patrick.net

NuttBoxer says

Only complaint was the single bathroom

One bathroom for a small to medium sized family is a minor inconvenience. Nothing more.

NuttBoxer says

it's pretty fucking depressing to admit that your wealth is being stolen from in front of your eyes, and the system you've been told leads to prosperity, actually leads to slavery.

The US government doesn't have to pay off its $31 trillion debt. The government debt can't be compared to something like a household's finances. When governments for one reason or another run up large debts, it is, as far as I can tell, unusual to pay those debts off. - Paul Krugman, May 23, 2023

Few investors rode the pandemic-era housing boom as high as Jay Gajavelli. Fewer still have fallen as far.
Before Gajavelli found his real-estate career, the 61-year-old immigrant from India was just another information-technology worker, putting in 60-hour weeks for a middling job in Dallas. Last year, Gajavelli’s company owned more than $500 million worth of Sunbelt apartment buildings with more than 7,000 units, and was one of Houston’s biggest landlords.
Over the past four years, Gajavelli built his real-estate empire using funds from dozens of small investors who wanted a chance to earn a landlord’s riches without any of the work. He pitched double-your-money returns in ebullient, can-do talks at investor conferences and on YouTube videos. 
He described buying buildings with plans to upgrade units, raise rents and sell for a profit after as little as three years. The idea that everybody needs a place to live was the bedrock of Gajavelli’s pitch. “I never worry about [the] economy now,” Gajavelli told investors in a webinar presentation last year for his company, Applesway Investment Group. “Even if [the] economy goes down, still I make money.”
Gajavelli’s investors were, in fact, highly vulnerable to interest-rate increases over the past year that crushed the business model that they and thousands of others in similar deals across the U.S. had hoped would make them wealthy. For them and a host of small investors —who were expecting a share of rents and a piece of the profit in an eventual sale—it is looking like a looming investment-property disaster.
In April, Gajavelli’s company lost more than 3,000 apartments at four rental complexes taken in foreclosure, one of the biggest commercial real estate blowups since the financial crisis. Investors lost millions. Gajavelli didn’t respond to requests for comment.
His company had taken out commercial real-estate loans that carried floating interest rates and were adjusted each month. Those types of loans in 2021 offered initial rates as low as 3.5%. Everything changed when the Federal Reserve began raising rates last year, driving up monthly loan payments. Inflation contributed to higher expenses, and Applesway couldn’t raise rents fast enough to keep pace. After bills went unpaid, company properties went into foreclosure.

https://apple.news/AxiPeg69nRZqA85XuvSnPJA

Al_Sharpton_for_President says

Noooooooooooo!

RWSGFY says

Al_Sharpton_for_President says

Noooooooooooo!

That looks like bullshit. Weren't prices still going up in 2022?

pudil says

@pudil,

There’s two problems with debt.

1. You get overextended. Sure it’s all great on paper when you’re using 5% down loans to build your real estate empire. But then the market takes a dip and the bank calls your loan and then you’re forced to sell into a down market.

I have never seen or known anyone who got their loan called due. In theory, it’s possible, but I haven’t seen it in real life.

Banks are in the business of lending, not foreclosing, or calling the loans due and taking losses. As long as people keep making payments, banks will let them be and not calling anything due.

GNL says

That looks like bullshit. Weren't prices still going up in 2022?

https://www.redfin.com/news/housing-market-tracker-april-2023/

I think everyone should be prepared for rates going higher from here. You should be prepared for 6 or 7 percent. - Jamie Dimon, May 22, 2023

gabbar says

The US government doesn't have to pay off its $31 trillion debt. The government debt can't be compared to something like a household's finances. When governments for one reason or another run up large debts, it is, as far as I can tell, unusual to pay those debts off. - Paul Krugman, May 23, 2023

Tell that to Venezuela, Zimbabwe, Nigeria, Weimer Germany. Free market says nothing goes up forever, confidence in a scam always evaporates, and what's left is just reality. If it wasn't taken from the ground, it wasn't earned.

