Preparing for and profiting from a crash

Buying & Selling Real Estate
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Preparing for and profiting from a crash

Ben S.
Investor · Tampa, FL · Member since 2017 · 122 posts · 87 votes

I have a few predictions about the economy, and am looking for the strategies of those who have a similar views. I'm not looking to discuss differing views, just if you agree with this view.

First, I believe the economy will crash in the coming 2 years (likely within 1 year). This is due to the stock market being far overvalued, the usual 8 year economic cycle, and the economies of other countries that will likely crash first and then domino around the world (China, Japan, EU). I do not expect a zombie apocalypse or any such thing, but a situation as bad overall or maybe worse than 2008. 

Due to this, I would like to both be prepared for such a crash to not lose anything, as well as be able to profit from it. 

I am currently focusing exclusively on rentals as I believe the demand will remain or grow stronger, though prices may drop a bit. I want to not only be able to live on my rental income, but have plenty of extra in case prices drop more than i expect.

Regarding debt during a crash, is there any advantage to having loans through big banks versus small banks? I don't believe interest rates will increase during this time, as the central banks will continue their strategy of lowering rates to try to help the economy. 

I want to keep a fair amount of cash reserved to cover possible extra vacancies.

For the profit side, I plan to keep some money in gold and silver, as they generally go up during a crash, and are not dependant on currency (i'm not really sure what the dollar will do during this time). I think it's too risky, but I could keep more debt on the rentals and purchase more gold/silver or have more cash on hand, as it may be harder to borrow during/after the crash.

Once the economy has stablized a bit, I want to sell the gold/silver and pool my cash to purchase more real estate at a discount, likely rentals homes, a mobile home park, or a small apartment building. I could also purchase homes with more focus on the appreciation as the market goes up again than the monthly cash flow.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y

@Ben S.  OK lets look at the other side of the coin

stock market crawls back  investors sell and flee to real estate.. real estate strengthens with this new infusion of capital.  ??? possible ?

there are always deals in real estate  Always  it does not take a crash to create opportunity.

and why would real estate crash in the next 2 years.. just because the stock market crawled back?

unless you had big unemployemnet like in 08 to 2010.. and you have folks who have bought homes in the last decade that actually qualified and are locked in at historic rates.. just because their market stops appreciated or retracts a little .. those folks don't sell they just ride it out.

there is and will always be the US citizen that can't manage debt no matter the market.. gets divorced .. has bad health issues... dies intestate... so there are always deals.

Each market cycle I have personally lived and invested through was unique  no two the same.

And now with Foreigners grabbing a huge share of our investment properties for cash and hedge funds doing the same.. why would those folks cut and run especially the cash buyers.

coming into 09 40% or more of all sales were for CASH... so cash buyers don't panic sell generally speaking.

I do see certain markets leveling off the appreciation run up.. we are seeing that big time in Dallas right now the herd mentality of that market has cooled down a bunch.

and here in Portlandia higher end is just holding to little move up.. but middle price range still moving up.  Charleston another market I am active in has seen 20% move up in 2016 alone.. unbelievable there. and thankfully I got in 4 years ago.  now I look like a freaking real estate genius  identify a market all the way across the country pulling the trigger and having properties I thought would be a great exit at say 400k and now I am selling for 550k... LOL.. but I have been on the other end of this as well.

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  • Account Closed
    Johnson City, TN · Member since 2014 · 586 posts · 705 votes
    9y

    Perhaps since you see a bear market, how about selling your over inflated real estate then using the money to short stocks? Then you can have a bundle to buy new properties with at half price?

    3Reply
  • Ben S.
    OP
    Investor · Tampa, FL · Member since 2017 · 122 posts · 87 votes
    9y

    @Account Closed I've thought about shorting stocks or other things (bonds), but I want to keep my finances more stable than that. Real estate, gold/silver, and even the US dollar have been fairly stable in past decades versus a lot of other investments. I'm a pretty conservative investor, and am looking stable income more than quick riches. I also know real estate really well, far better than the stock market, and feel investing in what you know best usually gives the best results. 

