Syndication Investing During a Recession

Syndication Investing During a Recession

Brian BurkePro Member
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes

Investing in real estate during a recession makes many people feel like a long-tailed cat in a room full of rocking chairs. For others, it’s an exciting opportunity.

In my 30 years of real estate investing, I’ve seen my share of market cycles and felt the pain they deliver, but I managed to get through all of them without losing any of my investor’s money. Losing my own, on the other hand—well, that’s a different story!

Most at-risk during times like this are the investments you’ve already made. If you are invested with the right sponsor, who implemented the right structure, you’ll stack the deck in your favor for a good outcome. Thanks to recent economic events, it probably won’t be the outcome you planned for, but one that you can live with, all things considered.

But what about new investments? I’ve found that the best investments are ones made at the trough of an adverse cycle, and ones made during the initial climb back up. A notable example is when I bought 120 houses in the San Francisco Bay Area from 2010 to 2012 at the depth of the last cycle. When I sold them 5-6 years later, they had gone up in value by 2-1/2 times. That trade underscores the importance of timing. This cycle isn’t likely to duplicate that result, but it could present some interesting opportunities.

So, what about investing in a passive real estate syndication now? Making the right decision is more important than ever. That means that BiggerPockets’ launch of my new book is perfect timing (The Hands-Off Investor: An Insider’s Guide to Investing in Passive Real Estate Syndications). It is critical that you invest with the right syndication sponsors and in the right real estate. This book will show you how to do both.

In talking with our investors about the current state of affairs and how they are planning their investment strategy from the short to medium term, we’ve heard responses ranging from hoarding cash out of absolute fear to those who view this as a chance to take advantage of opportunities that arise from the ashes, to just about everywhere in between. Where do you find yourself on that spectrum?

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Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
6y
Originally posted by @Brian Burke:

Investing in real estate during a recession makes many people feel like a long-tailed cat in a room full of rocking chairs. For others, it’s an exciting opportunity.

In my 30 years of real estate investing I’ve seen my share of market cycles, and felt the pain they deliver, but managed to get through all of them without losing any of my investor’s money. Losing my own, on the other hand—well, that’s a different story!

Most at risk during times like this are the investments you’ve already made. If you are invested with the right sponsor, who implemented the right structure, you’ll stack the deck in your favor for a good outcome. Thanks to recent economic events, it probably won’t be the outcome you planned for, but one that you can live with, all things considered.

But what about new investments? I’ve found that the best investments are ones made at the trough of an adverse cycle, and ones made during the initial climb back up. A notable example is when I bought 120 houses in the San Francisco Bay Area from 2010 to 2012 at the depth of the last cycle. When I sold them 5-6 years later, they had gone up in value by 2-1/2 times. That trade underscores the importance of timing. This cycle isn’t likely to duplicate that result, but it could present some interesting opportunities.

So, what about investing in a passive real estate syndication now? Making the right decision is more important than ever. That means that BiggerPockets’ launch of my new book is perfect timing. The Hands-Off Investor: An Insider’s Guide to Investing in Passive Real Estate Syndications. It is critical that you invest with the right syndication sponsors and in the right real estate. This book will show you how to do both.

In talking with our investors about the current state of affairs and how they are planning their investment strategy from the short to medium term, we’ve heard responses ranging from hoarding cash out of absolute fear to those who view this as a chance to take advantage of opportunities that arise from the ashes, to just about everywhere in between. Where do you find yourself on that spectrum?

I have been in the business since 1997 and was heavy in real estate in 2009. I had several ground up projects I had just completed. I was in the process of converting the construction loans to perm financing and all lenders went dark. Not only did they go dark but they started calling the loans. I had $35 million in loans at 9% and close to $300k going out each month to keep the properties going. The Fed was nowhere to be found and there was no talk of forbearance. I was very fortunate as I had cash, great cashflow, I pulled all my equity out through the construction loans and all my loans were non-recourse and guaranteed by the entity holding the property so the lenders had to work with me. I funded all the deals on my own so no investors were at risk. Others were not so fortunate and the banks as you know were foreclosing on properties left and right. I finally persuaded the banks to extend the loans and sold through all my properties over the next two years so everything worked out but it was definitely a scary time and a great learning experience. I had never been through anything like that and didn't even know what a work out was prior to 2009. I continued to do deals and develop properties even during that period as I had cash and cashflow so even though these deals were technically in default and in work out a few other banks were still lending. 

