Real Estate Agent · Spokane · Member since 2019 · 17 posts · 16 votes
Hello all!
How is everyone doing? Are you insulated for a big drop or are you over leveraged?? with money being this cheap STILL are you all seeking to borrow or hold off?? just curious.
I have just gotten a refinance on my owner occupied triplex. Got a really great appraisal and am going to pull a HELOC and go shopping for a new project rental to start on. What is everyones opinions of the looming doom of a huge crash??
I think we are due for something just based on history, but then again im not sure. my market in particular is SUPER HOT and it has been for about year or more.
Also im thinking if I buy something soon and the economy crashes I will have done the numbers on the higher price anyway so it should be fine right?
scary times we live in right now..
Id love to hear others opinions on this thought!! thanks!!
You need to have your opinion validated by at least two sources. So, are you getting the same opinion from both your crystal ball and your Ouija board, or just one of the two?
@Jared Johnson be careful what you wish for. In 2008 I was getting 900 month for a one bedroom condo. In 2010 I was getting $450 and hoping the tenant kept his job so he could pay rent. It's all relevant Bad times hurt everyone. Of course I agree horde cash. Be wary of carrying to much debt. I am happy to buy 30 cent to the dollar but you can only do that will cash Between 2008 and 2012 I was able to ensure my families future because I had cash and paid cash. If rents drop I am ok because my expenses are minimal.
@Jared Johnson thanks for posting this interesting thread. As a CNBC watcher I can get fed up watching professionals assert one prediction to then turn around a few months later and completely contradict themselves about future market growth/ decline. Investing in up and down markets via dollar cost averaging is long term the best way to go about conducting REI imo. No problem buying more when markets are down, but not a reason not to buy the right deal in a hot market (even if those deals are few and far between). Good luck!!
You are right on point my friend. If you arent doing deals now if you dont have experience your probably wont be doing deals when the lending tightens up or drys up.
In my opinion I think many people are missing the massive elephant in the room. Very large institutional investors are loaded up with cash with WAR rooms on go mode to buy up as much of these assets as possible. They will be buying large packages of trouble assets straight from the bank for pennies on the dollar. Most of this inventory wont even hit the market whole sale like the 2008 crash.
This info is coming straight from investment banker friends who learned from Black Rocks moves in the 2008 crash .
So good luck in waiting for all the unicorn deals! I dont think it's going to be there folks so stay active in the game
I agree @Joe Edwards there's some huge players in the game just salivating at what is to come. Lots of things won't even hit the market, it will be all about who you know and who you know knows.
Heck, even if there was a reduction in prices, it would be slow and dragged on. There is so much money sitting on the sidelines waiting to jump in that that alone will prop up the market for a long time before things start to noticeably go south.
People love to buy the dip, and that alone will keep things steady longer than they should be in my opinion.
But very importantly of our rentals with mortgages, ave DSCR is 2.0 to 2.5 ish. Please google and self study what dscr is and why its the basis fir asset based lending underwriting and us investors resilience. Ie ability to eat huge rent reductions (zero chance of this in my markets) and still cover the mortgage.
- no debt rentals in our solo 401ks. Very resilient.
Cash + high dscr + pretty smart about solving problems fast while they are still small... = resiliant.
Tnx for the question.
Fwiw i see see near zero chance of a crash, at most a flat 2021, many many many reasons.
So many people take their cues for the housing market from the stock market. When you think critically about what drives stock prices up or down and what drives housing prices you realize they are moved by very different forces.
You don't need stocks to sleep in. 100% of American's can sell all their stock and go to bed that night. Demand on the housing market is driven by demographics, in our present sencario and for the next years this is millennials.
We have about 300,000 millennials in Milwaukee (150k as couples), the oldest 38 years, sick of renting and not wanting to move back in with mom and dad. Our complete 5 county metro area market sells about 30,000 units per year, to ALL demographics. At the same time supply is limited by old folks living longer and new construction being over 500k and unafforable for first time buyers.
Nothing that can happen to the stock market can change that demand and supply equation. Anything that happens to lending, the economy, a pandemic has only a temporary impact, as we have seen this spring, because once the initial anxiety is over, we are back to damand and supply.
