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And then there's this: Where else can I invest my money and have the same NOI (net operating income)? Interest rates are so low that it's almost impossible to make money work to create cash flow. Yes, I could open another business. But, that's a young girl's game -- been there, done that. I know my assets. I know my tenants. I'm in control of my income. Yes, at times it's inconvenient, but being broke would sure be worse.
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Yes, it's one cycle after another. But, trying to predict and act on those peaks and valleys will make you crazy and keep you broke.
I was in the Los Angeles housing market for 30 years. I saw it crash and burn more than once during those years. In 1979, housing interest rates were 12 1/2 %. Then in 1980, they went to 21% - 22% just about overnight. It was to curb runaway inflation. Talk about the housing market coming to a complete stop!
That's true for single-family homes and small units. I have seen banks make borrowers pay down commercial loans for commercial properties and multi-family units when the market values fell. It depends on what kind of loan you're talking about.
I know a lot of service businesses cant go digital, But I'm mainly talking about retail. The market is not growing, there will always be brick and mortar businesses, but right now the most commercial buildings being built are warehouses, because all these online companies need places to store their products. I believe we are in the transition between physical and digital. All the businesses that can go online; will.
The SFR market is booming -- but for how long???? Higher taxes? IF the job growth stalls? -- those factors will affect housing sales down the line. Also, some of the cities and states (such as California) are having an exodus of citizens. Prices are all about supply and demand.
Yes, that is true. BUT, many of the people who lost their homes in 2008 were middle, upward mobile people who had overreached on their housing purchases. And then there were no-paper purchasers and sub-prime people who were counting on the housing market continuing to appreciate -- not crash. Doing the same thing over and over expecting different results is the definition of insanity.and, if you loaned money to pay for the house, now you have more purchasing power to pay it off (figuring that you have a business and your selling price is going up equal to the inflation rate/purchasing power rate... yay
Explain what you mean by "too efficient of a market". I understand, but it probably a new concept for a lot of people.
An efficient market is one where the varies are already factored into the price of that asset. You're right. The RE market is a lot more efficient than your business.
Depends heavily on where you're talking about buying...
Yes, the residential markets in many areas have held up... so far... And the problems that I detailed are not "sad". They are part of a cycle noting changes in people's lifestyles.
Heard radio interview with re agent, who said exactly same thing, recently.
The recession in the 1990s took down the entire Savings and Loan Associations and the Thrift industry. It took the whole decade to absorb the extra RE inventory and for the RE market to right itself again. the secondary market and Wall Street took over financing our RE deals. I hope this moment is nothing like that one. That one hurt us investors and RE professionals like hell.
Actually, they are cycles that occur regularly. I've been through several over the years. They are trackable. I don't know the exact moment they will happen, but I know when things are getting overheated or going sideways. The wild card is an unforeseen event, like this virus shutdowns. But, the underlying issues were already festering in the commercial RE markets. Those wild cards are generally a tipping point, not a determinate.
In my mind, the low rates are a two-edged sword. They can get a person into a property that can be wonderful for the investor. (When I started in 1976, SFR interest rates were 9.5%.) On the other hand, it's a way to control the investor by keeping him in debt forever. Those debts and their resulting payments become the velvet handcuffs that are a backdoor to controlling the RE housing market.
I've tried some side investment and I haven't won the brass ring yet. They have consistently lost my investment nut.
I agree. It's going to be bad when the secondary market and Wall Street can start foreclosing or collecting on all these commercial loans that are in default and forbearance. I read that the plan is to segment the back payments into an additional amount that will be added to the regular payments. Yikes! And then there are the tenants who haven't been paying their rents. When allowed, the RE owners will need to evict them -- an expensive and long process. A lot of them are going to fight like hell to continue to live rent-free. It's really hard to get someone to pay who hasn't been paying... or even get them to admit that they owe the back rent and late charges. Then the owners must get those vacant units ready to rent -- which is also going to add to the crushing burden that is being faced by the owners. What happens if they are heavily leveraged and have a thin profit margin? Then those tenants who are evicted are going to have both a record of the eviction and judgment against them -- making it almost impossible for them to find different housing. If that pool of undesirable tenants is large enough, it could hurt the number of qualified tenants -- which can push up the vacancy rate for the RE owners -- further complicating any recovery. The dark clouds for the commercial RE market are gathering into a self-feeding storm.
You underestimate the bad decisions of the average consumer, sadly
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