Fast forward to today. This is a very different environment mainly because of the moves on the part of the Fed and the Treasury. They are not going to let the banks, credit and debt markets collapse like they did last time. Especially given the fact that Neel Kashcari is largely influencing the policy makers as he had a front row see at the treasury in 2008-2009. 

The only caveat is we do not know how long this is going to last and what the real and lasting effects will be on the consumer. The longer this goes the more likely things will take longer to recover. What we do know is there are always opportunities in every economic cycle. There will be opportunities in retail and office if you have the stomach and the capital. There will likely be several multifamily properties that will take a hit if the shutdown continues into June or July. Storage will most likely weather the storm and continue to perform however new developments may take much longer to fill so there may be some opportunities there. Mobile home parks are also very recession resistant and given the unemployment benefits the Fed is backing up the states with they should continue to perform. Industrial is booming right now due to the rise of e-commerce but you need to pick your spots as the old "build it and they will fill it" doesn't work everywhere when it comes to industrial. 

Personally I am opportunistic so it's a bit too early for me to jump unless its a really compelling deal. Investors are eager. I get calls every day from people looking to deploy capital. These are relationships I've had for years and they have all been sitting on cash waiting for a time like this. What I have found is those in my network who are liquid (over $100 million) are not concerned and are ready to deploy but they are looking for much more yield than 2 months ago. I have also found that less sophisticated investors especially those who have not been through 2009 are much more conservative and are not comfortable investing in anything right now. 

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  • Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes
    6y
    Originally posted by @Brian Burke:

    Investing in real estate during a recession makes many people feel like a long-tailed cat in a room full of rocking chairs. For others, it’s an exciting opportunity.

    In my 30 years of real estate investing, I’ve seen my share of market cycles and felt the pain they deliver, but I managed to get through all of them without losing any of my investor’s money. Losing my own, on the other hand—well, that’s a different story!

    Most at-risk during times like this are the investments you’ve already made. If you are invested with the right sponsor, who implemented the right structure, you’ll stack the deck in your favor for a good outcome. Thanks to recent economic events, it probably won’t be the outcome you planned for, but one that you can live with, all things considered.

    But what about new investments? I’ve found that the best investments are ones made at the trough of an adverse cycle, and ones made during the initial climb back up. A notable example is when I bought 120 houses in the San Francisco Bay Area from 2010 to 2012 at the depth of the last cycle. When I sold them 5-6 years later, they had gone up in value by 2-1/2 times. That trade underscores the importance of timing. This cycle isn’t likely to duplicate that result, but it could present some interesting opportunities.

    So, what about investing in a passive real estate syndication now? Making the right decision is more important than ever. That means that BiggerPockets’ launch of my new book is perfect timing (The Hands-Off Investor: An Insider’s Guide to Investing in Passive Real Estate Syndications). It is critical that you invest with the right syndication sponsors and in the right real estate. This book will show you how to do both.

    In talking with our investors about the current state of affairs and how they are planning their investment strategy from the short to medium term, we’ve heard responses ranging from hoarding cash out of absolute fear to those who view this as a chance to take advantage of opportunities that arise from the ashes, to just about everywhere in between. Where do you find yourself on that spectrum?

     Brian, I think you make some great points, I also believe syndication can be good during any time, it depends on the sponsor, discipline, and underwriting if you are a heavy value-add guy (Me) - I think deals are out in the marketplace all the time, it requires more searching more due diligence, but they exist in good and bad times. The key is to be relentless in the pursuit of your goal and deals will always be there. Now in less fortunate times are more deals available? Maybe? I think in the coming months to half-year we will certainly see more deals hit the market as owners deal with bad buys overvalued purchases, heavy competition in development (ground-up) - mass unemployment - if you do not follow the trends but stick to the fundamentals of a deal structure you should fair well. 

  • Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes
    6y
    Originally posted by @Roni E.:

    I think you should focus on cash on cash. Also,truly understand and see what rent collections have been for the last 120 days. I would also be careful of a project where there is a lot of rehab or construction work. 

    Roni, what's the hesitation for projects requiring a lot of rehab or work, those are the most interesting as they present the largest value gain opportunity and likely have the lowest competition as investors not many want to do the tough work, everyone just wants to the lipstick, but do you really squeeze all the value in that case? Are you able to set yourself apart form the completion with just lipstick? 

