We hear the concern that some tenants may not be able to pay rent due to the Corona virus crisis.
While this is a valid concern, there are a couple of things to consider:
We talk about buying new homes in good areas. When these are the homes you buy, the likelihood of your tenants being “white collar” is high.
White collar employees are the ones who usually have the easiest transition to working from home. These would be high tech employees, engineers, etc. These types of employment lend themselves easily to working remotely, working from home, using Skype and Zoom for video meetings etc.
Thus, the likelihood of white-collar employees not being able to pay their rents is lower.
This is another example of why it makes so much sense to buy good homes in good areas.
Many new investors are attracted to the lower costs and supposed better cash flow (on paper), of house located in bad areas.
What is happening now is just one example of why that may not be a good idea.
An exception is very low-end areas, where most of the tenants are HUD-and-Section-8-helped tenants. HUD and Section 8 will continue to pay rent for the tenants regardless. However, these types of houses are always challenging and their future appreciation may not be as high as good homes in good areas.
During the last recession, which started in 2008, we obviously bought homes not only in good areas, but picked up bank foreclosures in any areas, including blue collar locations. However, during regular times, buying brand new homes in good areas is a staple of smart investing.
There may also be help on the other end for landlords, if rents aren’t being paid, there are forces now working with lenders to give abatements and postponements of mortgage payments. When there is an issue at one end, the other end has to be addressed as well. In California there are already lender concessions to 90-day delay on mortgage payments by some of the major banks, with no repercussions to the mortgage payers, or late fees. It is likely that the rest of the nation will follow suit.
We will discuss this, and other issues, during our next big 1-Day Expo on May 16th. If by May 16th large public gatherings are still not happening, we will have the event online.
As we all observe and fear the Coronavirus, we see many cities under “shelter-at-home” restrictions, and many “non-essential” businesses closing. Then on the other hand, the Fed lowered rates almost to zero, and mortgage rates, after a short spike, are starting to settle down near the lowest point ever. Some people fear a recession is likely to follow, and if we remember the recession of 2008, I think it’s quite possible. That depends, of course, on the length of the lock-down.
If a recession does occur, let’s point out some of the differences between the recession of 2008 and the next recession, if it hits.
Before the 2008 recession happened, there was a major boom in many states. Home prices in states like Arizona, Nevada and Florida went through the roof. The media was shouting “It’s a bubble! It has to burst!” Prices of homes in Phoenix, for example, nearly doubled from the beginning of 2004 till the middle of 2006. Not all states participated in the party, for example, Texas and Oklahoma have not gone up very much during that time.
When the 2008 recession hit, the markets that went down precipitously were, of course, the exact markets that had participated in the 2004-2006 boom. Places in Arizona, Nevada, Florida, and other states. Prices tanked and crashed quite a bit. However not across the board, states like Texas and Oklahoma did not go down very much during the recession of 2008.
By contrast, at the present time, especially in affordable markets like Oklahoma City, Tulsa, Baton Rouge, Central Florida, parts of Atlanta, Raleigh and others, there are currently no price bubbles. No major boom has happened, Thus the likelihood of a major price crash in such markets is much slimmer than the markets which crashed in the 2008 recession. There are very high priced markets now, the expensive markets in San Francisco, for example (which has already started going down in price last year). In such markets, there may be a stronger effect on prices. Also, when you invest in a brand new home in a good area in Oklahoma and pay $170,000. You are buying the home not much over the basic construction and land cost. Again, the probability of an “intrinsic value” home like this going down much is small. By contrast, a $2M home in San Francisco, which cost $900K to build, has a lot of “air” in the price, with a higher likelihood of prices going down in San Francisco.
The recession of 2008 was created by housing. Lenders released all limits, and loans were made to virtually anyone that was human, almost regardless of credit or ability to pay. Some loans were up to 125% of the value of the house. This bad debt, called “sub-prime”, was then packaged among other debt, and amazingly, the credit agency gave these packages high ratings, as if it was a quality debt product. Then these faulty packages sold on Wall Street, and financial wizards found way to leverage them enormously. Once defaults on the bad loans started to hit, the entire structure unraveled.
