Investing 102

[Bucketlist2012]

Originally Posted by GregWeld

You don't even want to hear what I think about investing in Landcaster, or that area, let alone investing in ANYTHING that's in California...

I love California - but not as an investor. Way too many tree huggers and laws there. The criminals have "rights" - the renter that doesn't pay has "rights" - the border hoppers have "rights". No thanks!

Dump the property and buy some good stocks....

Haha....No doubt...That is why I will one property...The one I live in..I may move in the next few years to my forever home, but I will not keep this one..
Mainly for the reasons you mentioned..

I don't need a squatter laughing at me while he doesn't pay for several months...My health cannot take the stress and I won't do the jailtime for what I would do...

I would still stay in California due to family, but I don't have the stomach for the laws and rights given to squatters...

[glassman]

Some of my clients that are high end boutique resalers have said there are two California's for investing, coastal and "other". They've all said stay away from " other". There are exceptions to that of course, but when were in the game of numbers...

[frankv11]

When I buy such property. I have already taken into account eviction , holding time , repairs etc... All that has to be factored in. As long as the numbers make sense and oppurntunity strikes and if I have the means I'll be all in.

For example on above mention property. If there is no drastic change in market. I should get all of my investment back in six months. it will pay for it self while generating a profit and if there is a bit of room maybe ill pay my self a bit on the front end. With today's interest it would be a sin not to keep it. If I could keep one or two of those a year. Maybe I'll be able to get a professional management firm when I'm 45
Plan C , which is not really in my plans would be to sell and profit an avarage of $70k before taxes.
Now that is just my point of view we are all at a different stage,money wise career, family goals etc... So most definitely not for everyone but do what you know works for you.

[GregWeld]

Good post Frank... and the part I like the best is that you understand that everyone has differences. So ideas are just that... ideas -- and they can be
modified... used in part or in whole etc.

Doing what someone understands and has intimate knowledge of - to me - is the best way to invest. They see and understand the pitfalls. They have a better sense of changes - good or bad etc.

The main part of this entire thread is just to get going and do SOMETHING - save - invest - start early. Make your own "luck".

[Vegas69]

I like your statment about making your own luck.

I was speaking to a physician client of mine yesterday and he was talking about how lucky he is to have his position. Then he started talking about all the training, meetings, interviews, and decisions he made over the years.

I went on to tell him luck likely had some play but a majority of his luck was self made. You don't get lucky being a couch potato.

If you want things to change, YOU must change. Whether it's you skill set, education, health, relationships, finances, whatever....

[slow4dr]

I have been lurking in this thread for a while but I figure now is as good of time as any to join in and contribute anything I can (which is minimal).

What I've done may be considered crazy to some but when you have minimal cash flow you really have to think outside the box. The old saying of be aggressive when others are scared and be scared when others are aggressive has worked for me. I had some great help from not only my boss who also has rentals but a great family friend who at his peak had over 20 SFR's being rented.

BTW: I fit the "other" classification that 'glassman' mentioned above since I am 70 miles East of L.A.

Just a little back story:

*Bought my first house in 2001 with a 80/10/10 loan (primary residence)

*Refi'd house #1 in 2002 to a 15 year loan compiling all 3 loans (rates had dropped far enough that my payment stayed the same)

*Refi'd house #1 again in the Summer of 2010 (this is where many would call me crazy but I went back to a 30 year loan to keep cash flow more positive).

*We bought a bigger primary residence (house #2) with only the minimum required for an FHA loan in December 2010. Using an FHA loan allowed me to keep more cash in hand. IMO too many people are hung up on saving just enough to have 20% down and then they don't have any cash left over for back up. I'd rather not tie up that cash (since I didn't have a lot of it). This was my first swing at a rental property so I was preparing myself for the worst. I wasn't in a position to wait while I saved more any longer because my local market had already started climbing back up by this time.

*I was able to rent house #1 within a few days of listing it. It is a house I am familiar with since I lived in it for 10+ years so I know it inside & out. It is a great SFR with RV storage, 800 sq ft air conditioned shop, big easy to maintain yard. Which made it easy to pretty much have the pick of the litter when it came to applicants.

*The rent payment for house #1 was making the P&I payments on both #1 & #2 houses plus a little extra.

*The newest little bonus came about a month ago. I was able to refi house #2 at a point and a half lower rate AND the house had appreciated enough to get rid of PMI. This dropped the total payment including PMI roughly 20%.

*I've had a few little hiccups at house #1 over the last 2 years. Clogged kitchen sink (plumber called), water heater was leaking from the valve (just needed to be tightened down LOL), I had to replace a garage door spring and I had a leaking stand up shower that I ended up upgrading to a tub (full bath now instead of a 3/4) anyway but overall nothing too crazy. Should the proverbial poop hit the fan I still have the money I didn't spend on the down payment as a cushion.

*I would love to pull the trigger on house #3 as an upgrade for my family and then rent #2 but there just isn't enough inventory right now in my area. For instance there have been less than 10 listings matching my search criteria in the last 90 days. My current residence is very similar to the original only bigger, RV storage, shop, and of course a big easy to maintain yard so renting it should also be no problem either.


*********************************************

Up until this thread I never thought I would ever invest in the stock market. I would like to thank all involved and especially Greg for the ever-so influential way of putting things into perspective. I not only have been researching stocks the last few months but have also gotten my rather stubborn on the subject wife to come on board as well. She would have laid over dead before investing in the stock market but she has read through most of this thread and is now asking me how much a week we should be investing.

I am starting to familiarize myself with the Yahoo & Google finance pages to find my comfort zone and follow basic trends. However, there is one small thing I've noticed that is different between these two sites and that is the Dividend. The Yield is always the same but the Dividend amount is always substantially higher on Yahoo's page. I am sure it is just some small difference in the way it is written but for this reason I have leaned towards Google instead (mainly because Greg has posted specific amounts and they have matched Google exactly). If anyone can explain the difference so I can understand it would be much appreciated.

-J

[JKnight]

J - Yahoo quotes dividends as an annual amount, whereas Google shows what you are "expected" to get on a quarterly basis.

[slow4dr]

Originally Posted by JKnight

J - Yahoo quotes dividends as an annual amount, whereas Google shows what you are "expected" to get on a quarterly basis.

I figured it was something simple, thanks.

[GregWeld]

Originally Posted by slow4dr

I have been lurking in this thread for a while but I figure now is as good of time as any to join in and contribute anything I can (which is minimal).

What I've done may be considered crazy to some but when you have minimal cash flow you really have to think outside the box. The old saying of be aggressive when others are scared and be scared when others are aggressive has worked for me. I had some great help from not only my boss who also has rentals but a great family friend who at his peak had over 20 SFR's being rented.

BTW: I fit the "other" classification that 'glassman' mentioned above since I am 70 miles East of L.A.

Just a little back story:

*Bought my first house in 2001 with a 80/10/10 loan (primary residence)

*Refi'd house #1 in 2002 to a 15 year loan compiling all 3 loans (rates had dropped far enough that my payment stayed the same)

*Refi'd house #1 again in the Summer of 2010 (this is where many would call me crazy but I went back to a 30 year loan to keep cash flow more positive).

*We bought a bigger primary residence (house #2) with only the minimum required for an FHA loan in December 2010. Using an FHA loan allowed me to keep more cash in hand. IMO too many people are hung up on saving just enough to have 20% down and then they don't have any cash left over for back up. I'd rather not tie up that cash (since I didn't have a lot of it). This was my first swing at a rental property so I was preparing myself for the worst. I wasn't in a position to wait while I saved more any longer because my local market had already started climbing back up by this time.

*I was able to rent house #1 within a few days of listing it. It is a house I am familiar with since I lived in it for 10+ years so I know it inside & out. It is a great SFR with RV storage, 800 sq ft air conditioned shop, big easy to maintain yard. Which made it easy to pretty much have the pick of the litter when it came to applicants.

*The rent payment for house #1 was making the P&I payments on both #1 & #2 houses plus a little extra.

*The newest little bonus came about a month ago. I was able to refi house #2 at a point and a half lower rate AND the house had appreciated enough to get rid of PMI. This dropped the total payment including PMI roughly 20%.

*I've had a few little hiccups at house #1 over the last 2 years. Clogged kitchen sink (plumber called), water heater was leaking from the valve (just needed to be tightened down LOL), I had to replace a garage door spring and I had a leaking stand up shower that I ended up upgrading to a tub (full bath now instead of a 3/4) anyway but overall nothing too crazy. Should the proverbial poop hit the fan I still have the money I didn't spend on the down payment as a cushion.