  • Roni E.Pro Member
    Specialist · Earth 2.0 · Member since 2019 · 598 posts · 271 votes
    6y


    Originally posted by @Steven Gesis:

    Right now we are in a unique market and prices will only go down. To go into a deal where you want to do a major rehab is very high risk. Construction timelines will be delayed, it will be unknown if investors will get any cash flow and if so a small amount, the courts will have a backlog so if you need to evict it will be about 6 months to get them out. Then I do not know how you will do the debt e.g. bridge then roll.over to Fannie that is added risk. The prudent approach would be to try to buy a class B/b plus with a reset cost basis and budget 2-3 years flatness in rent, larger bad debt and large rent concessions, and a cap rate increase of least 1.15 percent in 5 years. 

    Cash flow is king.

  • WorldWide · Member since 2016 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @Greg Dickerson:
    Originally posted by @Adam E.:

    @Greg Dickerson

    Wow! Awesome, thanks :)

    It will be a video recording. 

    nice. are you going to post it to youtube or some other platform? there is a good interview jordan belfort (wolf of wall st.) did with him a few months back (highlights were fire). 

  • Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    6y
    Originally posted by @Victor S.:
    Originally posted by @Greg Dickerson:
    Originally posted by @Adam E.:

    @Greg Dickerson

    Wow! Awesome, thanks :)

    It will be a video recording. 

    nice. are you going to post it to youtube or some other platform? there is a good interview jordan belfort (wolf of wall st.) did with him a few months back (highlights were fire). 

    Yes I watched that, It will be on my YouTube channel Monday afternoon. We will drill down on Cardone Capital and his other business and what's going on right now.

  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    6y

    Finding partners is going to be harder than normal and at the beginning is dangerous. But if you buy at the trough, oh boy can you make a huge amount of money.

  • Suzanne PlayerPro Member
    Attorney · New York City / Long Island, NY · Member since 2020 · 597 posts · 248 votes
    6y

    Every recession is different.  Perhaps there's some opportunity in this one (if it does become a recession) that there hasn't been in past recessions.

  • Member since 2020 · 17 posts · 4 votes
    6y

    The way I see it... buy when there's fear, sell when there's greed. I'll check out the book!

  • Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    6y

    @Ivan Barratt

    I hope you are right and you very well could be.  I consider myself a pessimistic-realist and I give ourselves a solid chance of a real conflict with China.  America is just starting to realize who the gangsters are that run China.  My fear is China will realize that they can’t get rid of Trump by having the media parrot what a Xenophobe he is.  Then China may feel they have nothing to loose and attack Taiwan (or some other semi desperate action). Unfortunately we have a military pact with Taiwan like we do half of the rest of the world.  Full disclosure I like Trump and think he is right about China.  So if we get into any sort conflict with China even a proxy conflict through Taiwan, Hong Kong, Japan, etc. this fluffy, create nothing economy we currently have will be brought to its knees.  The thing that gives me solace is if that happens it doesn’t really matter what you invested in its all going to hell LOL!  Bottom line is I don’t see how China says, “thats fine go ahead and take all of your production out of here and leave us to figure out how we keep all of our people working and not getting disgruntled."  In my view China never comes as close to measuring up to the West as it does right now.  

    Sorry for the China rant there my point was I can see a scenario where this recession could get scary bad.  

  • Rental Property Investor · Fort Collins, CO · Member since 2015 · 273 posts · 127 votes
    6y
    Originally posted by @Todd Dexheimer:

    @Brian Burke many of our investors have hit the breaks. They aren't making investments in RE right now until they see some certainty. Right now too much is in the air for most investors. When deals start to hit the market - likely 6-12 months from now, I would expect many to be ready to invest. Others will still hold out, while others will have been negatively effected and not able to invest. 

    Agreed. I've put an artificial time frame at around 6-9 month. But now is when you get team assembled. Putting together business plans as we speak. 

    Good luck to you and thank you for bringing so much quality content.

  • Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
    6y
    @Eric While I think the odds of a shooting war with China are low I do think a two system (two internets, two currencies, two great powers, etc) world is inevitable. RE Taiwan: this should be real interesting to watch. Eisenhower (or someone from that era) called Taiwan the worlds largest aircraft carrier.  Much like Russia putting missiles in Cuba I can't imagine China "allowing" a US "carrier" so close to their mainland sphere of power.


    Originally posted by @Eric Bilderback: 

    @Ivan Barratt

    I hope you are right and you very well could be.  I consider myself a pessimistic-realist and I give ourselves a solid chance of a real conflict with China.  America is just starting to realize who the gangsters are that run China.  My fear is China will realize that they can’t get rid of Trump by having the media parrot what a Xenophobe he is.  Then China may feel they have nothing to loose and attack Taiwan (or some other semi desperate action). Unfortunately we have a military pact with Taiwan like we do half of the rest of the world.  Full disclosure I like Trump and think he is right about China.  So if we get into any sort conflict with China even a proxy conflict through Taiwan, Hong Kong, Japan, etc. this fluffy, create nothing economy we currently have will be brought to its knees.  The thing that gives me solace is if that happens it doesn’t really matter what you invested in its all going to hell LOL!  Bottom line is I don’t see how China says, “thats fine go ahead and take all of your production out of here and leave us to figure out how we keep all of our people working and not getting disgruntled."  In my view China never comes as close to measuring up to the West as it does right now.  

    Sorry for the China rant there my point was I can see a scenario where this recession could get scary bad.  

  • Kim Lisa TaylorPro Member
    Attorney · Saint Augustine, FL · Member since 2016 · 247 posts · 234 votes
    6y

    Here is what I have been hearing from my Commercial Real Estate Investor contacts: 

    1. Fannie Mae and Freddie Mac backed lenders are requiring 6-18 months interest payments in reserve at closing prior to funding deals; said it depends on debt service coverage ratios. This can have a negative impact on whether a deal works or not as you may have to raise more money from investors, lowering the returns to investors;

    2. Investors who lost money in the stock market won't pull out their funds to invest in real estate until the market recovers and they are back at pre-coronavirus levels; this leaves investors with cash from savings, self-directed IRA funds, or 1031 money, which cuts out a significant percentage of investors. When talking to investors, find out the source of their funds and how they have fared in the stock market to see if this may affect your raise;

    3. After the economy recovers, it is anticipated that those who rode out the stock market lows may be interested in more stable real estate investments;

    4. Sellers aren't making price adjustments yet; they are waiting to see how the economy recovers; 

    5. Syndication clients who syndicated commercial properties immediately after the Great Recession of 2007-2009 did really well for themselves and their investors when they sold their properties 3-7 years later.

    How can you get ready for the deals that are expected to come in the wake of this? This is a great time to reach out to investors to see how they are doing; talk to them about their future investing plans (and yours), and work on your investor marketing materials. For those that are contemplating doing a fund, it's a good time to start the process as that can take a bit longer than a typical syndication to set up. 

  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    6y

    @Brian Burke I agree that investing at a low point is the best time, but I am not sure people are hoarding cash out of fear. Any smart investor knows we are at the peak of an old cycle, not the bottom of a trough. As you pointed out, your deals were in 2010-2012, but that is 1-3 years after the stock market crashed. The people who purchased real estate in October 2008 (a month after the stock market crashed) did not generally get the best deals. My point is we are a ways off from feeling the true effects of COVID. People investing in syndication today are paying 2019 prices, built on ten years of market appreciation. The valuations have not had time to adjust. If you are looking at the performance of a apartment right now, the next 12 months of rent collection will be worse than the last 12 months. Anyone trying to sell a year from now will have an asset that looks worse on paper. So I agree invest in the trough, but disagree that this is the trough. I hope that makes sense.

    Of course this is very market dependent. Some markets will feel much more pain. Some may not even be too bad as certain markets are far less affected by this. And there is always deals to be had. I would just argue that people need to be really careful right now who they are giving their money to. This statement holds true now more than ever, "Past performance is not a guarantee of future results."

    Congratulations on the book and I am looking forward to reading it! 

  • Investor · Passiveadvantage.com · Member since 2019 · 166 posts · 91 votes
    6y

    @Joe Splitrock.  Joe, when do you think we will see the deal terms respond?  When will you be looking more aggressively?

  • Ian IppolitoBusiness Member
    Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @Joe Splitrock:

    @Brian Burke I agree that investing at a low point is the best time, but I am not sure people are hoarding cash out of fear. Any smart investor knows we are at the peak of an old cycle, not the bottom of a trough. As you pointed out, your deals were in 2010-2012, but that is 1-3 years after the stock market crashed. The people who purchased real estate in October 2008 (a month after the stock market crashed) did not generally get the best deals. My point is we are a ways off from feeling the true effects of COVID. People investing in syndication today are paying 2019 prices, built on ten years of market appreciation. The valuations have not had time to adjust. If you are looking at the performance of a apartment right now, the next 12 months of rent collection will be worse than the last 12 months. Anyone trying to sell a year from now will have an asset that looks worse on paper. So I agree invest in the trough, but disagree that this is the trough. I hope that makes sense.

