What are your thoughts on this "conspiracy theory"?

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What are your thoughts on this "conspiracy theory"?

Ty Whitman
Jacksonville, FL · Member since 2014 · 20 posts · 9 votes

It's been a bit of a surprise to me that, in spite of what I thought was a huge bubble last year, both real estate and stocks all kept rising.  Once COVID hit, I was sure that would prick the bubble and start the downturn, but both markets only seemed to take off.  I'm not sure our stock or real estate markets would have continued to climb without trillions being printed by the fed.   I'm left in this place where I don't trust the stock market as an investment, and I don't even like just holding cash with all the money printing and inflation. Real estate is where I'm comfortable, but I'm worried about a huge downturn, even though I feel like my particular market will be somewhat resistant to one as compared to other markets.

I was listening to a podcast the other day that was talking about foreign and wealthy investors buying up real estate in the USA, as well as "dirty" money being "laundered" through real estate.  This text link below was basically the gist of the podcast.  Here are some excerpts:

"All-cash transactions have come to account for a quarter of all residential real estate purchases, “totaling hundreds of billions of dollars nationwide,” the Financial Crimes Enforcement Network – the financial crimes unit of the federal Treasury Department, also known as FinCEN – noted in a 2017 news"

also from the article:

“It reminds me of Moldova after the fall of the Soviet Union: oligarchs running wild, stashing their gains in buildings,” James Wright, an attorney and former Treasury Department bank examiner, told me. He now helps foreign governments combat money laundering. “Back then, you’d walk down the street, and people would say, ‘That building is a washing machine.’ Everyone knew it. Today, America is not that different.”

I've done a small amount of research into the topics talked about, as well as how FinCEN operates, and it's interesting.

So my thought that I'd be curious to hear your opinions on:  What are the chances that "those in the know" are "laundering and stashing" money into real estate due to knowledge of a massive impending economic collapse, and that is essentially what has kept this market propped up as long as it has into this COVID crisis?


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Curtis YoderPro Member
Rental Property Investor · Tulsa, OK · Member since 2014 · 241 posts · 187 votes
5y

I have been investing in SFH and small MF for over 20 years. When I first dipped my toe in the water in 1999 I was told that RE was overvalued and would be devastated in the coming year. I was spooked, I bought very slowly and a handful of properties over the following years. After the crash of 2008 everyone told me again that RE was a poor investment and just look at the housing crash! It took me a few years after that to simply dive in and believe in my return numbers, forget property values for the most part, focus on the value play and cash on cash returns and stay conservative.

The gist of this is don't believe all of the "experts", they always have much to say. Of course you should be prudent in your research but if you listen to the outlyers you will never do anything. Because of course the world is going to end tomorrow don't you know!? Be careful who you listen to. Good luck!

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  • Ty Whitman
    OP
    Jacksonville, FL · Member since 2014 · 20 posts · 9 votes
    5y

    Forgot to add the link:

    https://www.truthdig.com/artic...

    0Reply
  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    5y
    Which Bubble?  With a huge military and petrodollars supporting the US Dollar as the "reserve currency of the world", arguably the USD was in a bubble the last few decades.   Are asset prices increasing or is the value of the dollar shrinking?  It is worth mentioning that measuring dollars to other fiat currencies makes for a very poor measuring stick.

    I'm very skeptical of the FinCEN report you reference.  A "cash" real estate transaction happens all the time for legitimate and legal reasons.  Nobody is driving to the bank with a huge pile of dollar bills to close a real estate transaction.  Money is wired from a bank account.  The government already tracks all the wires and any deposits in excess of $10K to make it hard for people to launder money.
    7Reply
  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    5y

    PS  That Truthdig article is total crap.  Anybody who has been a landlord knows this statement from the article is completely false and one-sided. "With anonymity comes impunity, and, for vulnerable tenants, skyrocketing numbers of evictions." 

