All Forum Posts by: Alvin Sylvain

First of all, you say that Cryptocurrency offers a "solution", but there is no mention of what exactly is the problem being solved.

Cryptocurrency as an exchange medium is here to stay, there is no doubt of that. But then, so is gold and silver.

But do you really want to be in the group of far-sighted individuals who find out where the landmines are the hard way? I'm not trying to be a Luddite here, just warning that there are known and unknown pitfalls and somebody still has to fall into them.

Bitcoin in particular has a number of problems that make its use as a currency problematic. As mentioned earlier, its value measured in other currencies can fluctuate wildly in a short period of time. That's great if you buy something for a 100 dollar bill that only cost you $50, but how would you feel if the reverse happened?

Further, it may sound great on paper that the quantity of Bitcoin can not be increased, but the pragmatic reality is that, as we get closer to that max quantity, the time and expense of "mining" the next coin takes longer and costs more. There is no transaction fee in handing over a suitcase full of USD which takes place instantly. That can not be said for Bitcoin. There is a known, predictable transaction fee paying with loans or credit cards. Again, that can not be said for Bitcoin.

There are competing cryptos that seek to resolve these problems. But as far as I'm concerned, cryptos in general and Bitcoin in particular are not real solutions to any real problem. For me, I'll wait and let the rest of you explode the landmines.

Ok I'm gonna bust your bubble right now.

The best way to invest with "no money" is to GET SOME MONEY.

"How?" I hear you whine. There are a number of ways, but most of them start with getting a job or a better job or a different job. Get an education if needed for a better paying job. Move to a different community if the opportunities are better there.

Once a paying job has been secured, start saving your money like crazy. "The Richest Man in Babylon" advises you squirrel away 10% of your gross income, no matter how little or how much you make.

While you're working on being gainfully employed, EDUCATE YOURSELF in Real Estate Investment There are plenty of educational resources right here on BiggerPockets (BP), most of which are FREE.

Now, I know there are "gurus" who purport to be able to "teach" you how to invest in real estate with no money. You may have seen their Facebook ads, Radio ads, TV ads, etc. Some of those "gurus" are scam artists, and many of them charge enough money for their "lessons" that you could just as well put that money into an investment.

There are even BP subscribers who will tell you it's possible to invest with No Money, and they'll have tales to tell. Some of them may chime in on this thread later. OK, I admit, it is possible. But it's a heck of a lot easier with money.

So get a job. If you're that serious about it, get a job as a Real Estate Agent (requires taking classes in most areas and passing an exam). That way you'll not only learn the Ins and Outs of the business, you'll be two steps closer to the Best Deals.

Are you handy with tools? Get a job working for a contractor. This will also get you two steps closer to the Best Deals, as you'll know which properties are in need of a fix-up, and you'll be able to fix them up. Get good at that, and maybe you can partner with somebody who has the money while you do the work.

But that's basically it in a nutshell. Don't give up, but don't expect the Good Fairy to tap you on the head with her magic wand. You have to put in the work.

Consider taking out a HELOC or some other sort of loan to pull the equity out, then put it up for rent. In today's SoCal market you ought to be able to rent it out for a boat-load of money. You'll probably still get 10 rental applications within a day.

I haven't noticed a spike recently, but recently I've been kind of cut off from radio marketing since I'm not in my car much anymore. So maybe from the radio gurus, the peak was last March. I don't know.

But your second question is definitely true. The advertisers track your every movement, and they know exactly what your interests are to the micrometer, and that's exactly what they try to sell you. Forget about privacy. It no longer exists. 

Of course you're welcome! But hey, sometimes you gotta go through the fire! :-) Better here than at a tax audit ...

No worries, we're all learning as we go. But now you know -- this is a numbers game! Work the numbers, and you'll already have your answer!

Another thing I often do is recommend that people get acquainted with the BP calculator, or just about any other REI calculator. I personally like the one from DealCheck. Just figuring out how to work the calculator is an education in itself. It'll ask you stuff like, "How much to allocate for Cap-Ex?" and the first time I saw that I went, "HUH?" (a very important expense that often gets overlooked with rentals)

So again -- best of luck!

I'm going to say the same thing I've said many times on these forums.

Work the numbers.

Consider: 1 br/1ba with unfinished basement -- Flipping or Renting? How much to you make in either case? Numbers!!
Consider: 2 br/1ba, a Finished Br in basement -- F/R? How much after Improvement Expense? Numbers!!
Consider: 2 units, 1 br/1ba and Basement Studio Rental -- F/R? Add a Kitchen and Bath Expense? Numbers!!

Compare each of those and see if any of them make sense for a GO decision. If you can't make the numbers work, or you can't get the seller to accept an offer where the numbers work, then take a pass.

My point is, nobody can answer your question definitively without running through all the numbers. Don't post them here, nobody wants to do your homework for you.

One quick snarky remark (sorry!): "Do you factor it in as repairs estimating the cost of finishing the unit?"
WELL DU-UH!! You factor in every expense! How you choose to label the expense is up to you.

OK, snark over. Grab that calculator and get to work! Good luck!

Calculate how long it would take you to save enough money to buy three additional rental properties with the money you save by not paying a mortgage on your primary residence. Probably just put the entire mortgage that you aren't paying into some high yield account (if such can be found).

Then calculate how much Total Cash Flow you would get (Rental Income minus Rental Expenses minus Mortgage on Primary Residence) if you bought the three rental properties instead. Put that money into said high yield account.

Do a long-range guestimate. Consider, if you go debt-free now, every year you wait the rental properties are going to be, say, 3% more expensive. Consider, if you buy now, your rental income is going to increase by, say, 3% every year. Compare these two totals (and their long-range accumulation) after 5 years. After 10 years.

After you do the math, I expect that, unless you have some emotional attachment to the magic words, "DEBT FREE", you're probably going to decide to buy those three rental properties. But, everybody has to make up their own mind.

Personally, I don't believe in magic.

Define "better".

The higher Cap Rate will generally mean a larger profit, at least on paper. "ProForma" as @Steve Morris mentioned.
But the lower Cap Rate will generally mean nicer areas and less trouble with tenants.

You want a 15% Cap Rate where you have to hunt down your tenants for rent every week? And not always get it?
Or a 4% Cap Rate where everybody is wonderful and cooperative while you lose money every month?

Bottom Line, Cap Rate can be used for comparisons, but that's about all. You still need to check other metrics, like ROI, IRR and Cash Flow.

There is one way to calculate the Cap Rate.

Net Operating Income (NOI) divided by Current Market Value (or Purchase Price), usually expressed as a percentage.

Be warned: I've looked at dozens of properties, and after a while it gets to be like gathering the EPA mileage estimates. No real live person ever gets an automobile to actually achieve the published EPA mileage, but it gives you some way to compare. So when Car A gets an EPA of 30mpg, while Car B gets 25mpg, well neither number is wholly accurate, except you can figure Car A gets better mileage than Car B.

Put simply, not in one single instance did the published Cap Rate match what I calculated.

But I trust my own calculations more than what's published. Just like I trust the mileage I actually measure from my own driving than what the EPA says.

If Property A is published as having a 7% Cap Rate, and Property B is published as having a 5% Cap Rate, all I really know is that the Cap Rate for Property A is higher than that of Property B. (Unless my calculations go the other way, which is unusual) If I see a Cap Rate of 15%, it's probably either a Tear Down or in a horrible neighborhood, or if I see a Cap Rate of 3%, it's probably a Grade A neighborhood.

Never-mind that my calculations differ, it gives a point for comparison.