What do you invest in when everything is over valued?

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What do you invest in when everything is over valued?

Gordon Forbes
Investor · Roseburg, OR · Member since 2015 · 34 posts · 48 votes

What do you invest in when all the cyclical investments seem to peak at once?

In my humble opinion:

Real estate is due for a correction.

The stock market is due for a big correction. 

Every currency is on shaky ground.

Precious metals no longer seem to be the contrarian investment.

Crypotocurrencies are just too new to know which ones will have a future.

Inflation or hyperinflation is a real possibility so sitting in cash is suicide.

If everything goes really really bad then the only universal form of "monetary" exchange will be canned food and shotgun shells. I'm not enough of a doomsday prepper to go that far.

So what does that leave?

Does one diversify so that when 9 out 10 investments tank one has enough left over to buy Scotch and wallow in drunken misery? (Ok, perhaps that's a little too pessimistic).

It's just when I look at my portfolio I think "man, I should sell that (real estate, stocks, forex, metals) before it drops like a rock" and then do what with the money?

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Michael Swan
Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
8y

For every overpriced highly speculative Phase 2 selling stage area in America, there are areas of America that are moving from stage 1 to Stage 2 buying phase.  This is the phase where you can make great cash flow and Appreciation is just starting to take off.  I invest in Euclid Ohio and Lake County Ohio presently and property values have risen  about 40-50% since 2014 in those areas.  

I sold and 1031 exchanged all my pricey San Diego Rental properties that are clearly In the middle of a Phase 2 selling stage.  In a few years the party will be over in San Diego.  The party is just starting where I am investing now.  

I went from 10 San Diego rental properties purchased in a clearly stage 1 Buying phase in 2011 and 2012.  I was cash flowing $50,000 a year.  Then, in late 2015-2016 all of those San Diego rental properties doubled in value.  So, I 1031 exchanged them all and now am a principal in 8 apartment complexes in NE Ohio that have 122 front doors and they cash flow at $160,000 a year and rising at a rapid rate.

You gotta know when to hold em, know when to fold em, know when to walk away and no when to run!!  

If I can do this on $80,000 family W2 earned income living in pricey San Diego, anyone can.

Go for it!!!!

Swanny

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    8y

    It is not necessarily over valued, you just haven't accepted the new value. 

    As a byproduct of growing older you fall victim to the "I remember when syndrome". You reference everything now to how it was in the past, so naturally everything seems expensive. 

    Just remember that in five years, today's prices will look like a bargain.

    7Reply
  • Eric Pittmann
    Rental Property Investor · Carlsbad, CA · Member since 2013 · 12 posts · 2 votes
    8y

    The opposite of what everyone else is doing, is what?

    0Reply
  • Ian IppolitoBusiness Member
    Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
    8y

    @Gordon Forbes, If (and that could be a very big "if") all the things you're saying are really just about to happen, then it would be very easy to make a ton of money off them. There is a way to play almost any trend as a contrarian and profit from it. Even the disaster of the Great Recession made fortunes for those who were able to figure out a way to short it.

    1) real estate is due for a correction? Hold cash and wait for it to happen and then purchase at pennies on the dollar. Or: invest in conservatively underwritten debt, and when the borrower defaults, you foreclosure and take ownership of the property at a fraction of the value.

    2) stock market due for a big correction: short it.

    3) precious metals: Warren Buffett pointed out that investing in assets that produce no income, like precious metals, has never been a profitable long-term strategy. Simply just avoiding precious metals has been a very good long-term strategy.

    4) hyperinflation about to occur: invest in properties or leases that are indexed to inflation.

    Etc. Etc.

    The problem is, that no one is really sure any of those things are going to occur, and even if they do when it's going to happen. So for example, you might be paying a ton of money to short the stock market, and it actually goes up and becomes a money loser. Or another example: in 50% of the last six recessions real estate prices actually went up and not down. So again you could find yourself on the wrong side of the bet if you are too pessimistic.

