All Forum Posts by: Stetson Oates
Stetson Oates has started 1 posts and replied 62 times.
Post: What is the best starting strategy in real estate to be profitable?
- Posts 62
- Votes 59
Quote from @Jules Aton:
At your age with a family I would be hesitant to go all in anything different than what is paying your bills. You are already doing RE, continue with a LTR or fix/flip. Also don't overlook TSM index funds for truly passive potential gains and diversification.
Post: DSCR Loans Will Default
- Posts 62
- Votes 59
IMO:
This can and could have been said about all DSCR loans for the last 25 years. Lenders require a 1:1 to qualify, but most will underwrite more conservative.
As an underwriter and lender, at one time in my life, this is click bait. There will always be lenders who are great at underwriting and hedging risk.
There will always be lenders who are not great at underwriting.
Aside from all this, there will be well underwritten loans made by great lenders to great borrowers that default. It happens.
Post: Trump signs exc order allowing 401k into private equity syndicators bonanza?
- Posts 62
- Votes 59
OK, This will be a really dumb question. Can I direct my 401K into my own real estate investing?
Post: Equity Rich, Cash Poor: The Growing Dilemma No One Wants to Admit
- Posts 62
- Votes 59
Raise Rents if you are in this position. If you cant, sell the property and invest elsewhere.
Post: The future of BiggerPockets Forums with ChatGPT
- Posts 62
- Votes 59
Kinda OT, I love AI when I'm trying to word an email or have a rough draft of what I'm trying to say. Chat GPT cleans it up for me and usually says what I'm trying to convey in a better format.
Example, when I'm sending a welcome email to a new tenant or wording a late payment email. It's really helpful in those areas. I've also used it to compile data and it's been a moderate success, but it's getting better at analyzing the data. I always have to re-format the presentation and clean up some of the "weirdness" Chat can have. Overall I'm happy with Chat and what it provides. It will only get better, that's scary.
Post: How many people do actually really live 100% off rental cash flow?
- Posts 62
- Votes 59
Quote from @Marcus Auerbach:
Quote from @Jay Hinrichs:
living off of rental income to me is just another business.. your running a rental business instead of working for someone else.. IE self employeed still takes risk/effort and attention to details.
I think were many get romanced into this is thinking Rentals = no or very little work..
There are many business you could live off of cash flow with the same investments. IE millions in debt and Lots of cash dumped into them to buy the rentals..
Just another form of American Small business which is the backbone of our economy and lifestyles here in the US>
One thing that does make it easier to enter though many can get debt with zero experience where as buying a business acquiring debt normally takes some experience.
Lastly to me it really depends on the Asset class IE if your buying lower end C D section 8 much more work required and less likely you will ever live strictly on the cash flow over debt and cost to run them..
And of course the bonanza happens when you retire your debt like many who have posted thats when life gets good.. but today max debt cash flow assets is going to be very hard except for those that are also flipping and creating income outside of the rentals and never touch rental income
One trend I see in the responses here is that people who live off their rentals are also the property manager and the handyman. I don't mean that negatively in any way; I love working with my hands and it is very satisfying. But financially speaking, a portion of their income is compensation for doing these tasks.
When you look at the guys that really have scaled, most of them have started their own PM company and are vertically integrated. But that's the cool thing, you can design your biz the way you like it, do the things you can enjoy and outsource what you are not good at. (Or hate, like in case my bookkeeping LOL)
It's just a values thing. My father always taught me that any debt you take on is paid before you eat. I think syndicators think they take on investors and not debt. To me they are the same thing, you pay them before you eat. Brandon is spamming the social media venues like crazy, I hate that. I tend to think he's a good guy but if he were, he would stop looking for investors, subscribers, workshop money.... I hate it for all involved but Brandon is not helping himself I think.
Post: NAR reports huge drop in pending home sales - Does It Matter?
- Posts 62
- Votes 59
Quote from @Ken M.:
Quote from @Patrick Roberts:
Quote from @Bill B.:
It sounds a lot like the lock in effect is still in effect, as it obviously is. But too many “news” sources already declared it over, or at least ending.
80-90% of sellers are buyers? What’s the motivation to pay 50% more for a home priced the same, or 100% more for a slightly more expensive home? You HAVE to be moving, combining households, or some other life event that just isn’t happening that often.
If housing is at all time unaffordable levels, what do sellers need to buy a new place? All time high selling prices. Can’t get em? Can’t move. Property either sits on the market or gets taken off and they stay put. As Jay said the only people who can switch house at “almost no cost” (5-6% selling costs?) are people selling paid off properties for something about the same or cheaper.
if prices are going down, there’s no incentive to quickly sell for anyone that’s going to buy another property. “Oh no, housing prices are going down. I better sell my home quick, and buy another one…”
This is a large part of what I'm seeing in my markets, which is obviously just an anecdotal observation. There is relatively little forced selling right now. Many sellers are in no need to sell and will take their house off the market if they cant get what they want for it.
