RE investors input wanted.

Discussion in 'Business, Investing & Finance' started by Concrete Helmet, Aug 18, 2020.

  1. bradgator2

    bradgator2 Rioting
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    Please tell me you somehow utilized "bag of dicks". :lol:
     
    • BMF

      BMF Bad Mother....
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      I saw a report about all the northerners moving to Florida. It said there was an FAU study and it found that south Florida real estate was 20% over priced. I was just in Florida for 10 days, everyone I talked to said they couldn't believe what was going on w/ real estate in Florida and they expect a dip soon - possibly after the virus protections expire (Nov, Dec, Jan?). I'm sitting on a ton of cash, ready to pounce when it happens!!
       
    • Concrete Helmet

      Concrete Helmet Hook, Line, and Sinker
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      Not sure about S.Florida but C.Florida just had it biggest 2 months EVER in the 500k-2.5m range for sales. Just looked at the online services and the Casa Del Lago has went up 54k in the last 30 days.....my 2 little shoebox rentals are each up over 10k in the last 30 days....

      Gotta love all those Yankees gettin outta dodge and bringin big baskets of cash...
       
    • FireFoley

      FireFoley Senior Member
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      Good to see you @BMF. Where you been, Florida, LOL? Yes it is a nightmare here, but things will ease. Sadly the Tampa area, which you are looking into is one of the top 3 or 4 hot spots now for people looking to buy. But as we have talked with all the rental eviction moratoriums and all the mortgage forbearances, it is really tough to get a handle on all of this. Banks are putting away Billions each quarter for reserves b/c they have no idea how much paper they are holding that will go sour. Eventually the freebies will have to stop and it will have to shake out. Landlords can't go on forever not getting rent b/c they have bills to pay and mortgage bond holders have to get paid. It is one big cluster FVKK. Also all these new fangled homeowners are not going to think that driving hours to get anywhere from the burbs is all that fun after a while. And learning that having a car and a house are both money pits, they will eventually opt for an easier life that they had previously. Patience my friend, patience.
       
      • Detroitgator

        Detroitgator Well-Known Member
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        Hilton Times Square closing permanently Oct 1 after missing several mortgage payments. Could probably pick it up cheap ;)
         
      • Concrete Helmet

        Concrete Helmet Hook, Line, and Sinker
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        The $600 a week thingy ended over a month ago and unemployment mysteriously fell to 8.4 from 10.4 the month before.....8.4 was about the average during Obama's reign of terror(2008-2014)so I think it's pretty safe to say there won't be nearly the investment buying opportunities out there for a while unless Weekend at Bernies wins the election.
        Mortgages in Forbearance Down From Peak
        Latest Housing Market Stats
         
        #26 Concrete Helmet, Sep 5, 2020
        Last edited: Sep 5, 2020
        • FireFoley

          FireFoley Senior Member
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          Not arguing the numbers Crete, but having done this my whole life I learned early on that never believe any gov't numbers. With that said, I too wondered how the rate could drop so much with the nonfarm payroll number being exactly on the estimates and no revisions to the prior 2 months. 350K were temporary census workers but a job is a job. but I did see under the hood that 2 million more people were getting some help vs. last month. The actual unemployment rate is derived from the "household survey" which I think 3 million got jobs and 2 million lost jobs. Also the Participation rate increased a smidge so I would have thought that might add a smidge the the unemployment rate. But it is still a paltry 62% or so. anyway if you ever wanted a snooze, read how the BLS calculates this monthly number and the way they use this birth/death model as part of the calculation and you will realize it is all horseshyt. But for the Papers 8.4% is 8.4%
           
        • Concrete Helmet

          Concrete Helmet Hook, Line, and Sinker
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          I'm sure numbers get skewed depending on how they're plugged in....I am more concerned with "under employment" in the long run and it's overall effect. In reality one of the factors in the slow recovery of 2008-2014 was that so many 50-100k annual wage earners that got laid off/eliminated DID get new jobs....ones that were paying 10.50 per hour...this time around it is mostly the 10.50 hourly worker who seems to be taking the biggest hit along with some small cash flow type business owners. A lot in those categories are not your typical home owner(some are) so I believe we will have a housing fall off eventually it won't be nearly to the effect of 2008-2014.....
           
