You’re going on year 2
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Well when you have the federal reserve handing out trillions of dollars to prop the markets up of course my prediction will keep failing. The federal reserve has been backstopping the markets now for many many years. If they stop giving wallstreet free handouts you would see an immediate collapse across all economies around the world.
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Pelosi capital —-if you didn’t hear - she just bought a house few miles away from the dooonaaald in palm beach for retirmundo
I have had this same discussion with few young millennials who are in the market for a new house but the biggest obstacle they tell me they’re facing are their partners who want the “stereotypical millennial” house that @wam22 mentioned.
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Yep and once they buy that their DTI is effed and if they can get a rental, they have to put 25% down.
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I don’t 100% disagree but here is an example. A move-in ready triplex (2 3bed/2ba and 1 1bed/1ba) in Chicago is $600k. Assuming I can get $4500/mo, it would take 12 years to be cash flow positive without factoring in insurance, maintenance, interest, etc. Lets round the number up to $1 million for total expenses with interest over 30 years. What is the house worth? No one know. All I know is if I sell it for $1 million, I break even. Forgot to add this - 18 years to make $1 million. So 12 years of pure profit adds up to $650000.
Or I take my 3.5% down payment with an average return of 6% and I spread the $400k I would have spent on interest/upkeep over 30 years and now I have $2.9 million with no tenants.
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Excellent point, but you are taking one single unit into consideration. The whales in real estate use any equity and/or collateral as leverage for additional buying power. Of course nobody is going to see a steady 6% annualized return at the end of a 30yr term on a single property when factoring maintenance, expenses (seen and unforeseen), and other expenditures.
Real estate is a great investment when bought right. This market is not right.
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I understand how the whales do it or how to become a whale, especially taking a loan out against an existing property/collateral to use as a down payment for a new property and continue that cycle. The saying is that the first million (or billion) is the hardest to make and then it is easy after that.
But yes, it is a tough market for anything right now and I am not ready to take a potential six figure haircut as a learning lesson when there are still student loans (I married into 90% of it thanks to my wife) to pay off.
This is not the market where you buy your 1st property either for personal use or to start a rental real estate empire.
The current conditions are suitable for people already with built-in equity which have ballooned & they are taking it out to buy more properties.
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This is all wrong. I can recommend a few books if you want. You shouldn’t be paying anything for upkeep, interest etc, and with tax deductions you likely will even cash flow. It’s not easy to find the right property, you gotta search and add sweat equity, but they can be found.
Chicago I would likely avoid though. Same issues as Philadelphia, as in the City is broke. My taxes went from 1500 in 2007 to 8k in 2015 and then there’s other taxes they hit you with. Once the state told me I couldn’t evict non paying tenants, that was it for me…
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Send me some recommendations. Always down for learning more.
IIRC I paid almost $200k in INTEREST on the first house I bought in 2005 / sold in 2015 at a loss. If only housing had a stop-loss.
But I did learn how to patiently sit-out a bubble, no matter how much I could have made during it.
My dog has no idea we rent. Aside from lacking a pool she loves her yard.
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Please cc me on the reccs. This is not up my alley and would love to read more.
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First get on bigger pockets. Immense knowledge there about every single aspect of real estate investing. You can avoid every mistake us “old timers” made before we had highly developed Internet forums. I say that as I bought most of my property before 2013 and there’s so many more resources now.
It’s just important to start all this in your 20s. I could never do it now at 39. I just don’t have the hustle in me anymore and I’m not willing to put in the sweat equity that saves you so much money.
Crushing it (actually a fun read)
Financial Freedom with Real Estate Investing
The Complete Guide to Buying and Selling Apartment Buildings
Multi-Family Millions and Emerging Markets
Side note. The market is high but my first place was 6.5% interest. If you buy and hold at 3% interest your Costs are fixed. Even if you lose 100k on paper, that equates to $300-mo in mortgage. Nothing really…
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Finding the right deal is not easy, but when you find that right commercial deal you’ll be set for a couple of years. The purchase price price doesn’t really matter as long as you have a NOI you’re comfortable with imo.
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Timing is indeed key. Bought a townhome pre covid - 464,999 starting price. Fast forward till now. Same townhome starting price 655,995. Also have no mortgage due to a company declining me last minute forcing me to liquidate a huge position in the market right at the top.
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false
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This is a completely different market than we had in the 2005-2008 bubble.
Back then, everything was so unregulated that anyone with a decent credit score could get qualified for a mortgage that they couldn’t afford because banks were giving out Stated Income/No Doc loans with an ARM.
Too many buyers were banking on quick flips and not purchasing for true use or purpose. When masses are buying primarily for the flip, the bubble burst is inevitable.
Getting a mortgage today is entirely different. Banks are analyzing all financial details with a microscope. These are real buyers who can afford the mortgage. Nobody’s walking away from their investments this time. Not in IMHO anyway.
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The banks made their nut investing bailout funds. They no longer need to give risky predatory loans to help the middle and lower class try and keep up with inflation. They created the greatest wealth transfer the world has ever seen under the guise of a pandemic. Now they’re using the pandemic to blame capitalism for all the problems they created. We never had true capitalism, that’s the main problem.
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If we’re going to use leverage, which most real estate investors do, why not compare it against the stock market with leverage?
For example, TQQQ…this is the QQQ (Nasdaq index) with 3x the daily performance. Unlike, say margin, you will never get a margin call or get sold out by your brokerage. You can also buy in in a qualified (IRA) account.
TQQQ has gone from a low of around $17 in March 2020 to over $170 today. It’s not for the feint of heart…it dropped nearly 70% last spring. Going back to inception in 2010 will give you even more FOMO…it’s up over 20,000% since June 2010!
SSO is similar, but based on the S&P 500…again, these funds get slaughtered in bad markets…in 2008/2009 it lost nearly 80% from peak to trough.
There are other ETFs that give you double vs triple for those who seek less volatility.
This, BTW, is not a recommendation. But if you’re going to borrow 80% (or 4-1) to buy real estate, then 3-1 or 2-1 on the stock market looks downright conservative!
And lest we forget, much of the value of real estate these days has to do with interest rates…ask any old timer who had a 15% mortgage in the early eighties. Should interest rates ever climb again (or should I say when they do), it will make for really interesting times for real estate.
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