Real Estate Craziness

by FI Fighter on November 29, 2018

in Real Estate Thoughts, Real Estate Updates

It’s no secret to long-term readers of this blog that I got to where I am today because I was lucky beyond belief to have been fortunate enough to have been able to gobble up World Class Tier 1 real estate assets when they were discarded to the bargain bin back in 2012-2013, and to a lesser extent from 2014-2015.

Anyway, the thing about me (as you may or may not know) is that I try and be as objective as possible when it comes to asset valuations… When the merchandise is cheap, I’ve got no problems with “backing up the truck” and having a field day, going on a major shopping spree… On the flipside, when I feel that stuff is overbought or further in BUBBLE TERRITORY, I have no qualms with packing my things up and calling it a day…

 

And the reality is this — If you’re a blogger (like me) and you aren’t constantly shilling/spruiking/pumping the same story over and over again, ad nauseum, you run a serious risk of pissing off, alienating, and outright losing your readership base (been there, done that far too many times to count)…

I’ve done this writing gig long enough to know that the masses don’t want to hear your views on objective truth! No, the mainstream has been and ALWAYS will be into herd mentality thinking…

That’s why contrarian investing ain’t ever gonna be popular… When people are greedy, you’re scared shitless… and when people are shitting bricks, you’re filling up your shopping bags with a big ol’ smile on your face…

That’s the way it’s supposed to work, if you wanna make $$$…

But you’re most certainly gonna be one of them lone wolfs if you go that route… It’s too dissonant to comprehend for most people…

 

Translation: Give me a happily ever after fairytale… I don’t wanna hear your drivel!

 

But, as usual, let me try and back up my own thoughts with some ramble ramble…

 

 

Please note: Those numbers I slapped together above are just a “generic” representation of the Bay Area. Truth be told, my own gut is telling me those are rather conservative figures and the reality is even (far) uglier… since many homes in the Yay Area are selling for well north of $1 million now… Really, I just threw up crude numbers for what a crappy (very old and dated) townhouse should fetch in some of the cheaper neighborhoods…

 

To be quite frank with you all, the numbers (math) above will never make sense to me and my mind has infinite difficulty trying to process how the fuck it could make sense to anyone out there…

 

You’re gonna buy a house and pay $4,300/month in PITI (+ HOA) when you could rent the same house next door for $3,000/month?

What the fuck are you banking on exactly, “building equity through principal paydown” (ummm sorry, that still seems like a lousy return to me)?

Or, are you an insane gamble gamble type of moron like that Idiot Fighter guy (but c’mon, give him a break, even he never skid this far off the rails…) looking for (much) MOAR appreciation (to da moon Alice!)?

 

Granted, I’ve always been quite horrible with numbers (math), but as a guy who vividly remembers what it was like to be able to purchase World Class Tier 1 real estate assets and be able to rent em out for VERY POSITIVE CASH FLOW, or shoot, even live in the units myself while possessing a total PITI (Principal, Interest, Taxes, Insurance) that was less than what market rate rents were going for, I could rather easily rationalize in my own mind why it made sense to own real estate back in the day…

These days, in many places of the world (e.g. Bay Area, Hong Kong, Vancouver, Sydney, London, etc.) you’re going to see abominations like the numbers I just threw up there above with the Bay Area example…

 

In this day and age, as I’m writing this:

 

It’s way cheaper to rent than to buy real estate (in many, probably most World Class Tier 1 cities)!

 

Of course, many buyers out there don’t give two shits (and apparently can’t compute basic math either), because this bull market in real estate has been going on for so long now, almost nobody even remembers what it was like to lose any money!

 

That’s how markets work, ladies and gentlemen… They are typically inefficient beyond comprehension…

 

And most definitely, common sense and logic go out the window when the bull is roaring loudly and in full control (like right now)…

 

The crazy thing in my mind, though, is this — Aren’t buyers worried about having a safety net/backup plan? I mean, what if you buy a home to live in like the aforementioned and you end up losing your job?

 

Then what?!?

 

Obviously, you can’t just post an ad online (e.g. Craigslist) and be able to rent the unit out… I mean, sure, you could… but you’re gonna have to COVER THE SPREAD since you’re gonna be, you know, REALLY CASH FLOW NEGATIVE!

 

Seriously, do prospective buyers in today’s nutty market even consider things like that? When you’re going in guns blazing buying, do you consider “worst case scenarios” and like how long you could keep the property afloat if you can’t continue to make the monthly payments?

 

Further, in a market crash, wouldn’t it seem like a reasonable assumption to make that rents would either stay flat, or possibly even soften up a bit, as opposed to continuing to rise to infinity and beyond?

 

You got me…

 

Which is why I have zero interest in dabbling in super expensive real estate right now… especially if the numbers don’t work at all (currently, not by a long shot)…

 

I guess the caveat would be if you just need a place to live and are super loaded where you either don’t need a loan, or even in a “worst case scenario” you got enough cash/funds elsewhere or on the sidelines to able to comfortably weather any storms… no matter how nasty.

 

Anyway, just my two cents…

 

As always, readers can expect me to just continue mouthing off and keeping things real with you all… I really need to stop caring about losing readers and stuff like that as long as I’m following my heart and telling it like how I see it…

 

No regrets… I ain’t gonna shill/spruik/pump shit I don’t believe in, even if I myself have got “skin in the game” and I’m badmouthing/talking down my own assets/holdings… Umm, shooting myself in the foot…

 

I’m an agnostic investor, first and foremost…

 

And you can feel free to join in and rip on my own assets too, telling me how overpriced they are right now… For some reason, people get so damn offended when you want to talk shop objectively, taking things so personally when investing/speculating shouldn’t be personal…

 

Crazy times we live in…

 

Fight On!

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