Real Estate

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The stock market is hitting new highs. What should we make of this?

This week,  the S&P 500 reached yet another record high — marking its fourth consecutive day reaching a new all-time high.

Last Friday (the first of these four consecutive trading days) marked the first time in two years that the S&P 500 finished at an all-time high.

Here’s an 11-minute video recapping what happened:

After two years of not achieving any new highs, the S&P 500 is now breaking records daily.

How do we interpret this? Here are a few things to keep in mind:

(1) The high is comprehensive.

The S&P 500 — which tracks 503 stocks — represents about 80 percent of the overall market.

It’s a more comprehensive indicator of the overall market than the Dow Jones, which tracks only 30 large companies. The Dow took a slight dip today, but both the Dow and the NASDAQ hit new highs in December.

The Dow is an excellent indicator of how large companies are faring. But the S&P 500, by virtue of tracking a much bigger basket, is a better reflection of how the overall market, including small and medium sized companies, are also performing.

(2) The tech sector dominates the all-time highs.

Tech companies make up the largest chunk of the S&P 500. Here’s a chart of the top ten companies by weight for SPY, an exchange-traded fund that tracks the S&P 500:

Source: slickcharts​

The top ten companies in SPY are nearly all in the tech sector. This stands in contrast to the wider, more expansive range of sectors that comprise the top ten Dow Jones companies by weight:

Translation: while the overall market (including small and mid size companies) is doing well, the bulk of the gains are still being driven by tech.

The same small group of megacap companies — the “Magnificent Seven” (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) — that drove much of last year’s growth continues to lead the way, fueled by hopes of an artificial intelligence boom.

But what’s interesting is that the equal-weighted S&P 500, in which every company within the index gets the same weighting, is only slightly lagging the standard S&P 500. Yes, equal-weighted is behind, but not by much. Translation: even without the oversized influence of the Magnificent Seven, the index is running strong.

The market has also priced in the expectation that the Federal Reserve will lower interest rates this year, which leads to the next point …

(3) The Fed will send new signals at the end of January.

The next Fed meeting is Jan 30-31, at which point we’ll know whether the Fed is ready to start cutting interest rates yet.

The Fed held rates steady during their last two meetings, held in September and November 2023.

They’re widely expected to cut rates in 2024, but the debate that economists and market-watchers are holding is when? — could it be as early as next week? (Unlikely, but possible.) Or will it happen during one of their following meetings on March 19-20 and April 30-May 1st?

Many analysts expect that the Fed will hold rates steady this winter and begin cutting in the spring or summer, but the substantial improvement in inflation data has some people feeling optimistic that these cuts might come sooner than later.

The Fed rate cuts are expected to unleash pent-up demand for everything from cars to houses and make capital more accessible for companies.

Homebuying, in particular, is expected to rise as interest rates drop, leading to a projected minor climb in home prices this year. (Mortgage interest rates are at their lowest point since last May.)

Summary: Big Tech is fueling record-high market growth, inflation is under control, and the overall economy looks resilient.

The average person is starting to feel better about their wealth.

The U.S. Consumer Sentiment Index is at its highest point since July 2021. As the name implies, this index measures how confident and optimistic people feel about their finances.

This survey, conducted by the University of Michigan, shows huge gains in households feeling more confident that inflation is behind us, jobs are strong, and income can keep up with expenses.

The index climbed a cumulative 29 percent over the last two months. That’s the biggest two-month leap since 1991.

That said, we’re still no where close to our 2018-2019 confidence levels.

What’s the takeaway from all of this?

Economic data is strong. Markets are on a tear. Consumer sentiment is improving. The year ahead has plenty of cause for optimism.

Blackstone CEO Steve Schwarzman, at the World Economic Forum in Davos, mentioned that he thinks “animal spirits” — the role emotions play in the markets — will be strong this year.

Given how much is riding on consumer confidence in this (almost) post-inflationary world, that’s particularly apt.

For more detail, watch the latest YouTube breakdown.

And I’ll see you in the next newsletter!

— Paula

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Source: affordanything.com

Apache is functioning normally

“OMG I missed it. I should’ve bought two years ago.”

“Am I too late? Are all the good deals gone?”

“Look at how much cheaper it used to be. I’m priced out now.”

“Isn’t my best bet to wait for a crash?”

Oh my dear friend.

Those sound like remarks made today … right?

Well, they’re not.

Those are the remarks I heard in 2015, even everyone was lamenting how much real estate prices had climbed, relative to 2012.

“Damn I should’ve bought back then! It’s too late now. Everything’s expensive again. I’ll just wait for prices to come down.”

I know, that seems silly in hindsight.

But put yourself in the shoes of an aspiring real estate investor in the year 2015. They had been thinking about buying a rental property for a year or two. But they hadn’t. And while they sat on the sidelines, prices skyrocketed.

The chart above covers January 2010 to December 2015.

In 2015, this was a prospective investors’ experience of the last 5 years. They saw home prices dip slightly from 2010 to 2012, and it scared them — “maybe there will be another crash!!” — so they sat on the sidelines.

Then the market boomed from 2012 to 2015, and by the end of that three-year period, they were kicking themselves to “waiting too long.”

“It’s too late!!!!!”

“The good deals are gone!!”

With the Great Recession in such recent memory, they comforted themselves with the idea that they could just kick back and wait for the next housing crash.

Nearly nine years later, they’re still waiting. And missing out on gains.

Here’s what the market did from January 2016 through May 2023:

Up, up, up, up, up.

Sliiiight dip for a few months in late 2022. Then up again.

The people who lamented that they’d “waited too long” and “it’s too late” psyched themselves out. They sidelined themselves. They missed those returns.

You see, pessimists get to make excuses. Pessimists get to validate themselves.