*I would love to pull the trigger on house #3 as an upgrade for my family and then rent #2 but there just isn't enough inventory right now in my area. For instance there have been less than 10 listings matching my search criteria in the last 90 days. My current residence is very similar to the original only bigger, RV storage, shop, and of course a big easy to maintain yard so renting it should also be no problem either.


*********************************************

Up until this thread I never thought I would ever invest in the stock market. I would like to thank all involved and especially Greg for the ever-so influential way of putting things into perspective. I not only have been researching stocks the last few months but have also gotten my rather stubborn on the subject wife to come on board as well. She would have laid over dead before investing in the stock market but she has read through most of this thread and is now asking me how much a week we should be investing.

I am starting to familiarize myself with the Yahoo & Google finance pages to find my comfort zone and follow basic trends. However, there is one small thing I've noticed that is different between these two sites and that is the Dividend. The Yield is always the same but the Dividend amount is always substantially higher on Yahoo's page. I am sure it is just some small difference in the way it is written but for this reason I have leaned towards Google instead (mainly because Greg has posted specific amounts and they have matched Google exactly). If anyone can explain the difference so I can understand it would be much appreciated.

-J

HUGE KUDOS TO YOU MY FRIEND!


Here's my one though I will add to your investing... Diversify. Don't just do all single family rentals. Stocks will add income - usually over time they grow - but more importantly for YOU - they will be LIQUID. So - I'd build a portfolio of dividend paying stocks.... to add to your housing empire. Seldom do all facets of investing work in conjunction with each other. Housing can go up - stocks might be down - interest rates WILL go up from here which will cause your housing to take a "hit" if they rise too quickly or too far... So you want BALANCE in investing. What happened to MANY MANY people is that all their liquidity dried up when they needed it most... that's a very very bad thing!

If your two houses go up enough -- you might try parlaying them into a fourplex or something similar but don't keep borrowing on them. The key here is to build a retirement cash flow - and that happens when your renters pay off the balance and YOU become the bank!

I have a friend that lives in a 12 million dollar house -- he started out doing EXACTLY what you've done. He parlayed that into 1000's of apartments. It didn't happen over night -- and his apartments are the type I invest in -- LLC's with investors -- his company puts the deals together - and they manage them. Sweet deal.

[slow4dr]

Originally Posted by GregWeld

HUGE KUDOS TO YOU MY FRIEND!


Here's my one though I will add to your investing... Diversify. Don't just do all single family rentals. Stocks will add income - usually over time they grow - but more importantly for YOU - they will be LIQUID. So - I'd build a portfolio of dividend paying stocks.... to add to your housing empire. Seldom do all facets of investing work in conjunction with each other. Housing can go up - stocks might be down - interest rates WILL go up from here which will cause your housing to take a "hit" if they rise too quickly or too far... So you want BALANCE in investing. What happened to MANY MANY people is that all their liquidity dried up when they needed it most... that's a very very bad thing!

If your two houses go up enough -- you might try parlaying them into a fourplex or something similar but don't keep borrowing on them. The key here is to build a retirement cash flow - and that happens when your renters pay off the balance and YOU become the bank!

I have a friend that lives in a 12 million dollar house -- he started out doing EXACTLY what you've done. He parlayed that into 1000's of apartments. It didn't happen over night -- and his apartments are the type I invest in -- LLC's with investors -- his company puts the deals together - and they manage them. Sweet deal.

I have been a little reluctant to look at multiplexes even though the ROI is usually much higher than a SFR. Both of my mentors have had bad luck with them and in my area multiplexes are typically in the not so desirable areas. That's not to say that it is not a possibility but it may be down the road once I have a little more time (confidence) under my belt.


The one thing I have been really thinking about lately is starting an LLC for the rental property. Many of the regulars at biggerpockets have recommended starting one for any rental venture. The problem I see is that technically you will need one for each property. What are your thoughts about that?

Property management is another subject I have been thinking about. For the time being I am more than happy to manage the one property by myself. With the future possibility of managing multiple properties in my spare time it may be worth every penny.