Question for other accredited investors: what are you doing now?

Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

There are companies like fig.us building new small multi (4-20 units) in Idaho, Utah and Texas. I’d love to move up to small multi but in Vegas they are the least attractive properties. I certainly have some properties I wouldn’t mind exchanging as well but with nothing to buy and cash coming in monthly there’s just no fire to get started.

John Barrett

Rental Property Investor · Everett, WA · Member since 2015 · 458 posts · 386 votes

We have pulled some equity out of properties that have seen significant run up in values and done a couple of 1031 exchanges to trade up into larger multifamily properties. Currently planning on holding a larger cash position until prices start to adjust to the higher interest rate environment. Cap rates are still really low and it doesn't make sense to move forward with the vast majority of listings. I am not interested in following the dumb money chasing every so called deal.

My opinion is that there will always be deals you just have to be positioned well to capture them. Trading 1 for 2-4 seems reasonable but I wouldn't be feeling you have to make move.

Best of luck.

Tony Kim

Rental Property Investor · Los Angeles · Member since 2018 · 844 posts · 1k+ votes

Sierra Crisp

Rental Property Investor · los Angeles, CA · Member since 2017 · 47 posts · 32 votes

Right now interest rates are still low. I’ve pulled cash from properties and am searching for larger complexes in other states. 5 or more units. I would avoid the multiunits in Nevada. I have a good chunk of property out there but the multi-units out there are D properties at best and bring a lot of problems.

Nick Kosko

Member since 2018 · 7 posts · 3 votes

Originally posted by @Jack B.:

So what are the other accredited investors here doing. I'm primarily looking for opinions from people at the accredited investor level.

Asking questions, just like you are here. My mentor taught me opportunity finds cash. I seek out other people like us and have countless conversations over coffee and meals. I, too, feel real estate is fairly overbought. There are still great buying opportunities out there but I don't see that they are found on the MLS or from your local wholesaler. Whether it's real estate, or another cash flow business, my best deals have come from networking and relationship building.

I've also been tremendously blessed to have a entrepreneurial centric client base that is fairly wealthy. I've seen opportunity spring from conversations there as well. I know one deal emerging from some client conversations is around a senior living home development. Lots of money flowing in that direction these days.

Alina Trigub

Rental Property Investor · Glen Rock, NJ · Member since 2015 · 3k+ posts · 2k+ votes

@Jack B.

By asking about what accredited investors are doing, are you alluding to the investments that require investors to be accredited?

To me it's not a matter of what each person is doing, rather how well do you know your niche(s)?! And then, if you believe it's not safe to stay in that niche now, then I completely agree with @Nick Kosko suggestion. Best advise/ideas are born through the actual networking. So it's essential to stay actively engaged with your network.

Best!

3 Reply

Rental Property Investor · San Diego, CA · Member since 2018 · 242 posts · 234 votes

@Jack B. I just moved $600k to cash by selling some stock to get ready for the next downturn. I’m staying away from sfr and doing muti- family . I’m also starting to look at storage and Mobile home parks.

Jeff C.

Real Estate Broker · Bakersfield, CA · Member since 2018 · 269 posts · 597 votes

Originally posted by @Jack B.:

I bought most of my rentals at the bottom of the market or near bottom, other than 2 of them that I had to buy 1.5 years ago due to 1031 exchange that I needed to do for a long list of reasons.

I have capital to deploy, but am more interested in using existing capital in rentals already so that I keep my other money for other opportunities (plus once I buy an investment property, it's difficult to get that money OUT tax free).

So what are the other accredited investors here doing. I'm primarily looking for opinions from people at the accredited investor level.

I'll be selling one rental in a couple months after nearly 5 years of holding it and buying either 1 or 2 replacements in Seattle area or buying 4 replacements in Las Vegas OR spreading it around the country.

One thought has been turnkey rentals but I've read terrible things about them.

So for now I'm just buying 2-4 more with the sale of one, but not going in to buy 10 new houses with capital on hand until the market crashes. I'm dollar cost averaging....not timing the market, there is a difference.

Attempting to rid myself of my last 7 remaining flips, then I intend to mostly kick back and observe for a couple of months while things settle out. The Las Vegas market looks poised for another beating right now. You may want to drag your feet on acquiring more property there. Inventories are up massively year over year, and sales volume has ticked down.

Omar Khan

Rental Property Investor · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes

@Jack B. For the stocks side of the equation, continue to hold onto low-cost index ETFs with monthly buying and DRIP everything.

For my real estate business, continue to invest money into our own syndications which are focused on a combination of cash-flow and appreciation in TX and FL.