RWSGFY says

Inflation contributed to higher expenses, and Applesway couldn’t raise rents fast enough to keep pace.

Naw man, you didn't listen to all the opinions in this thread. Rents and salaries always keep pace with inflation. Just sit back and relax, someday we'll all be millionaires!!!

WookieMan says

I've known people that have committed suicide over debt.

How many?

Without sharing others' personal informations, what were the circumstances?

Eman says

I have never seen or known anyone who got their loan called due.

You need to get out of the Cool And Hip Bay Area, bro.

RWSGFY says

“I never worry about [the] economy now,” Gajavelli told investors in a webinar presentation last year for his company, Applesway Investment Group. “Even if [the] economy goes down, still I make money.”

No you don't.

Eman says

Banks are in the business of lending, not foreclosing, or calling the loans due and taking losses. As long as people keep making payments, banks will let them be and not calling anything due.

What do regulators say about that? Banks don't ever have to mark their assets to market?

(I have no idea).

NuttBoxer says

If it wasn't taken from the ground, it wasn't earned.

I've long said that real wealth can only come from labor and land. Everything else is a skim.

Eric Holder says

Eman says

Banks are in the business of lending, not foreclosing, or calling the loans due and taking losses. As long as people keep making payments, banks will let them be and not calling anything due.

What do regulators say about that? Banks don't ever have to mark their assets to market?

(I have no idea).

Let’s look at it from this perspective.

House 1 is worth $1M. Bank lent $800k. House drops to $600k. Borrower still makes monthly payments like clockwork. What’s the mark to market value?

House 2 is worth $1M. Bank lent $500k. House drops to $600k. What’s the mark to market value when the borrower defaults on payments?

In general, banks only mark it to market once the assets have been foreclosed and on the book. This is when the assets are called “bank owned”.

Another scenario, house is worth $1M. Bank lent $800k at 3%. However, banks now have to pay depositors 4.5% for their money. What’s the mark to market value on this $800k note?

GNL says

NuttBoxer says

If it wasn't taken from the ground, it wasn't earned.

I've long said that real wealth can only come from labor and land. Everything else is a skim.

@GNL,

Is Warren Buffett a skimmer or a labor? Some people work with their brain while others with their hands. However, they don’t get compensate equally. One thing most people don’t realize is that we get to determine how much our time is worth.

When I was working a W2, I knew I was worth a lot more. I knew I was there for the experience and reputation (of the company) before opening my own firm. Then I realized I would still be trading time for money even if I owned my own firm. My family wouldn’t be taken care of if I kicked the can.

Then the GFC happened. I hung up my W2 and went ball deep into what I knew could build generational wealth and take care of my family in the event I kicked the can. Within a few short years, it proved to be a prudent decision. Wife’s siblings said quitting my W2 was the best decision for the family. Some of them are a few millions richer, on paper, because of my decision. Simply amazing how one decision can change the course of someone’s life forever.

Eric Holder says

Eman says

Banks are in the business of lending, not foreclosing, or calling the loans due and taking losses. As long as people keep making payments, banks will let them be and not calling anything due.

Bankers are in the business of taking everything you earn, and making it theirs. The money is worthless, it's what we put into the system that adds the value.

Eman says

Is Warren Buffett a skimmer or a labor? Some people work with their brain while others with their hands. However, they don’t get compensate equally. One thing most people don’t realize is that we get to determine how much our time is worth.

Neither. Buffet is a pedo. No way what happened in Omaha in the 80's would have been allowed otherwise.

On the compensation, you are 100% correct. Probably not how you're thinking though. Putting number in an account or paying someone paper with no real value isn't worth much, as we are learning more and more every day. But what you take out of the ground always has value, regardless of if the system collapses on it's head.

I'd rather be self-sufficient on my own land than make a million dollars a year.

