Investing 102

[clill]

on the lighter side...
https://youtu.be/lQegMA_kY9Y

[GregWeld]

Thanks Charley - because this video is absolutely PERFECT!!

[im4u2nvss]

Originally Posted by GregWeld

Thanks Charley - because this video is absolutely PERFECT!!

Thanks for the laugh Greg. I feel 1% or less of portfolio is ok.

[GregWeld]

This market has become so interesting..... half the time people are betting the market is going up and buying the dips -- half the time they're selling....

I sit here and laugh at the whole silly mess -- why? Because the market is UP UP UP ---- and when it goes down 5% everyone freaks out. Really?? Pick a name - check where it was at the beginning of last year -- and where it is / was at this years LOW....


Okay --------------- but here's one thing -- AS A BUSINESS -- I would be concerned about.

INTEREST RATES.

Why?? Because people are just people. Look at your own personal situation. Do you have ANY interest rate sensitivity? Buying a car? A house? Is your old loan at 3% ?? You think that payment is "okay"? What happens if your payment is based on 5% ?? Is your home loan on a 7/1 at 3.5%.... and you're 4 years in to that.... How much will your payment go up if you refinanced today to a 30 year??

Inflation is here -- it's been here for awhile.... it's been a coiled spring waiting for the worst opportunity to pop. Rates have been artificially low for years now... they too are a coiled spring. The FED thinks it controls rates.... but they're now a SELLER... and it's a BUYERS market. What's the mean?? That means that people buying debt -- control the rate they want -- this is controlled by what they will pay for bonds - and the government has a LOT OF THEM to sell... right when they're planning to add more debt to the pile.

Here's why it's important -------- going forward ----- will people be able to buy a house at the new rates? Cars? Or will they sit on their hands and stage a buyers strike.... When/if that happens we'll start with the layoffs in the housing market.... which hits suppliers (Caterpillar and Cummins and Deere etc).... and there's a chain reaction that doesn't end well.


OR


Do people realize it's still "cheap" and they'd better get busy buying stuff (most buy on time)...


SO ---- look at your own situation for some guide. Have you loaded up with debt? Has your business loaded up with debt? Or did you pay down debt - put money in the bank - and are sitting pretty?


IT'S THE REAL REASON YOU'RE SEEING THIS MARKET GO CRAZY ---- nobody knows where we're going and we're kind of at a bit of a crossroads. Will we be in trouble as a nation with higher rates -- or will we be fine and keep going? I have no idea. I'm not saying that I do.... I'm asking you to keep your ear to the ground and watch where you live and work. What do you hear from your friends and business associates.... are they working overtime or are things coming back to normal? Is biz great or has it changed etc?

[slow4dr]

Always interesting to read your posts Greg.

I have been thinking a bunch about the local housing market (SoCal) lately. I am in no position to buy right now so it seems like the best time to watch from a safe distance. Prices in my area are above 2006/7 levels with a decent amount of inventory for single family homes. I've had a couple friends recently purchase houses and a few have popped up in my neighborhood over the last year. One of which sat empty for 9 months before being sold. Sell price was within 5% of original asking.

I can't for the life of me imagine buying a house right now at these prices. Even IF I was in a position to buy. For you guys in the real estate business what are you seeing personally? First time buyers on the rise? Mostly investors with cash deals? Are prices trending up or down in your area?

What prompted this post is someone close to me that has a few rental properties is looking to buy right now. I fully respect him and most previous financial endeavors which made me wonder, "What does he know that I don't?". Maybe he's just more of a risk taker than I am. His History of such things would beg to differ. He's always been on the conservative side of things so it seems out of left field from my perspective.

He's looking at $300K condos that will likely produce $1500 in rents. That alone should be enough information to make a "NO" decision.

[Vegas69]

Comparing the real estate market from 2006 to 2018 is tough to do because they are not that alike. First, financing isn't anywhere close to that loose and most homes are bought with considerable documentation and scratch in the game these days. Don't discount inflation either. The cost over everything is up since 2006 so the same median price isn't relative.

With all that being said, I think a cool down is coming soon. It's been a really good run in most markets for quite some time. I'm not saying it's a bad time to buy if it makes financial sense. I wouldn't buy because you think you will hit a home run. That was in 2010-2014 in most markets.

The key is and always will be, buy real estate only if the numbers make sense personally long term and you can afford to wait to sell until the market is right again. If either of these don't equate, don't buy.

[GregWeld]

Originally Posted by slow4dr

Always interesting to read your posts Greg.

I have been thinking a bunch about the local housing market (SoCal) lately. I am in no position to buy right now so it seems like the best time to watch from a safe distance. Prices in my area are above 2006/7 levels with a decent amount of inventory for single family homes. I've had a couple friends recently purchase houses and a few have popped up in my neighborhood over the last year. One of which sat empty for 9 months before being sold. Sell price was within 5% of original asking.

I can't for the life of me imagine buying a house right now at these prices. Even IF I was in a position to buy. For you guys in the real estate business what are you seeing personally? First time buyers on the rise? Mostly investors with cash deals? Are prices trending up or down in your area?

What prompted this post is someone close to me that has a few rental properties is looking to buy right now. I fully respect him and most previous financial endeavors which made me wonder, "What does he know that I don't?". Maybe he's just more of a risk taker than I am. His History of such things would beg to differ. He's always been on the conservative side of things so it seems out of left field from my perspective.

He's looking at $300K condos that will likely produce $1500 in rents. That alone should be enough information to make a "NO" decision.

Originally Posted by Vegas69

Comparing the real estate market from 2006 to 2018 is tough to do because they are not that alike. First, financing isn't anywhere close to that loose and most homes are bought with considerable documentation and scratch in the game these days. Don't discount inflation either. The cost over everything is up since 2006 so the same median price isn't relative.

With all that being said, I think a cool down is coming soon. It's been a really good run in most markets for quite some time. I'm not saying it's a bad time to buy if it makes financial sense. I wouldn't buy because you think you will hit a home run. That was in 2010-2014 in most markets.

The key is and always will be, buy real estate only if the numbers make sense personally long term and you can afford to wait to sell until the market is right again. If either of these don't equate, don't buy.

Both good posts.......

Personally --- I'm so happy we're selling the apartment complex RIGHT NOW..... We've made a great return. Time will tell if we were stupid. In my head the old adage -- pigs get fat and hogs get slaughtered comes to mind.

In rental real estate it's all in the numbers.... they work or they don't. Long term - they can work on the SALE side of things. In ALL of my business dealings -- I work with the adage "the money is made on the buy, not the sale". In other words - I like to buy LOW and sell high.

My post was really about --- looking forward --- in an Investing 102 way.... a "heads up" --- pay attention - don't be complacent and think the market goes straight up for years and years -- houses don't go up forever and always.... and I'm not saying to sell -- or not buy -- Rates are still historically low... The stock market and housing market CAN and DO go up even in a rising rate environment.... We could be in a space like the 50's and 60's when employment was good - and steady - houses sold steadily - the market was steady.... and there's nothing wrong with "steady". I just hope the FED doesn't get it wrong and we have to be MINDFUL of where we're headed --- not where we've been.