    4Reply
  • Curtis YoderPro Member
    Rental Property Investor · Tulsa, OK · Member since 2014 · 241 posts · 187 votes
    5y

    I have been investing in SFH and small MF for over 20 years. When I first dipped my toe in the water in 1999 I was told that RE was overvalued and would be devastated in the coming year. I was spooked, I bought very slowly and a handful of properties over the following years. After the crash of 2008 everyone told me again that RE was a poor investment and just look at the housing crash! It took me a few years after that to simply dive in and believe in my return numbers, forget property values for the most part, focus on the value play and cash on cash returns and stay conservative.

    The gist of this is don't believe all of the "experts", they always have much to say. Of course you should be prudent in your research but if you listen to the outlyers you will never do anything. Because of course the world is going to end tomorrow don't you know!? Be careful who you listen to. Good luck!

    20Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Curtis Yoder:

    I have been investing in SFH and small MF for over 20 years. When I first dipped my toe in the water in 1999 I was told that RE was overvalued and would be devastated in the coming year. I was spooked, I bought very slowly and a handful of properties over the following years. After the crash of 2008 everyone told me again that RE was a poor investment and just look at the housing crash! It took me a few years after that to simply dive in and believe in my return numbers, forget property values for the most part, focus on the value play and cash on cash returns and stay conservative.

    The gist of this is don't believe all of the "experts", they always have much to say. Of course you should be prudent in your research but if you listen to the outlyers you will never do anything. Because of course the world is going to end tomorrow don't you know!? Be careful who you listen to. Good luck!

    Remember when houses got to 100k in Cupertino CA.  no one thought they could go higher and the crash was upon us anytime soon.. not only did it not crash they went up 20X   not sure if mid west homes that folks are buying for rentals will ever go up like that.. since those homes usually would only go up if rents were to go up significantly..  real estate is location location location in the appreciation game.

    Cash flow game its just numbers thats all it is.. not a lot of variables.  Investors simply pay for a given cash flow.. some areas the risk is higher or the demand is less and the returns are higher than other areas. 

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  • Curtis YoderPro Member
    Rental Property Investor · Tulsa, OK · Member since 2014 · 241 posts · 187 votes
    5y

    @Jay Hinrichs We don't get that kind of appreciation here in the Mid West like many larger cities do. However, we do have a very stable market for real estate. This makes our market very easy to create the cash flow all investors are looking for. It would be nice to get some of that appreciation but it definitely would change the market and our focus. For now, buy and hold works very well in our areas. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Curtis Yoder:

    @Jay Hinrichs We don't get that kind of appreciation here in the Mid West like many larger cities do. However, we do have a very stable market for real estate. This makes our market very easy to create the cash flow all investors are looking for. It would be nice to get some of that appreciation but it definitely would change the market and our focus. For now, buy and hold works very well in our areas. 

    I hear ya..  its all about scale.. in that game..  whereas so many in the high priced markets have literally retired off of one home they bought lived in and sold.. I know we get the over flow here in Oregon and in Vegas.. U know the tax free 500k you make when you sell your personal resi..   There is no question that being a landlord is the hot topic subject these days no doubt about that.. and its what has really created the markets in all those towns in the mid west.. without the out of state buyers those markets would look far different .. 

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  • Rick K.
    Investor · Hampton Roads, VA · Member since 2020 · 8 posts · 6 votes
    5y

    @Ty Whitman

    I don't think you need a conspiracy theory... The US added 20% more available dollars in 2020 and that money has to go somewhere.

    https://www.cnbc.com/2020/08/05/the-ballooning-money-supply-may-be-the-key-to-unlocking-inflation-in-the-us.html

    Related question... With that much more money in circulation, when do we get significant inflation?

    4Reply
  • Bill P.
    Investor | Syndicator | Instructor · Cincinnati, OH · Member since 2008 · 435 posts · 198 votes
    5y

    @Rick K. As soon as society has solved the inoculation problem, inflation will roar into the economy. My estimation is 2nd half of 21. But it will get larger and larger over the following 5 years. No stopping it this time due to all the central banks issuance of expansive monetary policy.