By contrast, at the present we are still under the Dodd-Frank Act, which was drafted after the 2008 recession. Borrowing is now much harder and lengthier than it was before the 2008 recession. Even borrowers with great credit are finding the current loan processes frustrating. The amount of sub-prime loans is minuscule relative the period preceding the 2008 recession, and steps were taken to make the abuses with rating agencies be much harder to repeat. Thus the next recession is likely not to be caused by bad loans. It is clear that if another recession comes, its effects on rental home investing will be quite different than the recession of 2008.
I believe that the best way to invest in real estate is to buy brand new homes, in affordable large metropolitan areas, where the rent numbers match well with prices. Then finance the homes with a fixed-rate loan. To the best of my knowledge long term fixed rate loans like we get here in the US don’t exist elsewhere. The monthly payment and the mortgage balance never change with the cost of living, while everything else does. That means inflation constantly erodes the true buying buyer of your debt, making your debt ever smaller in real dollars.
For these kinds of homes, purchased anywhere from $150K to $250K, I believe the effects of the next recession will be minimal. Rates are very low, however, so fixed rate loans will retain these great rates forever.
The act of buying good rental homes in large metro areas and holding them as rental for the long term, where the loan erodes, is a future-changer. It does not change your future instantly or even within a short time, but over the long term, this strategy is a powerful future changer. I have seen people retire well, send kids to college, and look much stronger financially thanks to these simple yet powerful investments.
Since these investments show their power over the long term, and since the interest rates are so favorable now, and since a possible impending recession is unlikely to have effects on prices like the 2008 recession, I believe this would be a good time to invest.
As an extra “bonus”, the virus fear creates more flexibility with sellers, including builders, and the ability to negotiate better prices.
I would be happy to discuss it with anyone who may wish to inquire further.
As we read, daily, about the spread of the Coronavirus (now also called Covid-19, but I will use Corona throughout), we are all concerned about the spread, mortality rates, means to protect ourselves and so on.
The stock market has taken a massive plunge over the past few days, on Coronavirus fears and how they may affect the economy.
Certain industries are already affected, the Olympics may be cancelled, and vacation spots are suffering due to flight and vacation cancellations.
As the stock market goes down, people who own stock feel less wealthy. However, it is reported in many sources that heavy stock concentrations in one’s portfolio occur in the upper quarter of income in the US.
Due to the virus fears, people become less mobile, fly less and stay put more.
The lure of the safety of one’s home gets more into focus.
In the affordable markets in which we invest, the type of homes we buy as investments are the type of homes purchased by homeowners who are squarely in the middle of the pack in terms of income, and even below. It is quite possible that a good segment of this population may not feel less wealthy. Their desire for a home will likely not diminish, and that means the demand for the type of homes we invest in is likely to stay strong.
The Fed is Already hinting that they are considering lowering interest rates to help the economy in the aftermath of the Coronavirus economic effects. That is at a time when interest rates are already some of the lowest in history. If rates go further down, the homes will become yet more affordable, with a potential for even greater demand, and even price appreciation. It is also possible that demand may be increased as some people move out of stocks and seek an alternative investment.
The organic need for families to have a place to live is not likely to diminish in the face of the Coronavirus. If people buy these affordable homes, especially with lowered rates, it bodes well for us investors. If people rent them, it also bodes well for us, as our vacancy rates go down.
There may well be adverse effects such as a dearth of workers due to tighter border controls and less travel, a dearth of building materials which usually arrive freely from all over, including the far east, and other shortages. Ironically, even these adverse effects are likely to increase prices, as supply may struggle to keep up with the usual demand.
This is a good lesson for us about the risk of investing in “vacation rentals”. Many younger investors may not be aware, or have forgotten, the devastating effect of the last recession on vacation rentals. I constantly talk to investor wondering why they shouldn’t buy vacation rentals. Just as in a recession, vacations are a luxury, and this luxury is one of the first to get dropped when circumstances are difficult. Even Airbnb’s may experience pain during a recession, as well as, possibly, in the face of the virus scare.
