All Forum Posts by: Randy Bloch

 What criteria are you using to compile this list as the best?

Excellent post by Clayton. The only thing I would add is match the terms of your debt to your investment horizon/strategy. Use HELOC if you want to flip or BRRRR....use cash out refi if you are going to tie the money up in long term hold.

@Isiah Ferguson

It doesn’t have to be all equity or full leverage...lots of room in between. As someone who believed max leverage was the best way to grow quickly, I saw first hand during Last recession the downside to this. I believe we’re pretty late in the cycle would lean toward less leverage, but have dry powder so you can take advantage when the opportunity comes. People on BP who had a little success want to go all in, it is like a drug...but remember real estate is long term game and money is made on the purchase, not the sale. I have cash right now and fight the urge everyday to it reach for a deal. Don’t do it.

I was having similar thought on how to diversify $1M and create a ongoing revenue stream.  I did not exclude real estate as that was part of my diversification.  Below is the list I a came up with.  I had some estimated returns for each and came up with blended rate of return of 8.5%.  Interested in others thoughts on the list?

@John Hickey

Let me preface this with I love Buffet and agree with his philosophy.

I think you answered your own question. Look at the buffet quoted...he says he does not worry about timing markets...look for business you like.

Meanwhile, what do his actions say? He has not bought much in awhile and is sitting on a boatload of cash. Theoretically, he might not be timing the market, but in reality he can’t find businesses that make sense at the current prices so he does not buy. Maybe not timing...but definitely connected

His last big buy was Kraft heinz where he partnered with Brazil PE firm, business case was built a lot on cost takeout...has cost Berkshire almost 4b loss

My point actions speak louder than words. People can post all day on BP about markets, But actions matter more....

Also, when you speak about data, you need to separate macro trend from herd investing. I am not a fan of following the herd as by time there is herd it probably is dumb money

But don’t ignore macro trends. They are real and will allow you to grow profitable. Millennials and baby boomer demographics are huge....in my area there is definitely trend of them moving to more urban areas and first ring suburbs. Macro trends and Lt investing go well together. Find the right deals with wind at your back.

@Allyn W.

His money is in 401k, not an IRA...I assume it is with his current employer so he mostly cannot roll into self directed IRA. Also, he is looking to buy a personal residence, not invest in real estate. You definitely cannot use a self direct ira to fund a personal residence....and lastly he is looking to take a loan from his 401k, which has no tax consequences if he pays it back.

@Victor S.

Good question, will level set everyone who thinks 300k is an expensive house :). Also, how much does he have already saved for a down payment without 401k loan

@Thomas S.

Buying a personal residence should be considered as part of your overall personal financial plan. It is not pure real estate investment, but impacts your personal financial plan. You have benefit of appreciation and principal Paydown and tax benefits that you don’t get as a renter. Now this need to be compared between monthly house payment and rent to make best decision, but house hacking would obviously impact this decision favorably.

His question comes from the fact in that he lives in the Bay Area and coming up with down payment is bit more challenging than in some parts of the country. He mentioned he is very financially stable, I assume he has good W2 job and is doing something right to have sizable 401k balance.

He need to evaluate how home ownership will impact his personal financial plan to makes this decision and whether he is comfortable with current Bay Area real estate prices

i think it is naive to say no correlation. Stock market is reacting to recession and that is connected to jobs and jobs are connected to people’s ability to pay rent or buy a house.

Everyone on BP is in different situation with different strategies. Some have long term buy and holds in market segments that might not be hit. Other are just starting out and could be over leveraged or maybe don’t have enough reserves to withstand a LT vacancy. Others own properties free and clear.

Other see opportunity because there might be blood in the streets and they are flush with cash and can find some deals

Others might be trying to flip...if appreciation/ demand slows it is a little tighter to get the #s to work

It is important to understand how a recession impacts your personal situation and your business model. Not to worry about...but so you ensure it does not impact you but also so u can take advantage of it.

different strategies work in different parts of the economic cycle. Use the right tools. If u keep trying to pound everything with hammer and u are now dealing with screws and not nails it will be a tough go.

I see your point on #1, my point wasn’t really about how long of terms he could get with 401k...I have no idea.  My point was as part analyzing his situation that he should understand how much more cash flow he would have because of the house hack versus rent  and that he could apply that to paying the loan off faster and thus being back to whole in his 401k and have a personal residence