All Forum Posts by: Bryan P.

Been doing a little bit of reading of Ray Dalio. He argues that the economy goes through short-term and long-term debt cyles. The main idea is that debt cannot significantly exceed wage growth or a bubble is created. I believe he's saying deleveraging happens when the wage growth is trying to catch up with debt burdens. I don't understand, however, how debt can "pass" wage growth. What kind of debt? Consumer debt? Public debt? Government debt? And whatever the case is, what does a full cycle of deleveraging look like? Does this mean if our economy deleverages, that means our income will be higher relative to current incomes?

I have a coworker that is wanting to sell a duplex. It's worth about 65k. She's willing to owner finance to me with 5,000 down at 6% interest for 17.5 years. The PITI for the property would be around 600. The currrent rent for both sides is 450/month. I'm thinking the rent is too low and should be raised to 500/month. This means the gross income would be 1000/month. That goes over the 50% rule. The place is in good shape with no major renovations (that visually need done immediately). Do you think this is a good investment even though it doesn't meet the 50% rule?

To give some background, I'm 33 yrs old. Own two rentals. One is easily meeting the 50% rule and the other is not (it's at about 85%, which is ridiculously high, but it used to be our primary and it's going to be paid off in 6 years. I'm hoping to keep it under control for those 6 years. I hope that's not wishful thinking)

I currently own two properties and my primary. My wife and I live modestly and make about 55-60k a year. I am currently 33 yrs old. Starting at age 40 our rentals will be paid off and will cover our primary mortgage. We will also have college debt paid off. All that being said, we will net over 2000 a month in reserve monies at that time. (might not be alot for some of you but it's good for us) I don't trust any other investment and I'm committed to real estate because it has a solid return and the tax laws are currently beneficial. I would like to buy one property per year when I arrive at that point in my life. Getting hard money lenders is an issue but the greater issue is the ability to personally manage 7-8-10 properties. If I do things right, I could legitimately have 8 or 10 properties, and I know from experience that two properties takes some work. Even keeping track of rent payments for 10 properties would seem difficult. I have a friend that owns 7 rental properties and he tells me it's getting to the point of having to hire a property manager. My question is: at what point did you, in regards to residential SFH rentals, have to hire a property manager? Also-what are the main challenges when owning 10 properties? What are things people would generally not account for?

I have a good friend who has a few hundred thousand to invest and he wants to buy 10 rental properties. He lives about 3 hours from me. He wants me to manage his properties for 75 dollars/month per unit. Two questions: Is this legal? Is this wise?

I would not perform any of the manual labor on the properties. I would simply collect rent and manage repairs and move-outs.

Thank you all for your responses.

My current residence appraised for 93,000 and I owe 73,000 on it, so I'm imagining that I could get a HELOC at 90%, which would leave me about 10K. I could also get 70% HELOC on the cash-flowing rental property, which would leave me about 7K. So that's somewhat of a buffer zone, I guess.

I had a friend who runs a very successful business (very business saavy, but not really into real estate) preach to me that if you overleverage and don't own things outright, you'll eventually get burned. I argued that if the numbers make sense and the cash flow covers expenses/vacancies/etc (via the 50/2 rule) then how is it any riskier than any other investment? In my head that's how it's working.

I currently own two rental properties. I live in a rural area and my wife and I make about 55,000-60,000 a year. We live modestly as she stays home part-time with our kids.

Anyways, one of our properties cash flows well (it meets the 50/2 rule). The other property hardly cash flows but there's only 7 years left on the mortgage and the property is almost fully updated within the last two years. At this point I am able to pay for repairs for both properties if I had to dip into my personal savings, etc. I have very little consumer debt to speak of (although I have a car about to die and needs replaced). That's the background information you need to know.

A coworker offered to sell me her duplex on owner-financing at a VERY LOW 5% downpayment and no closing costs. Great deal for me. The property is worth 65,000 and it rents for 1000 (500 each side). On a 20 year payback (at 6% interest) the PITI would be approximately 600/month. With increased rent it would be close to the 50/2 rule, assuming I could increase the rent payments to 600/month which is feasible for our area.

I cannot pay for this property with my personal income if something happened. That's the risk if I do this. So please give me your opinion on leverage. Is this opportunity over-leveraging?

Thanks. Has anyone used this philosophy, turnkey real estate to out of the area investors? I'd like to get some thoughts on this.

First question: Did biggerpockets require a monthly fee within the past year? I thought when I checked this site about 6 mos ago there was a fee? Just curious.

Second question: Is it risky to have rental properties attached to your primary finances? I'm thinking that if a tenant sues me I could lose everything. What's the best option? I'm been researching what is required of an LLC but still don't know alot about it.

Assuming that what I'm saying is correct, I would think that paying down my current mortgage is not as effective as buying more cash flowing properties. I can afford to buy one rental property per year. When I talk to people in my family they think I'm crazy to think about buying one per year (and having "all that debt"), but it makes sense when I write the numbers down on paper.

When I said the two rental properties produce 380 in equity, I was not talking about cash flow. Property #1 has a rent of 620 and the PITI is 300. Property #2 has a rent of 600 and a PITI of 520. (I know, the reason it's so messed up is because it was my primary residence that I have on an 8 year loan at 3.2 percent interest. It's dangerous but I'm willing to dish out the expenses from my pocket when they happen.) The expenses, including vacancy on property #1 will be 300. The expenses, including vacancy on property #2 will be 300 which means I will be dishing that out from my pocket.)

These two properties produce 380 in equity, assuming the houses don't lose value.

My new primary residence will decrease my net worth by 475 per month, but these rental properties will increase my net worth by 380. Therefore if I was only calculating net worth based on these properties alone, my net worth is in the hole by approximately 100 dollars per month (1200 per year).

Is this correct? If I did not realize something you said, I didn't deliberately mean to do so!