All Forum Posts by: Alexander Monnin

@Stevie Delacruz

Hey Stevie, I'm a senior in college studying electrical engineering.  If I were you I would not buy a property while you are in college.  Since you are in computer science, you are more than likely going to be a high income earner and will be able to quickly save enough for a down payment when you graduate. 

Focus on school right now.  I'm assuming you are a freshmen.  Strive to get at least a 3.0 GPA.  If you're ambitious and smart try to get a 3.5+.  I have a 3.75 right now and can tell you from first hand experience that a high GPA won't automatically get you a job.  What it will get you is a TON of interviews with good companies.  You will be a hot commodity and everyone will want to interview you.   Once again, I'm speaking from experience.  Last week I just accepted a full time position for next May when I graduate and it's my dream job.

Since you are a freshman, focus on getting an internship for next summer.  At my school, most freshmen don't even look for internships.  Don't fall into this category.  I found an internship after my freshman year.  Be proactive.  Find an internship.

If you have money sitting around to invest then do yourself a favor and stick it in a roth ira.  Buy some index funds.  You don't want to own a cheap college home.  I have maxed my roth ira the last 3 years and also have a taxable brokerage account.  I have about 60k combined, zero debt and am still in college.  I got most of my money from doing 4 internships that payed pretty well.  If you buy index funds you will get similar returns compared to a cheap college home.  To top it off it will require significantly less work.  Save RE for after college.

@Shal Patel you could always refinance the term with the same balance owed (not cash out refinance).  You would have smaller monthly payments and more cash flow.

@Account Closed

I don't see how that is related to anything I said earlier.

@Account Closed

I would say debt service is different for everyone.  People can have different payments even if they put the same amount of money down.

I think cap rate should be used to tell if you are over/under paying for a property.  If you buy at a 6% cap rate in a neighborhood that has a 4% cap rate, then you payed less than what the property is worth.

@Account Closed

Removing leverage from the equation doesn't make sense.  As I mentioned in earlier post, more leverage will decrease cash flow but increase returns.  

If someone were trying to decide between two properties, one an appreciation investment and the other a cash flow investment, it logically makes sense to compare them with whatever leverage gives the highest return for each property.

Also, you have been stressing that many investors need the cash flow now.  That goes against your suggestion of putting a 50% down payment of 375,000.  If instead you put 20% down payment of 150,000, well then you saved 225,000 upfront and could easily cover the monthly expenses.

I believe most people who say they need cash flow NOW don't really need it.  They use that said cash flow to fund their next deal.  They need to fund their next deal because cash on cash return is only an annual yield IF you reinvest the cash flow.  Next thing you know they have 5, 10, 20+ properties.  The cycle never ends because they always have to reinvest the cash flow for their cash on cash return to be an annual yield.

Why not just by an appreciation play with a conservative IRR of 10% or more?

Typically when I do internal rate of return calculations for properties in high appreciating areas, they have higher returns with LESS down payment despite being more cash flow negative.  This is because financing enhances the returns through appreciation.  In terms of only appreciation, a 7% market appreciation gives a 7% return IF the property is bought with 100% cash.  If it is financed, the 7% appreciation can give a return a lot higher than 7%.

@Account Closed

Thanks for commenting.

Its funny because a  little while back I had read one of your previous posts where you quoted a related article from FI Fighter, and I agree, owning prime assets is definitely the way to go.  I'm not sure I feel the same way about his mining stocks but that is neither here nor there.  I just wish I could fast forward 3-5 years into the future to when I will actually have a sizable amount of money.

@Thomas S.

I can't speak from experience but I have been studying very successful buy and hold appreciation investors.  I have learned that there is something to be said about the quality of your income.  

My plan is to invest in "A" neighborhoods in NYC.  In these neighborhoods, I can target wealthy upper class tenants.  In the case of a downturn, the first people to be affected will be the lower class, then the middle class, and lastly the upper class.  There is some good protection here.

Also, the economy of NYC is very diverse and I would say its safe to say that it will be a high demand city for many years to come.  I believe there was a statistic that said Manhattan had only 14 foreclosures above a certain street during the recession.  I think there is definitely benefits in investing in "A" neighborhoods. 

I personally plan on holding my investments forever and passing them on too my future children.  I suppose how long you hold your own investments is very specific too your own situation though.

@Albert Bui

I agree with what you are saying to some extent. For example, if you over estimate an appreciation rate it could drastically change your IRR. But in my opinion, the fault lies within yourself and not the IRR. I'm not saying it's perfect, but to my knowledge it is better than any other metric used on BP. What do you use primarily to evaluate investments?

@Daniel Dietz

Congrats on your returns. This is actually why I'm going to be an appreciation investor. It just shows that even a modest appreciation rate really increases returns. I have an aggressive plan to go after high appreciation rates. I've learned how to calculate an IRR for properties. I have yet to come across a more comprehensive metric. IRR is great because it factors in cash flow, appreciation, mortgage reduction, and the time value of money.