All Forum Posts by: Aaron Hunt

Such agents that do are worth their weight in Gold. They help to directly create value and wealth with every transaction without me even asking. They also can and will bring deals to your attention.

0 Votes

@Patricia Steiner

All good except #2.

The buyer pays the commission regardless. No such thing as the seller paying commission.

Where is the money from the ENTIRE deal/transaction coming from? Exactly.

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@Dan Heuschele

$180k/$3 million (equity appreciation) is a bad way to look at it. The leverage was a big part of it. And naturally with lower interest rates you feel safer as you do it. Equity appreciation probably helped tremendously. That’s a lot more consistent and will keep rising. The stock market will likely have way more fluctuations, and chances are he wouldn’t be hitting $3 million off of $100k by having $100k locked up in stocks over that same time period.

Me personally, in 3 yrs I put a certain amount in down payments spread over my properties and now receive 72% of the total down payments back as rent on mine per year. The overall equity is up 200% on my total down payments. My index fund heavy 401k is nowhere near those gains.

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Originally posted by @David Wrenn:

@Aaron Hunt You’re right and fortunately I just took a new position yesterday. It’s been a humbling experience the past few months for sure and I’ve had to adjust my lifestyle greatly but for the better and I’m going to maintain the new personal budget. Once your personal expenses are covered what percentage of the money left over would you save and the percentage you invest into your business?

What would I save? I don’t.

I invest all our discretionary income into whatever I can and hide it from my current self for my future self.

I don’t currently have a true side hustle that creates money aside from RE rental income and crowdfunding investments.

RE is just my escape, but it doesn’t make me nearly as much as my day job.

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Originally posted by @Caleb Heimsoth:

@David Wrenn. No one else mentioned it, so I guess I’ll do it. You should currently do nothing related to real estate. Go find another job. You want to invest from a position of strength, not weakness.

This. Why can’t you get another high paying job? If you made it there once - chances are much stronger you can do it again.

1 Vote

Originally posted by @Jon Lanclos:

@Tj M.

Spend 100000 on 5 properties putting 20000 down on each

100000 property - 80000 debt - 20000 equity - rents 1000 /mo - 6% loan to bank 360 mo - 479.64 PI - 150 taxes - 100 insurance = 729.64 exp resulting in 270.36 mo cash flow x 12 = 3244.32 income year / 20000 down - 16.22 rate of return on your 20k investment and you have 80000 left to go do 4 more investments of 20000 each so 3244.32 x 5 (houses total) = 16221.60 total income a year on 100000 investment plus you get depreciation and appreciation on 5 properties

Spend 100000 on 1 property putting 100000 down (no debt)

100000 invested in 100000 property no debt - 1000 rents - 150 taxes -100 insurance = 750 month cash flow x 12 = 9000 income year / 100000 investment in your no debt ( no leverage) investment = 9% return on your investment annually

In each example you spent 100000 - you can’t tell me that dead equity in a property makes more money than smart leveraged property - this example did not account for the deductibility of mortgage interest which could be another bonus

Also let’s assume there is 5 % appreciation in one year

In example one, that’s an extra 5000 equity you gain, in example 2, it’s 25000

The last way to make money in real estate is called equity capture - let’s say you were able to negotiate the property on purchase for 5000 less than market value - you “capture” that equity - this could also be an increased value because you slightly repaired the property - if you did this on 5 properties instead of one, it’s another 25000 in equity capture

I could have this debate all day - equity sitting in a house is only making you money in one of the 5 ways to make money in real estate - appreciation

Here are the 5 ways to make money in real estate ...

Appreciation

Cash flow

Equity capture

Tax advantages - 1031 exchange & depreciation

Principle pay down - by tenant

That example also left out 5X the CapEx and 5X the turnover costs. Again, I agree, if someone has TIME on their side leverage makes most sense.

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Originally posted by @Joe Villeneuve:

Originally posted by @Aaron Hunt:

Originally posted by @Joe Villeneuve:

Originally posted by @John Woodrich:

Originally posted by @Joe Villeneuve:

Maybe you should have read all the posts.

Can already tell you are a type B person in my example by looking at the post below mine and "dead equity".