        • FireFoley

          FireFoley Senior Member
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          In regards to residential real estate, it won't be anywhere near 12 years ago b/c this was not caused by a credit crisis (mainly mortgages) and people have not been buying 10+ houses at a time sight unseen like they were in south FLA back then. Be that as it may, there will be some repercussions as no industry will be safe. Commercial real estate is available everywhere in south FLA. I see empty shyt everywhere. If mortgage rates go up at all, residential will become stifled. Not crash but it will slow. Until all the gov't BS is removed and the banks/private lenders can begin to see the amount of loans on their books that will be bad, we really will not know. On the jobs front, you are correct. A lot of good paying mgmt jobs will not come back. Businesses realize that now anything can happen and can produce similar results with 70% of the workforce.
           
        • BMF

          BMF Bad Mother....
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          Re: the unemployment rate - if NJ, NY, and California would get their sh*t together the unemployment rate would fall even further (probably under 7.5%). BUT, I don't think the salaries pre-China Virus are going to be equal.

          I saw a report today: 1,000/week are moving to Florida.

          I was listening to the Ric Edelman podcast from two weeks ago (the 8/19 show). He said that there are currently an additional 1.8 million (more) mortgages that are 90+ days behind on their payments (and that 1.8 million number is growing weekly). Of that 1.8 million, 85% would be in foreclosure if not for the protections.

          I still think there's going to be a dip after the new year.
           
          • Concrete Helmet

            Concrete Helmet Hook, Line, and Sinker
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            That same thought crosses my mind this morning. If the states that are just f vcking peoples lives up were open I bet the rate would probably drop into the mid 6's....Now once you get to that rate cut all the assistance and I bet it goes to about 5 or lower.:lol:
            Once you get below 5% you are dealing some real lazy sacks o sh!t that are professional job dodgers and people who get moved from short term disability to permanent because they got addicted to pain meds after dislocating their thumb throwing boxes at a warehouse somewhere....we'll never get them back to work.
             
            • FireFoley

              FireFoley Senior Member
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              Here Crete, this kind of sums up what I have been trying to say. I will post it here since you mentioned employment in your post. Not saying it is correct but it does highlight those who could work, are not working or looking for work, thus not counted as unemployed.


              Why the real unemployment rate is likely over 11%

              The official unemployment rate fell to 8.4% in August as businesses continued emerging from broad shutdowns imposed early in the coronavirus pandemic, the Bureau of Labor Statistics reported Friday.

              That’s the lowest rate since unemployment exploded in April, to levels unseen since the Great Depression. It would also mean the official rate dipped below the peak seen during the country’s last downturn, known as the Great Recession.

              But the true rate in August is likely much higher than the official figure — perhaps even exceeding 11%, according to labor economists.

              The unemployment rate is a measure of joblessness in the country and is a rough barometer of financial hardship.

              A rate above 11% would mean the country remains in the throes of the worst period of joblessness in post-World War II history. It would mean roughly 1 in 9 people who want a job and are able to work can’t find employment.

              Prior to the coronavirus pandemic, the highest post-war unemployment rate in the U.S.was 10.8%, set in 1982.

              The August unemployment figure is also significant since it’s the first snapshot of joblessness from the BLS since a $600 weekly federal supplement to unemployment benefits lapsed at the end of July.

              Millions of workers haven’t been getting any federal assistance for more than a month, leaving them with just their state-allotted aid, which generally amounts to about half of lost wages. Workers in some states typically get less, however.

