Real Estate in Secular Uptrend

Workforce is shrinking. Homeless are growing.

1 Like

You can’t debate with someone who’s makes up what they want to see. The rest of us all use days of inventory as a metric and realize it is near all-time lows.

Days of inventory is not a metric of housing shortage or glut. Days of inventory changes rapidly based on economy, rates, market conditions even though we have same number of people and same number of houses.
Just like stock valuation is not a metric of GDP or per capita income.

It is literally the most accurate metric. Saying there’s 1M homes for sale right now is an utterly useless statement without knowing what is a normal amount or how long it would take to sell those homes. Prices aren’t going to crash when inventory is at record lows.

1 Like

Man, We need you in this forum (Not sarcastic, but really we need you).
Otherwise, it will be boring as almost all of us real estate Perma bull !
Let bay area come down 50% so that RE investment haters like me get in again !

3 Likes

Yes, but I thing there are some more bears in this mix. I am not a perma bear but I do understand that nothing goes in straight line and both bulls and bears both get their time of the day. If you want to beat the market, its important to understand trends well else one should simply invest in an index fund and sleep.
So far in last 8 years I have been able to pick up really good deals and timed them well too. Hope the streak continues.

.

:+1:

2009-2011 is the bottom of RE. Last 8 years means 2013-14, RE in early bull market, close one eye buy anything will go up. That is the same period, I started investing in Austin rentals… blindly buy, still get CAGR of 18% (very first one is 13%, later ones are as high as 26% because initially price appreciation in Austin is 3-4% p.a.) for the Austin RE portfolio. Great minds think alike? Slightly different :slight_smile: I don’t like MFH. Now both of us waiting to buy at the next housing bottom :slight_smile: Again great minds rhyme? Other than Austin, I am wondering whether I should diversify to Las Vegas and the triangle (Nashville, Charlotte, …)

Return from investing in RE rentals should be higher than return of S&P index, otherwise don’t bother. Investing in RE rentals is active management, for you, is almost like a W2 job. If you get lower return, you didn’t get pay for your effort and time. Investing in S&P index is effortless, except for setting it up initially. S&P index should be the baseline where any investing effort compare to.

CAGR of S&P with DRIP is 11%. So you have to beat this baseline. Take note, you might be able to beat in the last 8 years, doesn’t mean much, must be able to beat for at least 20+ years, ideally 40+ years.

Lastly, I believe in diversified asset portfolio not lopsided into stocks or RE. So I have S&P, AAPL and RE (30%).

Now, I see why you seek 50% down (you did not see 2008-2011 downturn experience !). On any case, I am in perma bull gang that we will not see median price below 20% as the max FED can tolerate 20% only.

Read 2008-2011, in short, most of the MBS lenders were Europe, China, Japan… etc banks. When home went down below 20% (at that time 40% or 50% was common), holders walked away with defaults. Big USA bank were holding millions of inventory, and they started filing bankruptcy (BAC, JPM…etc). This was leading Europe, China, Japan bank bankruptcy and whole world going to disaster. Then obama approved money printing by FED and then entire world recovered.

FED won’t make such disaster situation again as they knew what will happen. The threshold limit is 20% median price, otherwise whole world goes down like the way stocks are going down now !

I am almost 99.99% confident that 50% median price drop won’t happen as the max possible for bay area is 20% only.

I do not know the CAGR, but 2006 I had only $120k savings, that was used in my first home down payment. With multiple cash out refinance, purchases/selling real estate, I am completely free now in 12 years, almost like you. Everything happened in 15 years timeframe.

1 Like

.

:+1: Can we consider ourselves lucky? I do everyday. Compare with my friends, ex-classmates and ex-colleagues, I am very lazy yet much better financially. Is about choices :slight_smile: which turn out to be better financially.

Long enough, S&P and BARE always go up.

2 Likes

Yes on waiting to buy at the next housing bottom. I really believe that we will get another opportunity of lifetime within a year, just like in mid half of 2020.

On MF/SF, I personally would love to invest only in SFH but in bay Area SFH investment comes with very high negative cash flow which I think is not worth it. I assume in Austin too now, SFH investing will be challenging. MFH and SFH prices in long term goes in tandem so both gives same appreciation. But MFH has higher cash flow which also comes with more management burden.

On diversification, my plan is to build a 50M portfolio within Bay Area in next couple years and then focus on another market. I do not want to diversify too much and too thin. Keeping RE portfolio local has huge benefits specially if you are putting in your sweat to improve, remodel, rebuild.

1 Like

If you are trying leverage mortgage, real estate will help you grow, but with your thought process, you have chances to miss the boat (waiting until 50%).

On any case, stock market, simply VOO or QQQ, will give better return than real estate if not leveraged is used.

The main benefit in real estate comes with loan leverage, otherwise blind stock investment gives better growth as they correct than real estate.

1 Like

Agree. RE is a game of debt. And when playing with debt, its important to exercise caution.

2 Likes

Meanwhile Buffet has lost $44b in stock
Value. There is no better investment than your own home. And 90% of alll millionaires made their money in RE.

Berkshire said Saturday that a largely unrealized $53 billion decline in the value of its investments forced it to report a loss of nearly $44 billion , or $29,754 per Class A share. That is down from $28.1 billion, or $18,488 per Class A share, a year ago.

Yet, you aren’t selling your RE.

@REInv

Is an article pumping REIT. You may want to consider packaging your RE portfolio into a REIT once it gets large enough. You can get back many folds of your capital yet hold a sizable ownership of the REIT. That is what I would do if I have such a large RE portfolio.

1 Like

Buffet can not sell those stocks. If he sells, say AAPL, he is base price is $99 pre split, he needs to pay huge tax bill which May be more than $44B. In addition, he can not trade like us retailers. When he sells/buys any stock, he creates permanent impact to stock price as his value is too huge.

It is like selling bays area home worth 4m bought it 30 years before at 400k.

Buffet is very calculative and keeps large cash billions in sidelines.

When market is in deep trouble, he will use his cash into dividend gushing stocks at 30% or 50% below ATH.

This way he maintains a large non taxable growth for decades.

It needs proper understanding about economy, his investment ideas with right companies.

See how much he plunged cash into OXY now. He has long shot and patience.

He is the human computer on investment and very hard to practice such discipline and follow strategy.

Rumblings that mortgage rate would rise to 8% in 2023.

Get ready to buy when (if) happen.

Ofc rate would go higher or lower depending on terminal rate of Fed rate.

Current expected future Fed hikes,
0.75 0.5 0.25 0.25
So terminal rate is 4.75-5.00%

Terminal rate influences 10-yr T, mortgage rate and stock market valuation.

No rumblings yet on what all this will do to our deficits as we roll over our 30 trillion in debt. Back in the 90’s Clinton had the Treasury shorten the maturity of their offerings to artificially lower deficits. We never went back to normal. Is anyone here old enough to remember when the standard for quoting interests rates was the 30 year and not the 10 year? We were idiots not to sell more 30 year debt when interest rates were at a generational low.

1 Like

…housing may be a little frothy. So housing prices may come down or they may plateau, but not to the extent it happened.