All Forum Posts by: N.A N.A

Its impossible to buy at rock bottom except by pure luck. I have a lot more luck buying at the top and selling at the bottom than vice versa. You can't tell the bottom has happened until some time later. Then its too late.

If you read some of the discussion here about rental property expenses, and apply those formulas to rents and prices where you live, you may discover there's no way landlords can be making money. If that's the case, renting is allowing your landlord to subsidize your housing. When prices are appreciating, the owner will make it up when they sell. But when prices are falling, the owner is losing money each month and holding a depreciating asset. Being a renter is being on the better side of that deal.

I would say the CD's are an excellent location for you money at the moment. I totally believe you when you say its not easy in this situation. Is even worse than for most people because you're going to have hucksters out the wazoo after that money.

Ryan talks about cash on cash return. I'm guessing that's new information to you, or maybe you read over it in those two books. You need to learn about just handling money before you even try to invest in real estate. That's what we talk about a lot here, but I for one have a lot more money invested in other vehicles than real estate. You need some basic financial understanding first. So the CD's are a good, safe location for your money.

Take a year to learn about real estate before you plunk down anything. If you want to buy something, that's fine. I wouldn't buy much in FL right now because I think prices have a ways to go down there. But if you can find a decent single family for under $100K, it would be something to consider. On the other hand, if you can rent something for $700 or so a month, I think I would just do that. You have a wealth of options open to you. Buying real estate ties you down. You may find the option you choose involves moving. A property you live in is not an investment. Its a liability just like a car. You have to pump money into it to support it. Transaction costs are very high. Of the three residences I've owned and sold, NONE of them made one dime in nominal returns, let alone the inflation loss. Two were break even and one was a loser. Renting is not such a bad thing.

I'd seriously consider investing in some education. You say you're 40 years old and making $18 an hour. Without some sort of credentials, or real experience, that wage is going to be eaten up by inflation, and you'll be making the equivalent of $12/hour 20 years from now. $500K is not enough to live on. The rule of thumb for retirement (which is what you would be doing if you decided to live off the $500K) is to take out 4% the first year, and then adjust for inflation. That translates into $20K or just over the equivalent of $10/hour. If you take some of that money and invest in a degree ($50K at a state school, including room and board) or a technical certificate (some are only a few thousand and take less than a year), you're earning potential will be significantly enhanced. A few bad investments can easily half that windfall. Ask anyone who bought condos right where you are or dot com stocks in 1999. A diligent investment in yourself will give you the ability to recover from mistakes.

If you are serious about getting into real estate, take enough time to really learn the business. Reading here is useful, but it sort of assumes a certain level of knowledge. Spend some time reading 10 books on various aspects of the business. Ryan is absolutely right about cash-on-cash returns if you're plunking down hard cash for properties. If you buy crummy rentals, and its very difficult to buy anything else, you'll end up with less of a return than the CD's, more risk, and WAY more hassle.

Anon,

Interesting post. Obviously, opinions will differ greatly on the subject of paying cash vs various financing strategies.

My suggestion...figure out exactly what you want to achieve and then deciding on a plan of action will be much easier. Right now, the matter is wide open for anyone to voice their opinion based on what they'd likely do if in a similar situation...good or bad.

One side of the spectrum...as you've mentioned, put a huge down payment or pay cash for a place or two (not hard to do with $.5M in Fl at the moment).

The other side is to not even touch your reserve and get started creatively, honing your skills first while the stakes are lower.

Oh, about your question regarding how much to pay for one's personal residence...I suggest spending much less than you can afford. :lol: