Where are YOU looking to park your money?

General Real Estate Investing
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Where are YOU looking to park your money?

Alan Grobmeier
Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes

For those of you that think we are back in a bubble:  Have you sold any of your places into the 'increase'?  If so, where did you 'park' your cash?

My issue is that between my wife & I we have sold 3 houses this year.  They were the 'dogs' of the portfolio, but we made good money.  We are prepared to hold any properties we presently have thru the next downturn/recession.  

Now we are sitting on some cash and no where to really put it to work. Stock market is overpriced, real estate is overpriced, dont really care for becoming a HML (hard money lender) due to risk.

I feel this won't 'end' well.  @Jay Hinrichs has stated that it is a good thing that prices are eclipsing the highs prior to the 'Great Recession'.  And generally speaking, I agree.  However, what I am seeing is unaffordability across the country.  And because of the lack of affordability, I am concerned.  Most of the new builds I am seeing are NOT 'everyman' houses, they are "McMansions", with high price tags.  We appear to truly be going towards a 'have' vs 'have not' society.  Our kids, saddled with zillions of $$$ of student loan debt, may NEVER be able to buy.

So, with that said, what is everyone investing in?  I know PM is not the answer (yet).

Thanks,

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Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
8y

Hey Alan.  Everyone is wrestling with this question (or at least they should be or they are going to miss the fact that their property strategy has already been executed/achieved).

You invest in appreciating assets; so, market cycles and timing matters for that strategy.  You will have cycles of buying and cycles of sitting on the sidelines.  Or, you will need to pivot markets or strategies.  I am doing both.  I am redeploying capital into cash flowing assets...primarily mobile home parks (affordable), self storage (recession resistant), and B class multifamily (affordable)...and always adding value.

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  • Joshua Wright
    Financial Advisor · Leawood, KS · Member since 2018 · 60 posts · 20 votes
    8y
    @Alan Grobmeier Yeah...tough environment to go find and duplicate what you bought in the past. Just be careful to not chase that past performance to the point of overpaying for something and then taking it on the chin down the road. Watched some of my family members do that. I’d just try to hedge yourself as best you can for what could happen. Definitely have to go to RE if you want cash flow. I’ve got a few public, but non-traded real estate funds I’ve been using for clients lately who are in the same spot, but cash flow isn’t great. But you can still get some liquidity and exposure. Hard to duplicate good cash flow off a low cost property in a quickly appreciating maket :)
    0Reply
  • Alan Grobmeier
    OP
    Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
    8y

    @Joshua Wright, We've sold my 'mistakes' while I was learning what I wanted.  And the properties which are left are doing very well.

    I feel that IF I was to buy another property that is my business model, that I would overpay from a price point of view.  In addition, I would have to come up with way more money down to make it cash flow in a similar manner as my portfolio properties.  

    AND I know I better like it, I'm probably going to have it a long time.  Especially if their is a recession looming. 

    1Reply
  • Alan Grobmeier
    OP
    Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
    8y

    @Eric Adobo, not on the verge of BK.  

    But I am on the verge of Retirement 3.0.  It took me 2 tries to get it 'right'.  ;-)

    0Reply
  • David S.
    Rental Property Investor · Larkspur, CO · Member since 2018 · 198 posts · 179 votes
    8y

    If you can, go to commercial properties, four units and up, that need better mgmt. and perhaps some tlc. As you probably know, they value based on income, not through traditional appraisals and market demand. And to your point, that market should be relatively bullet proof since people are hurting for affordable rentals. Maybe try and find a syndicate for similar opportunities. I know they're few and far between, but that's all I got if you don't like the vacation rental idea. 

    With the commercial units, even if the market tanks and values ascribed to them drops relative to their income, you can still build a lot of value RELATIVE to the rest of the market. Now just to find one...

    1Reply
  • Richard C.
    Rental Property Investor · Orange County, CA · Member since 2014 · 49 posts · 80 votes
    8y

    Im still buying but very cautiously and to @Ned Carey point,  ONLY great deals with a significant value ad component.