Pessimists get to be right.

Optimists get to be rich.

“The irony is that by trying to avoid the price, investors end up paying double,” Morgan Housel writes in his book, The Psychology of Money.

In that passage, he’s discussing stock investing, but the principle applies to real estate as well. Those who lament that real estate is too expensive, relative to its previous values, are the same people who eagerly buy an index fund without complaining that it, too, is substantially more expensive than it was a few years ago.

I’ve never heard anyone say: “VTSAX is 50 percent more expensive than it was five years ago! It’s too late to buy. The good deals are gone. I’ll wait for the next crash.”

Yet they’ll say that about real estate.

Sure, people might debate whether the stock market is overvalued. But if you’re a long-term investor, you dollar-cost average into the market.

You understand that a share of VTSAX will cost significantly more today than it did five years ago, because, well, assets appreciate over the long-term. That’s the point.

Ideally, real estate investors would be best-off viewing their properties through the same lens through which an index fund investor views their holdings.

Sometimes you’ll buy high. Other times, you might hold through a decline. But over the long-term, based on historic trends, both asset classes (real estate and index funds) significantly rise in value.

Yet often, would-be real estate investors seem to forget historical trends.

When the topic turns to rental properties, many would-be investors sideline themselves because they’re convinced that “I’m too late” and “the good deals are gone.”

Sure, you can’t blindfold yourself, throw a dart at a list of houses, and find one with an amazing cap rate, like you could in 2012.

Sure, you have to actually, erm, what’s that word … WORK.

Good deals are available for those willing to find them.

Back in 2015, I often heard people lament that they were “too late” because real estate prices had risen so much in the past three years. “I should’ve invested in 2012! The run-up has already happened. I’m too late. I’ll wait for the next crash.”

Nearly nine years later, they’re still waiting.

The question is: are you going to be one of those people who says “it’s too late! the good deals are gone!” and then sit on the sidelines for the next 30+ years? Or are you going to train and compete?

If you choose to leave the sidelines and get into the game —

The first step is to understand: It’s not too late.

The prices that existed five years ago are irrelevant.

The only question that matters: “Is this a good deal today?”

It’s easy to substantiate the belief that you’ve missed out on all the good returns — you can see how much home prices have appreciated over the past three years. You can see all the capital appreciation you could have had, if only you’d gotten started sooner.

Just like if you’d bought a ton of index funds in 2018. Or better yet, March 2009.

Assets appreciate.

Sometimes there’s volatility, and they drop a little bit. But historically, in the U.S., major asset classes — including stocks and real estate — have always risen over time.

We seem to have accepted this reality in the world of stock investing. We don’t reflexively lament *not* buying more index funds at 2012 prices.

We might occasionally joke about it — “awww man I shoulda bought Amazon in 1997!” — but we know that when we buy a stock, we’ve evaluating today’s fundamentals. Past is prologue.

When we evaluate stocks, we ask: “Is this stock a wise purchase at today’s price?” But we forget to ask this question when we’re dealing with a tangible asset class like real estate.

Real estate often fills people with fear:

  • It’s a single six-figure transaction; a larger dollar amount than an index fund.
  • You borrow money to get into the deal; leverage increases risk.
  • You assume you can’t dollar-cost average into real estate, like you can with stocks. (In reality, many rental investors *do* dollar-cost average into real estate by investing in one property per year, or one property every-other-year … some type of periodic pace.)

Real estate’s tangibility also makes it an inherently emotionally-charged asset class. We can touch it, smell it, see it, hear its creaks and noises.

And when emotions are involved, we rationalize rather than reason.

“Assuming that something ugly will stay ugly is an easy forecast to make,” Housel writes. “And it’s persuasive, because it doesn’t require imagining the world changing.”

Pessimism is tempting, but it’s also limiting — and its intellectually lazy.

It keeps you broke and uncreative.

Optimism, by contrast, keeps you asking “how can I?” — it keeps you solving problems, rather than lamenting them.

  • “How can I find properties with a solid cap rate and good cash flow located within a two-hour drive?”
  • “How can I improve my skills as a negotiator?”
  • “How can I analyze and cross-compare across multiple markets?”
  • “How can I save for a downpayment?”
  • “How can I get approved for a mortgage if I’m self-employed / if I don’t earn much?”

Ask “How can I?” rather than lamenting “I can’t because …” and you’ll find your world switch.

And if you want answers to the above questions, you’ll find them in Your First Rental Property, our flagship course.

— Paula

Source: affordanything.com

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Last month, DataDigest explored market experts’ expectations for 2024, with the consensus calling for a moderately better housing market than 2023.

But a meeting of the Federal Open Market Committee the following week set off a market frenzy over expectations of interest rate cuts, moving mortgage rates down well ahead of experts’ forecasts and prompting a subsequent DataDigest that asked whether the picture for 2024 had changed.

On Jan. 18, Fannie Mae weighed in: yes.

Fannie Mae’s latest monthly forecast for the housing market predicts much lower mortgage rates than its December forecast — and thus more home sales and mortgage originations.

Mortgage rates, which dropped precipitously the week of the FOMC meeting, are key to Fannie Mae’s rosier view of the road ahead in 2024. Fannie Mae’s quarterly rate forecasts this month were far lower than last month’s and were its lowest forecasts in at least six months.

“Following the Fed ‘pivot’ in December, an anticipation of more dovish policy, and the recent decline in interest rates, our mortgage rate forecast has been revised meaningfully lower this month,” Fannie Mae wrote in its forecast release.

Mortgage rates have hovered around 6.7% — Fannie Mae’s December forecast for 2024’s average — since mid-December, and the company’s forecast for 2024’s average is now 6.1% with rates dropping below 6% by year end. This should prompt a “gradual recovery” in home sales and single-family mortgage origination, according to Fannie Mae Senior Vice President and Chief Economist Doug Duncan.

