All Forum Posts by: Nick Robinson

@Anudeep Pradhan
I agree with @Sergey A. Petrov in CA there are some rules you have to follow involving rents increases. Unfortunately, when you invest in a blue/tenant friendly state you will always have more regulations and roadblocks that will prevent you from running your business efficiently. For your situation I hope you are CF+ and you did not listen to "experts" that said you should be looking for appreciation and to just buy everything whether it CF or not.  If they are under market 12%, I would look to make up at least half of the difference this year. This depends on your location and quality of your property. For example, if rent is $2000 and you are at $1,800, I would raise them to $1900-$1950. Then every year I would slowly raise them to get them to market rate. Example if rent goes up $100 next year maybe I do a $75 hike. It is hard to give you a straight answer because there are so many factors that no one knows about your personal situation. If you are CF negative and you do not have a big reserve, you need to raise them as much as you can without risking them leaving if you do not have the money to get the property ready for the next tenant. If this is your only property you are probably not going to be as aggressive as someone who owns more doors because they can absorb vacancies easier. At the end of the day you are running a business and you need to increase rents as your margins are being squeezed by the government.

@Josh Pulley
I would recommend continuing to work you job and invest to see if this is something you want to do and you get the returns your expecting. I understand that you are burnt out at your current job, but it may not be the time to make big changes when we are just getting started with this recession. Without going into too long of a post this will not be a mild recession and that "strong" labor market is actually very fragile. With the government trying to pass another stimulus, $700B+ that is just going to make the effects of inflation worse. Cash will be king and there will be deals amongst different asset classes. You need to study and learn as much as you can and wait for those opportunities to present itself. 

Also, the government is filled with intellectual morons. Why would I look at the unemployment rate to determine if I am in a recession when unemployment is a lagging indicator? Don't believe your lying eyes. Good luck with whatever you decide to do. Be careful out there.

@Scott Trench

1. Real Wages have been growing from 2012-2019 but you can see a decline in 2020. Considering CPI is higher than wage gains over the past 2years I would expect that real median household income has gone down more than the ~$3,000 drop you see from 2019-2020

2. I agree the "wealthy" are seeing more paper losses but if the cost of food, shelter, and energy continue to rise people that earn less money will have a higher percentage of their income going towards basic necessities.

3. I would agree that if your money was in crypto or the stock market you felt more "pain" than someone that was not in either of those things. When you say current policy is promoting that are you referring to the FED tightening monetary conditions or the government raising taxes on wealthy people to distribute to low-income people? The government created the problem so now they are going to "fix it". They will do what they always do and make it worse.

4. I would argue that the economy has not recovered since the GFC. A recovery is when you go back to the previous growth trend line before the recession. If you notice Real GDP is on a slower growth rate than before the GFC and a slower growth rate after 2020. We live in a non-linear world so we are more interested in rate of change than a nominal #.

5. Powell says his main goal is to beat inflation, but we will see what he actually does. Triffin's dilemma is playing out in front of us. In the US raising interest rates may help to curb inflation, depending on if demand is going down faster than supply, but in the rest of the world the dollar is appreciating against most other currencies. A high dollar on the dxy is signaling dollar liquidity issues so the world needs lower interest rates and more liquidity. Since there is a lot of dollar denominated debt other countries will have to print more of their currencies to buy more dollars which will keep strengthening the dollar.

6. Ok

7. This is more philosophical debate on this one but a believe you should let the market determine wages not some bureaucrat that has never produced any goods or services in their life. 

8. Once again different thoughts about things but supply was affected by the governments, all governments not just US, reaction to COVID. When they told everyone to go home and not produce that reduced supply and at the same time, they gave everyone stimulus checks which increased the demand for goods. Most of that money is still working its way through the system but you hear from retailers such as Walmart and Target that they now have an 143% of supply and they are going to drop prices to get rid of excess inventory. FYI if you want to pick up a TV or big-ticket item, they are on sale right now. 

9. The only tool the FED has is to affect demand. Which I agree with you with the government putting up more regulations and constricting supply the FED has to decrease demand at a faster rate. Obviously from the rest of my response you can tell my thought is that you need to increase the supply side but since we are not doing that, I agree the FED will have to push down hard on demand. I know the news and mainstream economists say the American consumer has great balance sheets, but when I look at this chart, I see two spikes from stimulus checks and now we are back down to a personal savings around Jan of 2018. It also looks like consumer debt is increasing which goes back to aligning with Target and Walmart that they are seeing a decline in discretionary spending among their customers but not in their food. So more of people's wages are going towards food instead of goods

11. Agree to much dollar denominated debt in the world. It took about 60-80yrs for the Pound to lose reserve currency and before that took the Guilder about the same amount of time.  This is something that historically will not happen overnight but good luck it may be different this time. I would say there is a greater possibility of having the dollar loosely based on gold, maybe a 20% reserve, than see Bitcoin become the reserve currency. There is no way the banks are going to allow a currency to come up that they cannot control.