Eman says

Let’s look at it from this perspective.

House 1 is worth $1M. Bank lent $800k. House drops to $600k. Borrower still makes monthly payments like clockwork. What’s the mark to market value?

House 2 is worth $1M. Bank lent $500k. House drops to $600k. What’s the mark to market value when the borrower defaults on payments?

In general, banks only mark it to market once the assets have been foreclosed and on the book. This is when the assets are called “bank owned”.

Another scenario, house is worth $1M. Bank lent $800k at 3%. However, banks now have to pay depositors 4.5% for their money. What’s the mark to market value on this $800k note?

If bank needs to sell its assets to cover some of its obligations, the asset will
be sold at market value. It makes sense to regularly re-mark them to current market IF we are interested in the correct assesment of the bank's health. It's no different from AAPL stock: if it goes down you haven't lost anything unless you sell, but it is worth whatever the market says it's worth NOW.

@Eman,

Everything is and has been built upon labor+land. No offense but you're not adding anything to the economy imo. I'm not a hater, I'm just a simple thinker. I'm a business owner. My goal is also to build generational wealth. I think I have a good shot at making it happen. The difference is that I will be adding to the economy by eliminating middlemen by giving their employees everything they need to be a one man/woman business...for free. Yep, free. Many of these employees will go from earning minimum wage to over $100k.

Bitcoiner says

Nuttboxer, since you don’t like loans and banks…..wouldn’t you need a million in cash first to buy the land, equipment, etc to be self-sufficient? Or are you thinking of renting the land and the equipment?

@Bitcoiner

What came first, the land (chicken) or the fiat (egg)?

Where does capital come from? The sky monkey? Inflation? Mammon? The end game is either 1. locust fields, 2. depop or 3. 3rd world hellscape.

GNL says

Eman,

Everything is and has been built upon labor+land. No offense but you're not adding anything to the economy imo. I'm not a hater, I'm just a simple thinker. I'm a business owner. My goal is also to build generational wealth. I think I have a good shot at making it happen. The difference is that I will be adding to the economy by eliminating middlemen by giving their employees everything they need to be a one man/woman business...for free. Yep, free. Many of these employees will go from earning minimum wage to over $100k.

Adding value is all relative. This was why I referred to Warren Buffett. Does he add any value to the economy to you?

For me, it’s always been about having free time, owning my time and spending it however I want while taking care of my family in the event I kick the can. We’re all only on this earth for a short amount of time. I want my stay and my loved ones’ stay to be enjoyable. I’m not Elon Musk and don’t want to be one.

Have fun building your biz. 🚀🚀

Bitcoiner says

How are landlords or home flippers not adding to the economy?
Supply purchases to improve/remodel homes/apartment, employing contractors, collecting rent and re-investing the profit. And providing shelter to renters and a remodeled home to new homeowners. And being a RE millionaire means you spend your excess money on nice vacations, good food and entertainment.

What type of business do you own GNL?

Taking a dilapidated 2/1 house, made it into a 3/2 and sold for the highest price in the neighborhood is not adding value.

https://redf.in/rdeBNa

Taking a small 1,100 3/2 house, made it into a 1,700sf 4/3 house is not adding anything to the economy.

https://www.redfin.com/CA/Oakland/4266-Maple-Ave-94602/home/1913776?600390594=copy_variant&231528114=control&1778901559=variant&utm_nooverride=1

What does putting money in the stock market add to the economy? What does money managers add to managing money when everyone can just by SPY or QQQ? Adding value is relative IMO.

I love real estate for a simple reason. It’s like planting trees. One time effort while we get to reap the rewards for decades to come. All we have to do is watering it and adding fertilizer as needed.

Watching local billionaires such as John Sobrato, George Marcus, Todd and Ned Spiekers, who built their real estate empire and got to where they are today, there’s no reason to feel ashamed of what we do. Real estate is there for the taking. Anyone can do it, but not everyone will. It’s much easier to make excuses.

