543 Investment Property

[Martin Hash]

[brewster]

Umm, bullshit. What property has going for it is most people buy it leveraged, with a loan. This makes it different than regular asset investing, where most people do not buy stocks or bonds on margin. My standard speech is this: If you buy a rental property on a 15 year loan with 25% down, (a less common method than the 30 year FHA with 5-10% down) and that property brings in no cashflow, just pays its bills and maintenance for 15 years, at the end of that time you own it outright and you've made about 9.5% on your cash. On Wall Street 9.5% over 15 years is considered a great return! Madoff territory! Now, if your rents have gone up, and or your value has gone up, now your return has increased also.

For mere mortals with normal jobs, with some cash, but not hedge fund type cash, there's no better way to leverage yourself to security. If you have construction and maintenance skills, so much the better. Many people say "who wants to deal with tenants?" Someone who want's to get rich, that's who. The key is trusting your nose when showing them the home. I'm in NJ, where you cannot choose not to renew a lease nor raise the rents radically, and it's been fine.

Hash, My wife and I bought a multifamily property shortly after getting married 21 years ago, and used appreciation to buy 2 more since. We were lucky to do this in gentrifying area during an unusually good era for it, and are now financially secure, our children will graduate college loan free. I would not be surprised if my net worth is second only to yours on this board.

For people with the low end of cash, you can buy an owner occupied property, preferably a multifamily, for very low down, like 5%, under government programs. You then do what's called a "house-hack" or BRRRR: Buy-rehab-rent-refinance-repeat. You can do it every 2 years without tax issues.

[Martin Hash]

Real Property is still my recommendation to the right people, which you sound like to be the case, but you also caught the wave; lucky you.

[Fife]

1%ers hoarding the nation's wealth.

Day of the Rope awaits you.

[brewster]

Real Property is still my recommendation to the right people, which you sound like to be the case, but you also caught the wave; lucky you.

Yes I caught the wave, but you miss my point about the 9.5%. You don't have to catch the wave for it to be a good investment. It doesn't have to appreciate at all. Same thing about the BRRRR, it works in a flat market. A lot of the people doing it are in low property value areas of the country like the sun and rust belts where houses can be had under $50k.

Fife: I'm not close to the 1% either by income or net worth. I'd have to have over $10m for the latter.
https://dqydj.com/who-are-the-one-perce ... ed-states/

[Martin Hash]

Violating my cardinal rule of not predicting the future, I’m going to predict the future...

There is going to be a financial crash. Real estate will take a beating. I outlined what that beating will entail in my podcast. I wouldn’t be buying any triplexes today, and anybody who came to me and asked what would happen to their 20% down, I’d tell them they’ll lose it.

[brewster]

Violating my cardinal rule of not predicting the future, I’m going to predict the future...

There is going to be a financial crash. Real estate will take a beating. I outlined what that beating will entail in my podcast. I wouldn’t be buying any triplexes today, and anybody who came to me and asked what would happen to their 20% down, I’d tell them they’ll lose it.

I agree with most of that, except you'd only lose that 20% if you sell instead of waiting it out. You can't time markets perfectly, but you gotta pay attention and not buy at peaks. But if you're in it for the long run you can survive the cycles. My 2004 purchase was not a great deal, by 2012 I could not refi, they were telling me it was worth less than 70% of what I paid. Now Zillow tells me it's over double what I paid. Doesn't matter, it'll be paid off in 8 years, when I'm 65. The rents keep going up, and I'll get the money going to mortgage today.

Bottom line to me, there's a buying opportunity coming in a few years. Property markets move at a glacial pace. Values come down when people who MUST sell accept less than they were hoping for, setting new comp prices that the banks then use to appraise the next deals at lower than asking, and so the prices fall when banks won't loan on the old high price. Bottom of the 2008 crash wasn't until 2012. Bottom of 1988 crash wasn't until 1997. Crashes have a long tail: a steep drop, then a failure to even stay with inflation, resulting in a slow decline in real value.

[MilSpecs]

Violating my cardinal rule of not predicting the future, I’m going to predict the future...

There is going to be a financial crash. Real estate will take a beating. I outlined what that beating will entail in my podcast. I wouldn’t be buying any triplexes today, and anybody who came to me and asked what would happen to their 20% down, I’d tell them they’ll lose it.

How? If you don’t sell then you won’t lose anything. You can wait it out as long as you can come up with the property taxes. That’s how people survived the Great Depression: they had 3-6 apartment brownstones that the whole family was able to live in plus rental income. My in-laws did it. So did other relatives. A multi family house is a hedge against disaster.

[Speaker to Animals]

Martin,

What would you advise somebody like me to do who is looking to purchase a few acres of productive land in the Styx in about a year, not to live on, but to build a nursery and small farm to supplement income?

I am worried about this real estate problem, as I agree it is coming, especially when boomer properties hit the market.

[Martin Hash]

Do it.