12. I agree the difference between now and the 40s is we had fixed costs after the war, which would be like CapEx on a property. Once I pay to put on a new roof, I don't have to buy a new roof every year. So, when you increase the amount of currency units you will pay back those expenses in cheaper dollars. Now a lot of debt is indexed to inflation I know I heard somewhere and cannot remember the specifics, but we need to have high inflation for an extended period of time to bring our debt to GDP ratio back to a manageable level.

I will agree with most of your points at the end with buying positive CF assets that have long term fixed rate debt, but I would be careful buying stocks. Valuations are still pretty high and if you look through the last 100+ years buying the dip does not always produce great results. I definitely agree about now not being the time to speculate. Unfortunately, a lot of people over the past 10+ years are conditioned to expect a FED put and believe they will come to the rescue if the market starts to fall. No one knows for sure how long the FED will keep up with their tightening policies, but you should not base your investment portfolio on them backstopping the market. Remember about a year ago they did not see rate hikes till 2023. How did that work out? Now they are already planning rate cuts by 2024 and the market is saying late 2022. Good Luck Cathie Wood I hope your right about your ARRK fund having "deep value" because I do not see it.

@Matthew Palacios
I agree with @Henry Lazerow I would try to buy a small multifamily, ideally a 4 unit. It works with a house but then you are renting per room where I like my own space so I would prefer separate living quarters. Most of the time it is "cheaper" to buy multifamily than a house. For instance, when I bought my first duplex that I lived in I bought it for $300k and single-family houses in the area were going for $275k. Even with these elevated prices I see 4-plexes in my area going for $1.1-1.2m and the homes are going for $600k-700k. On a cost per unit, I can buy four units for $300k each or buy one house for $650k. I also like the protection of more units. My strategy was to buy a duplex to offset costs than I saved money and bought a SFR for me to live in. Once the duplex appreciated I 1031 into an 8-unit and over the pandemic 1031'd into a 14-unit. This was a long-term process from Nov. 2014 till June 2021, but it was well worth it. Did not take any cash flow, saved money every month, and the biggest and most important thing is study and learn as much as possible about RE, i.e., invest in yourself.
I am by no means a genius or am done building my portfolio, but you will be amazed if you keep buying solid CF deals it starts to build on itself. An example that I am not trying to brag or be showy is when I went to buy the Duplex, I was making $30k/yr living at home and saving all my money for 3yrs. Even though I had the funds to buy the duplex I had to have my dad cosign to be able to buy the property. 6.5yrs later the bank did not even bat an eye when they gave me a loan to buy the 14-unit and gave me money for the renovations totaling $1.6m. Now a year later my CF, all expenses taken care, is $8-10k/mo and my initial investment of $768k is at $2.2m. 
The goal is to just continually keep buying deals that make sense and are CF+. Good luck on your investing career.

@Felipe Soto
Much like everyone else has already stated it all depends on the deal. In general, I have more of a long-term outlook for my investing. STR "may" have the potential to make more money, but it will require more work and it might be less unstable. If you have $1M cash right now I would pick the market I want to invest in and buy a value-add deal. Some caveats to that are you may have a hard time getting lending on a multi-family (5+ units) if you have never done bought a MF before. 2nd is if you have never been involved with running a value-add project I would try to pick a deal with a little less work. Lending is going to be huge for that building. For instance, I had to come down with less money last year because the bank gave me extra money to do the renovation work. Need property management you can trust...

Good luck with everything. 

@Dalton Thornsberry
When did you move to SD for work? If you lived in the house for two years of the last 5 years you could sell the property and not pay taxes on the sale which means you do not even have to worry about a 1031. If you're looking for an opinion, I am selling this property all day, especially if it is tax free. You can get out of a tenant friendly state and move into more rentals that should CF better. I would be careful with a 1031 exchange. There are rules that you have to follow. If you do a 1031 you should check out the areas and have everything set up before you sell Bakersfield. Good Luck with your investing. As long as the property is CF+ you should be ok.  

@Russell Brazil
What the CPI measures is owner equivalent rent which is a survey that they give homeowners that asks them what they think rent is if they were renting out their home. Obviously, most homeowners have no clue what market rent is so the fact that it makes up a big percentage of the CPI shows that inflation is severely understated. We will not even go over hedonic indexing, substitutions, etc. If they are understating inflation and the homes drop in real terms that means it dropped a lot more in real terms. I know everyone, including myself, can get caught up looking at stats and inferring information from them. Example everyone going crazy over foreclosure numbers going up big percentage wise, well you just went through a time when they were at 0 so even a small amount will look like big increases. The current administration talking about how many jobs have been created but we are still under the number of jobs we had before the pandemic, so you just are bringing jobs back online. I think that last I saw we were 400k-500k short of pre-pandemic numbers. Look at unemployment the government uses the U3 number of 3.6% but if you look at the U6 number, which is a more accurate look at unemployment, was at 7.1%.