Eman says

Taking a dilapidated 2/1 house, made it into a 3/2 and sold for the highest price in the neighborhood is not adding value.

https://redf.in/rdeBNa

Taking a small 1,100 3/2 house, made it into a 1,700sf 4/3 house is not adding anything to the economy.

https://www.redfin.com/CA/Oakland/4266-Maple-Ave-94602/home/1913776?600390594=copy_variant&231528114=control&1778901559=variant&utm_nooverride=1

What does putting money in the stock market add to the economy? What does money managers add to managing money when everyone can just by SPY or QQQ? Adding value is relative IMO.

The idea of unearned income was big in CCCP before 1991. As in if you shovel shit at the government-owned farm or make ak-47s at governmen-owned factory - your income is earned and you're good person, but if, God forbid, you grow some flowers and sell them at the corner or sublet one room in your apartment to a student - your income is unearned and you're all kinds of horrible. But the worse kind of offence was selling something for more than you bought it for. That was "speculation". Sometimes it feels like half of p.net are closet Soviets, lol.

Eman says

Taking a dilapidated 2/1 house, made it into a 3/2 and sold for the highest price in the neighborhood is not adding value.

How so? An uninhabitable house was converted to a livable asset.

Eman says

I love real estate for a simple reason. It’s like planting trees. One time effort while we get to reap the rewards for decades to come. All we have to do is watering it and adding fertilizer as needed.

Watching local billionaires such as John Sobrato, George Marcus, Todd and Ned Spiekers, who built their real estate empire and got to where they are today, there’s no reason to feel ashamed of what we do. Real estate is there for the taking. Anyone can do it, but not everyone will. It’s much easier to make excuses.

I haven't seen anyone make excuses. Personally, to me, it comes down to "Am I doing my part for society?" That does sound a little pithy(?) but, I prefer to succeed in a way that adds. I admit that "Adds" might be subjective.

HeadSet says

Eman says

Taking a dilapidated 2/1 house, made it into a 3/2 and sold for the highest price in the neighborhood is not adding value.

How so? An uninhabitable house was converted to a livable asset.

I'm pretty sure he's being sarcastic. I have a brother who is a "mortgage guy". I do not think he adds anything to the economy. I see lawyers the same way.

Bitcoiner says

What type of business do you own GNL?

Specialized blue collar.

GNL says

HeadSet says

Eman says

Taking a dilapidated 2/1 house, made it into a 3/2 and sold for the highest price in the neighborhood is not adding value.

How so? An uninhabitable house was converted to a livable asset.

I'm pretty sure he's being sarcastic. I have a brother who is a "mortgage guy". I do not think he adds anything to the economy. I see lawyers the same way.

You haven’t been sued or slandered obviously.

1337irr says

GNL says

HeadSet says

Eman says

Taking a dilapidated 2/1 house, made it into a 3/2 and sold for the highest price in the neighborhood is not adding value.

How so? An uninhabitable house was converted to a livable asset.

I'm pretty sure he's being sarcastic. I have a brother who is a "mortgage guy". I do not think he adds anything to the economy. I see lawyers the same way.

You haven’t been sued or slandered obviously.

I've had to hire a lawyer before. Does that count for anything? Oh, and I try to keep a low profile.

Eman says

It’s much easier to make excuses.

Excuses for what?

Eric Holder says

The idea of unearned income was big in CCCP before 1991. As in if you shovel shit at the government-owned farm or make ak-47s at governmen-owned factory - your income is earned and you're good person, but if, God forbid, you grow some flowers and sell them at the corner or sublet one room in your apartment to a student - your income is unearned and you're all kinds of horrible. But the worse kind of offence was selling something for more than you bought it for. That was "speculation". Sometimes it feels like half of p.net are closet Soviets, lol.