I have realized after a decade of experience investing across public/private markets that hardly anyone can time the market. As long as you follow your plan, cash in your chips when you feel you've made an adequate return (as per @Russell Brazil point) and never get too greedy, most investors will turn out just fine in the long-term.

Institutions with hundreds of millions of dollars research budget don't know when to move into cash, so I always chuckle when investors tell me they have "moved" their positions to cash in anticipation of a correction/crash.

4 Reply

Charles Kao

Specialist · Grand Rapids, MI · Member since 2016 · 1k+ posts · 611 votes

@Jack B. I have been exploring other ways of investing in real estate with higher return on money AND time and focusinf just on larger deals and wholesaling or aligning our clients with assets we would have bought even 2-3 years ago. Also like @Russell Brazil we are trying to strengthen the quality of our holdings while trying to make our portfolio as correction or recession proof as possible. This has materialized in expanding into other asset classes such as self storage and mobile home communities or finding better financing to leverage our cash and return.

Jack B.

OP

Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes

Originally posted by @Russell Brazil:

Ive sold off a couple of C class properties I had after a big run up and have been moving that money to A class high demand. Been considering some putting some into syndication deals where it is a high quality, B+ type asset in secondary markets as well, but havnt made that jump yet to trusting others with my money. Id also been moving to a larger cash position out of the market in the last 6 months.

I haven't made that jump to trusting other people with my money either yet. Don't know if I ever will.

Rental Property Investor · San Diego, CA · Member since 2018 · 242 posts · 234 votes

@Nick Kosko I'm trying to connect/meet with other like-minded accredited investors here in San Diego. Where do you call home? I'm buying units in KS MO with 8%+CAP and 11% CoC returns. I'm looking to do my first 100-200 plex early next year. Targeting NC, TN, FL, KS ect

Rental Property Investor · San Diego, CA · Member since 2018 · 242 posts · 234 votes

@Jack B. I'm accredited. I have been buying in KS MO for the last 12 months. I have a rockstar commercial real estate agent, a local lawyer, property mgt ect. I have been buying turn key properties and been VERY happy... #mailbox$

Rental Property Investor · San Diego, CA · Member since 2018 · 242 posts · 234 votes

@charles kao. I'm interested in moving into self storage and mobile home communities. Lets talk.

Bob Floss II

Attorney · Northbrook, IL · Member since 2017 · 719 posts · 549 votes

Depends upon each market. I like @Jason Graves idea of buying in Kansas City, that’s an often ignored market with strong tenant pool.

Here in Chicago the large multi family market has been picked over. Several investors are having success with converting their 2 flats into single family homes and selling. We still have a decent amount of cheap single family homes that we are either fixing up to rent or flip.

I’ve lost a few partners to border hopping. Several are buying homes in northwest Indiana to chase cheap housing and the others went up to Wisconsin to get a piece of the Foxconn housing demand.

Scott Schultz

Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes

I just keep buying great deals, just like i did when i started, the deals are still out there, just fewer in between, I only purchased 3 single families and 2 duplexes this year (all rental no flips in 2018), vs 6-8 per year plus about 3 flips per year i was doing.I see no reason to deviate from a formula that works, I just have to work harder to find the deals

Marcus Auerbach

Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes

While new construction is an attractive playground right now, for buy and hold we are sticking with SF in the suburbs.

The MF market concerns me: we had massive amounts of new developments come online in the last years, more are under way and rent specials are increasing. New developments fearure fantastic common areas, high end finishes and very good noise insulation between units. Hard to compete with that with a 1960 built structure. Caps are down to 6-7 and rents start to look inflated too (more and more in the $2,000+ range) - I am expecting to reach the tipping point rather soon. SF tenants are a different audience and usually looking for their own space/yard/garage/patio/basmt etc not want a MF lifestyle. Generally I remain bullish for the market as a whole. at least for Milwaukee. We have a general housing shortage and cost of new construction is so high compared to existing inventory, that we will see retail prices pushing up for at least 2-3 years before we start narrowing the gap to new constrction down to historic averges.

Agree with Scott, growing slower, working a bit harder to find deals. But we are in a market that has appreciated about 5-7% every year now and so you have to shift your frame of reference a bit with that - a good deal looks different today than it did 5 years ago. We have also started to de-leverage shorter term loans in anticipation of higher rates.

Charles Kao

Specialist · Grand Rapids, MI · Member since 2016 · 1k+ posts · 611 votes

@Jack B. I'm looking at investments that can be automated or added to my portfolio with as much return on time as possible in addition to high cash on cash return. Because I do not want a majority of my holdings to be exposed to what I perceive to be high end of market even if numbers look good I have been wholesaling or passing deals on to clients and taking a realtor commission. All the deals we are doing are off market and our investors have been offering to fund our deals for equity so we are in a good spot.

