All Forum Posts by: Account Closed

At this point I'm giving up on having a crystal ball. (Almost) everything that drives a correction in the real estate market has happened; timing (we were due), jobs, the fed printing money... 

I do think it's smart to be cautious. Cash is king - if you can refi or take out a line of credit this prepares you for tenants who can't (or don't) pay rent and prepares you for opportunities should they arise. 

In the mean time, a good deal is a good deal. Keep looking using the methods you always have. If you're prepared for a downturn that doesn't happen, nothing ventured nothing gained... Having cash if you can works great in a good market and better in a bad market. 

Now... how to get the cash....?

@Scott Lennon

I think it will at least in some places.

One of the markets I am in seems to have more properties coming up for sale in my price range, and days on market seems a bit longer. The other market I haven’t seen that.

I think it is not going to be like post 2008-2009 when foreclosures skyrocketed.  

Yes, foreclosures could start popping up sometime early next year in those non-judicial states before others, but depends on the results of the vaccine, if they are satisfactory then we wont see a big wave of foreclosures, only those that couldn't survive, for which we will have a big army of hungry investors outbidding each other in a low rate environment. 

The opportunity is more around the paradigm shift that the virus brings along; where population moves out from one state to the other, people moving into suburbs, sun belt getting more populated (which btw started prior to 2020)

Expect property taxes to go high across all states as they need to make up for 2020. 

Don’t worry, the pain is coming. My guess would be Q3 2021. Of course, I could be way off and own zero crystal balls.

Some interesting and entertaining thoughts here. 

Although I tend to be a bull in this market this moment, no one (NO ONE!) can predict the future. It's good to talk about potentialities, and try to prepare for them, but being certain of anything is a fallacy. 

In Warren Buffet's book "Snowball" he talked about how he buys something that will provide value based on what he knows now (in RE that means looking at the local market conditions, price of the asset vs. cash return, etc.). He does not buy based on potential future earnings. That's called speculation. Because even the great WB knows he cannot predict the future. 

Just because you've been right (on either side), so far, means nothing. 

Anyway, thanks to everyone for the information, thoughts, and discussion! 

@Joel W

I know I can not predict the future. If you asked me 6 months ago where we would be I would not have said here.

Here is my take: 

Summary of common denominators of all downturns:

- They represent the end of a long time increased debt cycle

- Central banks around the world (Fed Reserve bank in US) print money and buy financial assets/instruments (in US they buy Gov bonds) - They lend the money and create liquidity (through digital money)

-The printing of so much money usually creates inflation but if you are positioned correctly with debt and right leverage against reliable income in real estate you can benefit greatly from inflation. Those who are not in real estate with the right structures become weaker and lose purchase power.

The current Pandemic disaster:

- US government is giving stimulus checks now to people because they do not have enough savings, and to companies because they do not have enough cash reserves and if not there will be bankruptcies.

- During these down turns, everyone loses money but some are able to position themselves to acquire assets at lower than their intrinsic value so they come out stronger. This widens the wealth gap which creates financial conflicts, potential social unrest, increase in taxes and a push towards socialism (politically speaking)

- There is some threat from the perceived rising power of China against US leadership but China has so many inherent and social problems because of status, class and financial disparities that they have to handle their internal potential implosions before challenging anyone (they are no real threat and if anything they are financially strong and can contribute massively to the US and other economies)

- Virus has caused lots of job losses and lower revenues to most companies

What you can do:

- Get into funds and larger real estate investments where the money is pooled together for better purchase power with experienced fund managers

- Choosing Fund Managers with experience mean thaey have been through past down cycles like in 2008 to 2012 otherwise you are taking a bigger risk (I think quite a few people mentioned this in this thread) 

- Choose safety and reliable cash flow over crazy syndications that offer unrealistic returns based on speculative proforma

-Understand the difference between a syndication and a real estate fund (a syndication is just one property but a fund is diversified by having several properties, in different locations, with different style of investing and a cross collateral - Syndications may offer higher returns due to risk)

- Stay out of the stock market because losing 25% of your money will require an increase of 33.3% just to breakeven again. If you look at Berkshire Hathaway's shares, 3 times of their life time they lost 50% of their price from the highest tick to the lowest tick so it does not get any crazier than being in the securities market.

-Gold is NOT a productive asset (meaning it does not produce any cash flow) stick with real estate as I explained above 

-Focus on learning more, and increasing your credit as well as economizing and investing in real estate structure and/opr assets that do not require too much time, effort and risk

Hope my summary of over 30 years of investing can help you

As an investor in real estate, I never look at the overall economy. I look at a specific property, then the market its in, and I base all my decisions on actual cash flow vs future potential income (and of course how much and how long it will take to get it to its highest and best use)

This simple recipe helped me survive bad times and prosper in good times with a great record through 1991 Gulf war, 2001 Terrorist attack, 2008 Great Recession, and the pandemic of 2020. 

If you focus on specific areas and understand the values and also get the proper insurance coverage and asset protection, you will do great through the compounding effect in your investments. (This also helped me come out ahead through several hurricanes, earthquakes and other weather and human calamities)

I would also like to add that fiat money is great because we can print it. Unlike Greece or Spain who are part of the European Union and cannot print Euros, we create wealth by infusing liquidity and our economy expands. 

What people complain about is exactly what will make you wealthy. When you acquire a property and get loan, inflation causes the debt to decrease in value over time. It is like borrowing a dollar and paying it at 50 cents over time. While the cost of replacement for the building and the rental income increase to meet inflation. 

Print another trillion and let those who work hard and understand the system prosper, while those who want a hand out complain.