All Forum Posts by: Rob Barry

I think it's fair to generalize a broad cooling trend, though there is still plenty of money flooding into the right markets. Home sales were down 3.4% in September and down 4.1% from last year, nationally. Seven straight months of decline, which is the longest since 2014 (WSJ).

Most savvy investors are already aware that we are late in the economic cycle. Private Equity are still deploying, though the increased cost of debt will make them more selective. When they pull back, the effect will be compounded due to the sheer size of their appetites and the hole they can leave in your business or market when the buy-side turns off.

Mom and pop will also start getting more selective due to the increasing interest rates and reduced ability to write off property taxes (worse in coastal regions).

While many tend to think of RE and securities markets as independent, I think we underestimate just how much of the demand these past few years has been institutional money parking profits in property.

The first shots have been fired. It's risk off time.

@Jaysen Medhurst

Great points. I have considered trading up for MF but, so far, cap rates aren't where I'd like in areas I've looked and I'm uncomfortable with where we are in the cycle to favor MF at a premium when I can cashflow at 16% net on unsexy SFRs with no friction. When the cycle reset hits and things come down, then it's 1031 time. 

Guess it's time to pound the pavement in GA! Maybe I can get a carve-out that lets me repay assets individually upon sale. 

I've been moving cash into SFRs in Georgia for a bit now and am up to 8, with 100% equity. I'd like to pull some out while I can still lock in a decent rate. I have no W-2 income, but my wife does and i have strong cashflow. Would it be better to go for a portfolio loan or go through each one individually? Would it be worth it to visit GA and try to deal with banks there as an out of state investor, or just go through Chase or a large national Bank? Any general tips? Thanks.

Originally posted by @Joseph Berhane:

@Rob Barry never heard of this... how to see a replay... or do you have anymorw insight?

I recently came across this strategy at a conference my investment group held. It was @Scott Smith of Royal Asset Solutions who gave the presentation. I just discovered he is a member here. 

I'm facing the same sorts of questions, needing to refi several homes in Georgia. The lenders with the best rates want you to have the note in your name.

Generally speaking, from those I've talked to, people have been fine deeding the property back to the LLC. But if said bank notices and if they decide they have reason to, they could use that Due on Sale Clause to make a push for whatever assets are securing the note. 

That wiped out a lot of wealth after 2008 and we are pretty close to the end of this financial cycle.

I've heard real estate attorneys mirror @Mike S.'s suggestion about moving it into a land trust from your personal name and assigning beneficial ownership of that back to your LLC. Land Trusts are generally thought of as being used for estate planning purposes and *should* not trigger Due on Sale clauses.

Best bet is to talk to an attorney.

@Mark Nickoson

Personally, I've knocked two Rs off of my "BRR" strategy at this stage. Mostly unleveraged on my SFRs, going for section 8 to max out cashflow on the government's reliable dime. Reduced potential for near-term growth but indefinite defensibility. Intend to 1031 into max-leveraged Class A if we hit a recession and prices come down.

What a lot of people don't talk about is that the economy is cyclical. You've got times like 2009 until around 2012 when lending was super tight, values of most assets were severely depressed (or still falling) and only people with balls and great asset management were buying. Six more years into a bull market later and liquidity is splashing around with too much money looking for too few deals. 4.5 cap is the new 6 cap, private placements are getting more and more daring and early bearish signs are coming from the stock market.

This year, specifically this past week, I think we've seen the first of the smart money locking in their multi year gains and getting more defensive. I've been getting pretty defensive myself, focusing on low-leverage, high cashflow SFHs, sold half my stocks 9 months ago into hedge assets and am stockpiling cash reserves for the "reset."

We are near the end of this economic cycle, and a "reset" is due any time now. When it comes, prices of many assets will likely fall, creating buying opportunities. Smart money will be ready to buy depressed assets for pennies on the dollar when the next cycle begins.

