All Forum Posts by: Dan DiFilippo

@Mark Braun central bank reserve (not really money) printing isn't stimulative. 100% increase in the monetary base hasn't fundamentally changed anything. There is too much debt and not enough economic opportunity to support it.

@Brandon Miller some good answers here. Think in terms of opportunity cost. Suppose you have $100,000 you can use to pay off 4% interest mortgages and that's the decision you're trying to make. Well imagine you didn't have those mortgages to pay off. Would you rather use that money to buy a safe 4% yielding instrument (like a US Treasury if they yielded 4%)? Or would you use it to buy another house?

In finance, US Treasury's are considered the risk free rate of return. Think of any debt you have in terms of being "an anti-Treasury".

Fayetteville-based broker here.  I like this area because it is essentially disconnected from the broader American economy.  We have an advantage because the military makes us recession proof.  If you are anticipating a nationwide economic downturn over the next decade, then Fayetteville, with the largest base in the country will be a top performing market.

I would say be careful about your ambitions of "putting the dream team together".  If you're brand new, you don't really know what you're getting started on.  You need a lot of competence and confidence to have a "team".  What I would recommend is do your damnedest to find a really good agent in your area who comes from a reputable brokerage that has strong relationships and then see who they can connect you with.  Don't try to build your team all at once.  Find a good starting point and then see who you meet and see who works for you.  Reshuffle as needed.

@Joaquin M Dugan Jr I've argued for my own market (Fayetteville, NC) as being chiefly opportune to catch a firm gust of appreciation while remaining the meteoric cash-flow generator it has historically been. It largely has to do with The Great Migration, reallocation to real assets, depressed economic activities over the next decade, and specifically to Fayetteville, America's largest military base. Essentially, shop for cash flow right now. Away from large commercial urban areas. You'll get appreciation as a bonus. Oh, and go where it's warm.

@Ellie Perlman solid breakdown - well done! There is one other thing I'd mention which is, yes, we're getting a lot of foreigner investors, but we're also getting a lot of domestic investors pivoting to real estate from their asset class. I've touched on this elsewhere myself, but the comparative yields are have caused real estate to be finally sucked into the bubble. Cash investors tend to limit their exposure to it because it's illiquid, labor intensive to manage, has several risk exposures, and needs to be leveraged to get competitive returns, which means it requires a long term capital commitment. But because price to earnings was so steep (even Pre-COVID), real estate actually came to have a natural edge over the more liquid securities markets. I've said for a while though that we are looking at a real flattening of the economy as we have continually weakened. Ultimately, returns are a function of underlying fundamental growth mixed with a risk profile. And I think what we've been witnessing is that underlying growth withering and taking everything down with it.

It depends on the region.  And, of course, it takes a long time for this ship to turn around.  For an array of reasons.  I've always felt strongly that The Great Migration is at hand.  I've written a lot about that on here.  Anyone over 60 years old has probably been thinking critically over the last 6 months about their retirement.  Many may have taken severance packages and simply not listed their house to move yet.  But they'll be taking off as soon as this pandemic clears up and they can list safely.  Remember, they live in the places where it is most dangerous to list - those reasonably dense suburbs that have been steadily getting worse.  And they generally only live there because it's the area they've lived for work over the last 30 or 40 years.  It's a massive population glut and they're going to be seeking to capitalize on high asset values and the artificially low rates that enable them while they last (the low rates are double-impacting, of course, as they facilitate the buyers buying their homes as well as they themselves buying their next home).  They will be moving from these suburbs around the mid-size and larger cities (New York, DC, LA to some extent, SF, Boston, and more) and buying houses in retirement-friendly areas in Texas, Arizona, Florida, Nevada, etc..  These are reasonably strong credit buyers with equity in their existing high values houses seeking to buy in low cost areas.  There is a lot of cash to be pocketed selling a $700,000 home with $18,000 taxes and moving to a $200,000 home of the same size with $2,500 taxes.  So I think look for the areas in the south and parts of the west that are friendly to these buyers.  I think Raleigh (and probably Charlotte to some extent - I don't know as much about it) was an early beneficiary of this move.  But it's only been getting started.  The boomers have to do this.  Because they don't nearly have what they reasonably need to retire.

And then there are a whole bunch of interesting little things that put an edge on this.  For example, consider appraisals.  appraisals look back 3-12 months depending on the circumstances.  What this means is that a desperate seller today could still be benefiting from home appraisals made before COVID was on anyone's radar.  If the wave of desperate to sell listings goes on the market tomorrow, there won't even be any lower value sales yet for the appraisals to comp to.  This is akin to a measurement used in finance called a moving average.  Moving averages naturally dampen sharp changes in prices causing them to appear as smoother, but sustained changes instead.  Trends.  So there is a lot of market psychology involved in the determinations.  But I think for sure we're going to see a lot of panic over the next 18 months.  And not just in the real estate markets, but really throughout the entire world and in all theatres.

@Rashad Jackson see if you have any viable markets within 2 hours drive of where you live. If you can't find any, you may have to check out some of the more nationally recognized investible markets.

@Chris Valverde Patrick Stoy with MC Mortgage group has strong private money arm, to be sure.

But between everything, it sounds like you're taking a bit of an unorthodox approach to your first deal.

@Philipp Grajewski I've been to this one. It's not nearly a $23,000 job. Quite a bit more. Also, that's probably on the high side for rental rate.

But good on you for actually showing a little bit of prudence on repairs underwriting and capex. You definitely don't need 16% between the two. I usually say 7% Capex and 5-7% repairs. But it also depends on how you like to manage your capex reserve. And that also sort of depends on the size of your portfolio and everything.