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Ben S.  OK lets look at the other side of the coin

    stock market crawls back  investors sell and flee to real estate.. real estate strengthens with this new infusion of capital.  ??? possible ?

    there are always deals in real estate  Always  it does not take a crash to create opportunity.

    and why would real estate crash in the next 2 years.. just because the stock market crawled back?

    unless you had big unemployemnet like in 08 to 2010.. and you have folks who have bought homes in the last decade that actually qualified and are locked in at historic rates.. just because their market stops appreciated or retracts a little .. those folks don't sell they just ride it out.

    there is and will always be the US citizen that can't manage debt no matter the market.. gets divorced .. has bad health issues... dies intestate... so there are always deals.

    Each market cycle I have personally lived and invested through was unique  no two the same.

    And now with Foreigners grabbing a huge share of our investment properties for cash and hedge funds doing the same.. why would those folks cut and run especially the cash buyers.

    coming into 09 40% or more of all sales were for CASH... so cash buyers don't panic sell generally speaking.

    I do see certain markets leveling off the appreciation run up.. we are seeing that big time in Dallas right now the herd mentality of that market has cooled down a bunch.

    and here in Portlandia higher end is just holding to little move up.. but middle price range still moving up.  Charleston another market I am active in has seen 20% move up in 2016 alone.. unbelievable there. and thankfully I got in 4 years ago.  now I look like a freaking real estate genius  identify a market all the way across the country pulling the trigger and having properties I thought would be a great exit at say 400k and now I am selling for 550k... LOL.. but I have been on the other end of this as well.

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  • Ben S.
    OP
    Investor · Tampa, FL · Member since 2017 · 122 posts · 87 votes
    9y

    @Jay Hinrichs Good points. I definitely don't think the housing market will be as affected as 2008 overall, and I don't think the crash will be the same, but I do think my market will see a bit of a drop, and that the stock market will be the primary point of the crash, along with economies in other countries we trade with, which will cause a mess all around. That uncertaintly is what I feel fairly confident will increase the value of gold/silver and will keep rentals full. Aside from that there is a whole lot I don't know. As a real estate agent, I know a lot of people in my area buy at the max the bank will give them, and do not have savings, so a stock market crash impacting jobs could cause a lot of selling even if people aren't underwater.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Ben S.  for sure Jobs are the wild card. you add high unemployment then yes you will have more opportunites.

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  • Account Closed
    Johnson City, TN · Member since 2014 · 586 posts · 705 votes
    9y

    Gold is a terrible investment unless you time the market perfectly. The only thing keeping the price where it is now it the people stubbornly holding on that bought it at 1600. Look at historical prices and gold had miserable performance for many years. Gold is a panic investment. If our financial markets imploded chaos would ensue and out society would melt down. The mist valuable thing then would be a loaf of bread, a roll of toilet paper and ammunition. Gold can neither protect you or feed you.

    3Reply
  • Sebastien Hitier
    Rental Property Investor · Hong Kong, Hong Kong Island · Member since 2014 · 188 posts · 114 votes
    9y

    Rentals with ample reserves for vacancies seem a very good bet. Most crisis come from investors being squeezed by margin calls and interest reset, so you need to make sure you are safe on this side. 

    Real estate works on multi-year trends, so have you tested whether it is preferable to buy precious metals only when there is a crisis, and keep buying rentals otherwise?

    0Reply
  • Ben S.
    OP
    Investor · Tampa, FL · Member since 2017 · 122 posts · 87 votes
    9y

    @Account Closed Gold typically goes up during a down economy, look at 2000 and 2007. I'm not talking about gold as a long term investment, just to preserve and increase weath during an economic crash. 

    What else would you put your money in during that time aside from real estate (something else to diversify)?

    1Reply
  • Bart H.
    Dallas, TX · Member since 2016 · 1k+ posts · 745 votes
    9y

    A few things.

    1) I hear it posted a fair amount on blogs etc. But why do we think the stock market will 'crash'?  What part of the market is super over valued?  Last I looked PE ratios were a little over 20, something like 21x's earnings.  Which is on the higher end of historic norms.  But Interest rates are freakishly low.  If you look at expected returns, maybe some people have fled bonds and moved to equities, but otherwise there is little reason to believe equities are super over valued.  

    Yeah, maybe we are due for a 10 or 20% decline in stocks,  those kinds of declines historically happen every couple of years, but they usually with a sharp rebound.  The dividend rate for the S&P (last I looked), is higher than the 10year note.  Why have money in bonds?  Why do we think the stock market is poised to crash?  If it did companies would be right in there buying to provide a floor.