“Inflation’s decline and the resultant Fed pivot to signaling future rate cuts lead us to believe that home sales and mortgage originations likely bottomed out in the second half of 2023 and that a gradual improvement is now underway,” he said in a statement.

“We expect mortgage rates to dip below 6 percent by year-end 2024 and for homebuilders to continue to add new supply, both of which should aid affordability. Additionally, the decline in mortgage rates is likely to push refinancing volumes upward, along with some pickup in purchase financing.”

The company’s quarterly forecasts for existing and new homes are up significantly from its forecasts from recent months.

Its forecasts for single-family purchase and refinance originations are also above its recent forecasts, although not as dramatically higher as with home sales.

Although Fannie Mae’s outlook for 2024 is up, Duncan warned against getting too carried away.

“However, even at less than 6 percent, we think rates will still have a significant way to go in order to meaningfully reduce the ‘lock-in effect’ experienced by homeowners who refinanced or bought during the pandemic,” he said.

Traders disagree

The yield on 10-year U.S. Treasury notes — a major factor in setting mortgage rates — opened December at 4.2%. On the heels of mid-month FOMC meeting, the rate fell to a low of 3.8% on Dec. 27.

That drop has been completely erased already in 2024, with the latest rate above 4.1%.

The steep rebound was fueled in part by comments Federal Reserve Governor Christopher Waller made at a virtual event hosted by the Brookings Institution on Jan. 16. Waller said rates should be cut “methodically and carefully” and added, “I see no reason to move as quickly or cut as rapidly as in the past.”

Equity traders, too, have been skittish regarding interest-rate-sensitive stocks — the same stocks that fueled a late December stock market rally. Traders sold off stocks of real estate investment trusts and speculative tech companies last week, but share prices have rebounded so far this week.

The pullbacks signal bond and equity traders are becoming less optimistic about a March rate cut. We’ll have to wait until February’s forecast to see if Fannie Mae’s optimism holds or if traders’ skepticism spreads.

Source: housingwire.com

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In 2024, the world of design is evolving — the 2023 design trends that once seemed evergreen are proving themselves out of fashion fast. Designers are leading a creative revolution, saying goodbye to certain decor trends that have been around for too long. Let’s explore the shifts and innovations that will redefine our living spaces this year.

The saturation of grays, greiges and beiges

The subdued palette that dominated 2023 is now experiencing a sense of saturation. While these neutrals are timeless, their overuse, especially within the realm of minimalism, has rendered them somewhat uninspiring. Consider infusing vitality into your color scheme with bold and saturated hues. Also, explore the rich spectrum of nature-inspired tones to breathe life into your living spaces. Jewel tones also contrast beautifully against most gray wall colors and add more personality.

Checkered pattern play and chevron prints have a checkered past

The once-revitalizing checkered pattern in home decor has become a victim of its own popularity. We have to say the same for the once-popular chevron print that found its way onto rugs, walls and decor items, too. Instead of continuing with this trend, opt for textural fabrics like natural linen. This shift provides a refreshing departure from the ubiquitous checkered aesthetic while maintaining a touch of vintage charm.

Overly coordinated decor

The meticulous coordination of every element in a space, a hallmark of 2023, is now on the wane. Beyond the significant investment of time and money, overly coordinated decor tends to create impersonal and somewhat sterile living environments. Embrace maximalism, which encourages an eclectic and personalized approach. It injects warmth and character, transforming spaces into inviting havens. While we can’t really say that minimalism itself is out, the aesthetic’s leaning toward over-coordination is.

Saying sayonara to impersonal spaces

Hiding personal touches within homes, a trend of 2023, is giving way to a more authentic and open expression of individuality. In 2024, the focus is on showcasing personal style, memories and uniqueness through decor. Consider creating a gallery wall that tells your story with pride. This departure from impersonal spaces contributes to a more emotionally resonant and visually captivating living environment.

Overestimating our green thumb

While plants undoubtedly enhance interiors, the misconception of universal gardening expertise can lead to the neglect of these green companions. Instead of overestimating our green thumbs, we recommend taking an honest assessment of how much plant care you can handle. Start small with low-maintenance plants like succulents, gradually incorporating them into your decor for a harmonious and vibrant atmosphere.

Style over comfort

The dominance of style over comfort in 2023 is evolving. The realization that a truly inviting living space should prioritize comfort and functionality is gaining traction. Investing in multifunctional furniture is a key shift, ensuring that pieces look good while enhancing the overall living experience. This move towards comfort signifies a departure from purely aesthetic-driven choices.

Choosing trendy over timeless

The inclination to chase trends is losing ground to a preference for timeless design elements, such as the transitional design style. The recognition that trendy pieces can quickly make a space feel outdated and impersonal is driving a shift towards enduring choices. Embrace mid-century modern design, sustainable pieces and neutral rugs for a timeless and enduring aesthetic.

Is gold gaudy in 2024?

Gold, as a timeless element, remains in vogue, but the gaudy and flashy manifestations are making way for more subdued and sophisticated design choices. The desire for a balanced and refined atmosphere has prompted a departure from the excessive use of brassy gold pieces everywhere — instead choosing a more burnished gold look. Opt for timeless and versatile gold accents that contribute to an elegant and harmonious living space.

Image source: ELLE Decor

Embracing bold statements of 2024

As we bid farewell to our once-beloved 2023 design trends, there’s a resounding call to embrace designs that have a striking impact. Vibrant color choices, daring patterns and eye-catching focal points are becoming central to creating memorable aesthetics.

