All Forum Posts by: Gil Segev

@Joe Blakley I liked your 3 way division of the investors market. I find it entertaining that realtors keep a very rosy outlook of the market. It makes sense of course, their livelihood depends on selling more properties now. 

One thing to keep in mind with a downturn or a correction is the difficulty of raising money. If things go south, you can bet lenders and banks will make it harder to borrow. Unless I find an incredible deal, I'm keeping my cash available to use at a later stage when I can hopefully use it in better deals . Even if the market doesn't fall, the chances of RE prices going up in the coming year is low so the risk is just the opportunity lost in the coming few months. 

@Michael Haas @Adrian Chu

Here's an article from today analyzing the impact on tech companies.

As you have correctly stated, cloud software and infrastructure are continuing to grow but the rest of the tech industry may take a hit. Some of these companies have deep pockets and others (like startups) do not. I hope this thing ends really soon and the market bounces back quickly!

 
https://www.business2community.com/tech-gadgets/covid-19s-impact-on-tech-spending-this-year-02297147

In either a second-half 2020 recovery or recession, Forrester predicts computer and communications equipment spending will be weakest, with potential declines of 5% to 10%.

Tech consulting and systems integration services spending will be flat in a temporary slowdown and could be down by up to 5% if firms cut back on new tech projects.

Software spending growth will slow to the 2% to 4% range in the best case and will post no growth in the worst case of a recession.

The only positive signs from the latest Forrester IT spending forecast is the continued growth in demand for cloud infrastructure services and potential increases in spending on specialized software. Forrester also predicts communications equipment, and telecom services for remote work and education as organizations encourage workers to work from home and schools move to online courses.

I REALLY hope you are both right! 

I just completed a flip and can't put it on the market for at least a month and who knows how the market will look when this shelter at home order is lifted.. 

@Michael Haas don't you think there is a connection between amount of high paying jobs in an area and rent and property prices? Look at San Francisco - the influx of high paid tech workers drove prices way high in recent years. Don't you think that if 20% or 30% were to lose their income in a relatively short amount of time, rent and property prices would drop due to the decrease in demand?  

@Michael Haas I'm definitely not up to giving any stock tips but to think that tech companies are not impacted by this is missing the big picture. Having 95% of the staff working from home for an extended duration is a BIG hit in productivity. Having 100% of your consumers and IT customers staying home and not buying PCs, new software or IT services is a critical hit to companies like MSFT or SAP. Amazon could be ok but as for all the rest - you can bet they will downsize. 

Less jobs = less renters = drop in rent and home prices.

You can start an LLC with equal parts of ownership and then go to the bank together and open a business account for the LLC with the EIN you get from the IRS.

The idea of BRRRR is to buy low with either cash or private/hard money and get your initial capital when you refinance. In your example your all in costs are: 60 (buy) + 15 (rehab) + 6 (closing, holding, refi)=81k so assuming you bought the house cash and was able to refi 90k, you exit the deal with:

1) All of the money you initially invested 81k + 9k extra from the bank 

2) A cash flowing property, say 100-200$ a month after all expenses. Being that you have none of your original money left in the property, this represents an infinite ROI.. Nice ha? 

3) 30k in equity: 120 ARV - 90k refi loan 

All in all not a bad deal.. And the best part of BRRRR is that you now have all of your money (+9k extra) to Repeat this process again and again..

To me it is pretty clear that if we get anywhere near the numbers quoted below of 30% (!) unemployment and 50% drop in GDP, there will be a high rate of mortgage defaults, foreclosures and lending restrictions which can only lead to a drop in real estate prices.
So it depends on how long we stay shut down and whether you believe these numbers..

"We're putting this initial number at 30 percent; that's a 30 percent unemployment rate" in the second quarter of this year as a result of the planned economic shutdowns, Federal Reserve Bank of St. Louis President James Bullard told Bloomberg News on March 22. Gross Domestic Product, he adds, is expected to drop by 50 percent.

@Whitney Hutten thank you very much for this information! I missed this podcast - I'll go listen to it now. 

Agree that the market is currently looking strong regardless to the shelter at place orders and potential jobs lost. It is my belief that it's a matter of time until this ripples into the RE market and we start seeing some drops in prices. It may not be a full blown crash but prices will go down. 

You say you'd also be prepared to leave a little money in the deal now to get things refinanced. Why would the deal and cash out refi be different now than they were a year or two ago?