All Forum Posts by: Henry Clark

Quote from @Spencer Haymond:

I always get a little laugh when I see this discussion about "Affordable Housing". I rarely see anyone address the underlying root cause of the issue. Our privately owned and centrally controlled monetary system, known as the Federal Reserve, and the legality of Fractional Reserve Banking is on a crash course for a battle between Freedom (Property Owners) and Royalty (the banks). 
Our economic system has inflation, which favors the banks, baked into the system. In a stable free economy the natural tendency is for prices to go down not up. This idea that everything goes up in price is completely fictional. Think about it, was it harder or easier to plumb a house with cast iron or galvanized piping or Pex. Is it harder to wire a house today with a Holehog and 12/2 or Knob and Tube with a hand drill. Was it easier to dig the foundation with shovel, horse and scraper or with a track hoe?

Due to economies of scale and technological advancements the prices naturally go down dramatically. The only thing propping them up and forcing them higher is our monetary system and governmental regulations that limit competition in the market place. 

Think through what your parent or grandparents paid for their house. Never in the history of the Federal Reserve have prices gone down for any notable period of time. The graph is always up and to the right.

Am I nuts?

 I’ll agree with you in general but that is only a portion of the reason.

1.  Houses have gotten bigger. 
2.   There are far fewer people per house. 
3.  The discussion needs to cover both wages and housing.   Manufacturing has gone overseas reducing wages. 
4.  When you bring in intentionally say 20 million illegal immigrants you lower the wages on lower income people both by their wages and increasing their cost of living thru more competition for resources.  I’m fine with immigration, but they have to be vetted and qualified.  

OP. Looked at your background and posts.  Looks like you’re around 26.  Have been in BP for about 3 years and made several posts.  

Recommend the following.

1. Switch gears on your REI strategy. Work on your living cost versus doing the normal buy a duplex and out $69,000 down. This is a separate post for you to make. Stop reading and thinking about rental houses at this stage. You need to both build up cash and also a career.

2.  Personal expenses- car?  Downgrade if needed.  My truck for college cost $100.

3.  Personal assets-  sell them

4.  Clothing- buy at the second hand store.  A lot of that is brand new.  I buy for my worker families in Belize and take to them.  On 1/2 price days I spend $250 and get nice clean clothes only with retail value of around $2,000.  Pay $2 to $4 per item.

5.  Food-  buy a box of 1 gallon freezer bags.  Buy a 20 pound ham and cut into 3 sections.  Ham for Brkfst/lunch/dinner.  Buy the 10 pound leg/quarter chicken bags.  Split up into smaller bags.  Go to the food pantry and pick up blocks of cheese.  Sam’s or Costco or order at your grocery store.  50 pound bag of beans and rice.  Boxes of pasta or ramen noodles.  Normally buy eggs but they are too high right now with bird flu.  Get a crock pot.  Buy 50 pound sack of potatoes.  Get the russet or white potatoes. They are cheaper than red potatoes.  Buy a 50 bag of onions.  If you want hamburger have your meat store take an Arm roast and fruit hamburger. This is 95% lean.  From one cow versus 100 cows trimmings, and a $1pound cheaper.  Etc. Etc

6.  On Sunday-  buy one bottle of beer or go to Taco Bell.  

7.  Work-  weekends or nights get a job stacking groceries or at the hardware store.  In older neighborhoods where yards need some help.  Offer $100 service to clear and cut back yard.  Sundays see if they need Sunday newspaper drop off.  Wash dishes at the local restaurants.  

Start small and Make Your Big Mistakes Early.  

Quote from @Zach Howard:

Quote from @Henry Clark:

When you say a mortgage of $4,000 per month on an 800 sqft apartment.  Is the market value around $500,000?  

 Market value is at least $835,000

As you mentioned no way to make the cashflow numbers to work.   Would have to be appreciation which would not be a good approach starting at that level.  

I would look at markets where you can do overseas military or state department renters.  This takes care of collections and filters tenants to a large degree.  Their boss or officer becomes your rent collector if needed.  

Plus as I mentioned the low interest rate is available in other countries.  

Jay mentioned Japan.  You might look at South Korea also.  

Make a post over in the commercial section.  Pick a listed deal in your area.  Do a deal analysis.   Don’t worry about being correct.  Only spend 2 hours on it.   Ask for people’s insight.  Put Florida or Miami in the title so those people with those flags will get notified about your post.

Or use the lookup magnifying glass. Put Miami or Florida. Pick a posted and engage with them. Ask them for REI meetups.

Use the magnifying glass on Puerto Rico.  Reach out to some of those posters.  

When you say a mortgage of $4,000 per month on an 800 sqft apartment.  Is the market value around $500,000?  

When I’m talking short term financing is bad.  Is using variable rates say 1 to 3 year periods on a 25 year asset.  People have failed twice now with the housing bubble and the recent meteoric increase in rates because they were gambling with the rates to save a percentage point.  

Per your reply to @N.   Your short term loan your paying in full with your payroll and not amortizing for say 25 years.  The confusion is most people are talking about a 5 year ballon on a 25 year amort period.  Almost all deals won’t cashflow using that approach.  You want to leverage. 

Use your RE background and make sure zoning allows and there are no hidden grandfathered requirement if it switches use.

Sounds like you have the $600,000.  Tell the lender you want a construction loan online of credit.   Buy as a church.  Do the construction and then appraise and refinance.  
Be careful though.  

Not knowing the configuration of the church the appraisal may be less than your purchase cost plus rehab costs.  

You don’t need them or anyone.

Now do you want to scale?  

If so you need them now and not later.  Tax accountant, banker, realtors, property manager, insurance agent, etc.  Start building a relationship.  

With these relationships they will steer you to other deals, investors, and also warn you.  

If you’re just going to do one or two flips a year keep your costs low.