sell now, gather cash, be prepared and get ready. market crash.

181 Replies

If your thinking of starting to flip fixer uppers, buying your first buy and hold, or your just starting out in RE investment. It would be best to put those plans on hold for at least a few months. Just wait and see what happens with the economy. This is a warning to all, but especially younger newer investors with no experience. I went into a detail in a previous post about why I think this a couple weeks ago, and its becoming more and more relevant as time goes on. Those who are still in limbo as to weather this global pandemic will have an long term impact on the US economy, as well as the housing market in general, need to face reality and plan accordingly. Again this is just my opinion and everyone will have there own plans and investment strategies. To tell you the truth, its really hard to believe that there are still people, to put it bluntly multimillionaire RE investors who think that covid will have no impact on the US economy and housing market. Read my post about the US economy below. The market is crashing, I am not just saying this, I have taken action and sold my primary home and am selling my investment properties to get prepared for whats coming. You can read about this below as well. I am writing this post not to gloat or get attention from readers. I am writing this post to WARN YOU. DON'T FOLLOW THE MASSES ON WALL STREET, THERE ABOUT TO RUN STRAIGHT OFF A CLIFF. THE BULLS HAVE HAD THERE TIME AND ITS OVER. THE TIME OF THE BEARS HAS COME. GET OUT WHILE YOU CAN.

people-think-were-nuts

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Again this is just my opinion and everyone will have there own plans and investment strategies.

Well, are you willing to sell me what you have for $0.40 on the dollar?  You'll thank me in a year for that generous offer :)

Originally posted by @Chris Gawlik :

If your thinking of starting to flip fixer uppers, buying your first buy and hold, or your just starting out in RE investment. It would be best to put those plans on hold for at least a few months. Just wait and see what happens with the economy. This is a warning to all, but especially younger newer investors with no experience. I went into a detail in a previous post about why I think this a couple weeks ago, and its becoming more and more relevant as time goes on. Those who are still in limbo as to weather this global pandemic will have an long term impact on the US economy, as well as the housing market in general, need to face reality and plan accordingly. Again this is just my opinion and everyone will have there own plans and investment strategies. To tell you the truth, its really hard to believe that there are still people, to put it bluntly multimillionaire RE investors who think that covid will have no impact on the US economy and housing market. Read my post about the US economy below. The market is crashing, I am not just saying this, I have taken action and sold my primary home and am selling my investment properties to get prepared for whats coming. You can read about this below as well. I am writing this post not to gloat or get attention from readers. I am writing this post to WARN YOU. DON'T FOLLOW THE MASSES ON WALL STREET, THERE ABOUT TO RUN STRAIGHT OFF A CLIFF. THE BULLS HAVE HAD THERE TIME AND ITS OVER. THE TIME OF THE BEARS HAS COME. GET OUT WHILE YOU CAN.

people-think-were-nuts

the-us-economy-will-recover-quickly-think-again


  

Some investors are selling too or already sold last year, but they will not be so eager to share that in a public forum, as they also work as brokers or manage real estate.

They want to have cash and be ready for price drops.

 

They want to have cash and be ready for price drops.

Well, if it's anything like 2009-2011, besides some defaults and banks forcing sales, there weren't price drops.

The prices stayed flat and sellers just didn't want to sell.

Of course, that got followed by 2013-2017 which more than doubled pricing.

Hence, I've decided to raise my offer from 40% to 45% on the dollar.

Originally posted by @Steve Morris :

They want to have cash and be ready for price drops.

Well, if it's anything like 2009-2011, besides some defaults and banks forcing sales, there weren't price drops.

The prices stayed flat and sellers just didn't want to sell.

Of course, that got followed by 2013-2017 which more than doubled pricing.

Hence, I've decided to raise my offer from 40% to 45% on the dollar.


If the crisis brings on a situation of market distress prices will collapse. The game is going to change. Things will not be as easy as purchasing properties and looking them appreciate, or collecting rent every month without any problems. Tenants will stop paying. Banks will start to foreclose. Prices will go down. This means there will be amazing opportunities, but only for people who know what they are doing. Everyone knows how to play a market that goes up, but when things turn nasty some people are going to lose it all.

There are some statements that are constantly repeated here at BP, and I am very surprised that there are all these wrong "mantra" going on and on, like:

- You don't time the market

- Properties have to cashflow

- The 1% rule

- Leveraging in order to grow fast

My personal opinion is most experienced investors don't invest in real estate following any of those rules. 

Investors do time the market, analyse the market conditions, funds manage their cash positions, investors hedge their bets. Professional investors do not tend to buy properties that cash flow in really bad areas. The 1% rule is impossible to attain in any interesting location. And over-leverage is the perfect recipe for disaster.