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  • Rachel Luoto
    Lake Oswego, OR · Member since 2015 · 174 posts · 115 votes
    8y
    Haven’t seen anyone mention commodities on here. I’m not as familiar with them but if you’re looking for an asset class in a current “low”, something to investigate
    3Reply
  • John Mclain
    Fort Lauderdale, FL · Member since 2017 · 7 posts · 3 votes
    8y
    Originally posted by @Rachel Luoto:

    Haven’t seen anyone mention commodities on here. I’m not as familiar with them but if you’re looking for an asset class in a current “low”, something to investigate

     I trade commodities and it's good money. With regard to realestate I am working with commercial properties. Self storage, Assisted living facilities and Professional offices (medical) are working well as income properties right now.

    1Reply
  • Account Closed
    Downers Grove, IL · Member since 2017 · 366 posts · 165 votes
    8y
    Originally posted by @Gordon Forbes:

    Thank you all for your thoughts. I used to be so optimistic. Now?, Grumpy old man. 

    Regarding Mary and waiting to sell at the peak: I am reminded of the words of Baron Rothschild when asked the secret of his success. He said "...I always sell too soon."  I agree with you, Mary, that now is too soon, which is why I want to sell before it's too late.

    Regarding Robert and gold rising when real estate falls: Well, sort of. While the 20% to 30% gains for a few years during a crisis, such as in 2000 and 2008, seem like a hedge I'm disillusioned with gold. When one accounts for inflation (hey kids, google that word) the buying power of an ounce of gold from 30 years ago to today is only double. So "double my money in 30 years" just isn't enough ROI while holding gold waiting for it to spike up 30% in a crisis while my stocks and real estate dive 50% for example. That scenario does however leave me enough money to drown my sorrows in whiskey. But only after I pay taxes on the windfall gains in gold that I sell at its peak while unable to offset that income with the paper losses on my real estate because only a fool sells at the bottom. So then I wait for real estate to take 25 years to recover its losses. In our last "big" recession real estate recovered in only 10 years. It took 25 years to recover after the 1928 depression. I'm reminded of how my grandfather decided it was better to let people live in his rentals for free versus having them empty and vandalized. It really was that bad in the 1930's. Those "gratefull" tenants then tore up the floorboards and anything else that would burn in order to not freeze to death during winter. Nobody had any money.

    Sorry I'm rambling.... anybody still reading?

    Gordon, gold is a crisis hedge not an inflationary hedge. 

    During the worst part of the melt down gold investments tripled in value while housing and stocks declined. The 1980 recession brought gold way up. Gold ran way up. The great depression, gold up over 20%. I you look at short windows over the past 90 years, gold managed the worse part of the crisises goldenly. 

    0Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    8y

    @Gordon Forbes

    I am wounded to the quick. Drugs, sir? Say no to drugs, my body is a temple, my strength is as the strength of ten because my heart is pure, et hoc genus omne.

    Glad I obviously got a chuckle. To your health, Gordon!

    0Reply
  • Billy Smith
    Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes
    8y

    The deals that I see in the current market is FSBO.

    The market is regional some cities are fully valued others cities still have legs.

    Word of mouth is what I am doing to get a deal done.

    Most MSL homes are not worth the hassle.

    I sold all my gold when it hit a number I wanted .

    0Reply
  • Michael Wagner
    Specialist · Victor, NY · Member since 2013 · 823 posts · 844 votes
    8y

    I get where you are coming from with this question but to me "Over-Valued" or "due for a correction" is largely market specific when it come to real estate investing.  Sure, the overall real estate market may be due for a correction but there are hundreds, if not thousands of micro-markets that will barely feel any sort of national correction.  There are countless opportunities for you to buy right and profit regardless of what the market at large does.  This is true whether you buy and rent residential apartments or work in commercial sectors.  I know this is a general response to the question but I think it important to remember that "macro" trends don't necessarily pertain to the "micro" market that any given asset sits in.

    As an example, nationally speaking the Self Storage Market is "due for a correction" and at its peak. Despite this, I bought a facility for $19 per square foot last month. Will be Valued at $40 per square foot within 12-24 months regardless of if we move into "correction" phase expected as interest rates rise....and even if its not "worth" that on paper. It will Have an NOI of $100K per year. Anyone who yields to the "there's no deals to be had in this market" would have missed this one....and many others.

    2Reply
  • Gordon Forbes
    OP
    Investor · Roseburg, OR · Member since 2015 · 34 posts · 48 votes
    8y

    That's some really great stuff. If only I hadn't dropped my crystal ball...