    Like everywhere in the country, these deals are far a few between, and when they do pop up, you have to act fast.   But you can find and obtain great deals in any market if you are patient enough and maintain discipline before pulling the trigger.  

    In the meatime, I am focusing on best and highest use for my portfolio by adding bedrooms / square footage / ADUs to properties that I can anticipate both an equity and Cash flow bump.   In Southern CA, sometimes you can build cheaper for cash flow than you can purchase it.

    But Im not opposed to sitting on the sidelines if nothing seems to work.  Sometimes being patient and observing is actually doing the best thing.

    2Reply
  • Andy Bahr
    Charlotte, NC · Member since 2017 · 18 posts · 7 votes
    8y
    @Mike Dymski I’m in Charlotte and am curious about self storage. Would you be willing to connect?
    1Reply
  • Justin KurpiusPro Member
    Rental Property Investor · Member since 2017 · 84 posts · 41 votes
    8y
    @Alan Grobmeier. Two routes to consider: Gold. Look back at 2008. Gold ramped up through downturn. If u go this route and it works, your equity would increase while the majority would be decreasing. It is also liquid, easy, and cheap via ETF. Notes. Buy some real estate notes in an area u would like to invest in at a discount. They foreclose, u get the house. They continue to pay, u get great cash flow. They refi, great ROI! -Justin
    1Reply
  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    8y

    @Alan Grobmeier one option may be to open up credit lines while you are in a position where you don’t need the money. Banks tend to be more willing to lend you money when you don’t need it and less willing when you do need it. Then, when the credit lines are open, you can take your own cash that you got from the sales of the 3 recently sold properties and buy some of the notes that @Jay Hinrichs mentioned to park your money for awhile. Then, if a great deal does presents itself, you can access cash through the credit lines that you opened up and you can take advantage of the deal. Then you can pay off the credit lines when your notes mature. This way you don’t have money on the sidelines not doing anything but at the same time you now have access to cash if something opens up and you don’t really have to pay much for that opportunity. 

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    4Reply
  • Andrey Y.
    Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    8y
    Originally posted by @Alan Grobmeier:

    @Eric Adobo, not on the verge of BK.  

    But I am on the verge of Retirement 3.0.  It took me 2 tries to get it 'right'.  ;-)

     Can you elaborate?

    0Reply
  • Andrey Y.
    Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    8y
    Originally posted by @Justin Kurpius:
    @Alan Grobmeier. Two routes to consider: Gold. Look back at 2008. Gold ramped up through downturn. If u go this route and it works, your equity would increase while the majority would be decreasing. It is also liquid, easy, and cheap via ETF.

    Notes. Buy some real estate notes in an area u would like to invest in at a discount. They foreclose, u get the house. They continue to pay, u get great cash flow. They refi, great ROI!

    -Justin

     Last time I checked, gold doesn't pay me every month. So its out. Almost as bad as crypto, except transactional costs being higher for gold. Transactional costs of real estate are more than made up for by attractive financing terms and tax advantages :)

    2Reply
  • Justin KurpiusPro Member
    Rental Property Investor · Member since 2017 · 84 posts · 41 votes
    8y
    @Andrey Y. U r correct. But I was answering the question “where would u park Your cash in the current environment”. Sometimes foregoing 1 year of cash flow pays for itself and then some. For example: market falls. Stocks and real estate. If u r in a low cost/low fee easy to acquire gold ETF, u make money while everyone is losing buying power. U can then sell Gold ETF and deploy that money to new discounted properties giving you more cash flow and greater price appreciation. But yes, u will not have cash flow.
    0Reply
  • Andrey Y.
    Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    8y
    Originally posted by @Justin Kurpius:
    @Andrey Y. U r correct. But I was answering the question “where would u park Your cash in the current environment”. Sometimes foregoing 1 year of cash flow pays for itself and then some. For example: market falls. Stocks and real estate. If u r in a low cost/low fee easy to acquire gold ETF, u make money while everyone is losing buying power. U can then sell Gold ETF and deploy that money to new discounted properties giving you more cash flow and greater price appreciation. But yes, u will not have cash flow.

