.  

Bring in a good dose of stagflation and consumer staple prices rise but constrain ability of landlords to raise rents to make up for rising P&I payments for ARMs and Balloon re-fi. 

At the same time stagflation causes Insurance premiums, trash collection, maintenance costs, and other variable costs to escalate.  Again, the highly leveraged and minimally cash reserved investors are the first to hit the windshield. 

Of course I may be wrong, but Interest rate cycles and the business cycle are pretty well documented and predictable.  

So ask yourself, do you think we are closer to the beginning or the end of both these type cycles?  

Well @ Mark Nickoson nails it.  

1.  No one knows if a recession is coming.  Wrong-  It is coming fast the business cycle doesn't stop.  It is a cycle.  This is the longest business expansion in history.  So do you think we are closer to the begin or end of the cycle?

2.  What makes this one different.  This will be the first recession to happen in 30 years in a rate raising cycle.  So what does that mean.  There will be many that will be burned when they are unable to re-fi in a rising interest rate environment.   

3.  You should have been preparing since 2008 like I have for the next recession by raising COLD HARD CASH.  You see to truly benefit like the big boys you have to skip a cycle and have cash hoards on hand to take advantage of the downturn.  I got lucky and bought my 35 acre tree farm in 2009 for peanuts compared to what I could sell it for now.  Plus I have had 10 years to pay down the note to less than %50 of the loan value and not market value.

4.  I haven't mortgaged a purchase since 2006 and have re-fied alot since the purchase, with my average leverage at 40% of loan amount and about 25% of Market value.

5.  I am looking forward to buying multiple properties from every investor that claims on this site " I have 100's of properties".  Everyone of these genius' have bought their properties in a falling interest rate environment (i.e. since 2000) and most advocate keeping them highly leveraged.  They  have a cruel lesson coming.  You need to go back to the mid 70's to appreciate how the next recession is going to be.   Do yourself a favor and research the interest rate cycle.  We are transitioning to a rising rate trend.  If the investor on this blog giving advice picture looks younger than the age of 55 then run from their advice.  They didn't live through the 70's and see what interest rates did to real estate investors.

6.  Also, you need to research what happens when a currency resets.  That is more than likely to occur with the next recession.  Also, do yourself a favor and find out what the book "The Fourth Turning" is about.   We are on the cusp of a change that occurs every 80 years.  It will affect us in ways that you can't anticipate.  The one thing I can say is look at what leverage did to people at the end of the 80 year cycle.  It will make you cringe.  2008 was just a warm up.  

7.  So my advice to you as a newbie/neophyte is to raise CASH and wait.  Your opportunity hasn't passed you by, it is yet to come.

GLTA! 

Finally something on BP with pictures and numbers that are a real world home run.   Thanks for sharing.

Sam

Anyone have recommendations for lenders in NC?

Contact these guys.  Just did an all cash closing.  Used the Fayetteville office.

Tiago Title.

2521 Raeford Road
Suite C
Fayetteville, NC 28305

2018 Eastwood Road, Suite 313
Wilmington, NC 28403