All Forum Posts by: Colby Easterling

 I did not reply earlier but yes, that is essentially my plan.

At a high level the way I think about my finances is I need x to retire (my number is about 2.5 million).  Converting that money to cash flow is a problem for later.   Nominally, I'll make 15-20% on real estate assuming reasonable appreciation (3-5%) at current prices and interest rates. But that matches the return on equity the big tech monopolies make.  So my expected return from buying MSFT, FB, etc. is the same as what I expect to make in real estate.  It also is about my portfolio returns since I started investing in the early 2010s.  Now we've had quite the bull run and I expect equities to return closer to 12%.  But the difference between 15% and 12% is only a year or two--which is negated by the fact that I won't really be able to retire because I'll still have kids at home (and a large portion of my net worth will be locked up in retirement accounts). 

So, what I see is my returns from real estate are similar to the returns from stock, but the real estate requires significantly more work.  At this point in my life, my time is better invested with my family (or career) than chasing an extra 1-2% returns in real estate. (If we see mortgage rates below 5% again, I might reconsider).  With all that said, I would like to have one house per child to help them with family formation when it becomes time, so I'll likely end up with a couple more.  And I might end up with a vacation home at some point.  But the bulk of my investment strategy is going to remain in stocks.

I was in a similar situation. What I did was buy a single-family home down the street from me which didn't need any renovations (although it did end up needing some cleaning).  It's performed well (except for the air conditioner broke) but was also more work than anticipated.

Part of the question with regards to house-hacking is your current living situation.  If you are living in an apartment, it's likely a great choice.  If you already have a single-family home with your own backyard, it's going to be a sacrifice.  Travis suggested a live-in-flip, which is similar as above. But it's a lot of extra stress living with small kids in a construction zone.

I will say, I am probably not repeating the process as the returns don't seem enough better than the stock market to warrant taking time away from my family.  That's also what my friends in a similar situation concluded.  But if you are set on real estate, go local in a nice area and, if possible, in the path of development.

Jessica,

A lot of those moves puts your money into different properties rather than in the bank where it belongs. First there is no reason to buy a Townhouse "all cash" instead put 40% down and reap the benefits of an extrenly low rate, No PMI and the option to escrow. That allows the payment to be low, manageable and easy to cash flow when you transition it into a rental.

When you move out you will have more money in the bank, stronger assets, and be cash fluid in case you need to make an offer on more investment properties. Most people make the mistake on putting to much moey down or use "All cash" and then need to pull it out later at a higher rate. In some cases they cannot pull the money out because it is now (Non-owner occupant) an investment and their credit union or bank may cap them at 70% or 75% MAX LTV.

Nothing wrong wiht putting 10% down on a primary but look at the rates on both 5% and 10% usually when you have PMI built in the rates stay the same. Unless you are putting 20% down there is not much difference between 5%, 10% or 15% in rates. Again PMI offers the lower rate because its less risky and offers insurance to the bank.

So when you sell your current home try and keep as much as possible and avoid an "All Cash" offer. Using 30% to 40% is aggressive enough to win an offer especially if you can close less than 30 days. Ask for a "Pre-Underwrite" this is where the bank underwrites the file and give you a "Loan Commitment" instead of a generic "Pre-approval" letter. We call it an ELA (Express Loan Approval) where we can close in 15 days or less because it already underwritten.

That ELA will outbid any offer even in some cases an "All cash" close because an "All cash" offer is usually well under the ask price. Gives you the highest chance of winning the offer with the seller and avoid all cash.

If you have any specific questions feel free to reach out or email me I enjoy helping and talking REI.

First lesson, which maybe should have been obvious (is now).
Garbage in, garbage out.

Second lesson.
Learn before you buy,...anything.  Getting your "feet wet", isn't a learning move, at least not a good one.  If you don't know how deep the water is, you may get more than just your "feet wet".

Third Lesson.
Cheap and discount are not the same thing.  See Lesson #1.