This movement invites individuals to step into the role of interior designers, breaking free from the mundane and infusing spaces with a daring, expressive approach. The power of bold statements is set to elevate our living spaces and leave a lasting impression in the unfolding narrative of 2024.

Make a new statement with a new apartment

If you’re still on the quest for a new living space, explore the available apartments and homes for rent. It’s an opportunity to infuse your creative touch and turn your dream rental into a personalized haven.

Source: apartmentguide.com

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If you were to believe everything that you see on social media you would think Blackrock has bought all of the houses in the US. Or at least most of the houses that have sold in the last few years. The truth is that Blackrock has not bought one house. They do not buy houses but there is a similar fund that does buy houses by the name of Blackstone. These are not the same funds nor are they controlled by the same people. While many people feel funds like Blackstone are buying all the houses that is not true either. So what is true?

What is the difference between Blackrock and Blackstone?

Blackrock is the largest asset management fund in the world with over 9 trillion dollars under management. Blackrock has had ties to the US government and has enormous power and wealth. Many people assume Blackrock is who buys houses because their name is so close to Blackstone.

Blackstone is a private equity firm that has 880 billion under management. Blackstone owns companies that buy and rent houses in the United States and other countries as well. They also own companies that buy and rent apartment buildings and commercial real estate as well. Blackstone also directly owns real estate.

These are not the same fund and it is important to make the difference because some will say the US government is helping fund corporate ownership of housing because of their ties to Blackrock. when that is not true at all.

Why are housing prices increasing?

Does BlackRock invest in companies that own housing?

While it is true that Blackrock does not own houses or own companies that own houses, they do invest in companies that own houses. Blackrock owns 6.7% of American Homes for Rent, which owns 59,000 homes in the United States. Blackrock shares in the company represent $872,000,000 which may seem like a lot of money but that does not even come close to the top 50 investments Blackrock has. Their number one holding is Apple with more than $176 billion in value and their 50th top holding is Wells Fargo with over $11 billion.

Many people claim Blackrock buys houses because they own some of American Homes for rent but to make that claim you also need to say they build phones, are a bank, and pretty much do everything because they invest in almost every industry.

Why are the corporate housing stats deceiving?

I am seeing more Facebook posts and articles about Blackstone wrecking the housing market because they are buying single-family homes. There are so many bad articles about corporate ownership of housing with bad data that it blows my mind. One article from CNBC claimed there 40% of housing would be owned by corporations by 2030 which is a crazy statement since less than 1 percent is owned by corporations now.

They got this stat from Yardi who claimed:

“Management estimated in a recent research paper that institutions own
some 700,000 single-family rentals in 2022, about 5% of the 14 million
SFRs nationally. MIM forecasts that by 2030, institutions will increase SFR
holdings to 7.6 million homes, more than 40% of all SFRs.”

I reached out to MetLife and they confirmed there was never any research paper published with this data. They did confirm their people had lunch with Yardi people and mentioned some of these estimates over lunch. I asked Yardi for a link or any data to back up these stats and they refused and called me a liar.

There are plenty of papers and stats that show from 300,000 to 500,000 homes are owned by large corporations. When you hear that 28% of homes are bought by corporations those stats include all corporations, the majority of which are mom and pops.

How many properties are hedge funds buying?

Is Blackstone wrecking the real estate market?

The truth is corporations and hedge funds own less than one percent of the 89 million single-family homes. Their share of single-family rentals is going up because more mom and pops are selling than buying. There are 14 million single-family rentals now while there were 15.2 million in 2016. In that same period, owner-occupied single-family homes have increased by more than 10 million. The reason rents are going up is that there are too few rentals not because funds are buying all the houses. Some funds are even building right now which we desperately need.

These big funds are the only ones buying houses to rent and I don’t think families or people who can’t buy should be limited to living in apartments. The video below goes into even more detail talking about bills introduced to stip corporate buyers.

[embedded content]

Build a Rental Property Empire

Categories Real Estate

Source: investfourmore.com

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The day after Christmas and all through the house, nobody knew what to do with the darn apartment tree now that Christmas was over. Fortunately, we have a few tips about Christmas tree disposal at the ready.

When you live in an apartment, you may not have the ability to just drag your old tree to the curb and wait for pick-up.

Whether you have a dumpster, some community trash collection area or indeed can put trash out at the end of a driveway, there are a number of ways for you to safely dispose of your tree after Christmas instead of watching it turn brown in your living room as the calendar changes.

Here are 11 Christmas tree disposal ideas for you as the season winds down.

1. Put the tree out with the trash

The easiest thing to do with your tree after Christmas is to take it out to the trash to be collected as recycling. Depending on your rental situation, this may mean hauling it out to the curb, taking it out to your bulk trash pickup area or having some designated tree plan.

If your apartment is in a residential neighborhood and you regularly take your trash to the curb, check with your local city or township for rules, dates and times as to when you’re allowed to put your tree out with your normal collection for recycling.

If you live in a building or complex with private or bulk pickup (like a dumpster), ask your landlord or management office what the policy is (or look for a posting on a community bulletin board or in the Facebook group) and when and where you can take your tree to be sent to its final resting place.

But if your apartment or complex doesn’t have or doesn’t allow drop off of your tree, you have a few options…

2. Take your tree to a drop-off site

Most municipalities have some sort of organized tree drop-off plan. In fact, there are more than 4,000 Christmas tree recycling programs throughout the country, most run by local waste disposal departments. Drop off your tree, drive away and don’t look back — unless you want to see your memories given the “Fargo” treatment. It couldn’t be more simple.

The idea of hauling your slowly-decaying tree in your personal vehicle to a drop-off site may not sound like fun, but doing it right will minimize the damage and mess. If you can find a bag or box big enough to hold the remains (even if you have to cut it into a few pieces), you will keep pine needles and sap from getting all over and in your car. Then, do the reverse of how you got it home in the first place. Strap it to the roof or toss it in the back. And if none of this is feasible, find a friend that owns a pickup.