    0Reply
  • Account Closed
    Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
    5y
    Originally posted by @Bill P.:

    @Rick K. As soon as society has solved the inoculation problem, inflation will roar into the economy. My estimation is 2nd half of 21. But it will get larger and larger over the following 5 years. No stopping it this time due to all the central banks issuance of expansive monetary policy.

    Inflation needs regular people to have their wages increase. No matter how much money the Fed pumps into the economy 99% ends up in the hands of the 1%. Who then use it to buy assets. So you get asset bubbles (which is also inflation). But as long as the system keeps the majority in debt and on the verge of poverty as seems to be the goals, it will keep inflation at bay.

    5Reply
  • Joe Cassandra
    Rental Property Investor · Woodstock, GA · Member since 2017 · 517 posts · 772 votes
    5y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Curtis Yoder:

    I have been investing in SFH and small MF for over 20 years. When I first dipped my toe in the water in 1999 I was told that RE was overvalued and would be devastated in the coming year. I was spooked, I bought very slowly and a handful of properties over the following years. After the crash of 2008 everyone told me again that RE was a poor investment and just look at the housing crash! It took me a few years after that to simply dive in and believe in my return numbers, forget property values for the most part, focus on the value play and cash on cash returns and stay conservative.

    The gist of this is don't believe all of the "experts", they always have much to say. Of course you should be prudent in your research but if you listen to the outlyers you will never do anything. Because of course the world is going to end tomorrow don't you know!? Be careful who you listen to. Good luck!

    Remember when houses got to 100k in Cupertino CA.  no one thought they could go higher and the crash was upon us anytime soon.. not only did it not crash they went up 20X   not sure if mid west homes that folks are buying for rentals will ever go up like that.. since those homes usually would only go up if rents were to go up significantly..  real estate is location location location in the appreciation game.

    Cash flow game its just numbers thats all it is.. not a lot of variables.  Investors simply pay for a given cash flow.. some areas the risk is higher or the demand is less and the returns are higher than other areas. 

    Do you think it's possible for RE to appreciate much more. 30 years ago, most people could afford a house, and their prices were obviously much lower. 

    Now, wealth is mostly in the older brackets with younger folks being unable to afford homes now. 

    So wouldn't there be a ceiling at some point?

    0Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    5y

    @Ty Whitman I have not seen or heard or money launring and I am one of the top 1% agents in my market. Occasionally I see a scam attempt - scammers posing as relocation buyers, requesting an attorney to overlook the transaction and then send a earnest money check of 100k instead of 10k and asking the attorney for a refund LOL.

    Real estate is not in a bubble by any metric I look at. Homes are way more afforadbale now than they were between 1990 and 2008, inventory is low, lending conservative. Even forbearance will only have a limited impact on the market, the numbers are just too small with only 2.8million left and 85% favorable outcome.

    The Midwest has been appreciating more than we are used to @Curtis Yoder - I can tell you for Milwaukee specifically. From 132k for a median SF to 192k in five years and accelerating, because of limited availability and demand driven by a demograthic shift. In a few days we will have full year numbers, I expect them to come in at +9% for the year, we were over 10% in November YTD.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Joe Cassandra:
    Originally posted by @Jay Hinrichs:
    Originally posted by @Curtis Yoder:

    I have been investing in SFH and small MF for over 20 years. When I first dipped my toe in the water in 1999 I was told that RE was overvalued and would be devastated in the coming year. I was spooked, I bought very slowly and a handful of properties over the following years. After the crash of 2008 everyone told me again that RE was a poor investment and just look at the housing crash! It took me a few years after that to simply dive in and believe in my return numbers, forget property values for the most part, focus on the value play and cash on cash returns and stay conservative.

    The gist of this is don't believe all of the "experts", they always have much to say. Of course you should be prudent in your research but if you listen to the outlyers you will never do anything. Because of course the world is going to end tomorrow don't you know!? Be careful who you listen to. Good luck!

    Remember when houses got to 100k in Cupertino CA.  no one thought they could go higher and the crash was upon us anytime soon.. not only did it not crash they went up 20X   not sure if mid west homes that folks are buying for rentals will ever go up like that.. since those homes usually would only go up if rents were to go up significantly..  real estate is location location location in the appreciation game.