Investing in single family homes in good areas in large metropolitan areas in the Sun Belt states for affordable prices, looks even more solid in the face of difficult circumstances, relative to vacation rentals. That is one of the reasons this is what we focus on.
One of the reasons I have been so steadfast about investing in single family homes is their vast future benefits, in addition to their great relative safety.
Morgan Stanley just released, on February 28th, a 3-scenario report as to how the virus spread may affect the economy. Currently they are estimating what they call “Scenario 2”, in which the recovery we now experience is stunted in a relatively minor way before means are attained to stop the spread of the virus, as the most likely senario. The 3rd and worse scenario may lead to a recession (albeit after all the checks and balances congress installed after the major 2008 recession, I believe a future recession to be quite a bit milder than the last one, especially since one of the reasons for the severity of the 2008 recession was the massive amount of sub-prime loans, a phenomenon that has been greatly reduced by congress since, and is not nearly as prominent currently.
We have seen prices of homes in many markets drop sharply during the recession, but we also know that simply holding on to the homes, while the 30-year fixed rate loan continues to be eroded by inflation, gets us out of that cycle and into the correction. I myself have already experienced it several times in my investing career.
An extreme amount of student loan debt is currently burdening the majority of college attendees within the United States. We’re talking about an average of 1.4 trillion dollars. Even more unsettling, this statistic doesn’t include the debt accumulated by Parent Plus Loans. Though these loans are deemed the parent’s responsibility, it is oftentimes agreed upon by the student to pay it back. This amount is estimated to be an extra $89 Billion.
Whether you are a student or parent worried about the burdens of educational finances, ICG is here to educate you on the valuable potential of a real estate investment.
Paying Back Student Debt?
Consider the possibilities of a positive investment. Though it might be intimidating to accumulate more debt, it could be life-changing to educate yourself on pertinent information that, if begun early enough, could initially obviate the need for student loans. ICG will guide you through the steps to build equity, pay for your kids’ or grandkids’ college, and also plan for a powerful retirement. Stay updated with recorded events and watch Adiel Gorel explain the importance of single-family home rental investments.
Want to Secure Your Child’s Future?
College may seem way down the line for your child, but it arrives sooner than expected, causing you to panic about the financials. ICG will provide you with the tools to solve this worrisome predicament. Investing in a single-family home may not seem in the cards right now, but it is an excellent way to provide funding for your child’s education. Working with real estate investments for over 30 years through historic recessions worldwide, Adiel Gorel presents easy-to-follow investment plans that go beyond securing future financial stability, by focusing on your wellbeing as a foundation for future success.
Investing in you or your child’s education should be of top priority. Join our worldwide sessions when you become a member, and gain deeper access to a variety of educational resources that simplify all your investment questions with doable answers. For a more in-depth look, attend ICG Real Estate 1-day Expo on September 7th, 2019 near the San Francisco Airport. Contact us for details and for complimentary tickets at firstname.lastname@example.org.
If that question scares you, we might have an answer
There’s no sure way to predict the future, but there are ways to prepare for it. With younger generations becoming less and less optimistic about their financial futures, top real-estate investor Adiel Gorel and International Capital Group invite aspiring investors of all ages to the ICG Real Estate 1-Day Expo, this September 7th, 2019.
Get an experience that will teach you how to:
- build a remote-controlled rental home portfolio
- navigate through new and evolving regional real-estate markets
- leverage current loan plans to your favor
- Meet the market infrastructure and property managers.
Network with other like-minded investors. There will be a lot of Q&A which is in itself extremely useful. Learn from several expert guest speakers.
Your financial future doesn’t have to be scary. Learn how to invest in your future with strategies designed for even the most inexperienced and/or busy rental owners. No matter what size, design the future you want when you register with ICG today, so you don’t have to wonder anymore where you’ll be in a decade. A lot of useful information for experienced investors will also be presented. Register fast before space runs out.
The modern-day picture of a successful career includes financial stability and less sleep. To secure financial freedom, one must sacrifice family, personal comforts, and mental health to the widely-accepted stressors of today’s fast-paced workforce. Sadly, the exclusion of restful sleep in our image of success does more harm than good as sleep-deprivation may also decrease life expectancy by 15%, shaving off almost 12 years from the standard life expectancy of 78 years. As we become busier with our daily goals, sleep tends to be tossed to the wayside, yet what good is wealth without health?