3. Chip your tree into nothingness

Instead of abandoning your tree at a recycle dump like an unwanted child, turn your tree into wonderful mulch. If your apartment has a garden or flowerbed or a landscaped lawn, you can toss O’ Tannenbaum into a woodchipper and let your tree live on.

Mulch and chips are great around bushes and small trees where they can help keep moisture in the soil and stave off direct sunlight. And as the chips decompose, the wood releases nutrients into the ground.

Don’t have a giant woodchipper lying around your apartment? No problem. Many cities and non-profit organizations offer chipping events where you can have your tree turned into mulch and either take it home or donate it to the local parks and rec department to be used in city parks.

New York’s two-day “Mulchfest” is held annually around the city and recycles more than 26,000 trees a year. And in Atlanta, the “Bring One for the Chipper” program is more than 25 years old and shreds more than 100,000 trees annually.

4. Dump your tree into a lake (nicely)

An alternative to schlepping your tree to a recycler or drop off is to dump it in a lake. Believe it or not, you can actually toss your (chemical-free) tree, trunk and branches separately into a pond or lake and the wood will provide shelter for overwintering fish. Discard your tree and help the environment.

Well, not just any lake and not just however you want. First, find a nearby lake or pond and then, contact the municipality where it’s located to make sure you’re following all local ordinances.

5. Dump your tree into your fish tank

On a much smaller scale, you can also snap off some of the smaller branches and twigs and arrange them in your home or office fish tank to give your fish a new and natural place to hide and chill out. Just be sure the wood is completely clean and dirt free before tanking it.

6. Reuse just the needles

If you don’t have an outdoor space (or fish), you can just upcycle the needles. Before you take your tree to a drop off site, shake a bunch of the needles off into a bag and spread them over the soil in your outdoor spaces or in a flowerbox or planter. The needles break down like mulch and work on balancing out the pH levels in alkaline soil.

7. Use your tree to smell fresh year ’round

The needles can also keep your house smelling sweet all year, as well. Only if your tree’s needles are still green and fresh-looking (give them a sniff), strip a bunch of them off and toss them into small paper bags. Stick the bag anywhere you want to smell piney fresh like a closet or catbox area and they’ll last a lot longer than you’d expect.

8. Make fire from your tree

If you’re one of the lucky ones to have a fireplace in your rental, congratulations … you have some post-Christmas firewood for the rest of winter. You may not have a woodchipper at your disposal, but someone you know somewhere has a saw or axe if you don’t have one. With great care, take your tree to an open space in your complex (ask to make sure you’re allowed) or somewhere nearby and start chopping.

Well, not right away. If the wood is still wet, take it away from a water source and let it dry. Wet wood in a fire can cause fires where you don’t want them. And if your tree is too dried out, it won’t burn properly. It’s a fine line. Either way, most Christmas trees are small and slender, so you’ll wind up with some good kindling or fire starters.

9. Replant your tree

If you have a backyard spot or community green space, and your tree hasn’t been cut or had its root ball damaged, you can actually replant it. If you live in warmer climates, and if your tree didn’t get dried out inside your house, especially next to vents or heaters, your tree may have a second life.

And new to the scene are actual companies that will rent you a tree, deliver it for the holiday and then come pick it up and replant it for you. It’s like Netflix for Christmas trees (OK, well kinda)!

10. Return your tree

And believe it or not, you may actually be able to return your tree! No, not for your money back, but in many places, you can drop your tree off back where you bought it. Some large lots and tree farms will take your tree back and recycle or upcycle it themselves. Ask them when you make your purchase if you can return it, or give them a call.

11. DIY your tree

Remember, your tree is made of wood! That means, if you have the requisite skill, you can make the perfect Etsy-level DIY projects from your soon-to-be-former Christmas tree. Try some of these projects, using the trunk, the branches or just the twigs:

  • Winter wreaths or window boxes
  • Plant supports and wooden plant markers
  • Tree trunk coasters
  • Tree trunk tealight logs
  • Tree branch candlesticks
  • Wall art
  • A wood slice clock
  • And yes, even a didgeridoo

Until next year

Regardless of what you decide to do with your Christmas tree, just know you have options other than dumping it somewhere under the cover of darkness. Or you could always just go with the artificial version and box it back up for next year.

Source: apartmentguide.com

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Whether you’re taking your first steps or fine-tuning your strategy, understanding the fundamental language of real estate is paramount. In this post, I’ll cover the top 5 real estate investment terms that are essential for every investor’s toolkit. From cash flow to leverage, these terms form the bedrock of successful investing. I think it is also important to know the right meaning for these terms and many people stretch the meanings or completely change them!

So, let’s dive in and equip ourselves with the knowledge that will shape our journey towards financial prosperity.

1. Cash Flow – The Foundation of Financial Success

Let’s start with a term close to every investor’s heart – cash flow. Beyond the straightforward inflow and outflow of funds, it serves as the cornerstone of financial success in real estate. It is one of the primary metrics I use to make purchase decisions. I also look at how good the deal is and how much value I can add.

Many people will tell you that cash flow is simply the rent minus the mortgage and insurance. However, if you want to know the true cash flow you will need to know all of your expenses. Here is an example of what true cash flow looks like:

  • Rent: $2,000
  • Mortgage: $1,100
  • Taxes: $200
  • Insurance: $200
  • Hoa: $50
  • Vacancies: $100
  • Maintenance: $200
  • Property management: $180

One investor might tell you the cash flow is $500 a month but they are leaving out many of the expenses the property will incur over time. The true cash flow would be -$30!