Charles Kao

Specialist · Grand Rapids, MI · Member since 2016 · 1k+ posts · 611 votes

@Russell Brazil What is your take on some of the syndications purchasing with extremely aggressive financing? Just saw a deal with 5 year interest only adjustable rate. Feel this type of deal has only one strategy and would not survive a market correction of any degree.

Account Closed

Gaithersburg, MD · Member since 2009 · 80 posts · 47 votes

Buying more properties in Arlington, VA. Amazon. Apple sniffing around. Others will come to poach talent.

Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

[email protected]301-893-4635 Podcast Guest on Show #192

Originally posted by @Charles Kao:

@Russell Brazil What is your take on some of the syndications purchasing with extremely aggressive financing? Just saw a deal with 5 year interest only adjustable rate. Feel this type of deal has only one strategy and would not survive a market correction of any degree.

Way more risk than Id be willing to take on. Little risk for the syndicator who is likely into it for zero of his own investment capital and is taking a free equity stake.

We are in a rising interest rate environment....and while contrary to what many people think, interest rates do not affect the national housing market the way people inherently think....they do affect certain asset classes. And one of the asset classes that should have some sensitivity to rising rates (especially if there is not correlating inflation) is these large commercial/multifamily properties. So if you are going 5 years into this with out any debt pay down, what happens if the asset hasnt increased enough in value to offset sales costs. The investors percentage has been diluted by the syndicators equity, now they are selling at a loss possibly. Maybe the cash distributions during the hold period are enough to compensate for that risk. But it would need to be a very high cash distribution rate to compensate for taking the risk of an interest only loan in a rising interest rate environment on an asset with sensitivity to those conditions.

Im a believer in long time buy and hold on the small scale regardless of whether we are in a rising interest rate environment or falling interest rate environment....Im even a user of adjustable rate loans....but Im not a user of an interest only loan.

Really one of the only reasons Id consider a syndicated deal would be so I can invest with someone I know and trust and like, and can be into a syndication at about $50k, or about half what I typically put down on a single family Id buy. Like @Ben Leybovich who is buying value add, but solid low cap rate assets. And for those reading who dont understand cap rates, Ive been saying it a million times lately....cap rate (or yield) is an indication of the risk of the asset (or market). It is NOT an indication of the return. Im already a relatively low risk investor, but if Im putting my money with someone else, in a rising interest rate environment, its going to be on a quality asset in a quality market. Im not buying some 12 cap on an interest only loan in a class D maket run by some scheister.

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11 Reply

Dan HandfordPro Member

Investor · Lexington, SC · Member since 2018 · 779 posts · 501 votes

@Jack B.

@Russell Brazil Why do you like the A class properties? Seems to be the most volatile MF asset class when it comes to the pending correction? What would it take to get you to start trusting other people with your money (just curious)?

@Bill B. Not sure building is the best way to go in certain markets right now. How much are the fig.us ground up development costs?

@John Barrett That's awesome about your moving up into larger multifamily assets with 1031 exchanges. What size deals did you move from and what size did you move up into?

@Sierra Crisp Considering historical interest rates...you are correct that right now they are still low.

@Alina Trigub I totally agree that your network is key in this space.

@Jason Graves Great move getting out of the stock market! Also, with the multifamily you get depreciation which you don't get in the stock market. Also, buying at a low cap does not provide the best returns when you are buying value add and increasing value with forced appreciation.

@Jeff C. What makes you think the Las Vegas market is "poised for another beating"?

@Marcus Auerbach You should check out www.weareapartments.org and see the actually shortage based on the supply/demand. Great resource for picking a market when you see lots of class A being built.

Great post and discussion. I like seeing everyone's take on the market.

Jeff C.

Real Estate Broker · Bakersfield, CA · Member since 2018 · 269 posts · 597 votes

@Dan Handford

For November:

"...GLVAR reported 7,003 single-family homes listed for sale without any sort of offer. That’s up 54.3 percent from one year ago. For condos and townhomes, the 1,605 properties listed without offers in November represented a 118.4 percent jump from one year ago...

Active inventory (single-family and condos) is up sharply from a year ago, from a total of 5,273 in November 2017 to 8,608 in November 2018. Note: Total inventory was up 63.2% year-over-year. "

This coupled with about an 11% decrease in home sales for the month, and I don't see any possible direction for pricing other than down.

Taylor L.

Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes

@Russell Brazil long term IO definitely is concerning, are you seeing anyone doing deals in your area without long term IO? All the deals I've seen there require it to make the numbers work (not a good place to start)

@Jason Graves congratulations on your turnkey success. What's your portfolio up to? How are you preparing that portfolio for a recession?