All Forum Posts by: John Walter

Well put!

There is no doubt we are living in unprecedented times. COVID-19 has undoubtedly thrown a curveball in all of our plans, at least in one way or another. My question is, are we in the beginning of another major economic recession? For those of us economic nerds, you may know recessions typically hit between Labor Day and Halloween, and I believe we are about to see this repeated yet again.

Recently released GDP results from the Commerce Department show an annualized 32.9% contraction in Q2, which is the sharpest drop in modern American history (equivalent of $2.2 trillion). **Of note, on a non-annualized basis, the Q2 GDP drop was 9.5%. As countries across the globe begin to release their own results, the outlook is just as gloom. Germany also reported a record quarterly decline of 10.1%.

On July 30th, the Labor Department reported more than 1.4 million first-time jobless claims; the second weekly rise (indicating a possible further uptick in unemployment). Add to the fact that as of July 31st, the additional $600 unemployment benefit officially expired for millions of Americans, and as of this writing, there is no congressionally approved replacement.

While those stats are interesting, they are all in the past. Unfortunately, the future isn't looking any brighter. According to FOX News, four in ten retailers have filed for bankruptcy thus far in 2020. Also, in the first seven months of this unforgiving year, more major retailers and restaurant chains have filed for bankruptcy than in all of 2019. Dunkin' Donuts recently announced the closing of 800 stores (8% of their total) by the end of 2021, and they are in no way alone.

Ascena Retail Group operates roughly 3,400 stores. They filed for Chapter 11 on July 23rd, and announced the closure of at least 1,100 stores. And the higher-paying corporate jobs are not as secure as they once were either. L Brands (Victoria Secret and Bath & Body Works) will be laying off about 15% of their corporate workers, as well as Macy's Inc. announced they will be eliminating 3,900 corporate and management positions. Even our nation's largest employer, Walmart, will be cutting "hundreds" of corporate jobs and "reorganizing" 4,750 stores.

Other economic-driving industries are at risk as well. September first, the airline industry can begin laying off employees, as their obligation to the CARES Act will have been fulfilled. United Airlines has announced possible layoffs of 36,000 employees, American Airlines has noted 25,000 employees, and 17,000 Delta employees have already agreed to receive buyouts or early retirement packages. In addition, Ford and General Motors have announced both layoffs and plant closures in an effort to reduce costs. Manager Magazin (not a typo) reported that Daimler may cut as many as 30,000 jobs as the company aims to save $2.3 billion.

Sure, the value of gold has hit a record high, and the value of the USD has seen a decline recently, but there must be some indicators we are not on a direct path of another recession...right? After all, U.S. economic activity improved in May and unemployment fell to 11% in June. And, the New York Times reported an average of 63,806 cases of COVID per day in the U.S. for the past week, a decline of 3% from the average two weeks ago, so there is some light.s

Clearly, I am predicting an economic downturn in the near future. I have started to increase my cash on hand in preparation for it, although I still hope I am wrong. What do you see? Are you as pessimistic as I am? Is all this hype over nothing? Has your investing strategy shifted in any way? 

If nothing else, hopefully this was at least somewhat of an interesting read.

Don’t forget maintenance, utilities, yard work, etc. That all affects your cash flow number. As to whether you should house hack or not depends on your living situation. Do you want to over next door to your tenants? Do you enjoy that specific area? That’s really a personal choice. 

I hear you. It all comes down to what you want. For me, I am only on my first property and I feel as though I am setting myself up to be able to scale up rather quickly (for my high priced market). That said, I care more about higher returns from fewer doors. 

I’m set to close next week and, conservatively, I should net $500 a month in cash flow, plus live for free. But, my goal is more cash flow and less work. I eventually want $10k a month in passive cash flow with as few doors as possible. 

As long as you know your “why,” that’s all that matters. 

Hey @Raz Francesco, thank you for your service.

A few things of note for you to consider. NJ has the highest median property tax rate in the country (1.89%), and commands (by far) the highest rent of the three areas under consideration. Strictly from a monetary perspective, if you plan on continuing to work at all, remember Texas does not have any state income tax either.

When purchasing, you will also be exempt from the VA Funding Fee for your VA Loan, which is about 2.3% of the purchase price (assuming it's first use and less than 5% down payment).

Orlando has one of the fastest growing populations, but it heavily reliant on tourism, Dallas still has great continued job and population growth, and NJ is seeing both population and price increases right now as more New Yorkers continue to migrate to the area.

Since you'll be living in the area, where would you be most happy? The NJ climate is vastly different than that of TX or FL so maybe it would more depend on where see yourself living.

This seems as though it will be your primary residence, but are you also looking at it as an investment property? As a primary, go for it. At that point, it's more about where you want to live, rather than an investment.

Is this meant to be a stepping stone to your 50 doors in 3 years? Not sure this would be the best route. Also, why 50 doors in three years? I can understand financially free, but either you plan on doing a syndication, have a sizable chunk of money, or are buying extremely low-cost units (or maybe all three).

Try to not get caught up in the "hype" of how many doors you have. I know that is what gets all the attention, but remember that requires a lot of work and your margins will be slim if you're highly leveraged. Focus on getting a property or two, learning the landlord process and then scale up. Just my two cents.

What are your specific questions?

@Dan Shenouda My best advice would be to:

1. Continue your learning, clearly define your goals

2. Join some type of REIA (plenty online)

3. Find a realtor in your area that is also an investor

Everything starts with knowing what you want. Figure out your niche (SFR, MFH, commercial, etc.), find your neighborhood(s), price point, property requirements (parking, <20 years old). Only after you know what you are looking for can anyone really start to assist.

Welcome @Brian Ricard and thank you for your service. I am also using my VA loan to get started. My best advice is to figure out what your goals are first, and then go from there. For example, I knew I wanted to buy a multi family property, close to family and work so I could house hack. That gave me my neighborhood where I would be happy, and the investment came second. That's strictly because I am house hacking. It's a different story for a pure investment.

Since you have a 5-bedroom, I’m assuming you have a family. More comes into play such as schools, their happiness and preferences, and living situation (roommates, duplexes, etc). My point is, just be sure to figure out what works out best for you and your family, then look at the numbers. 

I imagine $80k goes a lot further in WI than my market, so you certainly have options. Let me know your main goals, then we can talk strategy. 

Hey @Menachem Bloom I am also in Elizabeth and the first thing that caught my eye is the $10,000 in taxes. For a six-unit. That's incredible in this area. Most duplexes are $12,000+, so I imagine that building is under some type of either rent control or other program.

My two cents, as far as analyzing the numbers, never base anything off of what you "can get." Always run worst case scenario and go from there. That said, depending on the unit, building, and neighborhood, $1,500 sounds achievable, especially with parking. I see 3-bedrooms going from $1,400 to $2,400, so that would not be a stretch.