As an international investment corporation, we acknowledge and encourage wellness as the primary investment our members should make, starting with sleep. Affecting 30% of the American population, sleep-loss impacts our financial stability as much as economic and political shifts by crumbling our bodies from inside out. Not only does it maximize stressors, but sleep-loss has been linked to several illnesses, including a 70% drop in natural killer cells – the same cells responsible for preventing cancer. With an overwhelming amount of research begging for better sleep patterns, healthy investment options are crucial more than ever.
Close Your Eyes and Open Your Mind to the Key to Wealth.
In the face of chaotic trading floors, fluctuating markets, and complicated investment plans, it may seem hard to equate financial investments with rest. Contrary to cultural norms, long-time real-estate investor, Adiel Gorel presents flexible financial plans built with manageable low-risk solutions, such as single-family rental homes and the amazing 30-year fixed rate loan, all more conducive to improved health and wealth with minimal:
- Financial strain from rental upkeep
- Time wasted in closely monitoring multiple assets in different locations
- Sleep loss due to long work hours dedicated for far-off retirement plans
Created for inexperienced investors with little time to spare, investment strategies such as Remote-Controlled Retirement Riches can assist in creating prolific single-family home portfolios using multiple real-estate markets all with the support of tested strategies and experts.
Sleep-deprivation does not –and should not– equal success. Discover a new way to invest and rest with Adiel in our next broadcasting, August 10th, at 10:30 am on KQED Plus and create your wealth plan without sacrificing the core pillars of your health.
For more information on wellness and financial investments, visit our Membership Area to explore related podcasts and webinars designed to empower the decisions you make now and in the future.
On September 29th, 2008, the United States witnessed a financial disaster that would eventually overtake the globe. The Dow Jones Industrial Average fell 777.68 points after Congress refused the bank bailout bill. Seemingly overnight, the nation’s sense of security was swept off its feet. By 2009, 861,664 families lost their homes and foreclosing rates increased by 225% in two years. Ten years later, the effects have slowly dwindled away, but the fear persists as noted by the 23% of young prospective homeowners who see homeownership as a “bigger financial risk”, despite the market’s correction.
Eliminating real-estate investment fears, president of the International Capital Group, Adiel Gorel shares the minimum-risk/maximum-return solution: Remote Control Retirement Riches, the investment strategy designed for even the most inexperienced investor. As millions of Americans turn away from retirement plans and Social Security, find a simple solution in our upcoming broadcast discussing Single-Family Rental Homes.
Make an Investment with Confidence – not Fear
Owning multiple homes post-2008 may seem counterintuitive to financial stability. However, for the past 30 years, Gorel has developed and shared the Single-Family Rental Homes investment plan, assisting busy and inexperienced families to plan for their future without compromising the present. Explore a wealth-building strategy that has previously led to:
- Paid-Off College Tuitions
- Paid-Off Mortgages
- Paid-Off Home Renovations
- Healthcare Emergency Funds
- Investor’s Tax Benefits
Join Adiel Gorel in our upcoming broadcast, July 25 at 1:00 pm PST on KQED, to discover how to create multimillion-dollar rental single-family home portfolios using real-estate markets throughout the U.S. Learn about helpful loans and investment tips that support retirement riches regardless an investor’s age. Also, since real-estate investments involve several markets nationwide, you can implement methods at your own pace, maximizing your control over your investments while reaping benefits with minimal time constraints.
Erase your own investments fears and start planning the future with confidence. Follow us on KQED on the dates listed below to learn more at our interactive seminar. Visit our Membership Area for more detailed information and insights into becoming a home investor without becoming a full-time real estate mogul or hired landlord.
