Regarding Real Estate Investing

[Cliff Hudson]

Hi, currently I'm working in Thailand and when I get back to CA, this is what I intend to do for my real estate investing. I'm not very sure if this will work or not in real estate investing but I'll give it a shot.

Example: I bought a piece of property with 80% mortgage and 20% down and this property cost 100K with positive cashflow every month.

After 2-3 years, if property appreciates to 120K, I now have 20K free equilty. I will take a home equilty loan of 20K to down another property for cashflow. I now have 2 monthly cashflow coming in every month.

After another 2-3 years, I now have 2 pieces of properties that appreciate, I can again do a home loan equilty from the 2 properties I owned to down for another bigger property with more cashflow.

Is this the way it works?

[Jon Holdman]

20% appreciation is extremely unlikely, IMHO. If you buy in CA in the next 6-12 months, I would say the value being exactly the same 2-3 years out is the most likely scenario, and having 10% decline in prices is more likely than a 20% increase.

Getting a HELOC on an investment property is impossible right now. You might be able to do a cash out refi, at the cost of $4000 or so and get some of this money back. You're likely to be limited to 70-75% LTV.

Buying with 20% down right now for investment property would be quite good. I think 25% is more likely.

This strategy would have worked fine five years ago. Not so much right now.