    @Joe and valuations only looking high because I remember 30 cent gasoline. That is soooo true. But I also remember that the insane valuations of the dot com stocks in 2000 were suppoed to be the "new normal". I was working on Wall Street when the Dow broke 3000. Everybody bought a new car, good times were rolling. If the Dow went back to 3000 everyone would jump out a window. What is so fundamentaly different between 1991 (the Dark Ages to Millennials) and now? Other than some creeping inflation the only thing I see is all the Boomers who were pouring into the market. That would be the same Boomers who are now starting to sell in their retirement years. Even if the market wasn't overheated from a very long bull trend the basics of supply and demand and demographics scare me that a lot of retirees are needing to sell their stocks soon. But.... I'v been waiting for the market to tank for a long time now and its way too easy to get old, moribund, and cynical. 

    @Ian. Yep. I'm right in there with that line of reasoning. I just hate being so pessimistic, especially being pessimistic for so dang long. It's like knowing that the bridge is out down the road somewhere. Yet it feels like all the alternative roads are dead ends. But you make a good point about the dangers of being too pessimistic and I needed to hear that. Plus, being pessimistic makes me grumpy in the morning.

    Someone previously mentioned some passive investments. Oh to be an Accrdited Investor! I used to think that anyone complaining that "the rich get richer" and "it takes money to make money" was just whinning. Now that I see, but cannot participate in, the investments available to Accredited Investors I'm whinning too. However, the very rules meant to keep me and the "ignorant masses" safe from ourselves now set up those same "financially illiterate" to be preyed upon by the Regulation A+ proponents. Title 2 investments for accredited investors have more sec oversight than the tier 1 and 2 that is offered to the "rabble" (it seems to me).

    I am definately going to check out Ian's crowd funding reviews. Some of the things I've read elsewhere indicate the luster is gone from Reg A+ while accredited investors still get the cream of the crop Reg D offerings.

    Wow, even my dog doesn't whine as much as I am today. Thanks all for the advice, ideas, and encouragement.

    3Reply
  • Brian EastmanPro Member
    Self Directed IRA & 401k Advisor · Wenatchee, WA · Member since 2014 · 2k+ posts · 2k+ votes
    8y

    @Gordon Forbes

    Have you looked into note investing? Being the bank can be a good thing, and while property values matter, a loan with a conservative LTV will have insulation against market swings to a large degree. There are some note funds/crowdfunds as well as brokers of individual notes out there. Some require accreditation but some do not.

    0Reply
  • Ilias Kouider
    Rental Property Investor · Laval, Québec · Member since 2018 · 2 posts · 0 votes
    8y

    yourself

    0Reply
  • Michael Swan
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    8y

    For every overpriced highly speculative Phase 2 selling stage area in America, there are areas of America that are moving from stage 1 to Stage 2 buying phase.  This is the phase where you can make great cash flow and Appreciation is just starting to take off.  I invest in Euclid Ohio and Lake County Ohio presently and property values have risen  about 40-50% since 2014 in those areas.  

    I sold and 1031 exchanged all my pricey San Diego Rental properties that are clearly In the middle of a Phase 2 selling stage.  In a few years the party will be over in San Diego.  The party is just starting where I am investing now.  

    I went from 10 San Diego rental properties purchased in a clearly stage 1 Buying phase in 2011 and 2012.  I was cash flowing $50,000 a year.  Then, in late 2015-2016 all of those San Diego rental properties doubled in value.  So, I 1031 exchanged them all and now am a principal in 8 apartment complexes in NE Ohio that have 122 front doors and they cash flow at $160,000 a year and rising at a rapid rate.

    You gotta know when to hold em, know when to fold em, know when to walk away and no when to run!!  

    If I can do this on $80,000 family W2 earned income living in pricey San Diego, anyone can.

    Go for it!!!!

    Swanny

    10Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    8y

    + Good locations

    + Add value

    + Cash flow

    + Long-term debt

    + Prudent leverage

    = decent performance regardless of market conditions

    2Reply
  • Ian IppolitoBusiness Member
    Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
    8y

    @Gordon Forbes , well I'm glad I gave you something to think about that might make you feel a little less grumpy in the morning.

    Yes you are right that unfortunately the investments that are open to accredited investors are much better than nonaccredited offerings. And the idea that someone with more money must be more sophisticated, is definitely a stretch.

