All Forum Posts by: Account Closed

For decades people were gorging on cheap money. The spread between cap rates and mortgage rates was substantial. For example a 100K property with 1K per month rent would generate about 6k NOI (6%). You could get loans at 3% all day long (half the NOI). So leverage works mathematically in your favor. You are still taking on risk of course. Now when the mortgage rate is 7% and your NOI is still 6% or less, your leverage works against you rather than for you. And the risk is still there (compensated for only by potential appreciation).

The other part is psychological. True Financial freedom is not based on leveraged assets. Have a few paid of properties and enjoy the lower risk income. 

This is the other side of the risk equation that all the "refi till you die" bros miss completely. The tide is out. Who is naked? Debt always equals risk. Extend yourself more at your own peril. Better to close out the transaction, take your lumps and move on and dont be so cavalier with borrowed money again.

I was curious to see how big a problem gas stoves are as a contributor to global warming. Turns out the estimate is all the gas stoves is 2.6million tons of methane. Methane has a GWP of 34. So that's equal to 88.5 Million tons of CO2. Total US emissions are about 6000 million tons of CO2. So we are talking about  1.4% of the problem. If legacy stoves are not replaced its even much less impact. 

Now interestingly the main problem is not burning the gas but its the leaks from the system. Im sure there are better stove designs and piping designs to minimize the leaks, which are the real problem. A good analogy is cars. When cars started causing smog in cities, we didn't ban cars (or demand they all be electric, although that may have been a good idea). We fixed the problem with catalytic converters. Which also BTW the auto industry and some politicians fought tooth and nail. The point is that there are good technical solutions AND regulation is needed. 

https://www.weforum.org/agenda...

Let me guess. The OP has invested in "cash flow" following the "2% rule" in dead end cities. Now you know what risk/reward equations mean.

 First find a time machine. Then rewind yourself to 2010. Then you will find 2% deals wherever you look.

Once again, the ONLY pro UL or WL arguments are made by people who sell those products and benefit from the fee structure. I have yet to hear from any unbiased reliable source that this is in anyway an effective way to invest compared to more straightforward ways like index funds or real estate investments. Borrowing your own money and paying someone huge fees to do it will never make sense unless you couch it in a 300 page contract with a thousand caveats and enough confusion and obfuscation. As for the article it is spot on. You cannot fault it for comparing to stock market investments when that is EXACTLY the UL pitch. Stock market returns without the risk. Life insurance in and of itself is a fine thing to have when you need it. Thats what term life is for.

General rule of thumb. More complicated the process the less you are likely to benefit from it. And the more likely the purveyors of the system likely to make huge profits. Look at our healthcare and college systems for example. Hugely complex and screws people over. Infinite banking, HELOC to pay mortgage etc all benefit life insurance companies and banks. KISS is a great rule to remember. Allow just as much complexity in your life that you NEED and not an ounce more.

$7.4K gross rent on $1.3m is not terrible at all. Your problem is you dont have enough reserves to absorb the short term fluctuations. And the current interest rates. It also sounds like you are way over leveraged. The problem is less the property and more you.

Interest rates change everything. From the deal perspective of course it eats into cashflow. The more the leverage the greater the effect. But also it raises the bar on what makes a deal interesting to a LP. If the risk free return rate (say 10 year T bills for example) was less than 1%, the 8% preferred return syndication is great. When the risk free rate is 4% or 5% why give up liquidity and take risk for an additional 3%?  So from both sides syndicated deals look less appealing in high interest rate environments. @Brian Burke is absolutely correct. There are very few good deals around and the best syndicators will hold their existing properties and not buy at the moment. If they did their underwriting conservatively and didn't over leverage they can ride the cycle. Those that were aggressive and expected low interest rate forever will lose money. The tide is going out..lets see who is naked and who is not!!

There is a use case for SDIRAs for REI but buying syndications or actual rentals is not the best way. You can buy anything that generates a regular 1099 income rather than K1. Example notes, note fund, hard money lending fund, private loans etc. In that case the interest is tax deferred but the rate you pay when you withdraw may be lower than your current rate or at least the same. Also you get no pass through tax benefits like depreciation anyway on these investments.

You should never own actual rentals where you are responsible for upkeep and costs in an IRA because you have to use only IRA funds for all repairs etc and theoretically that's an unlimited number. You maybe forced to liquidate if you dont have enough reserves. Plus there's UBIT issues. Syndications are not quite as bad but a good syndicator tries to be as tax advantaged as possible any way so better in taxable accounts. You get pass through depreciation and capital gains which is lower than the taxes you will pay if you keep in IRA and withdraw later. I guess the one MAJOR exception is if you have a Roth SDIRA (is there such a thing?)