All Forum Posts by: Cary F.

Worst case scenario...  Simply don't renew the leases when they're up. I always try to make sure I can either end the lease through a sale clause in the lease or that the lease will end soon. 

Or look for properties that are owner occupied which means you'll have at least one unit free upon the sale. 

@Long Nguyen

How can there be a market correction when there is a severe shortage in the housing market?

It's just not possible. In order to have a housing bubble, you have to have over-building in new construction. 

New construction currently lags demand so severely that existing home prices are being forced up significantly.

We actually have a new construction shortage crisis. Here's some of the reasons why:

• 30% increase in price of input materials that new home buyers are not willing to pay (therefore new home builders not willing to build)
• Major shortage of construction workers due to last recession when construction was wiped out. (It will take years to replace this workforce)
• Building permits: Local governments only hand out so many new building permits at a time and they take time to process
• Land prep for new construction takes a significant amount of time

Here's a link to help you do a bit of your own research:

https://research.realtor.com/

There is no bubble right now. There is no bubble for the foreseeable future. Hell, housing prices have just now caught up to pre-crisis levels from a NOMINAL perspective. From an inflation adjusted perspective, they are still well below what they were.

I'm calling a 2026 crash. Yes I'd be willing to bet on it haha

@Solomon Ganz

I think your ideas and assumptions might have some blind spots and don't properly account for real estate cycles and recessions. Like, how much business will you lose in the next crash and for how long? And how much will your portfolio decline in equity or cash flow in the next recession?

Agents get hit particularly hard in recessions. The ones that say they don't are likely the few that survived and thrived. (Weak agents were weeded out during the recession while the strongest absorbed the remainder of the market.)

Being an agent is brutally competitive as the barriers to entry are hardly existent. 

Can you not stick with the full time job and try being an agent on the side? Like try to sell 1 house a quarter or 1 every 6 months... That way you'll at least be more familiar with the profession rather than just cutting and running which would be crazy in my opinion.

In economics, we have a term called selection bias. People on bigger pockets are typically aligned against having an awesome corporate gig so take "advice" with a grain of salt. 

Best of luck! Cary

 Guilty... I only read the original post which seemed pretty clear to me. I fear that the first post could be a little misleading for new investors who don't understand the stock market or the formula for compounding interest.

Investing in capital markets is a critical strategy for anyone seeking to increase net worth over time. It's a fantastic risk management strategy and a fantastic wealth play. It should be heavily encouraged if someone is looking to become a prudent investor. (I'm not referring to stock picking.) 

I'm sure you know all of this...  I just think it's important to point newbies in the right direction. Good work on your real estate efforts by the way.

@Account Closed Doubting the competencies of stock, bond and mutual fund portfolios doesn't make sense to me as an investor. A prudent investor will diversify investments across education, real estate, stocks/bonds/mutual funds and business acquisition.

If you don't diversity your investments, you are at risk of losing far too much. I'm not sure how you perceive 401K investing as a negative thing. Not only is it positive, it's also crucial. The long term returns in the stock market are about 8 - 10% nominal and 6 - 8% real. Investing in capital markets is a fantastic hedge against the breakdown of other markets. Investing in capital markets is also one of the most proven ways to become very wealthy over time. 

@Ryan Sommer

Howdy! First of all, a shred shack cannot be a bad idea for the winter months! Haha

I would do a little bit of homework if you haven't already. I would test the demand and vacancy rates by exploring the Airbnb app. The Airbnb app will give you an idea of what price point works and what the vacancy rates are for different prices and properties.

If you get a shred palace, and nobody wants to rent from you for whatever reason,  you'll be losing money in no time. But if there is indeed a very strong vacation rental market which will provide you with low vacancy, then perhaps it's worth doing.

Airbnb has blackout dates if the property you want is not available. If you have 50 competitors and they all seem to be booked, then it looks good. If you have a lot of competitors and they seem to have excess availability, run for the hills.

Also maybe call a hotel and try to book holiday weekends in advance. This would be Christmas, NYE, MLK Day and Presidents Day. If they all book at very high prices very early, the consider further. You could probably cover your nut on those holidays alone. Thanks for the vote in advance! 

Also I have spreadsheets for vacation rentals..  Let me know if you want a copy. 

@Sam Twarek Sam! Funny to see someone I know on Bigger Pockets..

I bought a double in West Lakewood last fall. Shana and I live upstairs and rent the downstairs unit.

With house hacking, I say just do it. Make sure the property will cash flow when you decide to move out and rent out the other half. But Shana and I are living in a very nice double and are living there very cheaply, all while picking up equity from the tenant helping with the mortgage. It's a beautiful model and works well in most cases.

I have some helpful Excel spreadsheets I can share with you for deal analysis. It's literally built from the BP deal calculator.

I also use some very helpful tenant screening software that you may find valuable.

If you ever want to catch up over a beer, just let me know. I could talk REI all day every day.

Totally agree but always like to make the following point:

I know this is contrary to popular belief, but the ROI for surgeons and medical professionals (17% ROI) is actually significantly lower than for MBAs (27% ROI).

This is because of foregone wages, foregone 401K contributions/matching, foregone investing and because of very large student loan balances. 

Many MBA students don't forgo wages OR pay for tuition as employers have tuition reimbursement programs.

Doctors and specialists have 8 - 12 years of schooling plus years of residency at low wages. 

A person who studies finance, accounting or economics is at a great advantage in comparison, especially if that student understands the concepts of investing and compounding interest. 

But I understand that your comparison wasn't doctors and bankers....  It was doctors and median wage earners. Obviously your point is valid but I always enjoy this topic as everything thinks doctors are ballers haha

The number one driver in my opinion is lack of investing knowledge and finance. 

By the way, if everyone was investing in real estate, then the majority of available returns in the market would evaporate.

You make money in any asset class by thinking in a way that is nonlinear. People move markets because they see the world in a linear way. Great investors find ways to tease out the inefficiencies in markets in a way that makes money. 

I agree with @Ben Leybovich

My wife and I bought a very nice double in a very nice part of Cleveland. We're renting out the bottom half which covers most of the mortgage, taxes and insurance.

We're basically paying $450 a month to live in a 1,600 sf luxury apartment in a great neighborhood. Rent for a place like ours is easily $1,300/mo. I don't see how this could be viewed as a negative thing, especially since we both have corporate jobs. 

This house hacking thing is pretty awesome and I highly recommend it.