All Forum Posts by: Omar Rivera

If you're looking to invest in Austin, TX please let me know as I'd be happy to help you. I'm about to receive my RE license and will be working with a local broker to open a new brokerage company in town focused on investment property.

If you're staying local, I recommend checking local university MBA programs as many business programs have a concentration of real estate. You mind find a new BBA or MBA grad who's interested in getting into investing.

Yes Matt, that basically what I'm saying. A more precise way of explaining what I'm saying is that you should always invest cash in whatever investment you can find that yields the highest returns.

Paying cash towards your mortgage is financially identical to investing in a zero-risk investment that has an annualized ROI equal to your mortgage rate. If there were no other investments available that had an ROI greater than your mortgage rate, then by all means do that. However, I can't see that being the case with how low interest rates are.

The problem people run into here is a matter of discipline... you have to keep investing to make this strategy work. If you're not going to pay down your mortgage and instead buy a new Jaguar, then you're not investing in higher returns and would be better off paying down the mortgage.

Even if you horde cash in your bank account, that's not a good strategy. Keeping some liquidity on hand is good and allows you to jump on good investments, but you're implicitly paying an opportunity cost for your money, and at the very least, your cash is eroding at the rate of inflation (historically around 3% a year).

I didn't even mention inflation before - which is another reason to NOT pay down a mortgage. Inflation lowers the value of cash, but it also lowers the value of your loan (which is good for you and bad for the bank). In a simplistic example, if inflation is 3% and your interest rate is 5% you're only paying a REAL interest rate of 2% on your mortgage! Which is why many consider some of the recent rates on home loans tantamount to "free money".

Good luck and keep investing!
Omar

Hi Matt,

I'm going to go out on a limb. Like everyone says, how you pay off your mortgage depends on your individual situation and investment strategy. However, I'm going to make some assumptions:

1. You're young (like me) and probably are planning on a very long investment horizon.
2. You're able to get a mortgage fairly close to today's insanely low interest rates.
3. You're planning on buying a property for positive cash flow, not necessarily resale price appreciation.

Given these assumptions, I would generally advise you do not yet worry about making advanced payments towards a mortgage. Young people generally want to leverage as much as possible - it essentially magnifies the power of their investments. If you've already paid the points and fees for a mortgage, let that mortgage and the fact you're investing with OPE (other people's money) work for you and use your hard cash to make another investment. Generally, as long as your can secure a return on investment higher than your interest rate, you should invest instead. The market is turning to a sellers market and the time will come soon that there may no longer be any great deals in the market - at that point I would still rather invest in securities instruments (mutual funds, REITs, index funds) or another investment vehicle. I honestly can't think of a reason I would want to pay down a loan at <5% interest.

Omar

Totally agree with Bill Gulley's comments. CAP rate is a good first-pass litmus test to see if its worth further looking into. Quick calculations like that are useful to create a shortlist and then gather more detailed information to build a cashflow pro-forma over your investment horizon. I personally like to use an NPV analysis as it will tell me how much I can invest and what my B/E will be between selling or keeping it as a rental if the property ever increases in value.

Don't get stuck on any particular metric or value (10% or 15% or whatever). I suggest you get used to looking at EVERYTHING in your target market, filtering with a quick metric like CAP rate and then just looking at the best opportunities, whatever they may be.

Hello Shane and welcome to the Forum! I'm a new member myself in Austin, TX. May I ask, what is your reasoning with investing solely in single family homes? What has kept you from venturing into duplexes/fourplexes or larger multi-family properties?

Thanks, everyone, for the welcome!

Lynn Currie Bryan Hancock Raquel Barela- I won't be able to make the 2 March meetup but will try to make the one after that. Thanks for letting me know! I look forward to meeting local members/investors.

James Vermillion - Thanks for your service and congrats on starting up your real estate company! I look forward to doing the same here in Austin in 2013.

I recommend using the Waste King disposals - they have a lifetime corrosion warranty as opposed to the InSinkerator units (which are junk IMHO).

Also, I like to change the filters myself every 90 days. I can knock out all of my rentals in the same day and it gives me a chance to take a look at my investments every 3 months while making sure the HVAC's are protected from dust/debris.

Hi BP Community!

I've Been reading the BP articles for a while and finally decided to participate in the forums. There's obviously a wealth of expertise and experience here and I'm looking forward to learning from everyone and perhaps helping others along the way.

A bit about myself:
Ex-Navy Officer currently finishing my MBA at McCombs (Go Horns!) and simultaneously getting a real estate license.

I began investing just last year - bought a duplex and fourplex and am looking to buy more - but am amazed at how the market has become dramatically more competitive in the last year!

I've lived in Austin since 2000 (minus the 6 years I was in the Navy) and have watched the city grown/change immensely in that time. I think we're in for the same amount of change in the coming years, which will bring increased opportunities for savvy investors.

Ultimately, I'm looking for bigger investments - I'd love to partner with people into a medium/large sized multi-family property or commercial developments.

In the meanwhile, I'll be looking to expand my personal portfolio while I continue to learn more!

Thanks,
Omar Rivera