Determining cash flow requires a variety of calculations, so I’ve created a calculator to help you out: InvestFourMore Cash Flow Calculator

2. Cap Rate – A Metric for Strategic Decision-Making

Cap rate, a metric mostly used on commercial properties and multifamily housing gives an idea of what the property will make without financing and what the property is worth based on the NOI or net operating income. The basic formula is:

net income / price = cap rate

The Cap Rate formula may seem simple enough but it can be manipulated very easily. Investors may not include all the expenses in the NOI or they may use projected income instead of actual income. Never take these numbers as absolute without digging into them.

You can use my calculator here: InvestFourMore Cap Rate Calculator

3. ROI – Evaluating Investment Performance

Return on Investment (ROI) serves as the scorecard for your property’s performance. As a pair to cash flow, ROI helps you determine what the property will make based on many factors like loan pay down, appreciation, and value add. Cash flow looks at what the property makes on a monthly basis and ROI looks at the big picture.

ROI is not easy to figure because some years may have a huge increase in value thanks to adding tenants or making repairs while other years may have much more modest returns. You would figure ROI on an annual basis and may want to separate out first-year ROI from the later years’ ROI because of those jumps in value.

Below is a video of a value-added play I invested in recently.

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4. Leverage – Maximizing Potential While Mitigating Risks

Leverage is the prime weapon of real estate investors if you are looking to scale quickly. With leverage, you only invest a fraction of the total purchase price, which can cause your returns to be significantly higher than investing in something like stocks. To achieve leverage, you use financing. Financing is one of the most important aspects of investing in real estate. You can make more money with loans than by paying cash.

On this site, I talk about the many different, creative ways you can finance real estate investments.

5. Equity – The Silent Wealth Builder

Equity, an often-underestimated force in wealth accumulation, goes beyond property values, embodying true ownership. 

equity = current market value - amount financed

Equity can be built slowly through market appreciation and loan pay down. You can also build equity by adding value and getting great deals on properties. I prefer to use both! Many people may say equity does not matter because it is not cash in hand, but it can become cash in hand by using a cash-out refinance, or selling. You can even use a 1031 exchange to sell and not pay taxes on the profit.

Thanks to leverage and equity, my net worth has skyrocketed to over $10 million just from real estate.

What’s the best way to invest in real estate?

Even better, you can use equity and leverage together to purchase additional properties and scale up your business using the BRRRR method.

Conclusion

This primer serves as a solid foundation for fundamental real estate investment terms. As you navigate real estate, I invite you to explore the extensive resources on InvestFourMore, where a wealth of data-driven insights and strategies await.

Feel free to engage with the community, sharing your experiences or seeking guidance. Here’s to your continued success in the world of real estate investment – stay informed, stay strategic, and keep building your path to financial prosperity!

Build a Rental Property Empire

Categories Real Estate

Source: investfourmore.com

Apache is functioning normally

This week’s Afford Anything blog post is a well-balanced diet:

  • Robert Kiyosaki predicts a massive crash — [philosophical]
  • Sobering stats about the housing market — [analytical]
  • Secret strategies to save on seasonal shopping — [practical]

The Robert Who Cried Wolf

Famed investor Robert Kiyosaki, author of Rich Dad, Poor Dad, recently caused an internet stir by predicting “the start of the biggest crash in history.”

Of course he did.

Kiyosaki is constantly crying wolf. It’s good for (his) business.

Bad news travels faster than good news.

People who prioritize attention over truth will use that to their advantage. Kiyosaki is a shrewd businessman. He understands the profit potential in strategic pessimism.

But that’s bad news for his followers. Per the law of large numbers, it’s reasonable that some people have kept their cash on the sidelines, rather than investing in the markets, after heeding his warnings. And that has massive lifelong ramifications on their wealth and retirement.

Lesson: Beware of anyone who peddles *negativity bias* in order to stay relevant.

These economic fear-mongerers don’t hold accountability for their track record of wrong predictions.

Their followers are the ones who suffer.

This is why it’s critical to choose your mentors carefully — and it’s precisely why you should never blindly enroll in an online class that’s taught by some random person whose ideas you haven’t vetted.

If you’re curious how often Kiyosaki has made the wrong call, note that Stanford-trained data scientist Nick Maggiulli, our guest on Episode 375 of the Afford Anything podcast, shared this illustration on X:

Pessimism has a visceral appeal. It’s evolutionarily advantageous to be hyper-aware of threats.

Our ancestors didn’t survive the jungle or savanna by appreciating the beautiful flowers. They survived by staying hyper-vigiliant of danger. This explains why negativity bias is so innate, so intrinsic. It’s a survival mechanism.

But in the modern developed world, pessimism keeps us overly conservative. We choose the “safe” major. We take the “steady” job. We tilt too heavily into conservative investments when we’re young, and we panic when our 401k’s start to decline. We avoid real estate investing and starting side businesses because these seem too risky.

Pessimism stifles innovation, entrepreneurship, and creativity. It locks us into mundane careers and middling investments as we muddle through risk-averse lives. In the end, we haven’t endured huge losses, but neither have we *embraced a shot* of winning.

As Episode 284 podcast guest Morgan Housel eloquently said:

“Pessimists get to be right. Optimists get to be rich.”

No, The Fed Lowering Interest Rates by 25 Basis Points Is Not Going to Flood the Market with New Housing Inventory 🙄

A little history lesson:

Once upon a time, in 2008, there was a Great Recession. It scared many investors and homebuilders, and they stopped making new homes.

In the decade that followed the Great Recession, new construction reached its lowest point since the 1960’s.

By 2019, the housing shortage amounted to 3.8 million units. This means there were 3.8 million more families and individuals who wanted a place to live — either to rent or buy — than there were homes available.

Then the pandemic struck. The prices of copper, lumber and other construction items shot through the roof (no pun intended). Builders had to raise home sale prices due to higher materials costs. Prices soared.

In 2020 and 2021, people across the internet cried, “Why are they charging so much more than the home is worth?!” — not realizing that “worth” is a function of the cost of labor + the cost of materials + the premium of scarcity.

And when supply is curtailed — as it was by 3.8 million units as of 2019 — there’s an ample scarcity premium.

Then inflation climbed. The Federal Reserve raised interest rates 11 times during their 2022-2023 cycle, resulting in a rapid escalation of mortgage rates.

This created a “lock-in effect” among existing homeowners. Nobody wants to trade a mortgage with a 3 percent fixed interest rate for an alternate mortgage with a 7 percent rate.

Existing homeowners with a mortgage have a huge incentive to hold.

Sellers who *need* to get rid of their property — for example, because they’re moving to another country — list their homes on the market. But homeowners who simply *want* to upsize or downsize are, for the most part, staying put.

This has created even more housing supply pressure.

Meanwhile, homebuilders — who must borrow money to finance their operations — are seeing the cost of capital skyrocket. Many have curtailed new construction, putting further pressure on the supply pipeline.

So we have a long-running confluence of factors that, piece by piece, keep exacerbating the housing supply crunch.

And this leads to today’s takeaway:

No, this problem will not magically solve itself the moment that the Fed reduces interest rates.

The Fed is meeting today and tomorrow. They’re widely expected to hold rates steady. (They’ll make an official announcement at 2 pm on Wednesday.)

There’s rampant speculation that the Fed will lower interest rates in Q1 or Q2 of next year.

— And —

There seems to be a pervasive myth that once interest rates decline, those “locked-in” homeowners will rush to list their homes for sale, flooding the market with new inventory.

The supply-demand imbalance will tilt in the buyer’s favor, home prices will plummet, and housing will become affordable once again.

Yet that is pure fantasy, disconnected from the data.

Imagine 10 people. Nine of them have mortgage rates that are less than 6 percent. The stat is 91.8 percent of mortgaged homeowners, to be precise.

Wait.

Imagine those same 9 people, the 9 out of 10 who have a sub-6 percent interest rate. Here’s how they break down:

  • One has an interest rate between 5 to 6 percent.
  • Two have an interest rate between 4 to 5 percent.
  • Six have an interest rate below 4 percent. The exact stat is 62 percent.

Let me say that again:

Six out of 10 mortgaged homeowners have an interest rate that’s below 4 percent.

Meanwhile:

One-half of mortgaged homeowners (49 percent) say they’d consider listing their home only if interest rates fell below 4 percent, according to a Redfin survey conducted by Qualtrics.

So this myth that if the Fed lowers interest rates, the market will get flooded with new inventory? — That scenario isn’t likely to happen for a long, long, looooong time.

As of Dec 12, 2023, the current average 30-year fixed rate for a buyer with a 740-760 credit score is 7.4 percent. Multiple reductions in interest rates won’t begin to approach the sub-4 percent rates of yesteryear.

The “lock-in effect” will last for longer than you might expect.

Lesson: Don’t wait to buy a home based on speculation about the market. If you have both the money and desire to buy a home, DO IT NOW. Homes are likely going to get more expensive in the future, not less.

How to Not Flush AS MUCH Money Down the Toilet This Holiday Season

Yeah, I know.

The holiday season is custom-built for parting with your money. Every store is promoting sales, discounts, offers. Limited time only.

It’s scarcity on steroids.

Holiday deals tap into the part of our brain that says — “this deal is only available now; I should snag it while I still can.”

Our FOMO creates jobs and drives the economy.

Since holiday spending is human nature, let’s forgo the guilting, shaming and finger-wagging that’s so endemic to the personal finance and FIRE community.

It’s counterproductive. Guilt and shame over holiday spending doesn’t change human behavior, it merely robs the joy from it.

It’s like chowing down a piece of chocolate cake while simultaneously fretting about the sugar.

You’re eating the cake regardless. You may as well enjoy it.

Instead, let’s accept that some degree of holiday spending is normal, and let’s focus on how to find the best deal possible.

Here are four pointers. (If you have more to add, please share these with the Afford Anything community) —

#1: If you’re buying an item at a mid-size company’s website (i.e., a merchant that’s bigger than a mom-and-pop shop, but not a big box retailer like Target or Amazon) — move your cursor near the “back” arrow on the browser.

This is called “exit intent,” and it often triggers pop-ups with discount codes.

#2: For online purchases: Create an account, put an item in your cart, and then leave the website.

This is called “abandoned cart,” and often triggers an automation in which the company emails you a limited-time-offer discount code.

#3: If you’re buying something expensive (over $500 – $1,000 or more), track the price for a few weeks, especially around the holidays. On sites like Wayfair, I’ve seen prices fluctuate daily.

#4: The least useful savings tip: Googling discount / promo codes or pulling these codes from mass aggregator websites.

You may get lucky, but typically 9/10 are expired or don’t work; they just yield a bunch of extra open tabs on your browser.

There’s an enormous selection of third-party websites and browser extensions that claim to help with this, with varying degrees of efficacy.

I’m not going to recommend any specific tools; recommendations are both dynamic and better crowdsourced. Please share your experience with the community.

Source: affordanything.com

Apache is functioning normally

With four commission lawsuits in play, Illinois currently holds the title for the most commission lawsuits in one state. In addition to the long running Moehrl commission lawsuit, as well as the Batton 1 and Batton 2 suits, the Prairie State is now home to the Tuccori suit, filed in early December 2023 by James Tuccori against @properties.