    Cash flow game its just numbers thats all it is.. not a lot of variables.  Investors simply pay for a given cash flow.. some areas the risk is higher or the demand is less and the returns are higher than other areas. 

    Do you think it's possible for RE to appreciate much more. 30 years ago, most people could afford a house, and their prices were obviously much lower. 

    Now, wealth is mostly in the older brackets with younger folks being unable to afford homes now. 

    So wouldn't there be a ceiling at some point?

    U know you would have to think so..  I sold my 900 sq ft 3 and 1 rancher in Palo Alto CA in 1992 to move to Napa Ca.

    it sold for just under 500k.. at the time  I bought it in 85 for 180k which was still a ton of money then.. I could have kept it.

    AS the house i bought in Napa was a bank foreclosure and only required 15k down and that included the country club transfer fee.

    But like many i thought HOW the heck could this property go any higher..  well its did  30 years later its sold for over 2 million.

    684 Encina Grande Palo Alto you can look it up.. now they did do a small addition to it .. added a master bed room and spruced up the kitchen.  probably 100 to 150k.. I had plans to the do the same thing before I moved.. And you look at the very expensive parts of many big cities and you could probably see the same thing..  I know north side of chicago around wriglyville is uber expensive and probably has the same kind of value increases.. Seattle for SURE  Portland somewhat.. LA basin for sure..  WA DC i bet  and same with NYC and Boston.. 

    One thing that does correlate to these areas and increase in value of course is the highest paying jobs basically in the world. and lack of land  its not like many areas that can sprawl to the cows come home.. ATL is a prime example.  So is most of texas and other areas.. OKC

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  • Nate Sanow
    I​nvestor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Ty Whitman

    I don't think that would have macro effect but maybe micro / local. But the article sounds like Ozark from Netflix meeting REI....

    1Reply
  • Jacob Jones
    Member since 2020 · 1 post · 3 votes
    5y

    @Ty Whitman IMO, the only thing keeping the stock market and the housing market grinding higher is the fed. Since the start of the pandemic, the fed has been printing money as fast as it can and buying up corporate bonds and stock to prop up the market. At the same time, they have reduced interest rates to near zero, making it extremely easy to borrow money for investments in real estate as well as stocks. When the fed finally starts to unload it’s balance sheet, that’s when you will start to see some of these markets start to flatten out or decline. Until then, everybody who can is grabbing up cheap loans to use for investments.

    3Reply
  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    5y

    "All-cash transactions have come to account for a quarter of all residential real estate purchases, “totaling hundreds of billions of dollars nationwide,”

    They're also the result of people from Cali selling a shack for $1M and buying a real house in OR for $500K.

    6Reply
  • Mike ReynoldsPro Member
    construction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes
    5y
    Originally posted by @Nate Sanow:

    @Ty Whitman

    I don't think that would have macro effect but maybe micro / local. But the article sounds like Ozark from Netflix meeting REI....

    What I was thinking too.  

    0Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    5y

    Some call it "laundering and stashing" others call it standard central bank policy...

    1Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    5y

    @Ty Whitman I have been seeing people say they’re waiting for a huge downturn since 2016. I even called for a mild downturn at the beginning of covid and I was wrong.

    There isn’t really any evidence of a downturn anytime soon. Keeping to much cash is definitely not a good idea

    2Reply
  • Chris Pasternak
    Real Estate Broker · Pueblo, CO · Member since 2013 · 368 posts · 303 votes
    5y

    Your theory is wrong.  Cash transactions up because of competition in market.

    Nothing to see here.

    1Reply
  • Suzanne PlayerPro Member
    Attorney · New York City / Long Island, NY · Member since 2020 · 597 posts · 248 votes
    5y

    @Steve Morris and people from New York & New Jersey going to Florida & the Carolinas

    516-503-7959
    0Reply
  • Bruce Lynn
    Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    5y

    I liked the investor that called me two years ago to say he wanted to buy a foreclosure.  Advised there were very few any more and the few I see mostly sell for great prices....not 50% discounts.  His answer was, well I will wait.  My answer, wait for what?  His answer wait or the foreclosure crises to hit again.  Me: When does that happen?  Him: I don't know, but now I want to wait.....guess he is still waiting and watching the prices skyrocket.

