The housing bubble has been looming over buyersâ minds since the pandemic began and hasnât cooled off one bit.
In fact, itâs only getting hotterâââabout to burst!
As prices and the cost of lumber are rising, inventory tightening, Zillow glitching and brokers multiplying, this is most definitely a sellers market.
Those fortunate not to have been negatively ravaged by the pandemic got the chance to save more, spend less and saw their portfolios rise two-fold to record highs during a deadly virus where unemployment and evictions shot up.
With no where to go and WFH bound, this meant more discretionary income to store and reinvest even more! This spiraled into the niche peculiar and unnecessary interest in the vacation home market, a place most utilized 2 months out of the year.
Thatâs the problem when you have too much money. You convince yourself you need more you never wanted.
Real Estate
One of the best ways to add diversification into oneâs portfolio, earn utility, passive income, lower risk and volatility, observe steady long-term gains, hold onto an almost certain appreciating asset, trail the underlying indexes and gain connections to a variety of networks is all through real estate.
Itâll always be in demand, just where is the question.
Majority of Americansâ wealth, 80% of it, is tied up in their main property and arenât even invested in the stock market, let alone own real estate since a mortgage is attached. Real estate can seem daunting and tedious considering thereâs a lot of upkeep with physical property and horrifying strangers a.k.a renters to babysit.
90% of Americans cannot pay straight up with cash for their property and these days, itâs making it even harder for them to get a good deal. These days with constraints, one of the best incentives to snag a property is to put more cash down. Mortgages are never attractive to sellers. Overpaying is the norm. Cash clearly isnât most homebuyers or anyoneâs best friend until they need it. You can read about the importance of cash here and why real estate will always be golden.
When we think of properties, we assume physical tangible real estate with tenants, broken windows, the occasional pest invasion, maintenance and mortgage are only involved which donât get me wrong, is true but letâs not forget you can gain exposure to real estate for a fraction of the cost via REITS that trade like securities via the marketplace and take part in commercial properties or multi-generational homes in the midwest on crowdfunding on platforms such as on CrowdStreet and Fundrise instead.
If you want to get above average returns, increase your net worth, gain exposure to diversification and skyrocket profit, donât beat them, join them. Learn from the expertsâââitâs all free and available information. Needing to be worth a certain amount before jumping on the train is an excuse. Real estate doesnât have to be physical and education doesnât have to come in a $50k classroom anymore.
Big Time
As a fellow New Yorker whoâs been hibernating in the city for the past year, a year Iâve never seen this gloomy and empty in a place that never sleeps, Iâve witnessed the dramatic and swift exodus already 2â3 weeks into the pandemic once it hit early March. Offices were evacuated, black limos lined outside of buildings, WFH kicked in and flights were still taking off to mini islands.
As in most cities, thereâs a stark difference between classes in distinct areas. In New York the areas that vacated the fastest and are still empty today include the Upper and West Side, not past 90th street or so and Tribeca along with some fancy Beyonce parts of Chelsea.
Midtown (Times Square) where tourists gather to the Financial District were both dead. The rest of Chelsea to the West side saw an influx of brave Millennials who embarked on the chance to live out their dream as rents lowered and streets were empty. The pandemic was an opportune time to seize the Big Apple all on their own with no crowded lines or double decker rides
It was peaceful and relaxing like the suburbs for a few months until my neighbors started coming back. But this time with their brand new license pilates and big tummies. Registration plate filings rose and by the end of 2020, the streets were packed with cars creating standstill traffic.
Fleeing of the Rich
New York was back again in winter of 2020 except for the prices, they surprisingly still stayed low and were all taken, which I happened to take advantage of myself. Yet as those who were able to afford the luxury to buy a vehicle in this crowded, cramped city and somehow park it in front of their townhouse or underground for $900 per month, vanished by the weekend to their one and only beach home, typically on Long Island, the top 10%âs escape.
If you want to meet the Upper, no pun intended, East and West siders, drive a few hours to Montauk and Amagansett to visit them in the Hamptons. When I come to think of it, the rich got richer during this pandemic due to strategic spending for vacation properties!
After all, spending more can lead to more money in oneâs pocket. Cheap doesnât last very long nor appreciate in value. As a classic personal finance guru, I got curious and my neighborsâ and upperclass New Yorkers got me thinking about my current and future goals within my portfolio. After all, the decisions I make today as a twenty-year-old will compound in 20, 30 years from now. Today is technically the best time.
Summer Strategies
Since my business, a.k.a rental that I purchased back in March of 2020 at the start of the pandemic has been generating smoothly and Iâve been able to increase rent for my reliable renter, Iâm feeling eager and tempted to scoop up another property before New York gets overblown like Oklahoma or Alpharetta. If you didnât get the chance to read my house hunting journey as a 20 year old, feel free to check it out here. It isnât as bad as you think, if youâre lucky.
At the moment, the housing market seems frothy like stocks, not accurately representing the true value of what these assets are worth so these are dangerous waters but if the wealthy are frolicking to multiple homes, shouldnât I?
After all, they must be doing something right.
What Vacation Really Gets You
My recent attempt to book a getaway in the Hamptonsâââobserving $800 per night for two for an ocean-front view left me dazed and frustrated to find a better deal or snag a property instead. After all, my vacation rental income would surely cover the mortgage in a few months after purchasing it. The only problem is, I donât have $3 million lying around. I guess itâs just have to wait then.
Yet, at the moment I donât have any regrets about not buying since there are truly unexpected headaches when it comes to vacation homes that arenât usually evident elsewhere which include:
-Local ordinances such as limits on renting
-Maintenance living close to the water
-Higher mortgage rates
-Pest and termite invasion
-Break-ins
-Mainly 2 out of the 12 months I would realistically be there-it would be hard to find renters on the beach in November
Just like renting, itâs sometimes better to stay for a few days, pay a bit extra, more like a lot, appreciate the limited stay and visit again next time without the hassle. Just pack up and leave.
As many of us always are, Iâm not looking to overpay on anything and these property valuations are getting a little crazy at this point. The other day I checked out a house, more like a run down shack about to be swept by the ocean in Montauk for $2.7m! I could get a Tyler Perry mansion in Atlanta for that price. I know someone will buy it and turn it into a resort but not me. After all, Iâm there to relax.
Iâm not going to say you have to be a crazy to buy at this time, unless you desperately need to which I donât think anyone is if youâre planning to move to the luxurious overhyped Hamptons, but sometimes you have to wait and pay a little extra instead of snag a hot run-down deal with the long-term headache of real estate.
Especially these days post inoculation, the last place we want to be is in our fully furnished new living room which took 6 months to have furniture delivered to. People want to get away as far as possible in places they never dream nor frankly want to own a home in like Greece or Mexico.
Vacation homes are everyoneâs dream but if you canât get it, improvise and move on. They arenât necessary and donât always make your life easier. The grass isnât always greener on the other side.
The more you have, the more work you have and that work ISNâT always worth it. For now, my rental property is enough at twenty-years-old.
As mentioned, sometimes spending more saves you more money down the line.
Do a staycation at your place, visit grandmas, take a road-trip to a friendlier and less bougie part of the countryâââvirtually anywhere besides the Hamptons and Greenwich, and appreciate staying somewhere that isnât yours!
Donât get too caught up with having multiple homes. Renters are a true pain and we always expect to use things more than we really do.
After all, half of the things we have are a waste unless of course they earn you steady passive income but can a vacation home really provide a true vacation?
Is it located in an all-year vacation opportunistic place or in Michigan?
Let people choose their hassle and priorities and you choose yours. Vacation homes arenât always a vacation.