All Forum Posts by: Bree Long

 Crossing from TN to AL and seeing different result :-) I still can't believe too that TN is rising almost like CA.

Hi @Bree Long

      Cheap money certainly inflated everything rapidly, but we still have a massive scarcity of supply, which will prop up the current prices. The Southeast saw huge migration numbers too, which drove the lack of inventory even more. No one person has the crystal ball to tell you if a reset is coming, but I see no way a reset like 2008 could occur when supply is lacking badly. And what will happen when rates do come back down is more rapid appreciation in values again because there will be a larger amount of qualified buyers out there with the lower rates. We lend in TN and NC and are fairly active in those markets, so I think we are seeing a little cool off, but I'm not convinced a large reset is coming, but again, no one knows for certain. 

A lot of OOS investors, who recognize investment property as a passive play and retirement vehicle (important distinction), not a vehicle to replace their current job or income level, are not banking off appreciation. Yes - it is incorporated in their underwriting but that's moreso on a market level than a property level. They choose Raleigh, Charlotte, etc (in NC) because it isn't going anywhere. We aren't going through an oil boom and they'll be left with a vacant house in a decade. People will need to rent and their investment property will stay rented. If you are holding for 10-30+ years, why is a "reset coming next year" something that would push you away from real estate investing in either state? You won't need to monetize that home for over a decade, or more.

As far as rentals, CoC, etc, etc....remember that equity paydown and tax benefits are paramount to investing and can usually have as much of an impact on your financial position as the cash flow. They just aren't sexy and talked about. In addition, that appreciation you've referenced has also significantly elevated rental rates and we have not reversed from that mark yet. Continued growth and appreciation of home values will continue to keep rental rates healthy. My perspective: if you cash flow now (current rent and current int rate), you will cash flow in the future (lower rates - hopefully - and higher rent rates).

The standard argument is 5% in a money market. Sure...less after interest tax on your 1040...You also can't shelter it from taxes with depreciation. That number probably won't last for the next decade so you'll be back to square 1 in a few years when that RoR goes back down to 1%-2%. + Equity paydown. Its the trade off of short-term trickle of returns vs long-term cumulative, dependable benefits.