    2) IF we get a recession, I think it will be due to rising interest rates, or some sort of geopolitical event. 

     I am not sure you can do much about world events other than have good cash flowing deals, and even those are usually temporary. 

     IF we see a sharp rise in rates, then yes, property values may take a pause as first time home owners are unable to to buy and maybe buyers are unable to make deals work.  BUT on the flip side, interest rates going up substantially likely means we have inflation. 

     At end of the day, if you have properties that are cash flowing, and inflation goes back to 7 -10%, then if you have long term fixed debt, wont you be in great shape as rents increase as fast as inflation?  

    If I have a 30year note, and my properties cash flow, or at least break even, a short term drop in real estate prices have little impact on me, because I have a high degree of confidence that home prices will be much higher 20 years from now than they are now.

    Maybe we are near the end of the super great times.  But I dont see a real estate crash, at least not a super deep/long one..  My wife and  personally will stay with long term fixed rates, and we might slightly lower our leverage going forward by booking some unrealized gains.  We might slow down a little, but we will continued to invest if and when we come across good deals.

    3Reply
  • Account Closed
    Johnson City, TN · Member since 2014 · 586 posts · 705 votes
    9y

    @Ben Silone, honestly I will give an answer that may not be politically correct but one of the best hedges against inflation and instability is firearms. Quality firearms are always easy to buy and sell and not only retain value but appreciate.

    2Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y

    Profiting from a crash is easy - have liquid assets and purchase assets that remain strong but devalued due to current conditions. Timing is always the trick. As far as assets, whatever the case you'd be pressed to do better than dollars, because whatever our currency's weaknesses it is still the standard-bearer of the world, and is likely to be so for at least the lifetimes of the people on this board. Maybe one day it will be supplanted by China, or some other nation, or nuclear hell will rain down and people will trade in chicken legs and ammunition, but until then you can do much, much worse than dollars. 

    As for gold, the price of gold today (about $1230/ounce) is less, adjusted for inflation, than at gold's 100 year low in 1970 of about $225. So if you thought gold was a tremendous buy then, and held it to today, you lost about $75/ounce, adjusted for inflation. Not smart.  

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  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    9y
    Originally posted by @Ben S.:

    I have a few predictions about the economy, and am looking for the strategies of those who have a similar views. I'm not looking to discuss differing views, just if you agree with this view.

    First, I believe the economy will crash in the coming 2 years (likely within 1 year). This is due to the stock market being far overvalued, the usual 8 year economic cycle, and the economies of other countries that will likely crash first and then domino around the world (China, Japan, EU). I do not expect a zombie apocalypse or any such thing, but a situation as bad overall or maybe worse than 2008. 

    Due to this, I would like to both be prepared for such a crash to not lose anything, as well as be able to profit from it. 

    I am currently focusing exclusively on rentals as I believe the demand will remain or grow stronger, though prices may drop a bit. I want to not only be able to live on my rental income, but have plenty of extra in case prices drop more than i expect.

    Regarding debt during a crash, is there any advantage to having loans through big banks versus small banks? I don't believe interest rates will increase during this time, as the central banks will continue their strategy of lowering rates to try to help the economy. 

    I want to keep a fair amount of cash reserved to cover possible extra vacancies.

    For the profit side, I plan to keep some money in gold and silver, as they generally go up during a crash, and are not dependant on currency (i'm not really sure what the dollar will do during this time). I think it's too risky, but I could keep more debt on the rentals and purchase more gold/silver or have more cash on hand, as it may be harder to borrow during/after the crash.

    Once the economy has stablized a bit, I want to sell the gold/silver and pool my cash to purchase more real estate at a discount, likely rentals homes, a mobile home park, or a small apartment building. I could also purchase homes with more focus on the appreciation as the market goes up again than the monthly cash flow.

    There will be no crash. It's called the "Recession Phase" of the real estate market cycle.  Keep in mind that, even though it's called the "Recession Phase" does not mean there will be a recession.  It will just be a bottom in the market cycle, which is continuous.  The real estate market cycles lasts generally 5-7years, but may be shorter, longer, more or less volatile (higher + lower peak and bottom) depending on many variables.

    While I think you've got a good strategy of hoarding cash in prep for a market bottom, I think your comments about a major crash are unlikely... But it's always good to have emergency funds on hand and hoard cash as the market you're looking at is dropping in price.