Let's be honest to you just like to me it does not matter what either of us use as our reasoning. If we find something that is cash flow positive and produces returns that are acceptable to us, we are buying. I am buying if it's going up, down, or sideways. As long as it is cash flow positive, and it hits my other criteria. In terms of buying a personal home to live in the reality is if you plan on living in a home for at least 5-10 years and you have a stable job and can afford the payment even if the market "crashes" you do not lose money on it till you sell. 
@JD Martin I do not know if you were specifically talking to me about holding on to large sums of cash, but I assume it was based on the fact you responded after I posted. I said now is a good time to hold on to more cash, I do not think you should be 100% cash or should be selling your property to take advantage of a RE "crash". Holding on to more cash might mean instead of 5% of your portfolio you go to 10%. The market is predicting a recession, along with the FED models, and a lot of bad economic data. During recessions is the greatest transfers of wealth and when things are on sale. Not saying there will be a housing crash just talking about investing in general i.e., equities, commodities, etc. My thought is you should have cash to take advantage of some of those situations. I should qualify for me personally no matter what is going on I would be saving cash waiting to refinance a 14-unit I bought last year and adding money to it to try and buy a bigger building.

@James Hamling
I like to look at charts that are adjusted for inflation so I can get a better idea if things are cheap or expensive. You will notice that when homes are adjusted for inflation you do not see as big of a spike as when you just look at the nominal value of the home.
@Russell Brazil
Your point of homes going up 130% in the 70s is a good point, but you are leaving out the part that the real value of the home went down for most of the 70s.
@Kathleen McDowell
Black Knight, a real estate analytic company, says that home affordability hit a 35-year low. I forget if you mentioned the loans being safer or not as risky which I agree with the mortgages are safer. What I would look at more is consumer debt hitting all-time highs and HELOCs. HELOCs are not a mortgage and is not included in that analysis. The FED does not set interest rates they set the FED Funds rate. This is important because even though they do not and cannot control the long-term bonds what the FED Funds rate does affect dramatically is interest rates on things like CC and HELOCs. Depending on the duration and depth of the next recession will see if this means anything. People that are highly leveraged are going to be at risk going into times with low economic activity.
@Account Closed
I agree with you that we are in a recession right now. The Atlanta FED just updated Q2 GDP to -2.1%, the NY FED just released their models 2-3 weeks ago that predicted negative GDP till 2024. Who knows how long or deep the recession will be but to get the FED's models to have negative GDP is extremely difficult. No one knows but I would guess that when the FED begins to try to sell their MBS to the market the 30-yr mortgage will continue to climb lowering the purchasing power of homebuyers. We have seen the FED decreasing demand but with the extremely low supply demand would have to go down quite a bit for a crash, 20%+ drop in price. Where we might see an increase of supply is from the STR market. Airbnb had just under 2.3m listing last year and according to their site the average property makes $13,800/year. If we are in deep and longer recession people will have less discretionary income which means people will not be renting Airbnb and I would guess a lot of Airbnb hosts cannot afford to hold those homes if they do not have renters coming in. There are so many cross currents when you look at Macro or try to predict the price of something it is almost impossible. What I do know is if you invest for CF (and are CF+), you take care of your properties, you have a good PM, and are in a good location it does not really matter what the market is doing, and you can be a buyer in all cycles. That being said in general now would be a good time to hold on to more cash. There will be deals somewhere stocks, real estate, etc. and cash will give you the opportunity to take advantage of those things. It will also help you protect the investments you already have.

@Branden Yang

You think if the market crashes and rising interest rates will promote construction. Look at construction during recession on a chart and let me know what you find out.

I do not buy single family homes as rentals. I was comparing apples to apples. I own $4m in commercial MF. I agree with you that to me MF specifically larger MF is the best investment but at the end of the day it comes down to math and access to capital.

My advice to you, constructive advice not attacking you, would be to study the market and fundamentals of MF more. You will not find 13% cap rate building and if you do that is a building you do not want to be in. Follow warren buffet’s advice “I would rather buy a great product at a fair price than a terrible product at a great price”

@Victor S.

“Made” anything on the house? Are you referring to that part of your payment goes to principal? If that’s the case in the previous post I mentioned that I am renting for $2,700. If I wanted to buy the home I would have to come up with down payment and closing costs ~$150k and my payment would be about ~$4200. That’s $6,900 going to principal a year. So to “make” $6,900 I would have to put up $150k up front and pay $1500/mo more than I am now.

What I was saying in the previous post if you took the same $150k you can buy a piece of property that gives you positive cash flow every month and you will get the same advantage you are talking about with a rental in terms of principal reduction and appreciation.