Market Guidance from Our Real Estate Coach of The Estates LLC.

[David Ginn]

The guidance for this week is you want to stay in the markets that are below $300,000 or $200,000 depending upon your area--I talked to a woman the other day that was in Boston and their lower range in the market is $400,000. Regardless of that fact, you want to stay in the lower range in your market’s purchases. You also want to pull to a cash position.

The recession is probably stretched out now and is going to hit somewhere between Q2 and Q3 or go into Q4 of this year, 2021. Right now Joe Biden has been elected president. As such, there are rumblings that his administration is going to do a third installation of stimulus support sent out to the country. So expect them to work to stop foreclosures and evictions and hand more money to the people. That is a common thing that the Democrats do, and we need to look at it. Once again, not from a perspective of what our political beliefs are, but how the decisions of the politicians will affect the business market.

So, as long as they keep inventories low by not foreclosing, the market will remain in an upward trend. Because of that you are going to see the market continue to move upwards in the markets until the banks are allowed to release foreclosure inventories back into the market. At that point your supply and demand numbers will change and force us into a recession. So what you're looking for is what the banks are going to do and the government as far as releasing foreclosures back into the marketplace--primarily Fannie Mae and Freddie Mac homes--which are a large majority of home assets.

Again, my guidance is that pull to a cash position and get into quick flips--in and out of flips in the lower end of the market. Right now, you can still get into a flip quickly and sell for a lot of money because the market is lying false. And you will be able to do that hopefully well into the spring.

In the spring I'm expecting sales to do well. I expect the markets to be strong in Q1 and maybe starting into Q2. So, no buy-and-hold investing across the board. There's too high of a risk to buy and hold right now at the height of the market as the market is ready to correct.

If your argument is cash flow to me, I would tell you that if you think you're gonna make an extra $400 a month and you have 12 months in a year to make $4800, your equities are going to be lost a lot quicker in a down-cycle than what your cash flow can gain you. So I would stay away from any type of buy-and-hold investing across the board as a general rule. Unless you can bring me a real specific argument, stay away from buy-and-hold investing and stick with flips in the lower end of the market.

[Steve Vaughan]

@David Ginn  Interesting. I appreciate the guts it takes to stand up and make a prediction vs the tired old what do you think /lets discuss post.

My first thought was agreement.  My lower value houses have rocketed in value and I am selling as they become vacant after retailing them up a bit.  No brainer when they are selling at build cost/sq ft. 

Then I was like whoa.  Sell all buy and holds?  You do know there are other asset types besides houses, right?  I have been transitioning into plexes and 5+ commercial apts since 2003 as they became available over the years.  

So what of transaction costs and friction?  Taxes?  Proceed re-deployment?  Or are you just saying to not purchase any? 

I saved $112k in closing costs and commissions doing a 5 transaction exchange solo, my way, last year.   So if I'm avoiding a drop in asset value much greater than the annual cash-flow, what of the transaction costs?  What of the tax implications?  What of having to earn a return on the proceeds?

The one common denominator in your recommendation is high transaction costs and taxes if your recommendation is to sell B&Hs.  Please comment.  Thank you.