Investing 102

[GregWeld]

Originally Posted by Vegas69

Thank you sir... As I said in my healthy 101 thread.... The pain of discipline weighs ounces, while the pain of regret weighs tons. I can play with cars later, it's time to set myself up for the future.

THAT is exactly what this thread is all about....

[XLexusTech]

Originally Posted by GregWeld

THAT is exactly what this thread is all about....

Vegas... I wouldn't ask this is the answer was not really important to me... did you get an investment or Traditional mortgage? I have a rental that is underwater and just about even..(income to expense annually). I cant refi because I haven't lived in in 3 of the last 5 years... Well I can but only as in investment loan which is not favorable... so if you know a way out i would love to learn...
I thought about putting the property into an LLC and letting it go.. I doubt it will ever be very heavy cash positive without a favorable refi...

[sik68]

That is a sweet deal. It's impressive to be so cash flow pos. without a lot of money down.

Is it common to find houses where the mortgage is significantly less than the rental market price? Do the renters of these places tend to be those that were put out by the housing crash?

[Vegas69]

Originally Posted by XLexusTech

Vegas... I wouldn't ask this is the answer was not really important to me... did you get an investment or Traditional mortgage? I have a rental that is underwater and just about even..(income to expense annually). I cant refi because I haven't lived in in 3 of the last 5 years... Well I can but only as in investment loan which is not favorable... so if you know a way out i would love to learn...
I thought about putting the property into an LLC and letting it go.. I doubt it will ever be very heavy cash positive without a favorable refi...

I purchased the property with an investment loan. I did pay 2 points to get that rate. Your Loan to Value is your biggest problem. The higher LTV, the more risk the lender assumes. What type of loan do you have currently? FHA, VA, Conv (Fannie/Freddie or Private?) Does it adjust or have a balloon?

Depending on your financial position and negative equity, a short sale may be beneficial. I'd certainly do that before suffering a foreclosure. A talk with an asset protection attorney and cpa would be your first steps. The laws are different than Nevada. The LLC won't protect you as the loan is in your personal name. You can only change how you hold title. Then research an agent that has a proven track record of closing short sales.

Originally Posted by sik68

That is a sweet deal. It's impressive to be so cash flow pos. without a lot of money down.

Is it common to find houses where the mortgage is significantly less than the rental market price? Do the renters of these places tend to be those that were put out by the housing crash?

It's really a unique recipe. Our market over corrected due to the bubble burst. Team that with all time low interest rates and displaced homeowners that have suffered a foreclosure/short sale and this is the result.

The margin between ownership and leasing can't be this wide forever. Our prices are increasing rapidly(21.5% in one year) and rates have been inching up. That will do two things: Reduce investor ROI and primary residence affordability. The margins will shrink and vacancy will rise as investors decide to move their money out of our market. I expect a rent decrease down the road but I have lot's of insulation and my properties are always at the top of the heap. I'll have then rented as long as the lights are on downtown.

I really feel like it's a once in a lifetime opportunity to capitalize on low prices AND interest rates at the same time. Investors agree as we(our market) have many hedge funds picking up 50 properties at a time all cash. While I feel our market is getting investor heavy, a majority of the sales over the last 2-3 years have been all cash, heavy down, or highly qualified. The foundation of ownership will be solid this time around. I do see a hiccup coming in 6-12 months when sale inventory increases and interest rates rise. I do see the individuals that have suffered short sales/foreclosures getting back in the market as buyers about the same time the investors start to wane.

I've been wrong before but these investments are no brainers over a lifetime.

[XLexusTech]

Vegas.. I have 2 loans the ole 80/20 from the BS loan days... 80% conventional which is likley 90 LTV on itself.. 20% HELOC which I would consider paying off... if i did the Net cash flow would be about 300/month and the initial outlay would be about 35K.

I thought a short sale is as bad for you credit as a foreclosure? and since the HELOC would have to be paid in full it would be tough to impossible.

Thanks for any help... the advice is appreciated.

[Flash68]

Nice work Todd. Your discipline here is inspiring and painful at the same time.

I have really tried to minimize my depreciating assets overall as well and I am down to just one. Yep, this stupid Camaro.

You are in a great position there with your craft and recognizing the opportunity. Congrats on capitalizing on it. That will be your Social Security (and then some) when the real one has nothing left in the coffers.

The fire extinguisher in the kitchen is a nice touch. Not many LL's I know would provide that. Smart.

[Vegas69]

Originally Posted by XLexusTech

Vegas.. I have 2 loans the ole 80/20 from the BS loan days... 80% conventional which is likley 90 LTV on itself.. 20% HELOC which I would consider paying off... if i did the Net cash flow would be about 300/month and the initial outlay would be about 35K.