              A federal Lost Wages Assistance program created in early August by President Trump’s executive directive adds an extra $300 a week for roughly five weeks, but workers in most states haven’t yet begun receiving that subsidy. And thousands aren’t eligible to get it at all.

              11.1% unemployment rate
              There are a few reasons the true unemployment rate for August is likely higher than the official 8.4%.

              For one, there’s been an ongoing data-collection issue since early in the pandemic regarding furloughed workers.

              The BLS determines the unemployment rate based on a survey of American households. People conducting the survey have sometimes misclassified workers as being employed but absent from work instead of unemployed on temporary layoff, according to the Bureau.

              Being absent from work — a category that includes people on vacation or on sick leave, for example — doesn’t boost the unemployment rate. A temporary layoff, or furlough, however, does increase it.

              The unemployment rate would have been about 0.7 percentage points higher than reported in August — or about 9.1% — if this misclassification error hadn’t occurred, according to the Bureau.

              The true figure would have been larger still when accounting for people who dropped out of the labor force, economists said.

              Such individuals may have been discouraged from looking for work due to the lackluster state of the job market, or may not have been able to look for work due to health concerns or childcare duties, for example.

              This is important because the federal government doesn’t count people as being unemployed if they’re not in the labor force. To be counted as in the labor force, people must be available to work and actively looking for a job.

              “One of the things many people seem to have missed is, the unemployment rate doesn’t count people who aren’t looking for work,” said Michael Farren, an economist at the Mercatus Center at George Mason University.

              There were about 164.5 million people in the labor force in February, before state governments shut down broad sectors of the U.S. economy. That figure fell by about 8 million, to 156.5 million people, in April.

              “You didn’t have 8 million people instantly decide, ‘I’m going to retire instead of deal with this pandemic,’” Farren said. “That might have accounted for a small subset of that number, but most of that is people permanently laid off.”

              The size of the labor force has since recovered to 160.8 million in August — still about 3.7 million people less than the pre-pandemic figure.

              If these people were counted as unemployed, the official unemployment rate would be 11.1%, Farren said.

              That analysis is “static,” meaning it doesn’t account for other factors that may have influenced the size of the labor force, like high school graduates now looking for a job. That sort of “dynamic” analysis would likely raise the 11.1% figure a few additional tenths of a percentage point, Farren said.
               
            • Concrete Helmet

              Concrete Helmet Hook, Line, and Sinker
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              It's no secret at least with me that the "true" unemployment rate is always about 2-3 percent higher than what the gov shows us.....but alot of that shifting started in 2008.....and has continued since then and alot of that has to do with the "shift" in disability.
               
              • Gatormac2112

                Gatormac2112 The Voice of Reason
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                @Bushmaster

                I'm just getting into the rental game and wanted to know what you thought about long term financing vs paying off a house. I have 2 SFHs that I purchased through foreclosure, each for a little less than $50k. I've put $25k into the first one, a 3 bedroom 1 bath 1100 sqft with 5 acres that rents out for $900/month and about $5k into the second one which is a 1700 sqft 3 bedroom 2 bath that I get $1000/month. I think I can get a little more per month in rent, these were just first guesses on the local market, they were easy to rent so will go up on terms next time.

                I'm curious if it makes sense to pay off the homes as quick as possible which would maximize the monthly cash flow or continue to let the renters pay the mortgage with a smaller cash flow and invest in more houses. I am 51 years old and don't want alot of debt going into retirement, even if that debt is being paid for by tenants. But I want to acquire as many good properties as possible too.

                Whats the right play?
                 
              • Bushmaster

                Bushmaster Well-Known Member
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                I am the same age as you. If your interest terms are low, I would use the excess cash to acquire more homes and pay the interest to the bank. Most require 15 - 20% down and if you have used up you liquidity paying doen debt you won tbe able to purchase additional properties.

