All Forum Posts by: Cory Mccarthy

thank you @Joe Villeneuve, you really know how to hit the target right in the bullseye with all of your answers.  Your insight is exactly what I needed and really hit on exactly what I was thinking.   If you are in cash flow property that has been properly researched and executed and you have a long term perspective, you are likely to be well positioned to weather a storm and in fact could benefit greatly from the corresponding fallout.   There were clearly many negative impacts to the crash, but they hit different regions, different classes of properties, and different investor in very different ways.  And like any pendulum, there were equal and offsetting positives that also were spurned by this collapse albeit these were somewhat delayed just like they are with the cycles of any pendulum.  If properly positioned heading into the storm though, you were likely also to be well positioned to benefit from the positive side effects that resulted from the corresponding market corrections which inevitably followed.  In A/B markets, available potential renter base did not shrink nearly as much as in C/D areas as unemployment wasn't hit to the same degree, you had already taken out your available equity, so when values fell, you didn't have to give money back since you were locked in, cash flow remained relatively stable since CF is not impacted by property value directly, and there was still a relatively strong base of renters, in fact perhaps somewhat increasing eventually as some lost their homes.  And so when values fell, there was little to no impact on on your cashflows, so you thrived throughout the downturn and simply had to wait out the storm and wait for the eventual correction to come about (i.e. Execute your long term perspective). Then when things started to turn around, A/B market values were generally quicker to rebound, you were able to take advantage of increased rents, lower property values, cheaper money, etc.  Sounds very similar to @Account Closed's formula for risk mitigation.  Thanks again for both of your perspectives and advice.

@Account Closed, thanks for the reply, that is some great advice and I think a great formula for insulating against economic shocks: long term perspective that is not overly leveraged in non-urban A/B markets.  I think that is priceless advice and one that can truly minimize risk.  There is no such thing as risk free, otherwise none of us would ever make any money, but carefully balancing risk & reward is sound & prudent advice to me.  Thanks for simplifying this in such a concise answer.

So in this year of the Presidential Election, I thought I would ask, which party, if they win the White House in 2016, will benefit Real Estate Investors more in the next four years, republicans or democrats and why?

@Nicholas DuncanGlad to help Nicholas.  Don't be afraid to reach out if you ever need any advice or direction, after all that is precisely what this BP community is really all about.  Best of luck to you and keep us all posted on your progress, we are rooting for your success!!

@Account Closed, I appreciate your points and completely understand that it is impossible to lump an entire state into one basket, but what I am trying to understand better is what is the driving force behind the differences.  If as you state, several areas are doing much better, but more urban areas might still be underwater, can that be explained away by simply class of neighborhoods, such as A/B areas are doing better while C/D areas are still struggling.  If it is as simple as this, what are the drivers of this, continued unemployment in C/D, vacancy differences, market demand forces?  I am trying to dive deeper and any insight you can provide is precisely what I need from someone who experienced the downturn directly and obviously not only survived, but thrived.  You know more than most or otherwise you wouldn't be here today as many of your counterparts at the time were swept away by the flood waters.  What did you do differently that others were not smart enough to do at the time?

@Joe Villeneuve, thanks for accepting my colleague request.  This is the thread I was hoping you would chime in on.  As someone who has been in this business for a long time, I imagine you had to have some valuable experience and wisdom to share about how to weather a storm such as the one we experienced through the 2008 to 2010 period.  I am particularly interested to hear about your particular experience here in Michigan specifically since we both reside and invest here locally.  Thanks in advance for your perspective and knowledge shared.

Thanks @Jay Hinrichs, once again you are full of useful insight for those of us newer to this field. I suspect maybe I completely underestimated the true impact of the Job losses and the ripple effects that cascaded outward from those losses. The whole point of my post to begin with was to help me understand the effects of the crash and to try to identify ways to insulate against the risks they posed. Seems to me that some of what I should take away from this is to not get too highly leveraged and always have the reserves in place to be able to weather any storm, even those larger than I might imagine possible. I was fortunate to have not taken the bait back in 2004 thru 2007 and get over leveraged on my primary home like so many of my neighbors, who lost houses in this market by the thousands, but as I begin my journey here in REI, you have to leverage to some extent to really get started, so I suspect its just a little bit of balancing act coupled with a little bit of savvy and a dash of good luck. With the insights and knowledge you and so many others here on BP so willingly share, I will certainly be more educated than most, so that should help as well. Thanks again for all your input. Curious why Texas values largely held as they would most certainly have also had a large population of lower wage earners similar to PDX and LV. Any suspicions or direct knowledge to share on why that was the case there?

Welcome @Nicholas Duncan to the BP community. I applaud your efforts and thought processes on hacking a house as young as you are. You have already got a leg up on 99.6% of your college age counterparts by just finding this site and thinking the way you do. If you have already started to analyze properties, then you have probably already figured out that a well purchased tri or quadplex can allow you to live there for free and provide you a little cash-flow on the side. You probably also have noticed that Saginaw is pretty affordable area in many regards. That being said, if your parents are really in a position to help, I would convince them to lend you the 3-5% needed (probably like $5-8K) for an FHA loan and commit to them to use the cash flow to pay them back as quickly as possible. The analytical tools available here on BP (above under the Tools Tab) will give you plenty of financials to show your parents and you will probably impress them with your analysis and presentation if done properly. I do believe you will have to show some steady stream of income for FHA, unless your parents would also be willing to co-sign for you, but I do not know enough about FHA loans to even know if that is a possibility or not. Never stop dreaming or reaching for the stars; those that say that "they can't" are the only ones that are ever correct 100% of the time because that in itself is a self fulfilling prophecy. Best of luck to you and please keep the BP community informed along your journey!

@Jerome Kaidor thanks for your input,  Interesting perspective you had to share.  I can imagine that for a period of time, that phone not ringing any longer must have been pretty scary for a while.  Glad to hear most came back and that your adjustable rate mortgage was useful.  Can't imagine using an adjustable at this time with rates so low, but I will keep that in mind if rates ever get back into that 8-10% range again.  I suspect it is only a matter of time really but hopefully it is a ways off yet.  Best of luck in the future.

@Account Closed, sorry it took me so long to get back to you, holidays really filled my sails this year and largely kept me off BP for a while.   I appreciate your input and quite honestly that is kind of what I was thinking about.  If you were not highly leveraged at the time and were able to have a longer term perspective on things, provided you were able to respond to changing market conditions and perhaps lower rent where necessary, if your cash flow was strong enough to begin with, it is likely that you could weather the storm as you have clearly done.   Just out of curiosity, how badly impacted were home values in the NJ area and have they completely recovered yet?  Here in MI, my value is still well below where it once was, albeit, I clearly recognize that it was over inflated at that time and was not really realistic to begin with, so perhaps it is properly valued now but it took a hell of long time to begin growing again.  in your opinion, what if any steps can you take to insulate yourself from these corrections if any?  Also wondering if you think certain areas of the country are safer than others and capable of weathering these storms better than other areas?