All Forum Posts by: V.G Jason

Quote from @Matthew Irish-Jones:

Quote from @V.G Jason:

We knew this already.

To think you'd be driving lambo's and riding private jets off of a $2.4M investment in Detroit of all places?

You're not even that equity rich per unit. Concentration is the name of the game to get the wealth. Not necessarily scale.

 Do you mean concentration of assets like a large multi family building?

 Multi family would be more scale, but can be Concentration too  Concentration means more quality less quantity.

10 houses in Detroit or 2-4 houses in a way better, thriving area? Diversification doesn't generate that run-away wealth; you divest via diversifying a bit once you have large wealth accumulation.

Most, not all, people that get massive wealth don't generate it by making 100 bets @ 1% hoping for a return. Or in this case 10 @ 10%, you do 2-4 at large weights and understand how the risk sits. If you can't sleep at night with it, you likely shouldn't take it on.

For real estate it'd be monthly cash flow via opex, capex & tenancy plus hold period. That's almost the case with any phys asset though.

We knew this already.

To think you'd be driving lambo's and riding private jets off of a $2.4M investment in Detroit of all places?

You're not even that equity rich per unit. Concentration is the name of the game to get the wealth. Not necessarily scale.

Quote from @Allan C.:

I'll disagree with most comments so far (except Dymiski). I think the issue is money supply, coupled with low-locked mortgage rates. All the money issued over past decade has aggregated in the top 1%, and this wealth gap is creating an affordability gap. 

high net worth individuals have a lot of liquidity and nowhere to place it. All asset classes are getting bid up as folks with material wealth chase yields, and there are still tons of people sitting on sidelines with cash. Even if market comes down, someone else with cash under the mattress will come out to place a floor on the downward movement. 

you cannot simply create more housing supply because commodity prices are stuck at elevated levels, and new builds will remain higher cost than existing inventory. 

I haven't found a clear path of getting out of this standoff, short of some large population reduction event, billionaires giving up their fortunes or developing nations offering cheaper labor. Technology advances are making matters worse as the wealth divide will continue to grow. I'm not looking to sound alarmist, but I'm finding it hard to see a solution. 

 Agreed in bold. Like I said above, it'll face a K like recovery. Wealthy will concentrate on more (hard) assets, and the rest will falter and be perma-renters. 

Also, assuming not every seller is a buyer then the 10 year lowering to where it makes primary FRM at 5% or lower will also indirectly touch the supply issue.

There's going to be a grey period where the economy is slow, the FRM prices to 5%, and inventory will be sufficient. Every local will face a different period of that, and you don't know what happens next; does the FRM go down to 3% due to massive economic headwinds, or does it stagnate there and the inventory decline due to massive economic tailwinds. 

Nobody knows, just keep your dollar investment at the right ratio of leverage, liquidity, reserves, and knowledge. 

Quote from @Patrick Roberts:

This is a contrarian point of view, but I don't know that there is actually a problem right now. Yes, homes are expensive right now relative to how affordable they were for the past 20 years, but that's becuase the last 20 years were an abnormality. Homeownership is hovering right around 65% right now, which is historically fairly normal. We're just used to an environment where it significantly above 65%. 

It seems to me that the market has largely corrected itself. Interest rates are back to historical averages. Homeownership is back to historical averages. I do not expect interest rates to drop meaningfully anytime soon, as the specter of hyperinflation is still right behind us. I also do not expect home values to drop meaningfully, as pent up buyer demand will likely put a floor under prices. My guess is that where we are right now is the new normal. 

No, it's not just the last 20 years. It's the least affordable since the great depression. Again, stop looking at things in dollars. If you do, you'll think everything is fine when you look at the stock market, other asset classes, etc. The abnormally was the intrinsic properties of RE; that'll likely never happen again. You won't buy real estate ITM at 80% LTV.

Otherwise, I agree with you on the views. For different reasons, actually. Nothing said real estate ever has to be affordable, there's no law stating that fact.

A lowering 10 year is one element of helping buyers, and supply is indirectly correlated to that so that's another major reason. Real estate will face a K-like recovery post rate ramping; the wealthy will concentrate to it and we will likely face a renter's nation.

He's responding to the advice via ChatGPT if you cannot tell. 

Disrupt the actual real estate agent and closing process.

Remove agents and loan originators; they prey on emotion. AI can absolutely replace their "skills". 

It depends.

If you're building wealth & young with limited obligations, it's likely best to leverage and keep enough reserves to manage the headwinds. The long-term fixed rate trade is an excellent one with time on your side.

If you're building wealth, older,  and have obligations, it's likely best to find a happy medium and understand to eliminate debt appropriately. The long-term fixed rate trade can destroy peace of mind, stability, and overall function.

Nobody with a significant HNW is "leveraging" their houses. They got there via leveraging, but they know they need to consolidate. 

Lack of debt= peace of mind. Again, finance is not just math it's behavioral. 

Quote from @Nicole Heasley Beitenman:

Quote from @V.G Jason:

2 years?

You bought into the rally, and mean reversion is hitting you. How did you prepare for this investment?

 I prepared by having multiple exit strategies at the ready.

That's not the only thing to take into consideration, and really not a proper way to prepare.

If the market downturns, liquidity dries up and exit optionality does too. It's all going the same direction. 

All your bets were on consistent and linear returns it seems right? Real estate is a 7-10 year timeline. How are you preparing for the cyclicality?

Those zip codes are Raleigh,  not near Duke Hospitals. Duke Hospital area is about a 30-50 min ride away. 

27610 should largely be avoided, except for some pockets. 

Multi(2-4) are extremely uncommon in this market and usually pretty terrible investments. Cash flow is a function of leverage terms in the deal. Rtp/Durham are not good for this, you'll need to put more down.

Quote from @Jonathan Warner:

Hi all. I've been fudging around with a few different ways to properly estimate CapEx in my proforma. I don't suppose you guys have a tried and true method of doing this do you?

 Simple. Make it a top line item.