I thought a short sale is as bad for you credit as a foreclosure? and since the HELOC would have to be paid in full it would be tough to impossible.

Thanks for any help... the advice is appreciated.

Rates will go up and that heloc will bite you down the road. I've had conversations with many of my past clients that we've closed short sales for and it can be easy on your credit depending on the rest of your profile. I have one that went from 830 to 810 and 800 to 750. (Approx.) A short sale is a settlement of debt, a foreclosure is a black eye on your credit and you forever. It's on a mortgage application, job application, home owners insurance applicatioin. You can get obtain a conventional loan in 2 years after a short sale, and 3 years for FHA. I've had good success with Helocs taking 6-10 cents on the dollar through a short sale and many times the 1st lien has paid it, not the homeowner.

Clearly, there are unlimited variables. From who your lien holder is, you financial position, State laws, on down the road. Find a competent local expert.....

Originally Posted by GregWeld

The key for INVESTING like Todd is doing -- is keeping the properties CLASS A... and investing in great neighborhoods where good people want to live. All the properties I've ever invested in were always class A apartments. You get a better tenant... higher rental rates... and less vacancy etc.

Todd -- I think your rentals should be unaffected by "down the road" events. You've positioned your self well. Great underlying price paid. Low fixed rate mortgage. You'll get good rents because the properties and management are nice. If anything - my guess is you'll be able to RAISE rates as housing prices firm because the prices paid for new purchases will have to be reflected in the rental rates. A rising tide floats all boats. The tighter the market gets with inventory absorption - regardless of who is buying the better it will be for everyone.

We just raised our rental rates 50% in one building I own (an LLC with other investors) and 35% in the one I just invested in (we're doing a major redo of units as they become vacant - raising the quality a long way). Over the next 10 to 15 years these units are going to make nothing but money.

Selling a depreciating asset to buy/invest in an appreciating asset with cash flow is the smartest move you'll have ever made in your entire life (other than marry Kelli). I'm proud of you for having the guts to make the move.

I'll take wisdom over speculation anyday. It makes sense to me as housing prices and rates increase, rents will follow. I've always been floating around in the glass with it half full and empty at the same time. It's kept my nose pretty clean over the years.

It wasn't an easy deal but you have to grow up and be a big boy someday.

Originally Posted by Flash68

Nice work Todd. Your discipline here is inspiring and painful at the same time.

I have really tried to minimize my depreciating assets overall as well and I am down to just one. Yep, this stupid Camaro.

You are in a great position there with your craft and recognizing the opportunity. Congrats on capitalizing on it. That will be your Social Security (and then some) when the real one has nothing left in the coffers.

The fire extinguisher in the kitchen is a nice touch. Not many LL's I know would provide that. Smart.

You must have hobbies as an outlet. I pissed so much money away in this one and others. This hobby just happens to be the most expensive and time consuming I've every experienced. I'm enjoying the simplicity of hunting, fishing, golfing, fitness, etc.... for hobbies. In comparison, they are inexpensive and easy. Once I get where I want to be and the desire is back, I'll put a brawler together. Maybe I'll just buy yours when the Wife puts her foot down.

[GregWeld]

The key for INVESTING like Todd is doing -- is keeping the properties CLASS A... and investing in great neighborhoods where good people want to live. All the properties I've ever invested in were always class A apartments. You get a better tenant... higher rental rates... and less vacancy etc.

Todd -- I think your rentals should be unaffected by "down the road" events. You've positioned your self well. Great underlying price paid. Low fixed rate mortgage. You'll get good rents because the properties and management are nice. If anything - my guess is you'll be able to RAISE rates as housing prices firm because the prices paid for new purchases will have to be reflected in the rental rates. A rising tide floats all boats. The tighter the market gets with inventory absorption - regardless of who is buying the better it will be for everyone.

We just raised our rental rates 50% in one building I own (an LLC with other investors) and 35% in the one I just invested in (we're doing a major redo of units as they become vacant - raising the quality a long way). Over the next 10 to 15 years these units are going to make nothing but money.

Selling a depreciating asset to buy/invest in an appreciating asset with cash flow is the smartest move you'll have ever made in your entire life (other than marry Kelli). I'm proud of you for having the guts to make the move.

[Bucketlist2012]

[B]Selling a depreciating asset to buy/invest in an appreciating asset with cash flow is the smartest move you'll have ever made in your entire life

I am at that crossroads too.. I am in the middle of refinancing my Home and helping my MIL refinance hers..This should be done in 30 days or less.

After that it is time to look at at purchasing at least one rental Property to start.

Vehicles are my only depreciating assets...I may sell one.

But I need to diversify even more from Stocks ,ect... and into some properties...

My Wife wanted to back in 2007 and I stopped her, and I was right...

Now she wants to again, and now she is right...

Todd and Greg...Thanks for the info and the push.....