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All Forum Posts by: Jim D.

Jim D. has started 17 posts and replied 409 times.

Post: Leave equity share intact, or have partner buy me out?

Jim D.Posted
  • Investor
  • United States
  • Posts 415
  • Votes 487

if you've lived in the home as your primary residence for at least 2 of the last 5 years, your gain on the sale if the house will be tax exempt. Since it sounds like you didn't quite live in it two years, I'd probably check with an accountant to see if it matters since your ex is still there. 

Post: Cash flow necessary for long buy and hold?

Jim D.Posted
  • Investor
  • United States
  • Posts 415
  • Votes 487
Originally posted by @Jim Schock:

@Chris Ruud So I need to admit

@Jim D. If you invest 500k in a property, and in 30 years it's still worth 500k that 500k has less value due to inflation.  As I stated the reality is it won't stay flat for 30 years which is why it's best to know what the growth rate in your area is.  

I don't think you understand the basic premise here. He's proposing putting a small down payment on a $500k property with a 30 year mortgage, and having the rental income cover the mortgage payments so that it's cash flow neutral after all expenses. If he puts 5% down  ($25,000), and the property value or rents never increase, after 30 years the loan is paid off and he owns the building free and clear. So investing $25,000 and getting $500,000 in year 30. That's a return of 10.5%.

If the property appreciates even 2% per year (increase of $10,000 on his investment of $25,000), he makes another 40% return because he's leveraged. 

Post: Is Scott Trench Wrong? Retirement Plans vs Real Estate

Jim D.Posted
  • Investor
  • United States
  • Posts 415
  • Votes 487
A 10% early withdrawal penalty isn't that bad. Is it possible to get the match, and then just pull it out the next year and use it for real estate? Then you would basically get an 80% match but have the money freed up.

Post: Cash flow necessary for long buy and hold?

Jim D.Posted
  • Investor
  • United States
  • Posts 415
  • Votes 487

What do you mean by this?

Post: My Dad Doesn't Invest in Real Estate- Is it too Late?

Jim D.Posted
  • Investor
  • United States
  • Posts 415
  • Votes 487
Regarding getting someone interested in investing, it's hard to do. I'm always chatting with family and friends about it. 3/4 of them get glazed eyes within a couple minutes, so I change the subject. The ones that are interested in it make it clear and always want to talk to learn more. I think if someone doesn't really feel an interest on their own it's pretty impossible to create one. Though it's beyond me how 20%+ returns don't get people excited.

Post: Cash flow necessary for long buy and hold?

Jim D.Posted
  • Investor
  • United States
  • Posts 415
  • Votes 487

If you're just doing one or two houses, I don't see a huge risk in having neutral cash flow. But I'd never want to scale bigger than that. 

My first purchase was cash flow neutral, which seemed fine to me. But then in the first two years I had to spend $6000 on plumbing issues and $4,000 on a new HVAC. After that I bought much more cash flow. The peace of mind knowing you can handle vacancy, big repairs, and down markets is huge. I want to know that if I got sick, couldn't work, etc. that my investments could keep humming along and I wouldn't have to worry about putting cash into them.

Post: My Dad Doesn't Invest in Real Estate- Is it too Late?

Jim D.Posted
  • Investor
  • United States
  • Posts 415
  • Votes 487
David is spot on. Have them check with their accountant, but they should qualify for the $500,000 of capital gains exemptions since it's their primary residence, so probably no need to 1031.

Post: 24 Year Old Making $16 an Hour, Closing on 4 Plex Friday!

Jim D.Posted
  • Investor
  • United States
  • Posts 415
  • Votes 487
Awesome work man! Impressive you did so much work to make sure you got a good deal. I'm a little concerned about your lender, for a couple reasons: 1. FHA and conventional owner-occupied loans both require you to live there for a minimum of 12 months as far as I know. 2. I have called tons of lenders asking if they can use a 5% down conventional for an owner occupied multifamily, and they have all said no. Literally dozens of lenders have told me that for any 2-4 unit conventional loan, it's 20% down minimum. I sure hope she didn't wink at some rules on your loan somehow.

Post: Why Doesn't Everyone Invest In Real Estate?

Jim D.Posted
  • Investor
  • United States
  • Posts 415
  • Votes 487
It's always good to look at opportunities with that mindset ("if this deal is so good, why hasn't someone else bought it?") It's an open market, so if there's real value in a deal you're right to question why it hasn't already been taken. However, someone has to be the first to spot the value, and sometimes that's you. There's a joke where two economists are walking down the sidewalk when they pass a $20 bill. One says, "Hey, is that a $20 bill in the street?" The other replies, "It can't be--if it was, someone would have already taken it" and they keep walking. As far as real estate goes, most of the people I know who don't invest a) are not aware you can get far better returns than the stock market or b) don't have the patience for the illiquidity.

Post: All eggs in one basket (town)???

Jim D.Posted
  • Investor
  • United States
  • Posts 415
  • Votes 487
I don't think the % of the town owned matters much. The risk would be if the local economy slides and your pool of renters and property values dry up. If I had 50-100 units, I think I would feel uneasy with all of them in one town. On the other hand, once you have a monopoly you can double the rent, right?