This is a common question here and the same people always dig their heals in. One side of the table may get caught with their pants down if we get another recession, the other side is making sure they don't get caught. I was fortunate to start investing in 2007 so picked up property on the back end. I have also worked with many individuals who weren't as fortunate, many realtors sold on the game of monopoly.

There is no correct approach to this, it depends on the individual's needs and goals. So that makes you wrong :)

Question: If the market turns down, and the property values decrease, and we are talking about a rental property with positive cash flow, how is the investor negatively impacted?

Positive cash flow on thin numbers, (yes, even your $400+/month) can easily evaporate when the market turns. In this case, the one with paid off dead equity is in a LOT better shape.

To each his/her own. I prefer to look at two things. My ability to analyze, and my cash. If I only put the down payment into deal, I only have the down payment to lose. If I have high enough CF, I cover vacancies and slow rent. Also, through my experience, and that of many others, when the economy turns down, there are more renters than less. This allows me to let the market recover and my rental too. If my rental value goes below my balance owed, it doesn't impact me...I just wait it out...collecting my rent along the way.

Nobody has any control over future events, such as property values. Equity can be here today, and gone tomorrow. I remember distinctly not long ago when many REI (and others) hit that date when they wanted to retire, depending on the equity/value of their investments to carry them through. The market crashed so bad, many had to work part time as greeters in Home Depots, and other stores...or where ever they could find a job that would hire a retirement age person.

The REI that survived, were the ones with cash flow. Some of the cash flow went down, some went up, but the vast majority were still positive...and none that survived it originally bought with thin numbers. They all started high enough to be able to cushion any reduction that might have happened to their rents...if at all.

The retirees that suffered were the ones that banked on their equity, and the ability to tap into it. It didn't matter if they owed nothing on all of their properties, the values all went down to less than what they needed to retire on.

Like I said from the start, "to each his/her own", but I prefer to own cash flow (but I still like the equity that builds up in them...thanks to my tenants).

I’m not disagreeing with cash flow and leverage early on, but I have seen two ends of the spectrum and man, does the grass look greener holding a lot of equity when older, than holding a lot of debt.

2 Votes

Originally posted by @Joe Villeneuve:

Originally posted by @John Woodrich:

Originally posted by @Joe Villeneuve:

Maybe you should have read all the posts.

Can already tell you are a type B person in my example by looking at the post below mine and "dead equity".

There is no correct approach to this, it depends on the individual's needs and goals. So that makes you wrong :)

Question: If the market turns down, and the property values decrease, and we are talking about a rental property with positive cash flow, how is the investor negatively impacted?

Positive cash flow on thin numbers, (yes, even your $400+/month) can easily evaporate when the market turns. In this case, the one with paid off dead equity is in a LOT better shape.

1 Vote

I’ve been an RE buy and hold, over all else, investor for a while now.

Besides maxing out our 401k(s) we just put our alotted ‘investment’ income into real estate.

I usually aim to buy one property per year. Occasionally, I have dabbled in PeerStreet and WeFunder as well.

Has anyone here gone off the beaten path and invested in a physical B&M bank in their town?

The opportunity recently came across my desk, and I’m really considering it but have no prior experience to go with.

The Board of Directors has a proven track record with a previous bank that was acquired and from what I can see they’re all fairly heavily invested in the new venture as well (skin in game).

Does this cause or raise any IRS/tax related issues that I should be aware of? What are the major risks here? Any benefits from a tax standpoint? What is the best way to legally and tax-advantaged way to hold these “shares”?

This is an investment where until the bank goes public or is acquired or starts paying dividends I would not see a dime returned to me.

Would be cool to “own a bank”, but need to play it smart!

Thanks in advance to anyone who can chime in.

0 Votes

All Forum Posts by: Aaron Hunt

Aaron Hunt has started 10 posts and replied 645 times.

Post: Neighbor asked to buy my house

Post: Should I report this agent to the Board of Realtors or?

Post: Should I report this agent to the Board of Realtors or?

Post: How did you buy your second property?

Post: Lost job $100 budget

Post: Lost job $100 budget

Post: How do you like having paid off rentals?

Post: How do you like having paid off rentals?

Post: How do you like having paid off rentals?

Post: Invest in a Bank: Yay or Nay?