    1Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    9y
    Originally posted by @Account Closed:

    @Ben Silone, honestly I will give an answer that may not be politically correct but one of the best hedges against inflation and instability is firearms. Quality firearms are always easy to buy and sell and not only retain value but appreciate.

    True story.

    0Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    9y
    Originally posted by @Jay Hinrichs:

    @Ben S.  OK lets look at the other side of the coin

    stock market crawls back  investors sell and flee to real estate.. real estate strengthens with this new infusion of capital.  ??? possible ?

    there are always deals in real estate  Always  it does not take a crash to create opportunity.

    and why would real estate crash in the next 2 years.. just because the stock market crawled back?

    unless you had big unemployemnet like in 08 to 2010.. and you have folks who have bought homes in the last decade that actually qualified and are locked in at historic rates.. just because their market stops appreciated or retracts a little .. those folks don't sell they just ride it out.

    there is and will always be the US citizen that can't manage debt no matter the market.. gets divorced .. has bad health issues... dies intestate... so there are always deals.

    Each market cycle I have personally lived and invested through was unique  no two the same.

    And now with Foreigners grabbing a huge share of our investment properties for cash and hedge funds doing the same.. why would those folks cut and run especially the cash buyers.

    coming into 09 40% or more of all sales were for CASH... so cash buyers don't panic sell generally speaking.

    I do see certain markets leveling off the appreciation run up.. we are seeing that big time in Dallas right now the herd mentality of that market has cooled down a bunch.

    and here in Portlandia higher end is just holding to little move up.. but middle price range still moving up.  Charleston another market I am active in has seen 20% move up in 2016 alone.. unbelievable there. and thankfully I got in 4 years ago.  now I look like a freaking real estate genius  identify a market all the way across the country pulling the trigger and having properties I thought would be a great exit at say 400k and now I am selling for 550k... LOL.. but I have been on the other end of this as well.

    Yes, I have mixed thoughts on your Dallas points Jay. I own a fair amount of properties here and, though my property values, rents, and taxes have doubled and tripled, I don't think this trend is ending anytime soon. I just spoke to broker who's used to do lots of bulk SFR and now focusing more on commercial from Frisco North. Still many willing/able buyers chasing very little inventory. Employers are moving here in droves, and locally in the San Francisco Bay Area we have tech companies moving and setting up large offices in Fort Worth and Dallas. Name a tech company and they either have a major office here or are in the process of setting one up.

    I'm a bull on both Austin and Dallas/Ft Worth for the next 10 years. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Jon Q.  I am talking high end  not rental stock..

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  • Azah Che
    Silver Spring, MD · Member since 2017 · 33 posts · 1 vote
    9y
    i did not understand most of ehat you said buti think you are smart. I am new to investing actually just started a month ago. Prior to this I went and graduaded from Law school and I am almost 30 now wondering what life will look like in 20 years and being a femle i better start planning now. I feel investing is the way to go.
    0Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    9y
    This whole predicting market cycles thing is really getting old. Just because you remember 2000 and 2008 does not make you some sort of RE market oracle. Not referring to anyone in general but just the whole situation as a whole. Of course the market will go down at some point in time and everyone who said it will can claim they predicted it at that time. A buddy of mine predicted a "crash" years ago, sold everything and has missed out for the last few.
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  • Ryan P.Pro Member
    Milwaukee, WI · Member since 2017 · 2 posts · 3 votes
    9y

    As for gold, the price of gold today (about $1230/ounce) is less, adjusted for inflation, than at gold's 100 year low in 1970 of about $225. So if you thought gold was a tremendous buy then, and held it to today, you lost about $75/ounce, adjusted for inflation. Not smart.

    If gold is currently at a 100+ year low (adjusted for inflation) then wouldn't it be the best time to buy gold for somebody looking to keep their money somewhat liquid while they prepare for a real estate acquisition? If that's true you're essentially buying gold at a discount  right now compared with the other 100+ years value against the dollar. Gold can also be sold off in increments so it is more liquid than real estate and as the original poster mentioned it is a transfer mechanism to pass wealth through a recessionary period (he's calling it a crash). The problem of "timing the market perfectly" (which another poster mentioned) to buy or sell gold is only necessary if you are trying to buy at the lowest possible amount and then sell at the highest possible amount. But if you are ok with a nominal amount of wealth preservation or return on investment then your timing doesn't need to be perfect. It just needs to be somewhat timely. 

