All Forum Posts by: David Song

I've been reading for a few months now on biggerpockets and feel like the beginner posts are starting to be not informative.  Lots of people replying with consider my location here or my location is best I can help you. I feel like people are just selling themselves not giving actual advice.. am I wrong for this?

 Wait.... your telling me your whole premise for some "crash" is a month over month number you found of a decline in some market...... that's ridiculous. 

Cold or not, Twin Cities is one of the major national markets, set to over-take Chicago in near term of years, so I'd say it matters, as you were saying "everywhere in the nation" is in decline since April. Andy yes, I do track the numbers, constantly, it happens to be my job. And our numbers YOY, which happens to be the widely established measurement of such movements, but also the month over month, increasing. 

To be honest, I am still amazed each data release at the constant incline, I am, I didn't expect it at this moment with loss of velocity but #'s don't lie. 

 Sorry David, but as you seem to believe prices have been declining in the entire nation, uhm, Minnesota IS in the U.S. and so far for 2022, we have had price INCREASES every month, this year. Not decline, not flat line, INCREASE. 

While it's not the bezonkers level it was last year, it's pacing around 10% YOY. 

Velocity has slowed, we almost have 1 full month inventory on existing homes now.... 0.9 to be exact. 

I think I'm very highly qualified on this topic to share my experience.

Here is a true story.

A fiend, let's call him "Bob", and I invested at the same time, in 2004.

He bought Cash Flowing properties in CT and I invested the same amount into a 3 Family Brooklyn, NYC property.

We both spent about $200k for our Investments.

This is an 18 year history of the comparison.

Bob's CT properties cash flows approximately $1,000 per month for all of this time.

My Brooklyn, NYC property didn't cash flow in 2004, but today, it cash flows $5,000 per month.

Bob's CT Property did get some appreciation, but the increase is something like $300k more than what he paid for it.

My Brooklyn, NYC property is worth $3 Million more than what I paid for it.

The one issue that is not being talked about is where do you want to live? This needs to be factored in.

Bob, unfortunately, in 2004, loved living in Manhattan. He rented an apartment for about $2k at that time when he made the purchase of his CT cash flowing properties.

Bob thought it was great that his $2k apartment was being subsidized by the $1k cash flow he was making per month from these CT properties.

HOWEVER, what Bob didn't take into account was the rent appreciation that would have eventually happened in NYC.

Bob's CT properties did not significantly increase over the 18 years.

HOWEVER, Bob's rent where he lived DID skyrocketed over the 18 years!

Bob, who was paying $2k a month in Rent in Manhattan, is now pay $5k per month today.

He went from a net of $2k rent minus $1k of Cash Flow to $5k rent minus $1k cash flow.

In other words, Bob's impact to his living costs went in exactly the wrong direction.

Not only that, Bob became priced out of the market in NYC.

He could have afforded to buy a property in 2004. But today, that is completely impossible.

Contrasting this with my own scenario, I am not only cash flowing $5k more than what I was in 2004, but my Appreciation is approximately $3 Million more.

The theme here is that if you really want to live in a highly appreciating City, which now seems to be EVERY desireable City everywhere around the US and the world, from NYC to Austin, even cheap places in PA and the boondocks of Florida seems to be completely priced out for many of the CASH FLOW Investors here, you should FIRST buy in the place you want to live in forever.

The problem with buying out of the area you wish to eventually settle roots into is that you may get priced out completely, even if you are building a cash flowing portfolio.

Something to think about.

Buy your first property, rental or otherwise, in the area where you are most likely to build your Roots.

There is a huge difference between those of my family, 90% of them, that did not invest or buy their home in the area where they live, and myself.

My Partners and I own 10 small multi-family properties in Brooklyn, NYC. This is where our families settled down.

The 10% of us who bought in Brooklyn, are incredibly lucky. We secured our homes forever. WE cannot be priced out.

The 90% is like "Bob".

My advice, don't be like "Bob."

At least buy the home you want in the area you want.

Investor Llew

We all know that in the past, Cali was the bomb. We're talking about the next 15 years...... Lots of variables here, way too many to really have even an informed opinion.

 Another state that beats CA with 15yr Len's, there is about 42 of them, take your pick. 

Look, first and foremost, look at your median home price. It's so high, how much appreciation can happen? To argue they can considerably appreciate is to argue that wages can by 3x/4x national average in CA. Why would any co. with half-a-wit have there operations in a place where production cost will be a multiplier higher? 

Silicon valley is in process of relocation, along with countless other CA based operations for this exact fact. 

CA is arguably seen it's peak. There is a long list of major issues starting to pop up, water is just 1. Not to mention there is a very real probability that CA will no longer be "CA" in 15 yrs, very good chance it will be 2 separate states. It's at the final mile for this to happen and the water issue could be the final straw that breaks the issue. 

Countless other states that have a lot of growth happening, and on the horizon to come. CA, are we to believe it has another 30% growth over next 15yrs? How? 

Biggest mistake my parents made was to sell their prime Manhattan Beach home. Per Zillow and Redfin, the house is now worth an estimated $5 million. If they had kept the home, they would be paying property taxes based on an assessment value of around 500K IMO. Talk about low property taxes! Of course, they had no way of knowing MB would be the de facto location for rich people living in Southern California. But it's amazing how this false narrative about Californians paying high property taxes keeps getting perpetuated (kinda like California being broke). What makes property taxes even more insanely low in CA is if you are 55 or older, you can sell your primary home and buy a new one and transfer your base year value to avoid a sudden jump in taxes based on your new assessed value.

Around 20 years ago we purchased two OOS properties. I loved the location of both but especially one on the sand at Gulf Shores Alabama. The other was lake front in Alabama. We sold them both because our San Diego RE was performing far better. Two hurricanes hitting the Gulf Shore RE in consecutive years was also a factor on us selling that property. The properties were not appreciating like San Diego. the cash flow was going in the wrong direction because the STR rents were not going up as fast as the property tax and insurance. Our insurance on the Gulf Shores property went up something like ten fold in just a few years (going from memory). There were two large claims for the damage from the hurricanes.

There are times that I wish we had kept the Gulf Shores property, but it is not because I believe it would have produced better return than the San Diego properties.  It is because a duplex like that does not exist in Southern Ca and, if it did, it would be >$10m.  

Our San Diego properties have produced great returns.  The rents compared to purchase price is incredible.  The appreciation has been incredible.  The property tax is very reasonable especially on the longer hold properties (thanks prop 13).  The insurance has increased at reasonable rate.  

 Yes David, that is the question, if someone moved out of state was moving a better decision in terms of investment. Life might make someone move, but if they choose to move because they thought they would perform better, that's what I want to hear results for.