All Forum Posts by: Frankie Woods
Frankie Woods has started 29 posts and replied 1243 times.
Post: Raising Private Capital by Matt Faircloth
- Investor
- Arlington, VA
- Posts 1,285
- Votes 491
I can't wait to read this!
Post: Novice Buy-and-Hold Investor from St. Louis, Missouri
- Investor
- Arlington, VA
- Posts 1,285
- Votes 491
Welcome to the fray @Josh Copeland. St. Charles is a great market as the economics are fantastic! I have property in S. City. STL as a whole has been on a tear the last couple of years. Let's hope that continues! Happy hunting!
Post: Idle Cash and the War Chest Strategy
- Investor
- Arlington, VA
- Posts 1,285
- Votes 491
Originally posted by @Joe Splitrock:
Originally posted by @Jay Hinrichs:
Originally posted by @Shiloh Lundahl:
@Mike Dymski people say we can’t predict the future but I believe we can. We just can’t predict it with exactness. In other words we can predict market corrections and market downturns because that’s what markets do, but we can’t predict the exact time or the degree of correction.
So in my opinion, if I can’t predict the timing or the severity of market corrections, the next best thing would be to hedge for them. So rather than flipping in an expensive market, I may buy properties that cash flow in just below the market average where there is still high demand regardless of fluctuations in the market.
My partner and I are still buying properties that make sense number wise, that cash flow, and that have a likelihood of appreciation. But because we don’t depend on our real estate investing income for survival, if there is a market correction that causes a decrease in home values more than 20% and rents to drop 15-20% also, then our cash flow may temporarily go down to zero. But it won’t stay that way forever. Even people who bought in my market at the top of the market in 2006 and 2007, if they bought it to where they were able to cash flow even a little, and were able to hold on to the property, then today they have an asset worth about the same as when they purchased it but the mortgage has been paid down over the past 10 years and they have a good chunck of equity in it now.
If you wait to only swing at pitches that look like they will be home runs then you will strike out a lot more than necessary. If you look for more singles and doubles and occasionally are able to hit a home run, then, in my opinion, you will win a lot more games (have more success with investing).
Shiloh keep in mind in the PHX market many investors cash flow did not drop 20% it dropped 100% and stayed that way for an extended time.. now not predicting another 08 meltdown but it happened to many of my personal clients that I sold Multi to up here in PDX they also bought PHX and lost their properties altogether..
in my mind doomsday you need some pretty good reserves... but I am uber cautious these days after living through that one and 2 before it..
That is the killer situation for an investor, when values drop 100% and there is no tenants to rent to. I had a tenant that was a landlord in Michigan prior to the crash. He owned two single family homes and his primary residence and lost them all to foreclosure. The crash happened and his tenants stopped paying rent after loosing jobs. Then one of the properties was trashed by a big dog that did $8000 damage. I know people will say, well that was Michigan, it would never happen in my market. I suspect if you had warned people in Michigan two years before the crash, they wouldn't believe it could have gotten that bad. Human nature is to not believe the worst will happen.
I challenge people to look closely at the markets they invest in. Look at the underlying economy. Things like medical and universities are stabilizing forces. Military bases, major manufacturers or markets dominated by a single employer present risk. I believe if you pick your markets carefully, that over time you can weather anything.
Still struggling to understand this scenario. This could happen in "good" or "great" markets. What am I missing here? I see the point about knowing your market dynamics, but you should be able to make money in any market (well, just about). I feel uncomfortable about the looming correction, even though I can't forecast when or if will happen. But I feel as if many of us have a reference bias based on the GFC. Sorry, I just finished Thinking Fast and Slow which blew my mind and now I'm questioning everything lol. Nothing against any responses, which I think are great. But I'm trying to wrap my head around this to put myself in the best possible position.
Post: Idle Cash and the War Chest Strategy
- Investor
- Arlington, VA
- Posts 1,285
- Votes 491
Originally posted by @Jay Hinrichs:
Originally posted by @Shiloh Lundahl:
@Mike Dymski people say we can’t predict the future but I believe we can. We just can’t predict it with exactness. In other words we can predict market corrections and market downturns because that’s what markets do, but we can’t predict the exact time or the degree of correction.
So in my opinion, if I can’t predict the timing or the severity of market corrections, the next best thing would be to hedge for them. So rather than flipping in an expensive market, I may buy properties that cash flow in just below the market average where there is still high demand regardless of fluctuations in the market.
My partner and I are still buying properties that make sense number wise, that cash flow, and that have a likelihood of appreciation. But because we don’t depend on our real estate investing income for survival, if there is a market correction that causes a decrease in home values more than 20% and rents to drop 15-20% also, then our cash flow may temporarily go down to zero. But it won’t stay that way forever. Even people who bought in my market at the top of the market in 2006 and 2007, if they bought it to where they were able to cash flow even a little, and were able to hold on to the property, then today they have an asset worth about the same as when they purchased it but the mortgage has been paid down over the past 10 years and they have a good chunck of equity in it now.
If you wait to only swing at pitches that look like they will be home runs then you will strike out a lot more than necessary. If you look for more singles and doubles and occasionally are able to hit a home run, then, in my opinion, you will win a lot more games (have more success with investing).
Shiloh keep in mind in the PHX market many investors cash flow did not drop 20% it dropped 100% and stayed that way for an extended time.. now not predicting another 08 meltdown but it happened to many of my personal clients that I sold Multi to up here in PDX they also bought PHX and lost their properties altogether..
in my mind doomsday you need some pretty good reserves... but I am uber cautious these days after living through that one and 2 before it..
I'm still struggling with the rents dropping to 0% for a long period of time. This to me means that the landlords were charging too much and rather than take a "market" loss by charging current rents, they chose to go to zero because they didn't understand the change in the market. Full vacancy at the current market rent to me suggests that people chose to go homeless rather than rent your clients properties. This can't be true. Am I crazy?
Post: When is enough enough? How many homes does one need!?
- Investor
- Arlington, VA
- Posts 1,285
- Votes 491
Everyone has the same opportunity to learn, network, save and purchase units. There is plenty of deals out there for people that are willing to grind. People that hustle and kill it just make me want to get after it harder.
Post: Would You Buy a Rental Property with Negative Cashflow?
- Investor
- Arlington, VA
- Posts 1,285
- Votes 491
@David Greene invests out of state and has written a book on how to do it. I invest out-of-state in STL and am looking into Colorado Springs from Albuquerque. As stated in Cash Flow Quandrant, when you buy negative cash flowing properties, you are limited in the number of properties you can own by the amount of extra cash you have from your "day job" or savings. If you buy positive cash flowing properties, your acquisition potential is virtually unlimited.
Post: Are we heading into the next Real Estate Market Crash?
- Investor
- Arlington, VA
- Posts 1,285
- Votes 491
Buy with enough margin of safety and you'll be fine in any market... Well, unless of course you are overleveraged and encounter some form of hardship (e.g., major repair, a need to refinance, etc.). Great points made by all the greats before me! Following this thread because it's a very interesting topic to me.
Post: Puerto Rico R.E. recommendations
- Investor
- Arlington, VA
- Posts 1,285
- Votes 491
@Moses Rivera good to know. We are trying to discuss options with locals in the area to help us acquire and manage the properties from a distance. I'll keep you informed about anything I find out.
Post: Puerto Rico R.E. recommendations
- Investor
- Arlington, VA
- Posts 1,285
- Votes 491
@Tyler Barranger Awesome! Looking forward to hearing what you find out.
Post: How to Analyze a Multi Building Multifamily
- Investor
- Arlington, VA
- Posts 1,285
- Votes 491
Will do @Michael Swan!