    My questions for the original poster and those considering this line of thought may include: How's the supply & demand of the properties you are working with?

    Have you done stress tests (worse case, best case, average case scenarios) on rent decreases, sudden expenses, increased vacancy rates, sudden and large rises in interest rates, property taxes, insurance on your existing properties and potential deals? 

    Are your financed deals at LTV ratios that could handle margin calls of 10-20% (if that's even possible for your mortgages)

    Do you have enough cash reserves (gold included) to handle worse case stress test scenarios?

    Is the exposure that you personally have against your personal estate at a level your comfortable with? 

    Do you own any of your properties outright so that you could "hide" your personal dwelling in a trust? 

    Do you have an investment strategy that is working in bull or bear markets with reserves that could handle major market corrections?

    I think the fact that you posted your original question while still being willing to invest and not cower with cash in the mattress shows wisdom and forethought worth considering. 

    Here's a resource for those wanting to understand more about the monetary system and gold: I have no affiliation with Mike Maloney nor do I recommend any knee-jerk reactions to the info. 

     https://youtu.be/DyV0OfU3-FU

    I also have found insight on understanding geopolitical events and how they could possibly effect financial markets from David McAlvany   https://youtu.be/U3aUCSONTf8

    I am not an expert and am simply happy to be a part of the conversation here as I am considering the same things. I'm thrilled to find both confident and cautious investors have jumped on this thread and look forward to the other insights that are offered. 

    3Reply
  • Dan Bryskin
    Investor · Minneapolis, MN · Member since 2015 · 252 posts · 263 votes
    9y

    @Ben S.. Where is always an opportunity. Can you sell one of your doors for top $$ and replace it with 2, getting more rent and an upside? That's the strategy I am after. I also realize my cash is more valuable then bank or investor money. They finance the deals, but it is my cash which moves my business forward. So I am looking to substitute as much of my cash as possible. But I agree with you, kitchen feels hot, time to move faster. 

    2Reply
  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y
    Originally posted by @Account Closed:

    @Ben Silone, honestly I will give an answer that may not be politically correct but one of the best hedges against inflation and instability is firearms. Quality firearms are always easy to buy and sell and not only retain value but appreciate.

    And they also would come in real handy in case the recession morphs into a zombie apocalypse ... still, I see firearms as an insurance policy more than an investment. Both insurance and investments are important, but there is a BIG difference in my mind as to how they are valued and analyzed, and poor decisions can be made when you try to mix or confuse the two.

    0Reply
  • Account Closed
    Investor · Scottsdale, AZ · Member since 2016 · 1k+ posts · 885 votes
    9y

    The real threat is the $200 trillion in unfunded liabilities and $20 trillion in national debt. That money will have to come from somewhere or be bankrupted. With real estate you can find renters to cover the mortgage (usually), with gold no such source of income exists. Gold is a "catastrophic" investment for wealth preservation. Silver is much more "liquid" and can be easily traded for bread and butter.

    The Stock Market will remain strong for the next year and a half as stock investors from around the world look for a better place to put their money. There is a LOT of Cash on the sidelines waiting to be invested.

    Chinese were driving up the property values in Canada but have moved to the USA since Canada instituted a 15% surtax on unoccupied real estate. Chinese are investing in USA real estate because the Chinese economy is in worse shape than the USA, but is hidden by 'fake paper assets". Real estate in USA will remain strong for the next couple of years. As Brexit causes money to flow to the USA it will prop up the USA dollar and investments here. None of this solves the national debt or unfunded liabilities and eventually the USA Govt and Counties will increase taxes to meet the pressure. Property taxes will rise considerably. It is a good time to buy real estate for the next few years especially if you use leverage. But, be prepared for rising costs.

    It is probable that North Korea will either start a war (if only by accident and miscalculation) or that the USA and / or China and Russia will pre-emptively attack North Korea to quell the threat) This would result in North Korean bombing of either Washington State or California as "proof" they are capable of raining destruction on USA. North Korea has 10,000 drones capable of carrying chemical and biological agents that could be released from a submarine off the coast of L.A. or San Francisco. North Korea is working on a ballistic missile which would cause an EMP attack over the western USA shutting down the entire power grid. Water filtration, gas pumps (no gas available for cars or food transportation) the Internet, lights, refrigeration would all be offline for months while the grid is brought back on. The USA does not stock the necessary transformers that the EMP attack would burn out. They are built "on demand" in China and shipped to the USA. It takes a year to order, build, ship and install each transformer. Hundreds would be needed. Clearly, real estate prices would be depressed at that time much as they are in Fukishima from the earthquake/tsunami nuclear meltdown. People will leave the destroyed and contaminated areas and have to live elsewhere driving prices up in the "in" migratory areas.

