All Forum Posts by: Chris John

I know I'm getting the hell beat out of me on this thread based on "votes", but I can't help myself...  I'm like a moth to a flame.

So, is the theory that someday I'm going to have to listen to a guy answer the question, "how did you get so rich?" like this?

"Well, I bought a house at an all-time price high of $550k and a 20 year rate high of 7.5%.  I then lost $2k a month on it, but that was just rents.  I had vacancies, HVAC repairs, and a new roof too that really drove that number closer to 3k a month.  After holding on for 15 years, I sold it for 19 million dollars.  Can't wait to buy, gotta buy and wait..."

@Bill B.

I don't really disagree with you.  I have done well in real estate as well.  Definitely down to when I bought and not my talent.  However  I'm not seeing much to meet my metrics.  

My argument isn't not to buy at all, ever, it's simply to wait until properties meet my metrics again.  If you're seeing this you like, great.  What? Where? What are your metrics?

Otherwise, I'm fine to stack cash, relax, and wait for things to change.  I have to do just as much work whether I'm making 20% or 0%, so I'll wait for 20.

@Bill B.

Respectfully, I very much understand the situation. 

When she bought, it probably made more sense to buy versus renting.  Now, that's not the case in many locales.  Sucks not to own, but the appreciation being offered isn't a good investment in my eyes. 

Renting and investing the difference would benefit many in this situation.  Having liquidity to buy at a better time.  It's such an overgeneralization to say that houses go up in value.  Obviously mostly true, but who would prefer to buy in 2007 vs. 2008?  I'll take 4 houses for the price of one any day.  The time frame and slope of the curve have a lot to do with such a blanket statement.  Doesn't matter if the house will be worth $1B in 2 years if I can't carry it that long.

I'm not interested in breaking this down year by year into it's true numbers, but apparently the S&P 500 average has been 11.36% since 1983.  So, if she had rented instead of buying, had invested her $500 and an extra $37 a month, it would be $400k right now.  Of course, she doesn't have a mortgage payment and her rent would've gone up in the meantime, but again, there are so many 'what ifs' in this situation, it's borderline irrelevant.  For instance, what if 3 years in she could've bought the same house for $22k.  She would've been sitting on a bigger down payment and could've bought then.  Really, who knows?

The real question for me as an investor is what do I want to do with my dollar now?  Do I want to tie it up in an illiquid investment where I have to fight with tenants, replace HVACs, and vacancies hoping to hold on long enough to make money in 10 years of appreciation or would I rather keep it working and liquid until I can make a better investment when the time is right? 

@Stephen Rinaldi

Whoops. Also forgot to mention that I think in a lot of markets we've reached the "buy term and invest the rest" stage. Right now, the disparity between mortgages and rents is so different, that I think "renting and investing the rest" is probably the way to go for a lot of people. Where I'm at, you could buy for $3.7K a month (assuming FHA) or rent the same place for 2K a month.

That provides a ton of liquidity and a nest egg while you sit on the sideline and wait for this madness to pass.  Lot of things can change (wars, generations aging out of their homes, rampant building) etc. in a relatively short time span of 5-10 years.

@Stephen Rinaldi

I think @Mike Dymski point (and I wouldn't pretend to speak for him as he has much more wisdom than I) is that there are a lot of guys on here saying words and relaying platitudes, but there's nothing behind it. Definitely not accusing you as being one of them as I don't know you and haven't read any of your posts before.

It's just that appreciation might not be worth it if I have to:

1.  Work my arse off just to find a deal.  I already have a job.  I get so many calls and mailers every week, I have ZERO intention of competing with them for deals.

2.  Go negative every month just to keep the property.

3.  Tie up a large amount of money into a down payment and renovation so that I have to wait years to get my appreciation.

There are many other investment opportunities that the extra work involved in real estate isn't always worth it to get the same (or even a slightly better) return.

Best wishes

@Michael Everett

Sorry, but I'm not sure of the answer to your question, but I would be VERY surprised (assuming you qualify) if you couldn't purchase this as your primary residence with a low down payment FHA loan of some type and still be able to travel. I would strongly encourage you to reach out to a few local lenders (I actually have a lender that I love that I can get you in contact with if you private message me if you would like) to get prequalified so you know exactly what situation you are in.

It sounds like you're living the life, so keep it up!  haha.

Best wishes

@Waleed Hamdan

I know that house hacking and California appreciation are all the rage, but I'd urge you to consider your options on this.  You're getting a ridiculous deal on your rent imo.  It sounds like your unit has 43% of the rental value ($3800/$8800).  If you apply that to the $2.5M property it comes out to about $1.075M.  A mortgage for that much (even with $300k down) would be well over $6K I'm guessing with taxes and insurance. 

I'd encourage you to keep renting where you're at and buy elsewhere.  $300k down on a $1M property could get you the $8-9K rent that you'd get from this property and leave you only financing $700K instead of $2.1M.  If you do decide to pursue this building I'd be very careful as it sounds like a lot of leverage ($300k/$2.5M = 12%)

Obviously, you know your situation the best, but it's possible to rent where you live and have the benefits of ownership elsewhere.

Best wishes with whatever you decide!

And, for those interested in timeshares, but don't want all of the hassles and expenses, redweek.com has a listing of bookings that people have made that they are willing to rent out.  Honestly, many of them look much cheaper than a vrbo. 

As our children get older and quit joining us at the timeshare, I would definitely consider selling it and just renting weeks on redweek where and when it makes sense.