There’s a difference between speculators and investors. Investors buy based on numbers aka ROI (return on investment). Speculators buy based on market euphoria with no fundamental evaluation. Investors always get a bad rep when SHTF.

As I’ve shared over and over again, We buy properties at cheap prices. Investors want to buy “cheap”. Buyers are the ones who drive prices up, and then blame it on investors when SHTF. Speculators help to fuel the prices to the stratosphere. Fortunately, speculators don’t get to play in the housing market this time around unlike during the housing boom in 2000’s.

HeadSet says

Eman says

Taking a dilapidated 2/1 house, made it into a 3/2 and sold for the highest price in the neighborhood is not adding value.

How so? An uninhabitable house was converted to a livable asset.

My point is that “adding value” is relative. We believe we “add value” while others believe we are skimmers and speculators. If it were easy, why didn’t they do it? Rather than settling for a W2 and be someone else’s bitch, we grab life by the horn and control our own destiny.

GNL says

HeadSet says

Eman says

Taking a dilapidated 2/1 house, made it into a 3/2 and sold for the highest price in the neighborhood is not adding value.

How so? An uninhabitable house was converted to a livable asset.

I'm pretty sure he's being sarcastic. I have a brother who is a "mortgage guy". I do not think he adds anything to the economy. I see lawyers the same way.

Our attorney bills us at $550/hour. When we saw him in action, that was when we felt he was worth every penny.

Our CPA bills us at $250/hour plus $150 for software fee. If she were to bill me $500/hour, I would still pay her. That’s how much value I see in her while other believes she doesn’t add much value.

Value is relative. For me, I want to be financially free and get to spend my time however I want. I don’t want to exchange my “finite” time on this earth for money. Haven’t had a W2 since 36 and it’s been a wonderful life. I want to be able to provide my loved ones with the same experience. Real estate just happens to be a means to an end.

Bitcoiner says

Eman says

I love real estate for a simple reason. It’s like planting trees. One time effort while we get to reap the rewards for decades to come. All we have to do is watering it and adding fertilizer as needed.

Watching local billionaires such as John Sobrato, George Marcus, Todd and Ned Spiekers, who built their real estate empire and got to where they are today, there’s no reason to feel ashamed of what we do. Real estate is there for the taking. Anyone can do it, but not everyone will. It’s much easier to make excuses.

Couldn’t agree more. Exactly my plan. Buy more RE, retire early from my corporate job and manage rentals.

Have you seen a real estate billionaire retired or any billionaire for that reason? I’ve had a chance to talk to a couple. It seems the word retirement is for people who don’t like their job. When you love what you do, you’ll work until the day you die. Google billionaire John Arrillaga who resided here in the Bay Area, he basically worked until the day he died. He was a real estate billionaire. His son is following his footsteps. We almost bought a 40-unit building from his son a couple months ago. The price is $4M higher than what we wanted to pay. 😂

GNL says

Eman says

It’s much easier to make excuses.

Excuses for what?

If you hang out or go to BiggerPockets, you’ll know what I mean. The same with going to real estate meetups. All sort of reasons why it couldn’t be done.

Even in my circle of friends, who I met on BP first, then in person at local meetups. They were full of excuses how it wasn’t possible to invest in the Bay Area. Now, one of them owns 17 units in the Bay, and one syndicated 27 units in the last 18 months. Now, they’re very confident they can repeat it. Real estate is a puzzle. They were just missing a couple of pieces.

A few things I’ve learned from billionaires, and I think they’re relevant when it comes to investing be it real estate or other assets.

1) buy with a margin of safety. Price is what we pay. Value is what we get. - Warren Buffett.

2) Rather pay a fair price for a great asset than a great price for a fair asset. - Warren Buffett. I would interpret this as buying prime real estate assets over cheap ones.

3) liquidity = value. Sam Zell. He learned it first hand during the S&L crisis, and I’ve witnessed myself.

These are some of the things to keep in mind in addition to putting the puzzle together to succeed in real estate.