All Forum Posts by: Dan M.

Makes sense thank you Bill for the clarification. I always just assumed a personal guarantee would be allowed in a SDIRA. 

I'm curious to hear from investors who are choosing to build a financial moat instead of leveraging as much as possible. I'll define the financial moat as establishing a financial security blanket to survive downturns or bad years. I would love to hear from you especially if you have done so a while ago. What advantage do you see from this type of strategy? What disadvantages? How many years of expenses do you have covered?

For a little context I'm currently in the process of paying down a mortgage that adjusted from 4.5% to 7.5% . I view this as a guaranteed return of compounded 7.5 percent for the life of the loan ( In my case 14 years). By doing so I will reap this theoretical return and get bonus cash flow by eliminating the principal portion of the loan. Technically speaking this is an after tax return of ~6%. My rental portfolio averages around 19% and current investment opportunities with the inflated interest rates and prices that I have looked at will offer a return from anywhere of 8-18 percent depending on the amount of leverage. I don't mind growth but the rate of return has to be comparable with the amount of risk associated with it.

I have picked up a little bit of stocks with dividends that exceed this 7.5% ( after tax adjusted ~6% ) return as I figure this is a great time to get a good cost basis and potential future growth and higher return if the dividends increase, almost like a rental increase. Though for me it is really hard to beat that guaranteed 7.5%.  I keep some known upcoming expenses in treasury bills that are getting ~4.3%.

I guess I'm at a point where it makes sense to me to start to take risk off of the table ( I'm aware stock investing is risky, I'm mostly talking about paying down the 7.5% mortgage) and would love to hear from people with the same mindset. Long term speaking I believe it will allow for me to make more speculative / risky investments that can pay a higher yield once the moat is established.  Feel free to PM me instead of posting below if you don't want to make it public I would love to have a discussion about this with like minded individuals who are in the process or have already achieved a solid moat. 

I think its really smart to "house hack" into real estate. You won't be making alot of money but you will eliminate or offset your largest expense. I wish I started that way myself. In theory this will help you save for the next one. I'm personally a fan of duplexes because of the higher cash flow generally than single family which is especially needed when starting out to cover expenses that will happen. I would suggest keeping a capital expense fund contributing towards it monthly if possible, you can keep it in a high yield savings account or monthly treasury bills so you earn some interest on it and its liquid if you need it. Once your capital improvements on your first property are covered as best as you know then you can look at it as the 25% downpayment for the next one. 

Eventually saving on your own to get the next, third, fourth ,whatever property becomes a headache/chore/seemingly impossible. That's where in my opinion it pays to be creative and doing things like cash out refinancing equity, pulling from your 401k, using 0% credit cards responsibly etc. Its a challenge to continue to grow but ultimately rewarding if you can stick with it for over a decade. If your the type of person that can eat ramen noodles for a decade to achieve financial freedom your in the right place.  ( It doesn't have to be this way but makes it alot easier )

I'm curious and maybe a little devils advocate, why do you NEED a non recourse loan? Your going to pay alot more for that privilege. Are you that uncomfortable with the property that it has a chance of bankruptcy? 

@Charlie Dedinsky Your smart to house hack in the beginning, I wish I did. One thing to think about is what if you had roommates in a single family house instead of a multi family unit? Its cheaper rent for them and helps you also. Properties have skyrocketed in the area and in my opinion will continue to rise for the foreseeable future even at these higher interest rates. There's an orange county NY meetup if you search the forums you should find the post or check facebook if you have it. I'm a Realtor and investor, feel free to shoot me a PM if you got any questions or want an opinion on a property or anything in general. 

I'm looking to connect with people who are like minded in the Oneonta area. This includes and is not limited to Sidney, Walton, Norwich, Otego, Bainbridge. Feel free to comment below or shoot me a message or colleague request. 

I wouldn't recommend it for a number of reasons. 

What if she fixes the refrigerator 3 months from now? 

How much longer will it take for her to finish he cleaning and painting to her liking, while your losing rental income on the other unit by her essentially occupying 2 units?

Tell her (your attorney said if your afraid of being the bad guy) your unable to comply with her request, but you will let her know when the new unit is ready to move into. I would also give her x amount of days to move but let her know you will have to charge a prorated fee per day after that to move for occupying both units. 

I mean myself and any bank would need more details, but if you utilize that large sum as a downpayment and have a small mortgage, wouldn't you easily qualify for the debt to income? I assume you want to live in one side of it? The property itself should bring in revenue ( even if you choose not to live in one side) and generally a bank will accept a portion of that rental income into the calculation. 

Have you actually talked to a bank? Call around and talk to a few people I'm pretty sure you will find someone who will make the time for you who can tell you pretty much on the phone if you could qualify and ballpark for how much. 

@Luke Tetreault I think it comes down to what are your goals? Do you want to earn x thousand a month? Do you want to have airbnbs all over the country and travel between each of them and living an adventurous life? Do you want to self manage? Where do you see yourself in 10 years? How much risk do you (not) want to take? 

Once you clarify where you are and where you wan to be the answer should be self evident to you. The quick short answer in my opinion is this: If you want growth stick to the small multis that you know and once the mortgages are paid off retire fully. Your young, you have time on your side. Don't over leverage and carry reserves. Survive for a decade and watch your net worth grow tremendously. Best of luck. 

@Jason Mergl Talk to Stephen McCormick at Empire Real Estate. A quick google search will give you his contact info. He is a busy guy but he is very knowledgeable and could probably help you out with multiple if not all of these things.