    Of course this is very market dependent. Some markets will feel much more pain. Some may not even be too bad as certain markets are far less affected by this. And there is always deals to be had. I would just argue that people need to be really careful right now who they are giving their money to. This statement holds true now more than ever, "Past performance is not a guarantee of future results."

    Congratulations on the book and I am looking forward to reading it! 

    I agree with you Joe. I personally do not believe that we're at the bottom.

    Even in the great recession (where the basic information about the cause was fairly quickly understood) we had multiple legs down as the effects reverberated through the economy (and those caused aftereffects and those caused aftereffects).

    In this case there is more uncertainty because we don't even know a lot of basic information about this virus, yet. I feel we will know a lot more in a month or two but right now there's no way to predict how long it will take before we have a recovery, at type of recovery it will be (U-shaped, V-shaped etc.) and how weak or strong it will be. And with many very different plausible outcomes: it's not yet possible to look at many investment asset classes and industries and say that for sure they are going to end up fine or not at the end.

    Even with all the uncertainty, I'm seeing that few to no sellers are willing to lower their prices to compensate buyers for the significantly extra risk in the current environment. So I don't see any reason to choose to take it on completely on my side and pay the pre-COVID 19 price versus just waiting a month or 2 for more clarity. At that point either they will be capitulating (and lowering the price), or everything will be looking okay and the extra risk for the buyer will be removed.

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  • Brian BurkePro Member
    OP
    Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
    6y

    @Kim Lisa Taylor Great insight.  I've heard many similar things from a variety of sources I'd consider pretty reliable, and seeing some of it play out in real time firsthand.  I can confirm as a buyer that I'm much more "watching and waiting" than striking, yet as a seller I'm not interested in selling at a lower price than I would have two months ago--I'd rather wait it out.  I think a lot of sellers will take that position, except for those that don't have that option for whatever reason.  And great point about reaching out to your investors to see what they are thinking.  We are doing that too, we've talked to 400+ and have around another 400 to go over the next 4 weeks or so.  The conversations have been really valuable.

    @Joe Splitrock, totally agree.  We have not seen any sort of a "bottom" yet because no one's really transacting.  Deals that were in progress either closed as expected or canceled altogether, depending on whether the buyer had to buy (1031s).  But what happens next?  I think it takes time for the bid/ask spread to reconcile, and the first step is seeing where income really falls and so far no one has seen that yet.  I think we are 4-6 months from having any tangible clarity and we'll only know the bottom after it's passed.  My 2010 deals did great, but my 2009 deals were early--it was a painful way of learning that too early isn't a good thing, a bit late is a lot better.

    @Ian Ippolito you bring up some good points here.  I've heard a lot of people talk about "things going back to normal" or "switching the economy back on," but far fewer people talking about the lasting damage.  How long will it take before people get on planes again?  For sporting events, concerts & festivals to be allowed?  For restaurants to fill up?  And what about the permanent damage?  Such as office leasing in the age of more working from home, or mega-conferences in Vegas shrinking or going virtual?  There will probably be a variety of elements of fallout that last a while.  Some have called for a V shaped recovery.  I think it looks like the Nike logo.  Time will tell...

  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    6y
    Originally posted by @Duke Giordano:

    @Joe Splitrock.  Joe, when do you think we will see the deal terms respond?  When will you be looking more aggressively?

     That is a great question. Really all we can look at are indicators. We are already seeing high unemployment and banks tightening lending standards. This reduces the number of investors, but it takes time for things to fall apart.

    I think the majority of the population still believes the country will "open up for business" in the next 1-2 months. We may start seeing certain restrictions loosen, but general distancing efforts will be in effect the rest of the year. People will realize that "open for business" is not "back to 2019". They will see that you can't just turn back on the economy and that there are repercussions from all the well intention financial actions. Freezing debt payments, high unemployment, lost revenue, lost tax revenue and government hand out loans all come at a cost.   

