All Forum Posts by: David S.

@Jake Riordan Understood, though I’d have to believe that’s pretty rare with a home that’s been fine for decades. Do you commonly see slabs in your area or do you feel it’s an outlier to have a slab out there? I’m wondering if a slab was appropriate to begin with?

@Jorge Leon Jr I've been contemplating the same quandary. For me, and probably you as well, I think a hybrid between cash and debt makes a lot of sense as follows, with reasons attached:

If you can, always buy cash. Helps with competing offers, it's more flexible, generally smoother process. 

As you go, finance properties after you've rented them out, but not all of them. That's what I mean by hybrid. Leverage some to 80%, especially those that are worth more... It makes no sense to leverage two 100k homes if you have one 200k home. If the market tanks, you have stored leverage in your cash properties still. By having some bought cash and others leveraged you can reduce your risk and keep your financing costs to a minimum. Employ the law of averages while segregating each home individually. It's also a lot cheaper to refi one home when rates drop than it is two homes. 

Buy fixers. Get that 20% equity up front if you can, which allows you to roll your money back out, and it keeps your leverage and risk down by default. Don't buy turn key, ever, unless you're at a point where you don't need to scale as fast. 

I think you have to emphasize the sweat equity aspect of the business up front on your first 3 or so deals. Lots of work, but that's your snowball effect and risk mitigation right there. After you have a stabilized portfolio up and running you can look for deals that CF well without a significant equity component up front. (By then the entire landscape may have changed anyway.) You'll also have more credibility with lenders once you have a track record of success. 

That's my plan. Who knows where this market and economy are going? Keep some buying power on hand and leverage carefully, but you SHOULD leverage. Watch your equity ratios. Good luck! 

Can anybody with building experience and knowledge of the KS City climate give me some feedback on buying a home on a slab in Overland Park? The realtor I've been working with was quick to point out that a particular home I was eyeballing was worth considerably less because it was on a slab rather than a crawlspace. 

I understand that slabs are not a good fit for cold climates as they can crack if the ground freezes, but then this house has been around for decades already. 

Looking for some feedback on a slab house in this area. Does it really impact the value that much? Is it the wrong region for a slab based on climate? Would you buy a house on a slab in Overland Park? 

To me, so long the slab isn't a significant risk/liability, it would seem that such a purchase would still make sense since the typical renter doesn't care if there's a slab or a crawlspace. Obviously a full basement is a benefit, but that's apples to oranges. Only when it comes time to sell it down the road is this a possible detractor. Right??

Thanks! 

@Matt Millard Gosh, there's a question that goes back for me... I like economics and did a minor but I can't remember. I do believe it's Austrian that I would favor. 

Frankly I'm not sure how one can't agree with most of what I said... most of it is plain vanilla facts. Seems everyone wants to ignore the debt crisis because the numbers are just too hard to even begin to comprehend and we all think it's the next person's problem. And that's where we're wrong. We all pay for it one way or another. And when everyone is looking the other way, nobody has their eye on the ball. Welcome to politics. 

What Jay said is in effect right; costs have surpassed what the lower class can afford and thus housing isn't being built for them. But that's not a temporary situation, that's a product of our fiscal environment and just a taste of what's to come. Next is the middle class and we're already seeing it. I'm middle class and can't afford to build a home. The generation before me, however, could. Before you know it, nobody is building homes because even the luxury class dries up for lack of buying power and demand.

We can all look back foolishly and say "Naaaah, that'll never happen! Look how clever we are!" But then the world has never seen national debt on this level, has it? And to think it's all fiat... People can nay say all they want, but we're in an experiment of epic proportions; that much is certain. I have a hard time seeing how it ends well for you and I if we're not providing basic services, like housing, that demand a market price. 

Anyway, I believe the statistic is something like $120k per person in national debt in the US, and that's right now. What are we going to do when it's $250k? Half these people don't even earn an income (elderly and children) let alone have that kind of money to spend. 

But still, if we just keep our heads in the sand... all will apparently blow by and we'll be none the wiser. Right?

A lot of good opinions here. One thing I feel is always forgotten (somehow) is our nation's debt metrics. Would any of you rather bright souls (not being sarcastic) like to explain to me how we're going to afford Social Security, defense, debt service, health care, etc, over the next 20 years? Not to mention all the pension plans that are underfunded even when the market appreciates. We're already running 1 trillion dollar annual deficits and the long term forecast is abysmal. 

If you ask me, we're in effect a slow motion version of Venezuela. The only way we keep the debt down is to reduce the value of our currency. Inflation. You're already hearing the Fed talk about "target inflation". You'll hear that phrase more and more and the number will slowly increase from 3% on up. Inflation is the new backdoor taxation... we all lose buying power to keep the house of cards upright, and the way it's going we're going to have to lose this value a good bit faster than we are now. 

And THAT is why I'm here. Because my rents will (more than likely) keep up with inflation over time. All that said, I agree that we're due for a recession, but I also agree that @Jay Hinrichs is right about costs of construction and thus housing inventory that's lagging. My guess is that housing sees a meaningful dip of say 20-25% within the next 3 years, but that's not to keep me from buying a property that can realize the same 20-25% of appreciation through some sweat equity. You hedge for that, build value, and keep doing it. It's hard to lose when you find ways to create value over the long term, recession or not.  

@Timothy Daniels Are you writing that two month check AND returning the deposit or keeping it in that scenario?? I can see two months if you’re holding on to the deposit, but that’s quite a gift otherwise. It’s akin to paying up in a hostage situation; tough call and it’s fair to say if it becomes a standard practice it’ll become a common practice. I get it though....

@Cheryl Gleason @Ryan Keenan I too find the advice to take no money at all a bit of a foreign concept having gone through a rough eviction process and never run into that advice from my lawyer. This could very well differ from state to state, and granted, my situation wasn't due to late or missing rent, but to me, even if they still pay, so long they've broken the contract in one way shape or form, you have grounds for eviction. Be sure to at least look at this closely before you're potentially tossing out perfectly good money. 

Calling all landlords who have been in the business for 20 or more years; I'm curious how you feel the average tenant has evolved over time. Have good tenants become harder to find over time in your market or has it been steady over time? Do they respect your properties the way they did 20, 30, even 40 years ago or have they changed for better or worse? Etc! 

In general, how has the quality of tenants changed over time in your view and where do you see this trend going in another 20-30 years? 

Cheers! 

Hello all, quick theoretical question; 

If I own my primary home free and clear and were to take out a maximum heloc on it, without using said heloc, how would that impact my ability to get a mortgage too? 

So again, the idea is to get the max heloc, not use it until ready to buy an investment property, but also see what a mortgage lender would allow on top of that based on income. The presumption here is ZERO debt whatsoever. How would a lender look at this? Would they simply apply the roughly 1/3 Debt to Income ratio regardless of the heloc facility one has in reserve? 

The way I see it is that the heloc is against the home primarily, the mortgage then is primarily against income as if you didn't have the home to begin with. But I have to believe there's a catch with debt to income ratios in using both at the same time.  

Thanks! 

@Anthony White Fantastic! Curious though; On just about every property in the Memphis area on Zillow I see that the property taxes have gone WAY up in 2017. A quick Google search gives me nothing obvious. Can you tell me/us what's up with that?? Literally many have doubled in a year flat. What's the outlook for property taxes out there? Thanks and congrats!