    The noncreditted offerings are almost universally much more expensive, have a lot less variety to choose from, and many times have almost no skin in the game from the sponsor.Thankfully there are more and more nonaccredited offerings coming out and the competition is starting to force them to reduce fees. Hopefully that will start to take effect in the other areas too. Good luck with your search.

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    0Reply
  • Michael Bishop
    United States · Member since 2015 · 401 posts · 394 votes
    8y

    Invest in asset classes that, historically, perform the best during downturns; multifamily, self-storage, mobile home parks

    0Reply
  • Jeff Kehl
    Rental Property Investor · Charlottesville, VA · Member since 2012 · 1k+ posts · 726 votes
    8y
    I'd agree with a couple things already said, good quality value-added cash flowing residential rentals are still out there. Also I think certain commodities look reasonable now like oil and gas. Third, I'd add retail strip malls and enclosed malls. they're very reasonably priced and I think selectively excellent investments. But I most agree with the poster that said just short stocks or buy puts if you're that negative. I always do some of that and it's been a losing bet for the last few years.
    0Reply
  • Jared Matson
    Jacksonville, FL · Member since 2014 · 9 posts · 1 vote
    8y

    1. Invest in retirement homes and public storage units. 

    2. If you are saying this other people are so they will not go out and find the deals. 

    3. I am selling two homes and looking at note and multifamily on the side. 

    4. Buy Gold, short NASDAQ, and have cash on the sidelines to buy when they start having a fire sale.

    5. Google companies with variable debt. Short them as the interest rates go up. Campbell soup has 25% of its debt as variable rate...not good.

    0Reply
  • Mark Sewell
    Investor · Houston, TX · Member since 2017 · 1k+ posts · 871 votes
    8y

    Scotch!

    The good stuff will appreciate and you have to admit, it is liquid!

    1Reply
  • Mark Sewell
    Investor · Houston, TX · Member since 2017 · 1k+ posts · 871 votes
    8y

    I know this was humor, but the human traffic thing is real down here in Houston.  I can show you some malls in gentrified areas here where your women-folk get abducted in broad daylight.  So I guess start up cost might be higher down here; a significant barrier to entry, in fact.

    If things really get bad, I will probably move to Roseburg OR and dig in with @ Gordon Forbes.

    Seriously, there are ways to make money in any market.  Half the battle is recognizing the signs that the correction is coming.  People that know how are able to short stocks, etc.  

    Here in Texas, our economy lags behind the rest of the country -- so we are last to go into a downturn and sometimes the first to come out of it (oil & gas drives a lot of that, but not all).  The reset with property values won't be that vicious here.  It wasn't in 2009 -- I bought my place in 2008, just a few months before the bottom dropped out, and it still has appreciated 40% over the last 9.5 years.  There is still plenty of opportunity here with RE, although it is getting harder.  You just have to kick over a lot of rocks to find a deal.  Me, I am still kicking over rocks.

    1Reply
  • Michael Plante
    Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    8y

    Will be great to revisit this thread in 5 years to see what really happens 

    8Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    8y

    Cash is a position.  

    0Reply
  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    8y

    This happens when there are no interest or inflation. Feds are trying to bring the normal economy back restore that confidence.  Sit on your cash.


    2Reply
  • Keith M Sant
    Flipper/Rehabber · Tacoma, WA · Member since 2018 · 13 posts · 12 votes
    8y

    @Gordon Forbes First I'd like to say that I 100% agree with your assessment of all the markets you mentioned in your post. I feel the same way.  The only advice I feel I can contribute is possibly investing out of state if you're not already doing so. Although the real estate market is cyclical, some markets are not as affected as drastically by economic trends as others. This is a book I listed to and would recommend. 

    https://www.audible.com/pd/Business/Long-Distance-Real-Estate-Investing-Audiobook/B078J6JBPC

    0Reply
  • Todd Dexheimer
    Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    8y

    @Gordon Forbes if you can buy good cash flowing real estate - especially commercial/multi-family with good longer term debt, then you should be able to hedge against a downturn in real estate. If inflation or hyperinflation happens real estate will be a great place to have your money. Deals are out there, you just need to flip enough rocks to find them. 

    2Reply
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