- KQED Plus: Sat, Jul 13, 2019 — 3:00pm
- KQED 9: Thu, Jul 25, 2019 — 1:00pm
- KQED Plus: Thu, Jul 25, 2019 — 10:30pm
- KQED Plus: Fri, Jul 26, 2019 — 4:30am
- KQED Plus: Sat, Aug 10, 2019 — 10:30am
For years, it’s been widely accepted that owning a home resides at the core of the American Dream, yet studies conducted by the Urban Institute report that 53% of millennials today cannot afford a home as they can’t even afford a standard 20% down payment. Between escalating healthcare costs and burdensome student loans, the average millennial would take up to two decades to save up for a down payment. The dream of owning a home may seem to be crumbling, yet based on these startling numbers, it is clear that the desire for financial stability is as crucial as ever.
While roughly 80% of millennials don’t expect to receive benefits from current Social Security policies, the pursuit of financial security and growth is still very much attainable through home ownership and rentals. Thanks to the magical 30-year fixed loan rate, maximizing savings’ funds can be done through remote control retirement, one of the many innovative strategies to be presented at the ICG Real Estate 1-Day Expo in San Francisco, U.S.
Dealing with the Unstable Concept of Financial Stability for the American Dream
As inflation and increased cost-of-living may pose as threats to buying a home, single-family home rentals revive the financial success “dream” as the most liquid type of real-estate on the market. Join us this September 7th, 2019 at South San Francisco Conference Center to learn how to leverage single-family rentals to your financial benefit while:
- Getting experts’ strategies and opinions
- Navigating taxes, loans, new markets, and more
- Networking with like-minded investors
- Exploring new market trends
- Participating in collaborative Q & A.
Just as technology advances year after year, it’s only natural that real-estate markets evolve with each generation, yet the result of a sound investment is a constant: financial success. Despite the negativity surrounding real-estate, there is still much to be discovered. Luckily, we are devoted to doing just that.
Whether it be through podcasts or interactive conferences, ICG is can help you invest in single-family rentals and guide you through a minimum-risk process designed to fit even the most inexperienced and/or busy rental owner. No matter your age, it’s not too late to start investing in your future. Register today before space runs out and build your own future on your own dream. Learn more with our podcasts and webinars in our Membership area where we outline strategies in more depth.
A few times a week I talk to investors planning on putting a large down payment on the purchase of a single-family rental home. The goal is to have a better “cash flow”. It may sound logical – the greater the down payment, the smaller the loan, and hence the monthly payments. However, the foundational piece of buying rental homes in the United States is the “gift” called “the 30-year fixed rate loan”. This loan sounds like a miracle to most foreigners, since neither the monthly payment nor the mortgage balance EVER keeps up with the cost of living around the world, while everything else does.
The magical 30-year fixed rate loan
The 30-year fixed-rate loan is at the heart of life transformation for investors when the homes are held for 10 years or more (preferably over 15). The loan keeps getting eroded by inflation (or CPI– the cost of living), while the home, rent, and everything else keeps requiring more dollars to buy (hence in dollars, their value goes up – even without intrinsic appreciation). The 30-year fixed rate loan starts looking quite puny after 12, 14, 16 years. It may be years before it is paid off, but since it never keeps up with the cost of living, inflation hammers the real value of the loan.
These loans are a great financial gift, with future-changing potential. Why, then, would you want to make the gift smaller? Especially at today’s low rates? The answer is, you don’t. A larger down payment will mean the magical loan will be smaller.
May be wise not to exceed 20% down payment
This is not fully utilizing the power of the fixed-rate loan, and it means the borrower has expended more of their scarcest resource: cash! Even very wealthy people, who can afford to put down a large down payment or buy for cash, choose to put down less money. They do this to leverage their cash with the 30-year fixed-rate loan.
I think that in normal cases, a 20% down payment should not be exceeded. The small additional cash flow due to having a smaller loan is insignificant at the present time. Right now, your main “cash flow” should come from your own earnings (salary). It is later in life during retirement that the rental homes can replace your income.
In cases of big 1031 exchanges, with not enough properties to identify, or in cases of not being able to get the FNMA loan anymore, then larger down payments are merited and that is a different blog post. I still think the down payments should be less, rather than more, in any circumstance. Currently, in our Membership area on our website, we have podcasts and a webinar that discuss loans and cash flow in depth. You can learn more about it at icgre.com/members