So I've been studying macro economics more and more lately. Particularly like George Gammon's youtube channel since he breaks it down so simply. It's actually caused me a bit of anxiety trying to listen to both sides of the debate and figure out what I believe is likely to happen and plan accordingly. Both sides have convincing arguments.
One of my biggest questions is what actually happens to a mortgage in the event that central bank policy leads to inflation, deflation or total collapse. I owner occupy a triplex near the Pearl and we use the two 1/1 apartments as short term rentals. Outside of March and April they break even or cash flow a couple hundred bucks for just a few hours of work a month and we don't have to pay a mortgage. We are working a refi that will lower our payments $700/month too.
The first of the year I never would have considered selling and I still do not want to but I'd be lying to say I am not concerned about living and owning in a downtown area due to covid, riots and growing crime/homelessness we are seeing around us. A homeless dude walked up on my porch yesterday at 7 am, carrying a tv he found in bulky item pickup to plug it in to see if it worked. The ****ing audacity blew my mind and he was mad that I asked him what the **** he was doing.
So, being that I entered real estate in 2015 I've obviously not seen a full cycle, not that anyone has seen what could be coming in a US cycle. I'm interested in opinions on what happens to mortgages in the event of any of the three possibilities the macro guys see coming.
1. Inflationary events- it sounds like this is the best case scenario for a property owner in a new low fixed rate 30 year mortgage. As long as people have jobs both rents and values should continue to go up and you're paying the mortgage with cheaper and cheaper dollars....until the dollar collapses. It sounds like the fed wants to and is trying to keep inflation running a bit hot but will they be able to do so?
2. Deflationary events- it sounds like this is the worse case for my situation as both rents and values would decline. Embry is building ~400 new class A apartments 1/2 mile from me, not that they are my direct competition now but should I want/need to go back to long term this would seem to put downward pressure on rents. Combine that with all the brand new commercial like the new Chase building, the new Credit Human building and the potential for commercial apocalypses I could see this beautiful little pocket collapsing for sure.
3. Collapse- what the f happens to my mortgage and my ownership of this home in a complete collapse of the banking system? Given that either scenario could lead to complete collapse I find myself wondering how I would preserve my investment here.
We have a 6 month reserve, we have cash we are looking to invest in apartments and I believe we are well positioned to buy value add deals after the elections that will provide us cash flow long term but this whole mess and the QE that is going on leaves me with more questions than I know how to ask. I am not even sure if I am asking the right questions at this point.
I look forward to your insight fellow RE ags.
One of my biggest questions is what actually happens to a mortgage in the event that central bank policy leads to inflation, deflation or total collapse. I owner occupy a triplex near the Pearl and we use the two 1/1 apartments as short term rentals. Outside of March and April they break even or cash flow a couple hundred bucks for just a few hours of work a month and we don't have to pay a mortgage. We are working a refi that will lower our payments $700/month too.
The first of the year I never would have considered selling and I still do not want to but I'd be lying to say I am not concerned about living and owning in a downtown area due to covid, riots and growing crime/homelessness we are seeing around us. A homeless dude walked up on my porch yesterday at 7 am, carrying a tv he found in bulky item pickup to plug it in to see if it worked. The ****ing audacity blew my mind and he was mad that I asked him what the **** he was doing.
So, being that I entered real estate in 2015 I've obviously not seen a full cycle, not that anyone has seen what could be coming in a US cycle. I'm interested in opinions on what happens to mortgages in the event of any of the three possibilities the macro guys see coming.
1. Inflationary events- it sounds like this is the best case scenario for a property owner in a new low fixed rate 30 year mortgage. As long as people have jobs both rents and values should continue to go up and you're paying the mortgage with cheaper and cheaper dollars....until the dollar collapses. It sounds like the fed wants to and is trying to keep inflation running a bit hot but will they be able to do so?
2. Deflationary events- it sounds like this is the worse case for my situation as both rents and values would decline. Embry is building ~400 new class A apartments 1/2 mile from me, not that they are my direct competition now but should I want/need to go back to long term this would seem to put downward pressure on rents. Combine that with all the brand new commercial like the new Chase building, the new Credit Human building and the potential for commercial apocalypses I could see this beautiful little pocket collapsing for sure.
3. Collapse- what the f happens to my mortgage and my ownership of this home in a complete collapse of the banking system? Given that either scenario could lead to complete collapse I find myself wondering how I would preserve my investment here.
We have a 6 month reserve, we have cash we are looking to invest in apartments and I believe we are well positioned to buy value add deals after the elections that will provide us cash flow long term but this whole mess and the QE that is going on leaves me with more questions than I know how to ask. I am not even sure if I am asking the right questions at this point.
I look forward to your insight fellow RE ags.