All Forum Posts by: Shannon Robnett

@Cody Stone This is true.  I just wonder why an investor will just sit with cash in hand waiting while inflation and appreciation east at the buying power of the money they have before they will look at the market and realize that 2016 strategies will just not work right now.  As a flipper you are always buying the ugly, sad and lonely house and giving it a new lease on life and there will always be those in every market.  But when everyone wants a cash flowing 4 plex that does not exist when do they realize that maybe another product type or strategy will be needed to get to the goal.  Its time to, in the words of my Millennial son, PIVOT and go after a different strategy in our Idaho market in order to stay successful!

@Tarun Bansal  Have you thought about the option of investing into an opportunity fund syndication?  This would mitigate your tax rate and quite possibly lock in some solid gains from your stock gain while averting what may be choppy trading coming down the pipe.  At the end of the day you may find that the lack of liquidity of the syndication time frame and a sudden turn of events in your stock pricing may force you to come to the table with cash you may not have or be forced to liquidate stock to cover should the stock experience a price drop.  This may cause you to sell at an inopportune time. 

@Joseph Gibbs Family is the hardest and friends are the worst to raise money from in my experience.  And I would agree with @Taylor L. about what you say and to whom.

@Greg Scott This is very true for a buy and hold strategy for sure.  As we all know some are in the game for cash flow and some are in it for growth, and that need tends to change during the game. 

We are using it in conjunction with new ground up construction and syndication. So our investors get involved with SD IRA funds in the construction and stabilization process, and after 12-18 months exit with mid to high 20's for their returns back into the tax deferred vehicle of their SD IRA to avoid taxes. IF all they are really looking for is growth of the funds, this seems to accomplish that without involving a long hold period that does not really offer huge growth as these projects do in a very short period of time.

I would welcome your comments on this process as you are an expert in the field.

This is similar to the way I see things also @Todd Dexheimer

I agree @Jonna Weber that investors are finding more value in new construction when looking for something for an investment.  @Anna Strausbaugh This is exactly the pivot I am speaking of.  There is increasingly less cash flow in existing but everyone is still clamoring for it without looking at the rather lucrative returns in building new MF in our market.  We have built several MF projects and have several more slated to start this year but its very rare to hear of someone playing the development game as a single buyer.  While a lot people chase after low returns rather than "miss out" even more look, see the state of the market and then do nothing because of the state of things. 

I am always glad to see the entrepreneur spirit is still alive in some that are actively trying to find good deals in the market by pursuing new avenues instead of just flogging you poor realtors to find the non existent 6 CAP. Hopefully you find more of these problem solving type that want to explore a nontraditional route. And if they need any help I would love to be of assistance in that arena.

@Stefan Tsvetkov 

Your perspective is interesting although not one I would agree with.

1.  Any investor worth his salt with basic calculator skills knows when a deal does not pencil and my question was more to the sanity of continuing to buy when that logical metric has long been bypassed.  That is where you have slipped from the role of an investor to the role of a speculator and they are very different.  My question was more as to why do people continue to do it?  We see it in the stock market all the time and about every 10-12 years in real estate.

2.  Valuation or what something will transact for is used at every point in the cycle, its just less scrutinized by someone speculating than someone who is actually looking at the fundamental value of the underlying asset.  Ray Dalio speaks about this concept at length in his best seller Principles.

3.  Housing in a particular market not making enough of a return to keep up with inflation in relation to price would indicate that the investor is indeed going backward in that particular situation and has gone again from an investor to a speculator.  Remember 2008 and the lesson that yesterday's demand and price does not guarantee tomorrows value.

4.https://www.cnbc.com/2019/11/2... 

https://dsnews.com/daily-dose/...

https://www.habitat.org/costof...

Some news articles that contain statistics that speak to a national housing shortage.  Remember the law of supply and demand?  Lack of supply creates increased demand and higher prices.  If we have an over supply we will have less demand and prices will drop.  And as stated in the articles we are simply not keeping up with demand and this is the biggest factor in rising prices in 40 of the 50 major metros included in one of the cited studies.

So @Stefan Tsvetkov why is it that a majority of investors continue to pick over a picked over market even knowing it is 10% overvalued at the time of the search? When will investors pivot and begin to look at other ways to get in the game while protecting themselves from being the last guy in or getting in to deals that do not cash flow just because the "have to get into that market"? I live and build in Boise and shake my head almost daily at what people are doing here with purchase prices when there are plenty of other options in other product type available in the Boise market. Just because you want a SFR should you buy one at 10% over market and cash flow negative just because you "know" it will go up? Rather would you be better off to look at the same market for different ways and opportunities to be involved in real estate?

I agree we are facing a nation wide shortage and this will continue to put pressure on pricing but buying over priced existing for appreciation the not only way to go in those markets.  And strong markets always have more than one angle @Kyle Mccaw as you well know.  And then once you have deployed capital into these strong markets you are always struggling with the question of when will the cash flow catch up with the appreciation and what do I do with the highly appreciated asset that is under performing  cash flow.

Its times like these that you see the innovators look at things a bit different and finding another way to solve these problems in these markets while still staying covered in the investment from a leverage point of view.  New construction syndication are a great way for this to happen as these markets have strong need for housing and an ever growing need.  Markets with strong job demand will continue to have demand for new product as they go hand in hand.  First we need the work then we need the workers, and the same cycle happens for workforce and affordable housing, but that does not always mean class B/C product.

Regardless of strategies deployed they always need some tweaking for exact market conditions and availability.  Especially when an investor is coming from a congested state, like California for instance, to a place like Texas where there is still plenty of room and land to grow.  the question is just when will people look for those other options.

So the great news is that the real estate market in Idaho for single family is on fire and shows no signs of stopping.  In fact it appears that the hotter it gets,the more it attracts people from out of the area.  And as a resident of Idaho for the last 40 years, I can honestly say I have never seen it like this, yes even in 2007 and 2008 it wasn't this hot.  On top of record transactions happening we are seeing inventory at the lowest levels in years and no real silver bullet to fix this.  Not only are lumber prices at 135% in comparison to last year, the PNW is literally on fire while Canadian lumber industry is being devastated by the pine beetle and labor is nowhere in site because rental supply is non-existent.

So if you are selling to actual home owners, you are up to your eyeballs in buyers and y'all are chasing sellers with multiple offers and 4 hour pending on listings becoming the norm.  Multi family has been a rare find for the last 3 years here in Idaho and what does hit the market is not pretty.  So what does that mean for investors trying to deploy capital?  What are you seeing with the opportunities for cash flow?  What is happening to the seller who bought in 2011 sitting on a pile of undeployed equity?  Is everyone just standing around and clamoring about the need for product in an asset class overburdened with buyers or are people doing different things? 

Inquiring minds want to know!

@Dan Millen

Why not just offer a 6% pref and then an equal % of the waterfall?  There are a lot of simple spreadsheets that will do that.  Just a lesson learned from having done a few of these simpler is better for 3 reasons. 

1.Easy on you

2. All investors feel equal and while you may have some investing $10,000 vs others investing $100,000 likely the small guy trusts you more as the money means a larger % of total net worth.

3. Its easier to make it repeatable when you want to scale this to the next 5 deals.