All Forum Posts by: Account Closed

Before I started investing in RE, I bought an expensive BMW. I had the cash to pay for it but I took a 0.9% 3 year loan which is now paid off.. After starting the real estate investing, I realized I could have taken the same $60K, bought a house for cash and used the positive cash flow to lease the same car. That way I would always have the 60K (& hopefully appreciating) asset AND a brand new car every 3 years! No doubt how my next car purchase is going to be!

@Gautam Venkatesan Its quite simple. Lets say the purchase price is $50K. And you can rent it for $800. If you put 25% down you have a loan of 37,500. I can get a 10 year note for under 4% but lets call it 4% for easy math. So payment would be about $379/month. Using the 50% rule (which works really well for my market and these rental ranges) you would have NOI of $400 and a mortgage payment of $379 leaving you a small positive cash flow of $20/month which is as good as break even. So what it says is that you can pay off your loan in 10 years at zero cash flow. If the house has zero appreciation, you have an asset worth $50K in 10 years (very conservative, should expect at least inflation level appreciation). To me this is the threshold of a good investment. You may choose to take a 15 year loan to give yourself some room but I analyze on a 10 year assumption. For giggles I did the analysis using a 15 year loan and if I add up principal pay down and free cash flows, at the end of 10 years its just about the same result.

I think CoC is a bit misleading on leveraged investments because it neglects the core value of a mortgage, which is increasing equity on loan pay down. You can manipulate CoC by extending out the mortgage terms. But your equity build is slower. My method is to simply see if the SFR can pay itself off in 10 years or less with zero cash flow and 25% down payment. IF it can, its a good deal in my book. It means my equity will increase 4X in 10 years assuming zero appreciation. It also fits conveniently with my investment horizon of wanting to have passive income enough to pay all my expenses in 10 years.

There's a lot of factors to consider. How important is this $500K to your friend? Life savings or 1% of his portfolio? Whats the time line of the investment? Whats your core skill (fix and flip, Buy and hold, managing properties?). Without that info its impossible to say how to use the money.

I would hesitate in general using an unsophisticated friend as an investor. Unless he knows exactly the risks involved, and even then, the friendship may be negatively affected if and when things go wrong.

I would very highly recommend Mike and Pinnacle. I have known Mike for many years and done business with him first as my mortgage broker and then recently with his turnkey business. I currently own 6 homes through him and I am closing two more this month. Mike is extremely ethical and actually cares about his customers. He has been available to solve problems long after the sale is done. I know many turnkey companies have bad reputations, for good reason, but if you want to do turnkey in Indianapolis, you would be hard pressed to do better than Mike.

In California each LLC costs $800/year. So one property per LLC is an expensive proposition. I personally just have 300K per home in general liability plus $1M umbrella over all of them. The Umbrella costs me an extra $250/year but theoretically covers any lawsuits. So effectively I have 1.3M protection from a lawsuit. I know people are afraid of getting sued but realistically lawyers are expensive. Tenants cannot easily afford representation so they need contingency lawyers. Contingency lawyers only take very strong cases where they are sure to win. So as long as you are careful and maintain your properties I would not worry that much. Also I have property managers and a lot of the maintenance is their responsibility. If they mess up something that leads to a lawsuit, chances are they will be named as a defendant also and they will have their own insurance also.

Whats going on is slow growth and high inflation in India is pushing rupee down while at the same time Fed is signalling cutting back on QE and overall strengthening the dollar. Strong dollar also equals weaker precious metals.

You can receive as much money as you want without any tax implication as a gift. As long as your father is not a US citizen or resident, he is not liable to IRS either. Your father will be limited by RBI rules in India about how much foreign exchange can be transferred in a given year. You can get a direct wire transfer into a US bank from any major Indian bank. I have used HFDC but any of them will do it. On a side note, rupee is rather weak now so I dont know if its the best timing to buy dollars. Of course it could get weaker too.

The gurus dont tell you about this part do they!

Buy and hold with property management. Some private lending.