All Forum Posts by: Frank Wong

Go through a escrow and title company you need a 3rd party to handle the funds and secure the recording of the deed properly.  It's a good question and I am sure it will help someone reading it down the road. 

When the market is rapidly appreciating appraisals can be an issue since appraisers are pulling older comps which are lagging indicators. In many cases the buyers will bring in extra funds to make up the difference or get a different loan from the bank (agreement from all parties in the transaction).

Example. Buyer is in contract for $200k and home appraises at $190k. Buyer is putting 20% down to make the purchase. The bank will lend up to the appraise value of $190k. Buyer brings in $10k to make the deal work. In a case the buyer does not have an additional $10k to bring the bank. The buyer can finance more from the bank and get a different loan as long as they qualify. If its a VA or FHA loan probably wont work if buyer doesn't have the funds as the buyer is already at the financed limit.

Over time buyers come in new price floors established and prices continue to climb because of supply and demand. 

Pros: Low entry price, turn key rental since you don't need to worry about exterior maintenance the HOA takes care of that, amenities for tenants.

Cons: Special assessments, possible rent control on available units to the complex to be rented out, no control.

Condos can be good investments even with the cons. If you are limited with funds and need to get into your first rental its a great first step. If you are looking for something simple without all the up keep its great. It all depends on what you are looking for and your financial situation. If you have the funds I would go with a detached rental with no HOA.

Sometimes leaving the capital in the property and letting it do its thing is the best course. I know I know you are letting equity sit in the property and not maximizing the returns. There is risk in taking out loans and sometimes having the security and peace of mind is worth leaving the equity in. You can operate and function more freely and make more money in other ventures with a clear mind. We have to protect our mental capital. 

Other factors play into the cash out. What will you buy next? Your current age? (20-45 can take bigger risk, 46-65 less risk) Your goal? How much time you have to commit? How much risk you want to take on? Whats your earning power? All these questions you can answer for yourself and help you with your decision. 

I think at your age you need to be strategic with your investment and not take on too big of a risk. Buying your own rentals has worked so far and you want control of your money moving forward not less. If I were to invest in a syndication I would just do a REIT. If I needed my funds for whatever reason I can click on a mouse and my funds are ready. I have control.

No one knows the future. It may or may not happen and you could be waiting for a very long time. More important is to understand that real estate is a long term game. You are playing for the next 10, 15, 20yrs. 

You need to look at your personal situation. Do you have a good income and job? Do you have savings and reserves to withstand losing your income? Can you make repairs with your savings? Are you levered up to your eye balls?  These questions are important to understand your holding power. 

When you can hold onto real estate and play the long game you are less worried about the short term prices. This is not to say you should buy just to buy. You still need to know what you are doing and buy correctly. 

At some point you need to jump into the market and not watch. Look at the data. It tells you the true story of whats going on. Always endless articles about tops through the years and endless people posting tops market crash etc. Sure I am open to the idea that a market correction can come but that can be years away I am not going to sit and wait for something that may or may not come. 

Let's look at data. It can be very simple. 

1. Days on market.

2. Inventory Supply of homes. More buyers than Sellers. Price going up. 

3. If a home has 10 offers and some markets 20 30 offers that means 1 family gets the house and 9-29 do not. This is bullish for prices. 

4. Real Estate is a process. Inventory needs to hit the market and people don't buy. Prices come down to a new point to attract buyers to pay a new floor price. This can take a very long time. 

5. Markets don't crash without inventory. Just saying =)

I am not saying prices can't come down and there won't be a market correction. What I am saying is do your own research and look at data points and come up with a conclusion and not base it on some article or someone's opinion. 

It depends on the market and DOM of the property (Days on Market). Is your lowball offer justified? Are you just throwing in an offer and hope it sticks?  How many competing offers are on the home?

If the home is just listed lets say 10 days or less very unlikely you offer will be accepted. Seller psychology. Why would a seller take your offer it hasn't even been tested for long. Yes, some cases sellers will be offended with the offer. Real estate is emotional. 

House has 10 offers and you still want to lowball? No way you just wasting your time. 

The thing is markets change and we are in a super tight sellers market right now. Low ball with no justification for the offer is just a waste of time for everyone involved. Now if your offer has reasoning behind it, go for it. 

It depends on your skill set.  If you know how to invest the $1m then take that amount would be the better option. If you don't, $10k a month is pretty sweet. The $10k a month I would assume is asset that guarantees it to you the income with no principle reduction and in this hypothetical scenario.  That in itself might be worth it.  

Everything has risk and taking the $1m could be lost in this scenario regardless of your skill set.  The $10k also saves yourself from making a wrong decision trying to grow the $1m.  

$10k x 12months = $120k yr

$1m x 9.8% SP500 return avg (investopedia) = $98,000 yr. Yes I know many can get higher returns but with higher returns there is risk. 

I take the $10k a month continue with my job and continue to stack and reinvest. Not many guarantees in life but if I am guaranteed $10k a month I'm taking it. 

I think a higher end LVP will be just fine but it really depends on your price point and competition. The quality of LVP today is really good and for the most part satisfy the buyers wants.