    There probably is money laundering, but I don't think in most places it is common.  Sure you hear of one or two pops here or there, but it is tough to do.  Even if you put cash in, there are flags when it comes out.   You could go pay cash---the green stuff to someone, get a deed and file it and never touch a bank or title company, but how do you get the money back out....sure you could rent it, and get a little back each month....but if you sell it and want the cash back in the system, now it is tracible ....title...and banks...checks.... very risky washing money this way.  It hurts when you loose your real estate.  Look at Optima 7171  https://legal.thomsonreuters.c...

    and if you think there is a bubble, look at the money sitting on the sidelines....lots of money and lots of money.  Just scowering for opportunities.  Look at all the Grant Cardones and their followers searching for multi....how much does Warren Buffet have in cash ready for the right investment?   I don't think the party is over and will not be over anytime soon.  Unless Covid mutates and ruins the party.

    2Reply
  • Ty Whitman
    OP
    Jacksonville, FL · Member since 2014 · 20 posts · 9 votes
    5y
    Originally posted by @Rick K.:

    @Ty Whitman
    I don't think you need a conspiracy theory... The US added 20% more available dollars in 2020 and that money has to go somewhere.

    Agreed, and that's kind of my point. If that money has gone to "the top 1%", are they then rolling it into real estate? 

    People talk about everyone moving out of California and New York, but someone still has to buy their homes when they move.  I sold two homes in California this year, and they sold like hotcakes.... one went under contract in a day and the other in one week. One sold to a family.  The other sold to someone who said they were buying it for their mom, but then no one moved in for 6 months. A company came in and did some renovations, and now it is a rental property.  

    And although this doesn't directly effect a buyer, I wonder how the bank reserve rate being dropped from an already, insultingly low 20% down to 0 at the very beginning of this COVID "crisis" might play into things.

    0Reply
  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    5y
    Originally posted by @Ty Whitman:

    It's been a bit of a surprise to me that, in spite of what I thought was a huge bubble last year, both real estate and stocks all kept rising.  Once COVID hit, I was sure that would prick the bubble and start the downturn, but both markets only seemed to take off.  I'm not sure our stock or real estate markets would have continued to climb without trillions being printed by the fed.   I'm left in this place where I don't trust the stock market as an investment, and I don't even like just holding cash with all the money printing and inflation. Real estate is where I'm comfortable, but I'm worried about a huge downturn, even though I feel like my particular market will be somewhat resistant to one as compared to other markets.

    I was listening to a podcast the other day that was talking about foreign and wealthy investors buying up real estate in the USA, as well as "dirty" money being "laundered" through real estate.  This text link below was basically the gist of the podcast.  Here are some excerpts:

    "All-cash transactions have come to account for a quarter of all residential real estate purchases, “totaling hundreds of billions of dollars nationwide,” the Financial Crimes Enforcement Network – the financial crimes unit of the federal Treasury Department, also known as FinCEN – noted in a 2017 news"

    also from the article:

    “It reminds me of Moldova after the fall of the Soviet Union: oligarchs running wild, stashing their gains in buildings,” James Wright, an attorney and former Treasury Department bank examiner, told me. He now helps foreign governments combat money laundering. “Back then, you’d walk down the street, and people would say, ‘That building is a washing machine.’ Everyone knew it. Today, America is not that different.”

    I've done a small amount of research into the topics talked about, as well as how FinCEN operates, and it's interesting.

    So my thought that I'd be curious to hear your opinions on:  What are the chances that "those in the know" are "laundering and stashing" money into real estate due to knowledge of a massive impending economic collapse, and that is essentially what has kept this market propped up as long as it has into this COVID crisis?

    I think the conspiracy theory is BS

    312-681-7487
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