@Joe Splitrock one topic not much discussed on these boards and I confess I don’t know what to make of it:
The biggest, richest and best housed generation in American history has just entered the prime dying years releasing an enormous amount of liquidity.
Not trying to be ghoulish but it’s something like 3-4 trillion in retirement assets. Even if the fed tightens, that’s a lot of liquidity in the system.
This is true. My parents are at a point where they are being forced to take mandatory withdrawals. Most people have their retirement tied up in the stock market. As people age they will move more towards bonds or cash. What happens to the stock market when everyone starts pulling out?
As far as being the richest generation, the main reason baby boomers have higher net worth is due to age. That being said, millennials are set to become the richest generation as wealth transition happens.
It will be interesting to see what happens as the money moves. I think it will have major effects on the stock market. I am not so worried about baby boomers vacating their houses, because younger generations are upsizing.
Things are pretty much moving ahead as normal from what I am seeing. There has been talk of concern over certain policies the Biden administration may change or enact but it's far too early to be worrying about that now. Certain segments of the marketplace are softer than others but those are where you can pick up good deals so it's all relative. No reason to panic or start hoarding cash yet.
BTW during the great recession and also to a far lesser extent when Covid first hit, lenders were still lending, they were just being extremely picky about who they worked with. So even if the economy falls off of a cliff, if you have good credit and a good DTI ratio you should still be able to borrow money.
There you go! In 2008 melt down not crash the market didnt truly feel it until 2014-15. So what makes people think 2021 is going to be the year. Banks are sitting on loads of cash. The banks already knows all there clients that will default issues so they have reserved liquidity for that. It's not going to be what people think.
With that said like 2008 there will be people hurt and for the experienced investor there will be some good deals out there to be had. Those deal however want be easy, straight forward deal. They will be deals that experienced creative people will put together that works inside there model of investing
I can't sit here and predict a crash or the timing, but I haven't bought anything since 2017. I'm always in the market to make a deal, but in the last couple of years I haven't seen any "deals."
Returns are super thin right now on everything I come across. I am just not interested in playing in a crowded market where everyone seems to be interested in working their butt off and risking capital for subpar/breakeven returns.
I was in the game pre-2008 and I am feeling the same way now that I did back then. The general feeling was that the market was INSANE and my thoughts were how long could it keep going vertical. It went on longer then I thought it could but eventually crashed. I was flipping at the time but I wasn't effected all that much because I didn't chase deals and I was naturally a lot smaller when the crash eventually came.
I just don't get a warm and fuzzy about where we are right now personally. I know first hand of a lot of distressed commercial (retail, office, hospitality). That product has not hit the market yet....maybe it never will.
I stopped doing bigger flip projects that aren't as easy to get out of and have been refinancing anything that is long term and NOT taking money out, but making sure payments are as low as possible. Went through 07-10 and learned alot. Prepare for the worst, but keep moving forward at the same time. Can just operate being scared and looking at the what-ifs?
@Jared Johnson The economic downturn we are going to see will not be caused by a haphazard housing market so you will not see the same level of depreciation, defaults, and short sales. Rates being this cheap are going to be a bigger problem for landlords looking for solid tenants. Defaults will likely come from overextended investors and that sounds like an opportunity to me. I would worry about it too much. Just have some reserves
@Joe Splitrock one topic not much discussed on these boards and I confess I don’t know what to make of it:
The biggest, richest and best housed generation in American history has just entered the prime dying years releasing an enormous amount of liquidity.
Not trying to be ghoulish but it’s something like 3-4 trillion in retirement assets. Even if the fed tightens, that’s a lot of liquidity in the system.
I'm very interested to see how this plays out and the impact it has to the market.
As to the OP's question, I'm about to close on a buy and hold sfh with solid cashflow and some equity, and with plenty of cash in reserve I'm not too stressed about whether the market goes down. There's been a lot of talk about a coming wave of foreclosures but the new stimulus deal just pushed the eviction moratorium out another month until the end of January. With the incoming administration it wouldn't be surprising to see this pushed out further. While I do want to be very picky about my next purchase I won't hesitate to jump on a good deal.