A Lazy Summer Spent Observing - Posted by JeffB (MI)
Posted by JeffB (MI) on August 29, 2011 at 20:36:18:
As I have written here a few times before, the LD business model is becoming more difficult in my market, and my plan has been to buy a couple free-and-clear rental homes (SFH) in good areas, with the proceeds from my LD note income. This spring I bought two homes and have been enjoying, thus far, headache free tenancies with early payments all around.
Having and RV and two young children, we spend most of the summer traveling and I do very little work other than answer the odd phone call on “what’s your account number again?” or excuses “my dog at my house payment”. No, I’m not kidding.
Since there have been very few good deals pop up on SFH homes I’ve been pretty lazy all summer. We have traveled over 5,000 miles this year already with the RV. During our travels I have come to notice a few things, which I will try to summarize here for your consideration and input as I seek to answer the question, “what now?”
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Suburban vs. Rural living, a tale of two realities. I have noticed that, independent of what state you are in, the pain being felt in rural areas is FAR greater than that of the metro areas. The further you go from a metro area, the worse it gets. Closed businesses, gas stations, restaurants, and vacant homes overgrown by weeds are commonplace. The upper peninsula of Michigan, for all it’s majesty and beauty, looks much like the images shown in the show “Life After People”, which I used to watch when I had cable. The metro areas, on the other hand, are often (but not always) booming, with chain restaurants aplenty jam-packed on a Friday night. New Wal-marts, Lowes, etc continue to pop up on every corner and no consumer need goes unfilled, from designer mattress stores to nail boutiques ad nauseum. In these areas, several of which I have been through, seem oblivious to the pain of their neighbors just 30 minutes away in some cases.
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The poor get poorer. As a continuation of point number one above, many cities (particularly in the rust-belt) seem to be dying a quick death as well. I have witnessed the struggle of most of my payors over the last couple years, all who are paying by most standards what we would classify as “affordable housing”. So perhaps there is demand for affordable housing in one sense, but the people who demand it are, most often, unable to pay for it. This in itself is an irony, because if affordable housing is not affordable, who’s going to live there? As an aside, with so many of my payors collecting unemployment for what seems like a dozen years now, I continue to question the wisdom of our current leaders who enable these masses to survive while doing nothing of value.
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Some people are mad at the government. Some fear the government. The rest despise the government. This one took a little more thought as it was not readily apparent to me until I sat down and really thought about my experiences this summer, collectively, as I talked to people in different cities and states.
a.The poor are upset with the government because the economy has not improved (for them) and the government should have fixed it by now, right? Hope and change?
b. The middle class are ticked off too, because they too pay higher gas prices, more for milk, and $14.99 for those chicken fingers at T.G.I. Friday’s. Not that those prices deter them from consuming the same. Further, many of these dual income households are in tax brackets where they are phased out of nearly every tax credit offered to the working middle class. Because we’ve got to pay for all those shovel-ready jobs!
c. The wealthy seem unhappy as well, knowing full well the inevitable result of this administration’s desire to make them pay their “fair share” and relieve the nation, at last, of it’s crushing debt load.
One may infer from the above my political leanings, but that is not the point of this post. I’m disgusted with almost every single elected official. They are all crooks and liars. Some better than others, but all scoundrels to be sure. Worse yet, the more I think about politics the angrier I get, and doing so accomplishes NOTHING towards my goal of financial freedom and providing for my family’s security.
So with all that, I ask:
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Does anybody share the same observations (especially for numbers 1 and 2 above)?
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If so, is there an opportunity present that can be captured, or alternatively, are there risks which should be avoided?
For me, it is leading me to acquire rentals in these suburban metro areas, near wal-mart, with good access to freeways and plentiful jobs. These homes cost more, but they should rent faster (and for more $$), and attract a better class of tenant. The numbers still need to work, though. But if the home prices tank as some people are predicting they will, I’m not too concerned, because they are debt-free and as such, will always provide cash flow, even if I have to undercut the rental market by 20% to attract the best tenants.