Imagine if you had capital ready to deploy in 2009. Real estate, stocks... pick your poison. You'd have made a killing. Like my buddy who was buying in Atlanta in 2013 and rapidly scaled up to 25 SFRs. He was buying $35k-$40k properties that cashflowed $800 that now appraise at $150k. That's serious wealth creation. That's what we should all be preparing for to whatever capacity we're able. Not that we'll see another R.E. decline like 2008, but there will be opportunities for sure.

I don't go for this "real estate vs stocks" banter. Each have a place in one's portfolio. What's more important is to recognize where in the cycle you are and be positioned for it, in my humble opinion.

Personally, I would not be heavily leveraged now, or hold onto property in landlord-unfriendly states as we face at minimum, a correction, and possibly a bear market. 

So I've found an off-market deal for a block of five c-class properties in Georgia at 10% below market, a few of which are currently in Section 8. Three will be leased and in good good shape when the deal closes, two vacant and in need of repairs, which will bring the all-in cost, including rehab, to just a hair under market value. Even still, the portfolio will cashflow between 14.5% and 16.7% by my calculations, which is a "Hell Yes" to me.

My intention is to make this my Section 8 block and get them all in the program. My question is - would you invest a bit more up front into more durable synthetic flooring, industrial paint, epoxy-coated showers etc.? It's my first foray into Section 8 and you hear the stories about tenants tearing out the walls... Or is it best to keep rehab pretty basic and cost-conscious? 

Curious what others have done.

Well I've only been at it a few years now but have no leverage yet. I've talked to enough people with stories of vast portfolios of rentals getting wiped out in the wake of 2008 - many under strange circumstances like unlikely contract clauses demanding repayment being triggered by things like lending banks getting acquired. I found a good team before I made any moves. Set minimum cap rate targets of 9% (for b class) or 14% (c class) and have been acquiring in cash. I look at comps for a sanity check. But with a team I trust, I'm really just looking to buy a cap rate and they know what I'm willing to pay for it. So far so good. Working with honest people really means everything. My wife and I live well enough below our means that we don't need much of my income for operating expenses, so it mostly just gets invested. For us, frugality is the method for enabling accumulatIon, rather than leverage. I do plan to introduce leverage when I get to 10 or so SFRs that are fully stabilized and predictable. But I'll probably only take on 60% leverage or so. I feel it would be silly to not use it for growth, but I would rather be conservative about it and move at a measured pace. And I would just not be happy with $150 per door.

@Justin Fraser nice work putting that together! I'm in a similar situation to where you were. Stacked up a handful of rentals over the course of a year and wanting to scale up faster. Thanks for the inspiration!

If I had 100 units and one wanted to pay me in bitcoin, I'd go for it. If I had 10 and one wanted to pay in bitcoin... probably not. 

I've spent probably 200 hours now, studying the blockchain/crypto space. The first thing you need to do, is disregard the opinions of anyone who hasn't...

It is very nascent and most of what's been going on since early 2017 has been pretty shady. Crooks are always drawn to that moment where big money discovers something revolutionary that nobody yet knows how to regulate. I remember when eBay was plagued with scammers selling fake everything, internet stock forums were full of pump-and-dumpers (who actually succeeded at their ploys) and Google search advertisements promised to regrow your hair. 

Bitcoin, at least, has a decade of history and a very large core of brilliant developers working on it. And people are actually using it - for things like international remittances (though you need to liquidate it pretty quick given the volatility). Who knows if it will be the dominant "e-money" in the future. But mark my words, there WILL be a dominant e-money of some kind.  That's really what cryptocurrency is all about; highly encrypted data that has innate (or at least agreed-upon) value. Data-as-money. 

Is it ready for broad adoption? I don't think so. Will it be Bitcoin that "wins" out? Who knows. Would I put 1% of my portfolio into it on the chance it might? Yes. It is unequivocally the best-positioned currently and the compound annual return of bitcoin over the last five years has been more than 160%. 

This is not investment advice. I am not a financial advisor. Risk of loss.