@Steve Morris   2009-2011 is when things were stabilizing from 2007-2008 crisis. What kind of example is that? I can't really tell if your joking or not. What is your true opinion about things to come? Im thinking your the permabull that thinks the market will climb forever. Start looking at the actual data instead of running your real estate brokerage. Better get good at short sales Steve. 

These kinds of people touted the greatest real estate market of all time back in 2007-2008 as well. You better buy now before you get priced out of the market. Right before it collapsed.  

This is what I mean. Your about to fall off a cliff. Also this is the 3rd time you poked at me about buying what I had at a discount. Getting old brother. Come up with some new material. This article below was written back in March. Things have gotten worse since then.   

https://www.independent.co.uk/news/world/americas/financial-crisis-2008-coronavirus-donald-trump-economy-stocks-a9392881.html

Originally posted by @Chris Gawlik :

If your thinking of starting to flip fixer uppers, buying your first buy and hold, or your just starting out in RE investment. It would be best to put those plans on hold for at least a few months. Just wait and see what happens with the economy. This is a warning to all, but especially younger newer investors with no experience. I went into a detail in a previous post about why I think this a couple weeks ago, and its becoming more and more relevant as time goes on. Those who are still in limbo as to weather this global pandemic will have an long term impact on the US economy, as well as the housing market in general, need to face reality and plan accordingly. Again this is just my opinion and everyone will have there own plans and investment strategies. To tell you the truth, its really hard to believe that there are still people, to put it bluntly multimillionaire RE investors who think that covid will have no impact on the US economy and housing market. Read my post about the US economy below. The market is crashing, I am not just saying this, I have taken action and sold my primary home and am selling my investment properties to get prepared for whats coming. You can read about this below as well. I am writing this post not to gloat or get attention from readers. I am writing this post to WARN YOU. DON'T FOLLOW THE MASSES ON WALL STREET, THERE ABOUT TO RUN STRAIGHT OFF A CLIFF. THE BULLS HAVE HAD THERE TIME AND ITS OVER. THE TIME OF THE BEARS HAS COME. GET OUT WHILE YOU CAN.  

people-think-were-nuts

the-us-economy-will-recover-quickly-think-again



I think a lot of people need to follow your advice. I think they need to sell to me as well :-)
  

 

Kudos for walking the talk and selling your properties.

I pivoted from value plays to cash flow plays (and always adding value) over the past few years in preparation for tough times. Invest in decent locations, add value, have cash flow, use prudent debt, carry reserves, and sleep well at night. I don't see the necessity to invest in today's market when today's high prices should be around next year at worst, but taking years or decades of savings off the table is also not an option for many. Sell the marginal properties and keep the good ones. Many of us invest in real estate BECAUSE of market concerns, not in spite of them.

@Mike Dymski I get it. Some people are priced in and they will ride the wave, but for someone new thinking of a house hack or a flip may want to just wait until a bit more data comes out. Just a few more months could save you quite a bit of heartache and headache. Don't buy into FOMO ( Fear Of Missing Out ) right now. 

These posts make me LOL. No one can time the markets. What you can do though is read statistics and realize trying to time the market is a losers game. Also even if you are right (unlikely but let's pretend) in past recessions real estate hasn't even crashed the two aren't directly correlated outside of 2008 which was real estate specific. We have mortgage delays and eviction bans right now. In my market chicago demand for 2-4 units is at an all time high and the people affected by covid were not the kind of people buying investment properties regardless. We haven't seen any significant tenant issues either some minor issues here and there with people asking to leave but no evictions or missed rent. It's been pretty business as usual from real estate standpoint.

If you are selling your properties the most likely result will be losing on closing costs and having to pay more close costs when you buy next at a statistically higher price at least by inflation. To think you can time the top and the bottom is a fallacy.

Each market is different. My market changes real slow, also follows the curve in a much smaller fashion. CA may lose 10% on a $800,000 house ($80,000).

Our average house is $120,000 ($12,000 loss in that scenario). Could rise to 10% higher.......$132,000.. Nobody here is rushing to sell or buy. 

I am not selling, but my offers are taking into account the increased risk that I believe to exists now.  Only one of my offers has been accepted recently and we pulled out during DD because there was too much risk in our value add.

It seems that while I am factoring in increased risk, other investors are not. Last week I placed an all cash offer on a RE that had $400K to $450K of rehab/work necessary (abatement alone was estimated at $40k to $50K). I put in an all cash offer that could have returned ~$100K to $150K if the market did not decline but a 10% market decline would have returned $10k to $60K. The amount of time for this particular rehab would have been many months, with lots of risk of additional items being found (house was built in the 1920s) and a lot of unknowns (for example, house does not have water or a sure means to get water, unknown state of the septic system, etc.).