     Can I  buy it through Vanguard website, brokerage acct?

    0Reply
  • Will Karstetter
    Rental Property Investor · Tulsa, OK · Member since 2017 · 41 posts · 34 votes
    8y

    @Mike Dymski great post! I am doing very similar with a strong focus on mobile home parks. Buying in the 70% occupancy range which is generally enough to pay the bills with a strong value add. Each vacant lot can be a great place to park $15 - $25,000 and get immediate strong returns. I have not looked into self storage though, perhaps I should add that to my list.  

    2Reply
  • Will Karstetter
    Rental Property Investor · Tulsa, OK · Member since 2017 · 41 posts · 34 votes
    8y

    @Alan Grobmeier Something you could consider is investing some of your capital with other investors. I do not know your strategy or accepted level of risk, but I imagine there are numerous people at your local REI that could help you diversify. But, if the market falls sooner rather than later this will only constrain you, but perhaps its years before we see the dip. Never know, there might be a fixed rate, with flexible terms out there backed by a second mortgage. Let me know what you end up doing :)

    1Reply
  • Will Karstetter
    Rental Property Investor · Tulsa, OK · Member since 2017 · 41 posts · 34 votes
    8y

    @Alan Grobmeier Forgot to mention that looking for a large value add project may also be an option. I know that is outside your current investment strategy, but mobile home parks are great for this. Very easy value add and each vacant lot is a great place to park some of your money.

    0Reply
  • Justin Thiesse
    Rental Property Investor · Mitchell, SD · Member since 2017 · 57 posts · 68 votes
    8y
    @Alan Grobmeier I have had the same thoughts. I was forced into doing a 1031 with my last apartment sale. I have been buying good quality 4-plexes. Something set up for baby boomers. If I wasn’t forced to buy to avoid capital gains, I would pay down any debt you may have.
    1Reply
  • David Hutson
    Rental Property Investor · Tampa, FL · Member since 2013 · 404 posts · 421 votes
    8y

    @Alan Grobmeier,

    Since you are asking where to park money if you were to sell I won't discuss 1031's and other property investing. I have sold four houses in CA during the last year and a half or so and I'm putting money into notes or crowdfunding. I have been getting between 12% and 28% CoC from many online sites. There are numerous out there, depending on your investing level. I'm hoping the market slows significantly and I can buy in another state when the market goes down again. I don't expect it to be like 2009 but I do believe prices for investment homes will go back down. All of my investments are laddered so they will start paying off at the end of this year and are somewhat spaced out for the next few years, similar to what people do with CD's at a bank.

    Hope this helps, at least if you aren't looking to reinvest in property right away.

    David

    5Reply
  • Kenneth LaVoie
    Rental Property Investor · Winslow, ME · Member since 2008 · 826 posts · 281 votes
    8y

    @Andrew Angell - Thank you for mentioning the infinite banking concept. I do consider myself a bit of a finance geek but even I have a tough time fully wrapping my mind around the whole thing. I've read the book, spoken with two providers, etc. and would LOVE to do it. I'm 52 and could afford to tie it up. I LOVE the idea of borrowing against it, but having your entire balance still get interest as if you hadn't touched it (so as long as what you're doing with the borrowed funds earns a return, you can literally "double dip" ... and I DONT think you're charged interest on the loan/withdrawal are you? (just what you "charge yourself" right?)  

    Have you really gotten 5% though? I think that's the whole thing that stops some people .. the projections are that: projections. The whole concept starts to fall apart if your dividend/return gets much below that. 

    Thanks again. Just wanted to throw some ballast in in case you were flamed! haha!

    1Reply
  • Kenneth LaVoie
    Rental Property Investor · Winslow, ME · Member since 2008 · 826 posts · 281 votes
    8y

    @David Hutson - I have some of these sites bookmarked for future...love to hear more about note investing from you if you don't mind? I've toyed with it but not bitten the bullet. We already hold the paper on a 6 year baloon 78K mortgage on one of our own properties but once that's paid I'd like to move into paper and crowdfunding deals. 

