BlackStone Real Estate Halts Withdrawals

“When things look grim, be the Reaper” - Andy Reid, Head Coach Kansas City Chiefs

Your inbox is going to be full of bad news over the next 12 months, or maybe longer. But we are not concerned. You’ll hear how real estate sales are sliding, home values are dropping, mortgage rates are high, or the economic outlook is uncertain. I have some news for you. Section 8 doesn’t abide by these events. 

😱 Real Estate Sales are Sliding!

Fewer properties for sale with fewer buyers means you can be more patient acquiring that next property. Make sure it fits the forecaster model of at least 5% Cash on Cash return and this fact doesn’t matter. I’ve personally lost 7 bids in the last 60 days. I stick to the model and won’t acquire a property that doesn't cash flow. I look forward to winning one soon, and I’m sure my realtor is too.

😱 Home values are dropping!  270,000 homebuyers who bought in 2022 are underwater on their mortgage

Great. Maybe I can catch a deal. We only advocate for properties that cash flow over the cost of the mortgage. So, yes, it’s a bummer that the house is not as valuable as before, but history has demonstrated that real estate values will return. Even if the return isn’t for a decade or more, it doesn’t matter. EVERY SINGLE MONTH you will get paid more than your mortgage. Remember, the Federal Government is your customer, and Uncle Sam will pay you on time. 🦅 🇺🇸 🎉 

😱 Mortgage Rates Are High

Fun fact, they’re not that high, in fact it could be much much worse. Think mortgage rates are high now? Homebuyers in the 1980s were paying 19%. Yeah, it sucks because you have to pay a little more than last year on the same piece of property, but property prices are also down, so your monthly payment may equal the same property you were looking at last year. If you stick to the model, it’s ok that interest rates are high today because you can always refinance it when rates fall in the future.

But What if Rates Never Fall? Great, you entered the market at the lowest possible rate possible.

But Rates Were 3% Last Year! Ok. I don’t have a time machine. Do you have a time machine? If so, can I borrow it? Looking back on historical rates that aren’t available won’t help you today. But you know what will? Acquire a cash flowing property.

😱 The Economy is So Uncertain. We’re Going to Go into Recession!

Yeah this is definitely a problem. If you have enough cash reserves, and are confident in your job security, keep investing. If your cash is so low and your job is uncertain and every single dollar of your savings will be used to make the downpayment on the property… well I don’t advocate for that. If investing in a property means using up all your emergency cash, then I would rather you build up emergency cash. 

Real estate investing is a long game and not a get rich quick scheme so if you only have $40,000 cash, and buy a $200,000 piece of real estate, you are realistically only going to be returning $4,000 a year in income (10% Cash on Cash). That’s not enough to live. So keep building those reserves. 

But for those of you with the money to make moves, make the move, because your money will grow. 

Which leads me to this final beauty. 

BUT WAIT!!! 

Isn’t it safer if I just invest in a REIT? 

Apparently NOT. 

Blackstone Limits Investor Withdrawals From $145 Billion REIT As Economic Concerns Grow
Glad to know your money is safe with them! All this means is they gobbled up so much real estate that they can’t lease, that their fund is now underwater and all investors can’t get their money out. Hmmmm. So tell me how safe REITs are again? 

It makes sense too. 

If Me and Mike are doing 10% Cash on Cash and up to 30% including unrealized gains per year, then a group like Blackstone has to return MUCH MUCH MUCH more in order to keep their clients happy to justify that management fee. So they are taking bigger risks, bigger bets, bigger leverage, and chasing monster returns. 

So yeah, go hard in a REIT and lock in your money. Or, invest in Section 8 today. We’ll teach you how.