I have one client who moved into a new primary and listed his old home for $300k over the two private appraisals he got for it prior to listing. He's nominally cut the price twice in small amounts, but has said that he's not "giving it away." If he doesnt get what he wants for it, he wont sell it - and he doesnt need to. He can comfortably afford to keep both houses for at least a few years if he chooses.
To your point, buyers are being equally as picky. Theyre not going to pay $2k-$3k/month more than they currently pay unless they get exactly what they want. I think this is why the market is largely freezing and transactional volume is so low. For every loan I close right now, I have 5-10 would-be buyers who want to buy, have decent income and credit, but cant afford current prices. As soon as on-market stuff gets within reach, they'll be buying. Whether this comes from slight declines in prices or interest rates is yet to be seen, but I suspect these would-be buyers will put a floor under prices at some point that is higher than most are expecting.
The only thing that I see bringing home prices down significantly anytime soon is major, prolonged stress in the labor market. It wouldnt surprise me if it's more likely that we see inflation return and wages grow rather than unemployment jumping a huge amount.
I've recently bought three houses where the sellers have no intention of buying anytime soon. They just simply have found rentals that are more affordable than their mortgage and maintenance costs on their houses, so they sold. I may be in a niche market, but if I am, I'm sticking around this one for a while.
I think the locations play a huge roll as well. Florida, I think is more of owners being tired of the hurricanes and insurance increases. If you pair that with the rates being high, Florida will be crushed.
Post: How to change title using your personal name to LLC?
- Posts 62
- Votes 59
If you have title insurance, once you move the title to the LLC your policy won't follow. If this is important, have the title company re-issue a policy.
Post: Holding costs when paying all cash? Other concerns?
- Posts 62
- Votes 59
Quote from @Joe Villeneuve:
Quote from @Stetson Oates:
Quote from @Joe Villeneuve:
Quote from @Stetson Oates:
Quote from @Joe Villeneuve:
Quote from @JM Edward:
@Joe Villeneuve that's a different way to look at it! I thought I was on the right track when @Chris Seveney validated my point, but everything can be seen multiple ways which is what makes these things so tricky. I feel all-cash is less risk because unless the market goes way down I can still likely get most if not all my principal back, even in a half done rehab(?).
As you see it, the lender is taking some of your risk away, but how does that work if there is a loss on the project? The lender takes the title and you lose your down payment and rehab costs? And you end up with a credit record that prevents you from taking out (decent) loans for the next many years? That sounds like more of a nightmare scenario than losing some principal, but I don't think I'm as educated on what this would look like and why you think it would be a better scenario. Can you say more?
Risk is based on 3 parts:
1 - What is at risk. This is ALWAYS the cash that was put into the deal.
2 - Who is at risk. See above. This is the person that put in the cash. When you buy all cash, you are taking on 100% of the risk. When you put 20% down, you are only taking 20% of the risk, and the lender is taking 80%.
3 - Who is the risk. this is the person/entity that is responsible for keeping the investment a good investment. This is the REI. This means the person who is AT risk the most, is the person that put the most cash into the deal, and they are relying on the person who is THE risk to keep their cash safe. So, the person who puts the least amount of risk (cash) into the deal, is the person sho has the least amount of risk.
On the other hand, the greatest risk will always be what you have to risk...which is your cash in any deal. You are either risking the small DP, or all cash. This also impacts legal action. A property with 100% equity is a target, one with 20% isn't,...or is at least a very small target.
On top of that, the cash you put into a positive cash flow property is what the REI pays for that property. When you put up 20%, that's what you are paying for it. When you pay 100% cash, then you are paying full price.
Plus, 20% down means you are buying 5 times as much value compared to paying full price in cash. So, a 5% appreciation generates 5 times the equity increase as well,...and that's exponentially gained on future appreciations.
Using debt responsibly is a good strategy and necessary in most cases if you want to scale. However, debt can be the silver bullet to an investor if not done responsibly. When I was an underwriter and lender, a foreclosure killed the deal. Those are very hard to overcome and would require you going off market for financing for at least 5-10 years before any financial institution would look at you again. Of course, debt allows an investor to scale quicker and take advantage of appreciation on a larger scale but running a risk analysis on who's making loan payments when the SHTF is a useful exercise.
While your assessment of debt vs no debt risk holds water when it comes to litigation, an LLC with an insurance policy and an umbrella sets up a good defense. As well as being in a state with charging order protection.
As I stated above. Foreclosures delay traditional financing, until the REI can show a positive track record after the foreclosure. There are many more ways to finance properties, not involving traditional financing, where a foreclosure shouldn't impact it negatively. These other ways will show positive results to a lender, and help to stop the foreclosure from stopping traditional financing.
While there are many ways to obtain financing other than obtaining from traditional sources, avoiding a foreclosure should be a top priority. Arguing that foreclosures only “delay” traditional investor financing seems to mean that non traditional lenders care nothing about past foreclosures. I would argue that even private lenders do due diligence on the borrower.