    If a solar flare occurred like the "Carrington Event" in 1859, the results would be the same.

    If the Cascadia fault erupts (which is projected to be a 9.0 earthquake and is now over due) Seattle, Portland and Vancouver real estate prices will drop dramatically along with the destruction of large parts of the cities.

    The New Madrid fault is over due for an earthquake and depending on the severity could have similar results.

    For these reasons and others, I choose to invest "Subject To" for "cash flow" in safe real estate backed investments spread over four states to minimize my exposure and I take my "equity up front" and invest that in various other commodities.

    And, the sun will rise tomorrow and I will be prepared for any eventuality.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Account Closed  well based on the N.. Korea threat what are we waiting for.. lets bomb those folks and take out their ability to rain terror on us.

    But you did not throw in there global warming and the fact that in 100 years most seaside towns could be inundated... Most of florida as we know it underwater

    Charelston were I work  flooded.

    Silicon valley under 3 feet of water.. Google forced to move its Mtn. View campus and others

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  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    I am prepared. I own gold, guns, income properties, and am mostly debt free. We are already seeing our markets level off. Talked to a couple different agents this week that stated they cannot get deals done. I have one rental that I was 100% sure would be leased within a week--still empty (but I don't have a mortgage payment so can ride it out if it sits vacant a month). I am mostly out of the stock market. Gold and silver are "insurance policies" and I am not putting more money into them. In the event all hell breaks loose they MAY have some value..but you cannot eat it. If Jay is correct about rising oceans, I may end up with beach front properties that goes up 1000% percent:)...but my family may be the big winner as I won't be around in 100 years. 

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  • Account Closed
    Investor · Scottsdale, AZ · Member since 2016 · 1k+ posts · 885 votes
    9y

    I only forecast out 5 years to 8 years basing most of the forecast on current geo-political and imminent or likely natural phenomena. Global change is a natural occurrence that is too far out on the timeline to impact my real estate investing. I stick to population growth, job growth, migration, political unrest, changes in governments, changes in the velocity of money, changes in the transfer on monetary wealth and of the method of transfer (exchanging commodities vs electronic funds). 

    As we proceed from using commodities for wealth storage, to using dollars, to using Bitcoin and other forms of digital currency (ACH, electronic transfers, iPhone payments, PayPay, automatic bill paying), it becomes easier for crooks and to steal and governments to confiscate  the wealth.

    Real estate has the advantage of being very hard to duplicate, forge or transfer electronically. I am talking about the actual real estate not the Deed. The disadvantage is of course, that you can't put it in your pocket and take it with you as you move your business to a new location. Governments can increase the property tax to outlandish amounts like in California, Washington, Maryland, New York and other states. They've shown that they are likely to do so in the future to try to cover their massive unfunded liabilities.

    The solution that I have found is to use "Subject To" for purchasing properties. I rarely own them for more than a few months, selling them to "Tenant Buyers" who give me 10% down and I cash flow the property. Since it is the new owner's property, I have no roofs to replace, upkeep or AC Units to pay for. In the event one of the aforementioned disasters happen, I am"liquid" and move my business to an unaffected area. It allows me to invest my profits in a wide variety of areas and commodities reducing my exposure to foreseeable yet unstoppable forces. 

    If one of the "Tenant Buyers" stops paying, the property reverts back to me and I sell it to a new "Tenant Buyer" at a market adjusted price. My joint venture investors are likewise cautious with their money and we put together an exit strategy that incorporates the high rate of return and lowered risk of "Subject To" that reflects the changing dynamics of real estate exposure.

    Plus, it's a lot of fun to buy properties.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Account Closed who is up front about charging for mentoring also agrees that sub too has it place teaching it to the beginners as a way to hold rentals long term.. is setting many sellers up for complete disasters and I know you know that you have no personal liability when they crater.. but there is moral and ethical considerations past money in these deals.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
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