                Most people look at the return % wrong as well. A 50k investment may equi 10k down. Financed fr 15 years, you should knock down on average 3500 a year year in principal. I see that as a 35% return on my money, not 7% as some will. I only have 10k invested and my risk is50k, but the house value isn't really at risk unless it burns down and you have no insurance.
                 
              • BMF

                BMF Bad Mother....
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                Mac, what part of the country are you? (curious where you're finding $50K houses) Low cost houses usually bring high problem tenants.

                Another thing to consider - the market is way over priced right now. If you sit on the sidelines for a while (maybe a year) you may end up finding some great deals. I'm sitting on enough cash right now to buy at least three $300k+ rentals. My wife wants to buy airbnb's, which is what we do now. We're planning (hoping) to move from the DC area back to Florida next year. Good luck!
                 
              • Concrete Helmet

                Concrete Helmet Hook, Line, and Sinker
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                I wrestle with this almost everyday with my 2 rentals. If the rest of your retirement savings are on track I'd think about keeping the mortgages since you get to use the interest as a write off and maybe even acquiring more if the market is reasonable....right now in Florida it is not. Houses just reached an all time high last month.

                My position is a little different. I am 56 and slightly behind in my other retirement sources so I've been playing catch up for several years. I am lucky that I have no debt and can feed my retirement saving with almost all of my current income besides any expenses on my rentals(our company pays all of my personal expenses like health and auto insurance, cell phone, gas and such) I'm also blessed that I don't have to worry about my wife or family because my wife has done pretty well for herself and has 4(2 commercial & 2 residentials ) properties which are paid off or very close to being paid off and owns the business where we work.

                Neither of us wants to acquire more property at this time due to the nature of our business and current market conditions. That being said a few years down the road when the last of our mortgages are paid off(4-5 years) I'd probably consider adding another residential rental if the market were reasonable to add to my monthly income.

                In short I'd say this is a decision you would have to decide for yourself but I don't see it being bad either way....just don't bite off more than you can chew(take on too many mortgages)
                 
                • Gatormac2112

                  Gatormac2112 The Voice of Reason
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                  @Bushmaster
                  @BMF
                  @Concrete Helmet

                  Thanks for the input guys, I wouldn't be buying anything now unless an obscene deal fell in my lap because as you all stated the market blows right now. As for where I live where $50k houses exist, I live in Cullman, Alabama. Houses aren't THAT cheap, I just happened on 2 foreclosures and somehow won the bids. The first house was in rough shape, but the land it was on was worth 30k alone, so I felt pretty sure that I could fix the house up and sell excess land off to bring the total investment down. The house appraises for a little over $100k as it now sits. The second house is in far better shape and is very large.....in a rural area though so price somewhat depressed. Both of them rented out very quickly. I realize these lower valued homes attract some problem tenants, I just hope diligence in screening pays off. I can't afford $300k+ airbnb purchases let alone 3 of them so I will stick to this route.

                  My interest terms aren't low as I had to jump on these quick and went with a local lender, If I don't pay them off I want to refinance.....where is the best place to get favorable rates for a property you don't live in? And I definitely don't want to bite off more than I can chew, thats kinda why I was thinking about paying them off and snowballing properties over time.
                   
                  • Bushmaster

                    Bushmaster Well-Known Member
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                    My company Master Gunner was from Cullman Alabama. Last name was Denson.
                     
                    • Gatormac2112

                      Gatormac2112 The Voice of Reason
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                      I was born and raised in Orlando, but in spite of piving in Cullman for the past 30 years I dont really know many people here. I commute to work in Madison, Alabama....have always been a commuter so I know more people outside of Cullman than in except for family.

                      Anyway, I have these on what I consider to be crappy terms....6% over 20 years, but had to move fast. Now that I have time I want to find a lender that can do terms closer to typical rates in the 3-4% range if im not going to pay them off. Im leaning towards paying them off even though i know using someone elses money to expand could be far more lucrative
                       

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