All Forum Posts by: Curtis C.

Brian Hoyt

You dont NEED school nowadays to become skilled in professions unless the profession requires specific knowledge or state regulations (e.g. Dr, lawyer, Dentist etc).

There is so much wealth of information on the internet and books people with the drive and motivation can teach themselves just about anything. Want to become fluent in statistics with parametric and non parametric data models, done, want to become a skilled musician (like Ben Leybovich) done. The list goes on. One of my sons friends didn't go to college and taught himself java script and C++ with www.codecademy.com. He became fluent in the languages within a year and half, built a portfolio, and was hired shortly thereafter. There is an abundance of information and self teaching methods out there.

The way information is shared nowadays is making the traditional college model obsolete. I will be happy when the bubble bursts, schools are forced to improve education or die out, and schooling becomes affordable for the average person once again or whatever replaces the modern day college institution.

Ben Leybovich College Tuition rates have risen 400% that of inflation, it is definitely a bubble. More debt is held in tuition loans that consumer credit.

My youngest got a degree in mechanical engineering and we paid for the full ride. He was hired straight out of school, but when the recession hit a few months after he was laid off. Since then he has had a hard time gaining meaningful employment. Mostly doing contract work where he can.

If I was unable to pay tuition, knowing what I know now, im not sure I would have advised my son to take on that much debt. Even working through school and taking your core classes at a community college and not going to a flag ship school 30-40k in debt isnt uncommon.

@Jennifer Lee, take a look at the statistics. A lot of law graduates are having a hard time gaining meaningful employment as well. And in the mean time strangled with debt.

Even new nurse grads are having a hard time just read this story i found today on CNN

http://money.cnn.com/2013/01/14/news/economy/nursing-jobs-new-grads/index.html?iid=F_Jump

Brian Hoyt I was under the impression that hard money is needed for many of these properties if they have any repairs beyond cosmetic touch ups, since the banks won't offer conventional financing.

Should I pass on any properties that need any structural repairs, and just buy the ones needing cosmetic touch ups and get a conventional loan for them?

@Brian Hoyt Thanks for clarifying, I appreciate it. You are making some great points for leverage. I guess the key is to keep your DTI conservative.

Do you, or anyone else here, have any recommendations for some hard money lenders here in DFW? I was talking to one of the guys at Long Horn Hardmoney Investments in dallas, a few weeks back at a meetup. Or perhaps I should consider private money, to avoid the higher interest of HML.

Just wanted to say thanks for everyone so far that has contributed to this discussion, it has been of great help, thank you all for your time.

In regards to leverage, my biggest fear is a huge slump in the market again. Maybe not to the effect of 2007-2008 financial crisis, but I see another recession on the horizon. If it were to happen I feel like I would get wiped out leveraging my 100k and having several houses with loans.

Brian Hoyt, In regards to the banks only counting rental income towards your DTI taking 2 years. Is that 2 years per a house or just 2 years as a land lord total? For instance If I bought a house on 123 Green Street in 2011, the bank will now count the rental income toward my DTI. But what if I buy a house today on 345 Orange Grove today, will I have to wait another 2 years for that one house to count in towards my DTI? That's a great analysis on 1 property vs several as well, im going to have to pull up some spread sheets and take a closer look. Thanks a lot for that write up Brian.

Xing Zhu Would you mind explaining this real estate index futures? Is this like some sort of insurance in a way in case the market goes bust?

John Chapman thanks for your great reply John. Yes I can really lock up properties at 55-65% I have been doing it for almost 2 years now part time while studying real estate using that to build up my cash reserves. I do have a question though you said “If you can really lock down properties at 55-65% minus repairs, then I would simply wholesale them or wholetale them.” You state wholesale in there twice, did you mean to replace one of those with rent? As in wholesale some for additional cash and rent some of them for myself?

John Chapman Thanks for your reply John. You guys are making me reconsider my stance. Perhaps if I use Hard money or private money conservatively I will give it a second look.

For $100,000 with conservative attitude, how many houses would you leverage and at what ARV price point?

Also when calculating DTI with loans, I suppose you count the positive cash flow as income correct?

Ben Leybovich

I have experience estimating repair costs, a good friend of mine is a contractor who has been very successful working with investors. When I was first getting my feet wet in REI I started wholesaling, ive wholesaled over 20 properties in a year and a half doing this part time. I can likely find and lock up properties for myself at 55-65% minus repairs. Seems like at that heavy of a discount it would be hard not to make some money. I am also good friends with a top performing Realtor and know of several good staging companies in the area as well.

I disagree with this statement. Just because you want to use little or no leverage doenst mean "REI Isnt for you", I know several people that only buy in cash. What happens if you take your $100,000 trade it for 5 houses with leverage, have 5 notes, and something unexpected happens. The market goes south and you can no longer rent your property. Now there is no more cash flow, you have 5 notes to pay for with nothing coming in. Leverage is how people lose their shirt in REI. And like I said it amplifies your gains AND losses.

Brian Hoyt

Thanks for the reply Brian. The only problem I have with your purposed situation is the loans for each of the houses. 5 loans is alot in my opinion and makes me feel uncomfortable. Hard money or whatever you are using to loan on the properties leverages, but it not only amplifies gains but amplifies losses as well. And that worries me.

Also what do you mean by prop no 5? Would you mind explaining that/

Thanks

Xing Zhu Thanks for your reply xing. A few million seems like a bit of a stretch for me, I was thinking more in the neighborhood of $450k or so. But I suppose as you grow that initial pile of money and it gets larger you will be able to lock up more deals simultaneously, assuming you have deals coming to you. And once that happens you can pick up the pace a bit.

Hello Everyone,

I am contemplating between 2 strategies right now for $100,000 cash I have to invest. I do not want to leverage any property. I like to sleep easy at night and not rest on a house of cards. The 2 strategies I am contemplating between are:

1) Grow initial pile of money from several flips, allowing me to buy 2 or 3 rental properties free and clear with cash
2) Or take what I have now and Purchase a single rental with cash.

Here in North Texas the bread and butter properties are about $120,000 for rental units. A little more expensive for a retail type flip, but this is all accounting for the 70% minus repairs rule.

I am open to suggestions and comments from the more experienced folks here, thank you