Home › Forums › Financial Markets/Economics › Worst Case Financial Scenarios ?
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The-Shoveler.
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June 16, 2014 at 10:10 AM #21131June 16, 2014 at 11:09 AM #775224
The-Shoveler
ParticipantA lot will have a different opinion but IMO these crises were as designed.
2000 and 2008
meaning well planned in advanced
June 16, 2014 at 1:32 PM #775225SD Transplant
Participantthanks for sharing HLS
June 17, 2014 at 2:54 AM #775248Anonymous
GuestIn my opinion, we need to plan it very well.
June 17, 2014 at 3:07 AM #775251CA renter
ParticipantOver-leveraging and increasing bets when markets are already high is almost always going to end in a bad way.
Thanks for sharing, HLS, and glad you’re able to pop in now and again. I always enjoy your input.
June 17, 2014 at 11:02 AM #775271HLS
ParticipantIt concerns me when agents sell people on ‘investing’ in property when they have zero experience themselves.
Like investment advisors that have no skin in the game but their income relies on advice to their clients.
Many real estate sales agents are dangerous.I see a lot of discussion about buying rental property and only talking about income vs. monthly payment.
Worst case scenario isn’t brought up.
I’ve been a landlord for over 30 years, a major expense is going to happen. Not everything is covered by insurance.Being a landlord isn’t for everyone. There can be a lot of pain associated with it that can cause personal & financial problems.
Real estate has become a ‘generational disease’
and I do not think that all the benefits will repeat themselves.
Something just doesn’t feel right to me about what is going onJune 17, 2014 at 12:37 PM #775272FlyerInHi
Guest[quote=HLS]
Being a landlord isn’t for everyone. There can be a lot of pain associated with it that can cause personal & financial problems.
Real estate has become a ‘generational disease’
and I do not think that all the benefits will repeat themselves.
Something just doesn’t feel right to me about what is going on[/quote]I agree that being a landlord isn’t for everyone. It can be a pain and it takes an active role.
But I don’t see how buying a rental property, and making a mistake by learning would be financially catastrophic. If you lose $500/mo, you can overcome it. Then you end up selling the property and learning your lesson. live and learn.
Being a landlord is work like anything else. The payoffs are years down the line.
June 17, 2014 at 1:18 PM #775278ParticipantSome people cannot handle losing $500 a month.
It isn’t always easy to sell a property in many areas without taking a huge loss.The payoffs ‘years down the road’ are not guaranteed. Most people who become landlords aren’t looking to learn a lesson, they are looking for a decent return.
Major expenses like roofing, piping/plumbing,
professional deadbeat tenants, and other problems
can cost multi thousands to solve, and payments need to be made even when the property is vacant and not producing any income.My point is that many people are just not realistic
about the long term potential problems/expenses.June 17, 2014 at 1:48 PM #775279ljinvestor
ParticipantHLS- Besides agents selling people on investing in property, what else out there currently doesn’t seem right to you?
I have no desire to own long term rental property but would maybe try vacation rental. For those investors who have had long term rental properties for the past 10+ years are tenants getting better or worse?
June 17, 2014 at 2:27 PM #775280livinincali
ParticipantI can think of a scenario where this type of situation would apply here in San Diego. Suppose for a moment you gobbled up 3-4 cash flowing rental properties in a place like Mira Mesa and rented them out to young Qualcomm engineers or some people that were in related fields. Suppose then that mobile slows down and Qualcomm decides to layoff 5K people. 2 or 3 of your tenants get laid off and decide to leave your properties. Now you went from you nice 5% cap and the $500/month to a negative $2000/month situation. How long can you handle that situation and how long will it take you to find new tenants?
June 17, 2014 at 2:37 PM #775281spdrun
ParticipantSo you list the two properties $250 under market and rent them to bus drivers or grad students for a year. Shouldn’t be that hard to rent if you drop the rent by $250, and you’ll still break even.
June 17, 2014 at 3:08 PM #775284Participant[quote=ljinvestor]HLS- Besides agents selling people on investing in property, what else out there currently doesn’t seem right to you?
[/quote]
Not a subject that you want to get me started on.It’s not selling people on investing that concerns me, it’s the misinformation that SOME agents provide in an effort to make the sale.
IMHO an agent has no business EVER telling a buyer that a property is cheap OR that it is a good investment. Using phrases like charming, and needs TLC etc are just opinions. Even a view is subjective.
In an effort to make money, surgeons perform surgery, mechanics repair cars, used car salespeople sell used cars and real estate agents sell used houses.
The average net worth/financial knowledge of many agents is horrid, yet many people look to these ‘experts’ for what is probably the largest financial decision of their lives.
I gladly counsel buyers from the financial side with options and information that their agents
are either incapable or unwilling to share.
There are often options that buyers aren’t aware of.There are many great agents but the majority just seem to have the attitude that it’s always a great time to buy & real estate always goes up.
Simple negotiations that often do not occur can cost or save people many thousands of dollars over time.
June 17, 2014 at 3:18 PM #775286Participant[quote=spdrun]So you list the two properties $250 under market and rent them to bus drivers or grad students for a year. Shouldn’t be that hard to rent if you drop the rent by $250, and you’ll still break even.[/quote]
You sound like a real estate agent that has a simple answer for what could be a huge problem.
Assuming that the folks that lost their jobs agree to leave quickly & peacefully and leave the place clean, you may have limited down time.I have seen divorces & job loss change people 180 degrees. The nice calm friendly tenants who pay their rent on time become the enemy squatter from hell and not only does an eviction cost you money for legal fees, you could be facing up to 6 months of unpaid rent and a destroyed property.
It doesn’t happen to everyone, but be a landlord long enough and you will deal with problems that you never thought would happen to you and that usually comes with expenses that you never expected either.
Flippantly saying “just lower the rent $250 and your problem will go away” is naïve at best.
June 17, 2014 at 3:18 PM #775285ParticipantIMHO an agent has no business EVER telling a buyer that a property is cheap OR that it is a good investment. Using phrases like charming, and needs TLC etc are just opinions. Even a view is subjective.
True about the subjectives.
But an agent IS qualified to say something is a good investment if s/he brings data to back up the assertion. i.e., purchase cost is x, rent comp is y, closing costs and repairs will be z, expenses will be a, b, c, and d.
Cheap? Sure, but please bring comps 🙂
June 17, 2014 at 3:25 PM #775287Participant^^^
“2 or 3 of your tenants get laid off and decide to leave your properties.”
If you read the scenario I was speaking to, the tenants had already left. True: eviction would be a worse deal.
Solution might be to try not to rent to people from the same firm or industry and keep rentals somewhat geographically diverse. i.e. one in Pac Beach, one in Mira Mesa, one in O’Side, one in Mission Valley.
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