The suit was originally filed in the Circuit Court of Cook County Illinois, but it was moved to the U.S. District Court for the Northern District of Illinois Eastern Division last Friday.

Like the other copycat commission lawsuits, the plaintiff James Tuccori, an Illinois resident who purchased a home listed on the local MLS in 2018 with the help of an @properties agent, is accusing real estate industry players of colluding to artificially inflate real estate agent commissions. The suit takes aim at the National Association of Realtor’s Participation Rule which requires listing brokers to make a blanket offer of compensation to the buyer’s broker in order to list a property on a NAR affiliated MLS.

“These anti-competitive rules permit Defendant and other NAR members to sustain buyer-agent fees at artificially high levels which would not exist in a competitive marketplace,” the complaint reads. “Defendant and the members of NAR further protect and promote their conspiracy by exerting control over and manipulating the MLSs, which constitute the gateway to homebuying and selling.”

“There is no pro-competitive benefit to the conspiracy,” the complaint adds. “Defendant and its coconspirators have effectively maintained and significantly raised the financial costs of buyerbroker commissions, despite the diminishing role of such buyer-brokers due to the emergence of third-party listing websites.”

As with all of the other commission lawsuits, Tuccori’s suit is seeking class action status. However, the suit is seeking both national and Illinois class action status for all persons who purchased a home listed on a NAR MLS with a buyer’s agent and or seller-agent employed or affiliated with @properties or any of its franchises, subsidiaries, or agencies between March 17, 2000, and the present.

The plaintiff is demanding a jury trial, as well as damages and a permanent injunction that prevents the defendants from continuing on with these practices.

In an emailed statement, a spokesperson for @properties Christie’s International Real Estate, the top brokerage in Chicago, wrote that the copycat suit was in response to the Missouri jury’s verdict in the Sitzer/Burnett suit.

“The Kansas City case was premised on those other brokerages controlling NAR by having their executives serve on its board of directors and executive committee, which allegedly created, implemented, and enforced the NAR rules at issue. In contrast, the Chicago complaint makes no specific allegation that @properties was or is involved in any such activities,” the spokesperson wrote. “In fact, while we are members of NAR, no @properties manager or executive has ever served in any role at NAR with any rule-making authority. This applies to Mabel Guzman, a former @properties agent who is mentioned in the complaint, but who was never an employee or manager with @properites and was never directed by @properties’ management in her volunteer role with NAR. We will move to vigorously defend against this complaint and believe that it will be resolved in our favor.”

Guzman moved to a Coldwell Banker affiliate in Chicago in 2020 and remains an active member of NAR. According to her official biography, she served as the NAR 2021 vice chair for the insurance committee and she also chaired the business insurance work group. In 2020, she served as vice president of association affairs at NAR.

Source: housingwire.com

Apache is functioning normally

Slowing job growth doesn’t mean a recession, but today’s jobs report tells me that the significant job gains we were accustomed to in the early part of the COVID-19 recovery period are ending, which ties nicely to how I thought labor would recover after COVID.

Even though the headline number on the report today beat estimates, we are entering a new phase of the economic cycle, which means you need to know where to look to get clues for a recession. The BLS jobs report data isn’t the best recession indicator, which we can all see since the recession of 2023 — forecast by so many — didn’t occur.

Here are my three key points on the labor market recovery since I retired my COVID-19 recovery model on Dec. 9, 2020:

1. Job openings should get to 10 million. (We eventually got to 12 million) We’re now down to 8.8 million.
2. We should get back all the jobs lost to COVID-19 by September of 2022. That checked off roughly on schedule, see here.
And the third is the most important one at this stage of the cycle:
3. If we didn’t have COVID-19, the total employment in America would have been between 157 million-159 million today. We are there now, and since population growth is slowing down, we shouldn’t have big labor reports going out, which will be perfectly normal.

Let’s take a look at today’s jobs report.

From BLS:Total nonfarm payroll employment increased by 216,000 in December, and the unemployment rate was unchanged at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued growing in government, health care, social assistance, and construction, while transportation and warehousing lost jobs.

Here are the jobs that were created and lost in the previous month:

In this jobs report, the unemployment rate for education levels looks like this:

  • Less than a high school diploma: 6.0%
  • High school graduate and no college: 4.2%
  • Some college or associate degree: 3.1%
  • Bachelor’s degree or higher: 2.1%

It’s jobs week, so we had four total reports. The job openings data was interesting because the quits percentage and hires are now below COVID-19 levels, which means the Federal Reserve is too restrictive with their policy today since the growth rate of inflation has fallen more than they thought.

However, the labor market isn’t breaking: jobless claims data is almost below 200,000. I will not go into full recession mode until this data line breaks over 323,000 on the four-week moving average. Don’t make the same mistake so many Wall Street people did in 2022-2023 by thinking a slowing down is a job loss recession. We aren’t there yet.

Of course, the 10-year yield had a wild day today. It shot up toward 4.08%, then fell to 3.96% after the poor ISM service print, and ended the day 4.05%. Some people might not understand yet how bad the ISM service print was, which could be one reason bond yields header higher later in the data.

Here is the chart of the 10-year yield before jobs Friday. The trend was going lower, but we hit a critical resistance level of 3.80%:

So, what do we make of the labor market after jobs week? Yes, it’s getting softer as the job openings/quit percentage data has been telling us. The significant job gain reports are past us now, and we are starting to get back to our regular pre-COVID-19 trend of job growth data.

Does this mean the labor market is breaking? No, but we don’t want the Fed to wait for jobless claims to break above 323,000 on the four-week moving average to cut mortgage rates. So, hopefully, the Fed realizes they overhiked and should be doing cuts to land the plane since the inflation growth rate has fallen faster than they thought.

Source: housingwire.com