All Forum Posts by: Brian Ploszay

In August, I noticed that my rent collections were less stable than previous months.  None defaulting but some new late payers.  My local leasing market is soft.  People are not moving.  My City has had some turmoil. 

I am not deterred but there are not a lot of deals that are attractive these days.  Interest rates are propping the market up, but that doesn't move me at all.

I have bought this year - selective value add type properties that are low risk to be hurt in an economic downturn.  But this year is not one of acquisition growth.  Some buyers are awaiting an elusive market crash, thinking that 2008 is coming again.  I do not know, but if it is bargain time, it will be buying time.

Great thread because it brought out lots of different opinions.  

Here is my take:   With key parts of the economy is disarray, I expected the real estate market to soften up a lot.   Instead, we have a semi-strong market where bidding wars are breaking out for houses.  I didn't see that coming!  

For a market to really tank, like 2009, there has to be a combination of high defaults and tightening or more expensive credit. We can see the future a little bit in that there are big spikes in delinquencies for FHA loans. Regionally, the greater NYC metro area is a leader in delinquencies. As for credit, it is better than ever with very low interest rates. And a mitigation factor for the delinquent loan growth is defeasance options, where many people will not have to lose their homes if they can re-perform their financial situation in time. Any foreclosure wave in my market won't hit for two years. The courts are closed and I live in a judicial state where foreclosures take a long time to complete.

Here are some easy predictions for the future for assets that will decline in pricing:  A lot of commercial real estate, NYC apartments - especially Manhattan.  

2021 is not going to be an easy year of recovery.  A lot of businesses will be off of Federal PPP money and layoffs will occur.   Courts will eventually open and both eviction and foreclosure cases will resume.  After the pandemic, the very large federal deficit is something we will have to contend with.  How that affects the capital markets (interest rates and inflation) in the long run is not clear yet.  A lot of people withheld selling their homes and moving because of the pandemic.  One day a surge of supply may happen.  

The original author to this post suggested to sell and raise cash.   Having cash is a conservative position -in times like this I 'll agree.   But to predict that pricing will fall off the cliff is no more than a guess.

Keep in mind that large capital groups with institutional funds have formed to buy houses if any such a wave happens.  They are a back stop that will mitigate a free fall in pricing decline.  

Great idea.  But now you are a landlord, a job that some people don't like.

There has been discussion about the future interest rates.  Fed is printing a lot of money.  Rates to stay low for years?  Or a spike in interest rates?   If you think the latter, refinance and get a fixed term as long as you can.  Investment properties rarely often 30 year fixed terms.

I like your post.  The market today indeed can change on a dime, as you say.  It is not a normal market.  

On one hand, Covid has kept a lot of homes off the market and there is shortage of product.  A few hundred thousand buyers are out there, facing this market.  

On the other hand, there are significant spikes in loan delinquencies and forbearance.  Layoffs in other sectors are starting (airlines is an example).

There is uncertainty in the economy, and hence real estate.  

Appellate court.

Very interesting post.  I never thought of such a situation.  Tenant screening is so important to me, that I do it in-house.  I can't imagine why one could not make a legal agreement stating that the owner has the right to review, confidentially, all financial information about a tenant.  

Full 3rd party management is obsolete if I cannot review this very important information.  

This is a good post.  I assume you have a single family rental.  My turnover costs are done by my crew.  They still end up costing at least $3K.  A vacancy also is the time to address any deferred maintenance and capital issues.  So I often go over $4K.

My cost to turn over apartments is far less.  Mainly because of smaller square footage and shared infrastructure (roof) with the entire building.

My costs for turnover in A / B+ areas is less, as tenants seem to maintain the properties better.

To make money in this business with rental houses, the strategy is to keep tenants for a long time.  If I have a tenant that only stays one year, it is a loss.   With houses, you have some people that will stay a decade.  

@Darius Ogloza   Honestly, for those of us who operate with C quality properties, your pictures are fine.  Usually I clear out the debris, paint the unit.  Replace a few things, and it is back to normal.  As long as they dont trash expensive items like kitchen cabinets.

@Steve Babiak     I put heat tape around them, nestled in insulation.  I originally figured that some of the units heat would rise into the attic, but that does fail when there is a polar vortex.   Anyway, most of my houses have other solutions that do not required jumping plumbing through the attic.  

In a basement of an apartment building, I piped gas pipe and did a mini space heater.  There really are only about 5 days a year that are at risk.