All Forum Posts by: Will Poon

The supply of money is a factor investors need to take into consideration. Money supply within an economy and the fiscal policy/monetary policies influence prices. The fed will go through balance sheet reduction and rate increases in the near future. I do not believe there will be peaks and valleys of the past. My opinion is there will be plateaus for long stretches. All the capital restrictions put on banks will not allow to over investment or under investment.

On a high level, DF is intended to gives regulators authority and oversight over large investment banks. The oversight being leverage limits, liquidity requirements, risk management, concentration limits, etc. I don't think there is any language specific to retail lending. Retail lending is just a small subset of large institutions. A repeal of DF will loosen regulation but bank still adhere to Basel III reqs.

To answer your question, no one knows exactly what will happen if DF is repealed. Its off to the races for banks to figure out how to make more money while staying within the language and Basel III. In my opinion, It doesnt impact retail lending and REI directly. It will impact it from a macro standpoint indirectly. I would watch for loosening lending standards but remember each bank has different standards.

You need money to make money. I don't advise 100% leverage. An example scenario- plumbing need repairs. You don't have the capital to fix it. Tenants leave. Now you don't have the rental income to repay financing, etc. Also,you cannot leverage 100% with conventional mortgage. The bank will look into where you got the down payment.

Eric- I have a hybrid washer/dryer. It does not work well. The washing is fine.. but it takes 3 hours to dry which waste a lot of electric

Fannie and Freddie are very complex. Take this as a simple explanation. In general they are a government backed liquidity provider for mortgages. For example;Banks that issues mortgages to retail consumers flip these mortgages back to Fannie or Freddie to free up bank liquidity for reinvestment elsewhere. In short,this is suppose to help keep the economic cycle churning. 

Sounds like you made up your mind before you posted lol

I do not think there will be a big drop in prices for a few reasons.

1. Thanks to Dodd Frank. Bank balance sheet is very expensive. A lot of collateral must be held vs its investments. This is to prevent bubbles and restrict over investment.

2. Low Fed rates have become the norm. Any sudden and significant increase will cause distruptions which the Fed will avoid.

3. Jobless claims are low resulting in more people competing for the same house.

This questions comes up very often. The answer is always- no one knows. If they give you an yes/no answer they do not know what they are speculating. If there was a real answer, there would be market corrections and prices would reflect.

With that said- you must look at your financial situation. Risk appetite vs reward. Draw out different scenarios. 

The increase is insignificant to a retail borrower at the 4%-5% range. It has huge bigger impact in the institutional credit markets where billion dollar debt is issued. I dont think a slight uptick will impact retail mortgage borrowings which impact housing prices. It may however impact the high end luxury homes.

Thanks for the input. I think for first property, I wont be able to absorb the losses; if I was diversified and had multiple units, I could make a riskier investment.