I was not surprised when we did not get the contract to purchase.  There are some good/great flippers in my market.  I know some can do the rehab cheaper than we can.  However, I view the offer we made as aggressive for the current risk level.  I believe some offers are not accessing the risk appropriately.  If the RE values do not decline, they may look smart.  If the RE values do decline, they will be looking at very little profit for their effort (a lot of effort).

I agree with the OP sentiment, but would choose to word it differently.  It is my opinion that offers should be placed in accordance with the higher risk level.  A decline in RE values in the near future is not inevitable, but I believe the odds are greater for a decline than they were 8 months ago and this should be reflected in the offers investors make.  I believe there are RE investors that are ignoring this increased risk.

Originally posted by @Steve Morris:
Originally posted by @Chris Gawlik:

@Steve Morris  2009-2011 is when things were stabilizing from 2007-2008 crisis. What kind of example is that? I can't really tell if your joking or not. What is your true opinion about things to come? 

Prices, outside of overleraged buyers didn't drop from 2007 on.  The sellers vanished.

Im thinking your the permabull that thinks the market will climb forever. Start looking at the actual data instead of running your real estate brokerage. 

If you want, I can post Portland data to prove prices didn't drop.  However, am not a permabull.  In 2009 I was buggin people to buy.  Since late 2018, I've been telling them to sell if they're going to do itin the next 5 years, so not true.

Also this is the 3rd time you poked at me about buying what I had at a discount. Getting old brother. Come up with some new material. 

Sorry if you get upset when people disagree, but if you truly believe that, you should be a heavy seller and out of the market the past 18 months.

Like most people quoting articles, I think you suffer from a subjective bias, ie you quote people that agree with you and attack those that don't.  Either that or you like to cateogrize people into 2 camps and real estate is not that simple.

 

 

@Steve Morris You dodged my question. What is your opinion about what will happen in the next year with the US economy and real estate prices. Your a Portland OR broker. What do you think will happen to Portland OR real estate prices in the next year. Do you think there will be an increase in foreclosures and short sales in the next year? Do you think unemployment is going to go up or down in the US in the 6 months? I have chosen my side of the fence on all of the questions I just asked you. You seem to be arguing, but not giving an opinion about what you think will happen. If you disagree so strongly with the post tell me why you think this way. What data do you have? How many people are unemployed right now in the US. Many people think those jobs are coming back. There not. Those jobs are gone fore ever. The companies filing bankruptcy will be gone forever. This is just the start of it. This is what I have unemployment rate for July 10.2 %. GDP drops at a 32.9 % rate, the worst US contraction in HISTORY. If you think the RE market being hot reflects the current condition of the US economy, your wrong. Just because your floating high on the hog being a realtor / broker right now does not mean there will be no correction. Its just means that people held off on selling because of covid and you got lucky because of supply and demand. When stimulus can no longer support whats happening then you will see the pieces start to fall. The banks will start to sound the alarm bells and you my friend will be very very quite. 

@Henry Lazerow  Its also funny that most brokers and realtors totally disagree with my post. Maybe thats because they want the market to climb forever to keep the money flowing. I get it, but its not reality. There has to be a correction at some point. The economy expands then contracts. We are quickly heading into a contraction.  
   

@Max T. Again, an argument with no opinion. Hey, its just my opinion. Everyone is entitled to there own. This is what I believe, and if my beliefs can help someone new wait for a better opportunity than I did my job. If I am wrong, then I'm wrong. Like I said before I'm not just chicken little sky is falling about what I believe. I put my money on the table brother. This is how I'm playing this poker game. I sold my home. Sold my rental properties. It was not just some small thing for me either. It was my dream home, but I believe in my heart that this correction will give me more opportunity to jump start my financial independence. Take it or leave it, this is what I believe, and this is my strategy, I took action, and this is where I stand, right or wrong. 

Getting quite a bit of flak from very experienced investors. Its not an easy thing. Another thing is some people can't get out. There priced in and there's no way for them to get out. Of course people are going to disagree with me when there so heavily invested in the market, or its there source of income. I truly believe many investors are going to go broke. The sad part about it is, for some theirs really nothing they can do about it now, its to late.  

I don't see any increase in inventory so I don't think investors are bailing out. I for one do think the economy is scary but I think we could just as likely see negative interest rates which could send prices quite a bit higher. And bringing jobs back from overseas, people shifting out of cities, printing money. I think you can make an equally good case that prices go higher even with this half baked economy. I have been calling for a crash for 10 years!

Tip: When I tell you the market has bottomed sell and when I say the market is toped out buy LOL!