On the Topic of Fear and Greed…

I was perusing around the online forums when I came across a thread that struck a chord with me — As has been the topic of much discussion over these last few blog posts, it was about Fear and Greed, and how we as investors can best prepare to navigate through the inevitable market cycles.

The original poster is well known on these forums and a really smart guy who I respect a lot, and someone who I’ve had the pleasure of meeting in person; it’s good to know that at this point in the bull run his focus has also turned to preparing to play strong defense!

Here’s a link to the thread with lots of insightful comments made by seasoned real estate pros who have weathered the worst of economic storms:

Super Smart?..or Super Sucker?..Riding a Great Market Cycle?: 1-Cycle Investors, Leveraging RE, & Feeling (Too?) Good?

This line in particular resonates 100% with me, and aligns with my thoughts on completing two separate cash out refis earlier this year to hoard more cash:

All I hear is “pay off debt to lower risk” “pay off debt, “pay off debt.” Because my properties cash flow well, I’d rather have the low, fixed, 30yr-am payments and cash in hand for the downturn, than a bit less leverage and far less cash on hand for future risk or deals.. The amount of cash I would need to significantly reduce my debt is very large, compared to the safety and buying power of that cash if/when the sh*t hits the fan again..

 

Great minds think alike? Or do Bay Area folks all just drink the same kool aid? 😉

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Financial SamuraiNo Nonsense Landlord Recent comment authors
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No Nonsense Landlord
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I think the stock market will be solid for a while, at least another year or more. The economy is strong. Profits from companies are going well. The dollar is strong. There are no upcoming headwinds, other than rising interest rates, which are not expected to rise soon, or fast.

Never underestimate the power of the market. There are 130+ years to look at it. In the long run, it is the best option.

A higher % of international exposure is good now, with the USD so strong. International stocks are a bargain, and when the USD gets weaker they will go up in terms of USD.

Debt is good, but is also higher risk. A calculated risk is OK too. Mitigate the risk by bringing in partners and staying in LLCs, etc.

Financial Samurai
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I just sent in a ~$21,000 check to pay off the last of my Pacific Heights 2/2 rental property worth about $1.1 million and couldn’t be happier.

It feels AMAZINGLY having a fully paid off property. Once the mortgage was less than 50% of the value of the condo, I got super motivated to pay it down.

The property still will rise and fall with the RE market. Just less leverage. I have a mission to save as much as possible now.

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