    This could take months to play out, even years. For those who thought finding the top of the market was hard, finding the bottom is even harder. I am not waiting for the bottom, just like I wasn't waiting for the top. I am waiting for some fractures and opportunity. 

  • Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
    6y

    @Hai Loc I think this recession will resemble Sept 11th. Changes will be made. But, more jobs will come out of this stange pandemic. This of the investment that will be made in healthcare just as it was as for security post 9/11. Think of the investment made in take out and other delivery services? Think of the inroads made in warehousing and logistics? There will be a boom in many sectors. I also think regional travel will see tremendous growth. I hope all of this helps. In 3 months we will all be back to work and thriving again.

  • Lititz, PA · Member since 2013 · 595 posts · 272 votes
    6y

    This is why I don't think multifamily syndicators need to worry too much:  Correct me if there are dark clouds I'm missing.

    This is not like any other economic crisis because the gov immediately decided to pay everyone to get through.  People are receiving money directly into their accounts through the stimulus checks and an additional $600/week on top of their base unemployment payouts.  Many will be earning more than they were while working.  Gov. is saying these enhanced payments can continue for 39 weeks.  They will likely be willing to continue longer if needed.

    Nothing like this happened in any other recession or 9/11.  Average person was on their own during the 2009 crash.  Now they are supported

    If there are dark clouds I'm missing please explain.

  • Rental Property Investor · Enterprise, AL · Member since 2019 · 137 posts · 85 votes
    6y

    @Brian Burke Looking to seize any and all opportunities that may present themselves. Not concerned or afraid, just moving forward with caution and proper diligence.

  • Newark, DE · Member since 2020 · 19 posts · 14 votes
    6y

    Buy when no one else is....

  • Member since 2019 · 8 posts · 1 vote
    6y
    Originally posted by @Brian Burke:

    @Roni E. you nailed it, in my opinion.  The moratoriums are going to do a lot more damage than people think.  Some say it's a 90-day to 120-day freeze.  I could see people living for free for nearly a year in some jurisdictions.  They should never have put those moratoriums in place.  Landlords don't want to evict, but consequences do need to exist in order for some people to feel compelled to fulfill their end of a contract.

    Specifically taking out this section - do you think we're potentially setting a precedent for any recession moving forward? Did the government just give the message that the people will always be bailed out in circumstances like these(by eliminating evictions)? This is a super special case that no one could have predicted, but it seems like the scale of holding people accountable for their own finances and savings is tilting in one direction.

  • Brian BurkePro Member
    OP
    Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
    6y

    @Kurtis Schreck I'd like to hope that this isn't setting a precedent, but in some jurisdictions, it might.  California has been doing the unthinkable to destroy the housing industry for a long time, and has ramped up its efforts over the last couple of years.  But this time they really went overboard with a blanket moratorium that is too broad and lasts for too long.  It will be very damaging, and I wouldn't be surprised if they do it again.  Other states, on the other hand, are less likely to repeat this practice, in my opinion.  They see this as a very unique set of circumstances, and I agree, but even they shouldn't have implemented the restrictions that they did.  Their intent was good, but the unintended consequences could outweigh the benefits.

  • Suzanne PlayerPro Member
    Attorney · New York City / Long Island, NY · Member since 2020 · 597 posts · 248 votes
    6y

    @Kurtis Schreck 

    I've been wondering about this too - will this experience help people see the wisdom of having cash handy in case of an unforeseen emergency?  


    After the 2008 recession I thought people would wake up to the shocking lack of financial literacy in the middle class in America.  I also would have thought more states would make financial literacy a mandatory course for high school students but only about 17 currently have the requirement.  People graduate high school and don't know the most basic things that will affect them for the rest of their lives, like how compound interest works.

    But I don't think anything has really changed in America.  People still live paycheck to paycheck even if they have a high enough income to accumulate a reserve of 6 months' living expenses.  I'm not talking about people who make way too little and just can't do this.  Of course everyone understands that it's not possible for some people.  I'm talking about people who spend on luxury items and yet need to use credit card debt for even minor emergencies, in spite of making a strong income.

  • Investor · Passiveadvantage.com · Member since 2019 · 166 posts · 91 votes
    6y

    Interesting @Brian Burke, how do you see what California is doing currently effecting things there in the short and long term?  Values have been way overpriced in CA for some time, some areas more than others but now it seems nobody will want to buy and most will just stay renters when the buy/rent cost ratio is what it is there.

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