    1Reply
  • Damon Pendleton
    Rental Property Investor · Richmond, VA · Member since 2018 · 46 posts · 90 votes
    8y
    @Andrew Angell can you message me what broker and/or company you’ve used to purchase a policy for this purpose? TIA.
    0Reply
  • Lucia Rushton
    Realtor · Dallas - Fort Worth Metroplex, TX · Member since 2016 · 1k+ posts · 925 votes
    8y
    @Alan Grobmeier through the good and the not go good we’ve continue to invest in oil wells for passive income. Not the Big boys but independent American operators. We get to have a more interactive experience. Also while you said you didn’t want to do HML, you could partner with people. Get a chance to know other markets, maybe do syndications - MF. All I can say is, nice place to be right now - well done you !
    1Reply
  • Sam Josh
    Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
    8y
    The one day drop in Facebook and some tech shares were enough to offer me a trailer of what a recession might taste like. Strange thing is I had sold most of my short term holdings as they hit their price targets and was planning to sell FB the day after earnings. I know we are talking a different asset class here but if the downturn is coming, I’d stay in cash and not worry about going for max yield. In a down market if returns are -10% or more, your 0% will look rich.
    1Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    8y
    Originally posted by @Andy Bahr:
    @Mike Dymski I’m in Charlotte and am curious about self storage. Would you be willing to connect?

    Sure, feel free to reach out.  I have invested in three good SS offerings in the past few months.  I have no affiliation with them...I've just analyzed a ton of offerings in the past few years.

    1Reply
  • Ian IppolitoBusiness Member
    Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
    8y

    @Alan Grobmeier,  I have a significant part of my profile in cash, so if there is a crash I intend to purchase distressed assets at a discount. 

    However, there’s no guarantee that will occur. And 3 out of the last 6 recessions, commercial real estate prices did not go down but stayed steady or actually went up (contrary to popular belief ).  So even though prices are high today  compared to where they were at the start of the cycle, there’s a 50/50 chance you may be kicking yourself 4 years from now for not buying now when it was much cheaper. 

     In my opinion, the only way to manage risk is to not invest all/most of your money in any one year,  but instead, spread it out over multiple vintages/years.  

     I know you said you don’t like hardmoney, but in my opinion, when it’s conservatively under written, it can be one of the safer bets in real estate.  I am invested in a couple of diversified funds there. I’m also invested in a triple net lease fund which is diversified over hundreds of properties. 

     My biggest holding in my real estate portfolio is a collection of debt-free single-family homes that I’ve purchased. Even if there is a big downturn, the lack of debt hardens them significantly. 

     A smaller portion I have in conservatively underwritten multi family equity.  And I’m currently looking at a mobile home park offering and self storage deal ( both are off platform syndications, and not on the crowdfunding sites ).

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  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    8y
    Originally posted by @Sam Josh:
    The one day drop in Facebook and some tech shares were enough to offer me a trailer of what a recession might taste like.

    Strange thing is I had sold most of my short term holdings as they hit their price targets and was planning to sell FB the day after earnings. I know we are talking a different asset class here but if the downturn is coming, I’d stay in cash and not worry about going for max yield. In a down market if returns are -10% or more, your 0% will look rich.

    Hey Sam.  I can't find support for the war chest strategy.  See the post I started below on it.  I am sincerely looking for feedback because I do not like investing into a hot market but the math supports many of the investments that a lot of us are still making.  And, I can't find any feedback from members other than "the market is too hot" or "prices are at 2016 levels" for not making these particular investments.  Are there strategies that won't work and properties that won't work?  Absolutely.  Is the market less profitable now than a few years ago?  Sure.  Are some of us having to pivot strategies and markets?  Yes.  Is it easy?  Heck no, can take years.

    Members seem to find what their belief system tells them are out there and many investors are still finding good deals and have zero concerns if the market corrects on those deals.

    https://www.biggerpockets.com/forums/311/topics/56...

    1Reply
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