Getting Paid in the coming Real Estate Crash.
Im going to talk about the biggest financial crash of our lives and how it affected my real estate holdings. Hold on to your seats cause I’m gonna debunk a lot of misconceptions in this post. This is not hypothetical data by some yale graduate that hasn’t even bought anything, this is real life experience from the trenches.
You may remember the Real Estate world as we know it came crashing down shortly after 2008 and the blood didn’t stop till almost 2010. Im not going to get into subprime mortgages, default credit swaps, ect but basically there was a bubble whereby Real Estate prices were higher than they should be and they came crashing down to below what they should be. This is a normal aspect of many kinds of investments and similarly can happen in the stock market.
From the early 90’s till about 2005 I was running my side hustles and buying some rentals here and there. There came a time around 2005 when nothing made sense to buy. Nothing was going to cash flow, people were buying rental properties that were losing money but also appreciating in value. The prices made no sense to me so I was sidelined from buying for at least 5 years leading up to the crash. Im not going to tell you that I knew what was about to happen cause that would be bullshit. No-one can predict market swings in Real Estate or In the Stock Market. If someone tells you they can then just punch them in the face cause their full of shit.
Leading up to 2008 I was able to shore up my finances since I couldn’t find anything to buy that made sense. I had a 100,000 line of credit secured by my personal residence just waiting to be tapped. I probably had holdings of about or a little more than 500,000 at the time. This is when I met Gary, the original property ganster and you can read about him here.
I began buying about 1 house per month and was able to pay cash since I had the line of credit. I would then remodel, rent, and refinance to get not only my initial money from the line but also extra for my next deal. It worked like this: My bank would loan either 80 percent of what you paid for the house or 70 percent of appraised value. The banks were literally overrun with foreclosed properties so they needed to unload for any amount of money. No-one was buying properties at first because of the media, real estate became a bad investment in everyones eyes. Except people like Gary and myself who knew we could still rent these houses for high dollars.
I was paying on average about 25,000 for a boarded up house and I would invest about 10,000 or more to get it rental ready. Because so much housing inventory was vacant there was a severe shortage of affordable housing resulting in a line of people willing to rent these houses for 900. I could normally refinance and get a loan for about 60,000 so if you do the math I was literally making cash flow from buying houses.
This hustle lasted a little over a year and I secured about 17 houses worth over 1,000,000 making this the most profitable year in my RE career. Today, from that one year alone I probably have about 500,000 in equity. Thats one year out of 30+ years of investing. This is how the biggest crash of our lives ended up being my most profitable one.
I want to point out that in hindsight its one thing to explain my thinking today but back then people thought I was off my rocker buying those properties. So many people had lost their homes and businesses to foreclosure that it seemed absurd that anyone was investing in a house per month in these seedy neighborhoods.
I remember when I told my fiancé that I was going to double down on my real estate and buy everything I could. Her response was, “Real Estate is a bad investment right now”. In her defense she did stand behind me and trust me even if she thought I was nuts. This is what I was up against and I’d be lying if I said I didn’t have doubts trying to crepe in. It was hard but I stuck to the plan for over a year and as a result it put me on another level with my investing.
Sometime around 2010-2012 my financing started to dry up and the foreclosures were slowing down thereby prices started going up. I ended up growing so fast I needed to take a breather and revamp my rental management so I could keep up with it. There is levels in rental management and as you get more tenants you have to evolve or you will become a train wreck. I went from about 30-50 tenants in just over a year so things changed real quick.
Thats the real life story with numbers of how I bought 17 houses in just over a year thats currently worth 1,000,000 +. If we have another crash I will again use my resources and you can decide for yourself if you should. Currently I own and manage over 100 units and not really buying single family for rental in the current market. The cards are too stacked against it so I only consider certain types of multi unit props that are cheap to relative value which Ill explain in a later post. Currently I have over 100 rental units which was a lifelong goal that I reached. At present its now time to enjoy that milestone for a while and then decide if I want to set another goal- maybe 250? 500? WWYD?