All Forum Posts by: Clayton W McGehee

I appreciate your thoughtful response and I do agree that mortgaging a home can and more than likely will have a better return percentage. I want to be very conservative on my first 2 or 3 homes and once I get that income coming in that will be pure profit every month that will give me the flexibility to mortgage homes in the future if I choose to with limited risk. I am intending to buy a fixer upper home that is in needs of updating and repair and take full advantage of the skill sets of  my father who has already agreed to help me. Luckily homes like this come cheap in my area.

I am not sure of your feelings on my strategy but I really do feel that every investor has to go their own way. If you have anymore constructive to add I would be really glad to hear it. 

 If you believe you can understand all of the nuances of real estate investing from a book or a forum I do not know what to tell you. There is NO REPLACEMENT in life for doing the real thing. You are not going to completely understand what it requires to renovate a home, be a landlord, etc. etc. Until you buy that first home and do it. You really seem to quick to judge people's methods who do not believe in what you think. I am kindly asking you not to respond again we are NEVER going to agree. You have NO idea how successful or unsuccessful I may become. Only thing I can tell you is I have a strong track record in my previous investments. Now please let this thread go and have a nice day/life. We have been talking about this and you completely derailed the point of the thread. 

Yes you are correct on MLPs. But the MLP ETFs do not require you to fill out a K1. The downside is you pay more in fees on those ETFs that a typical ETF but you get higher yields

 Nah. I will own far more than that. I will be buying at least 1 a year going forward in 3-6 months I will be buying one. Fast forward 1 year I will buy a 2nd. Fast forward 6-8 months 3. 

I've already done the math and I am sure it will not go quite as well as I hope but 4-6 in 40 years is out of the question lol. Will be WAY higher. 

 1. If I invested 100k the way I am currently I would make roughly 10k a year in my passive investments and probably 25-30k in active investments

2. I can say with near certainty my passive investments would not change much. My active investments do better in a bad economy.

3. Once

4. Luckily the majority of my investments are protected from losing face value. They simply can not do it, but it is possible I would have to withdrawal those investments and place them elsewhere in a bad economy.

I honestly do believe you could weather a housing crisis as your knowledge on housing is very substantial. But the only way the rest of us are going to get to that point is through trial and error no amount of book reading or reading this forum will prepare inexperienced real estate investors for a housing crash. 

 I can accept your answer, but what you are failing to see as well is we have no idea where the housing market will be in 5 years. If there is no serious problems in the next 15 or so years you could absolutely be correct that your method is superior. But if there is another serious housing crash (let's not forget it's only been a little over 10 years since the last one) then having a mortgage could completely screw your investment. I don't pretend to have the foresight to predict the market so I choose a more conservative route. 

I do sincerely want to thank you though. I know you are only trying to help and I appreciate it. When it comes to investing though everyone needs to follow their own path. 

 I can agree with a lot of what you said, but buying a property outright is not dangerous at all. If it doesn't pan out as a rental property I could choose to live in the property or I could sell it and get at minimum 80% of my money back honestly I could flip whatever I bought if I choose too. I'm going to add tremendously to the value of it through my labor. 

I'm already very familiar with how money works and investing in general. I've made thousands off of investments and currently make about 6$ a day just in interest on my "liquid" money. Being conservative is going to win the race more times than not. The Warren Buffett mentality is the correct mentality for investors to take for the most part. People are always trying to beat the markets and think they have the foresight to know the future better than everyone else sometimes slow and steady is the way to go.

Nothing you can say is going to change my opinion on these matters. I have read several books on real estate investing several times as well as the one written that was sponsored by this website. I take the information I like and leave the information I do not. When investing everyone has to follow their own path. Will you be a better investor than me or will I be better than you? I do not know and really do not care I know where I am going and have been successful so far. I appreciate your interest in my post. I am just looking for information on two types of investment I have never done before such as the 2 I mentioned in the first post.

Edit: I won't be spending anywhere close to all of my money. I have multiple investments that will continue to accrue money. That is kinda the point of this article to start another one on top of what I have. 

 Very little to be honest. I'm in the beginning steps of real estate investing. But I feel that is more reason to play it safe. 

A bad housing market is a GREAT time to buy for the future and if we were in a bad market currently I would probably consider that strategy as well. But taking out loans for investments while it can be quite lucrative has ruined many investors. Especially inexperienced investors. 

For instance my parents who have a mortgage on their home were supposed to have a payment of like 600$ a month but due to an error from the mortgage company the taxes where not included into the bill for the first year like it was supposed to be and they said it was. So now my parents current payment is over 900$ until those taxes are paid off luckily this will only be until the end of the year but there is quite a bit that can go wrong in the wonderful world of mortgages and encouraging young inexperienced investors to just pay the down payment and deal with the future as it comes is a recipe for a lot financial issues. 

 Let's say you get a mortgage and their is another housing crisis in the time frame you take that mortgage and you can no longer rent it out for the cost of that mortgage then you have to take funds out of your household to pay for it or even worse you can not afford it and have to let it go then you ruin your credit and you lose everything you put into it. Me with my home paid for even in a bad market I still own the property and can wait for it to go back up again. 

With that said it will take me 3-4 years to get my money back out of the home which is a reasonable horizon. Will likely be able to pay off a 2nd home within 1.5-2 years. Luckily real estate is pretty cheap where I live.

Taking out a mortgage for real estate is foolish unless you are fairly wealthy and can easily weather it not being rented out/rented out for cheaper than it really should be. Once I get a couple of homes paid for completely I would probably consider that strategy.