All Forum Posts by: Zachary Brown

 Thanks Pat, that makes a lot of sense. I agree, negative cash flow, definitely is a red flag as a starter. I agree with the stagnation (not that I'm an expert in that area, far from it). Will be curious to see what the next year brings. I'm very torn as I want to get invested, but am looking at a market with potential to go in many different directions, although I suppose that's always true. What I'm seeing now is that this is a strong highly valued market and getting in with a positive cash flow property will be challenging. Appreciate your feedback on this topic! 

 Thanks Dan. Great to see feedback from so many angles. Much appreciated. 

At first I thought I was looking for distressed properties, but after more research I think buying one of those would be a mistake for me, at least at the outset. Now I'm looking more at the long game LTRs. Find a couple SFH's or townhomes in the surrounding communities that are far enough on the fringe that I can maybe get positive cash flow and still have some reasonable confidence in appreciation over the long run. Will see where it goes.

Thanks Greg and Kelly! Great to see all the feedback. 

Kelly - Corporate housing investment makes a lot of sense as we continue to see big companies coming to the triangle and they have to live somewhere! I've heard that out of state investors are just buying up RTP property because they heard Apple was coming. That's certainly responsible for some of the valuation inflation happening. 

Greg - I totally agree with you around targeting broader markets. I find it very unlikely that I'll find a property in the Raleigh/Cary area and so I am looking at the surrounding areas like Knightdale, Wake Forest, Garner, Clayton, Fuquay-Varina, and so on. You also hit the nail on the head with access to the right connections (contractors, PMs, etc.). That is the roadblock I see with BRRR right now, as well as my lack of experience. I appreciate your offer to connect. I'm still researching and preparing to be ready to purchase when the right opportunity comes along, but I'll certainly take you up on that when I get there. Thanks!

Quote from @Chris Martin:

This post is meant to be constructive. I spent my career buying at the courthouse steps. Not directed at the OP, but I am seeing what Greenspan called the stock market equivalent of 'irrational exuberance' in the REI space.

I knew (and know) many investors who were financially wiped out in 2009-2011. They overpaid with leverage in 2006-2007 and when the market turned and rents dropped, they were underwater with negative cash flow. Remember strategic default? Take a look at the first chart below. Compare the 2006-2008 "bubble" to today's market. Regarding "getting in now and realizing the appreciation over the next 2 years may still make sense even if I have to lose around $5k in negative cash flow during that time," I see that as speculative at best. I would be surprised if prices remain at current levels in the next two to five years. The consensus is that we are in or about to enter a recession. I'd contend that we are in a recession now. See the second chart. The old school definition of two contracting quarters fits the 2022 US GDP. Adding to risk/uncertainty, just look at the mass layoffs in tech (not Apple so far, Amazon (18,000), Google (12,000)) that are mounting and expected to continue through 2023. 

This isn't 2008. But chasing negative cash flow property at retail (that's what 'turnkey' buying is), at or near the top of an overheated market, with relatively high interest rates, potentially a looming recession, and no more institutional iBuyers (they have effectively left the market) in the wings to bail out retail sellers, ... all this adds up to a lot of risk. Personally, I like lower risk investments not higher risk investments. 2002-2004 in the aftermath of the tech recession(*), now that was a great opportunity. 2010-2012 was another good opportunity. Now? I'd say no. 

If you do buy, I hope you do well. 

(*) IBM, Nortel, Alcatel, and a lot more companies shed many tens of thousands of jobs. 

 Thanks! This is exactly the dialogue I was hoping to spin up! See some pros and cons! I tend to agree with everything you’ve said. I’m not enthused about going into the market now. Was hoping someone would convince me otherwise! Will still keep my eyes open for opportunities though! 

 Thanks Ben appreciate the advice! That is exactly what I'm doing right now, just learning from my agent and soaking in all of the information about the market I can before I pull the trigger. That is my other fear, which is the opposite of the one I stated above. I'm also afraid that I'll miss the opportunity while waiting for the optimal buying environment. Always a fun place to be! Anyway, thanks again for the quick thoughts! 

First let me say that I've only been on the site for a week or two and I'm already getting access to such great information and networking that it's easy to see the value provided here and I'm so grateful for all of the help and advice I've received so far! Some of the folks who have been very helpful so far, Chris Webb, Cory Thornton, Brian Madden, Michelle Winters, and others! 

I'm still researching and learning about this market here in the Raleigh NC Area, however, based on what I've learned so far, I'm thinking I need to invest my money (around $150k capital) into turnkey rental opportunities, preferably townhomes as they involve little headache. My reasoning for this is that after researching further into BRRR, I think that it's not realistic for me due to the time commitment required. I'm a full time lawyer and diving into BRRR properties seems like it will take too much time. I'm also thinking this is more of a play for an experienced investor who knows what they are looking for in a property, has good connections, etc. More traditional investing in properties ready to rent seems like it poses lower risk and allows me to learn while investing in the market. As I gain more experience, maybe I can consider BRRR opportunities in the future. I do understand that this strategy will mean lower returns as well.

After talking to a few realtors, I've been told that there are rental opportunities out there in this market, however, due to high interest rates, it's difficult to hit the 1% rule for these properties and .08% is more likely. This would likely result in negative cash flow, which is a red flag, however, some argue that is a temporary problem which will be solved within 2 years when interest rates come back down. If that's the case, then getting in now and realizing the appreciation over the next 2 years may still make sense even if I have to lose around $5k in negative cash flow during that time. The alternative I suppose would be to wait like other investors for those interest rates to fall, however, again I'm losing that appreciation potential if I do that. The Raleigh area is a unique market in that it has very high valuations and has for years. The area is growing rapidly with new companies announcing development here like Apple, Amazon and Google. While the market is strong right now, I think the growth suggests appreciation will continue rather than fall, however, I appreciate thoughts from others. 

As a new investor, I'm not sure of the right path forward here and would appreciate any advice you seasoned pros have to offer on this situation. 

My biggest fear at this point: Buying at the top of the market and only seeing losses (I've run into this in the stock market and crypto, so trying to avoid the trifecta here) 

Thanks Drew! I wish there was a thumbs up feature on this, although is that what the upvote is for? Great advice and yes, hoping my wife will be my partner in REI when needed. Her parents are also retired and living down here, so we've got some good resources if we need help.

Sidenote- I see you're from Birmingham. I lived in Detroit for a year or so and grew up in Northern Michigan (Cadillac area). I miss the water. NC is wonderful and has lakes, but not comparable to what you see in Michigan. From my house you could throw a stone and hit ten lakes. Down here most of them you can't even swim in because they're reservoirs (which was a foreign concept to me until I came down here, but I digress). Great to meet you! 

 Thanks Cory for the kind words and great to meet you! Yes, let's definitely connect. I'll PM you and we can find a time to catch up. 

As far as glitter goes, the wife brought a truckload with her into the marriage so it won't be a shock, but I'm definitely starting to feel outnumbered haha. My brother also has two girls and we're trying for another baby this year, so I'm hoping for some backup! :) 

Thanks Jacob! Appreciate the insight! I’ll PM and we can connect further. 

 Hi Katherine! Thanks for reaching out! I just PM'd you as well! I look forward to getting to know you and working together as opportunities arise!