All Forum Posts by: Cory Binsfield

@Joshua D. Ha! I rock climb as well. Ya, the pay wasn’t great but it was one of the few jobs that I constantly enjoyed-outside of my rentals. Who says work has to suck?  

I completely agree with the podcast guest, Mike Anderson. Hiring people who worked in college is the way to go.

I notice that my tenants who work while attending the local universities tend to be better renters. They are rarely home since they are either in school or working. When they are home, they are prepping for exams or writing papers.

I worked my tail off in college. My worst job was moving office furniture in 100 degree heat in Northern Ca. My best job was guiding white water rapids and dealing black jack.

I also bought and sold a courier business and even worked as a Pedi-Cab Driver (bicycle taxi) on weekends.

I graduated with about $2,800 in debt since I tapped a student loan to buy a reliable vehicle so I could drive to my Black Jack job on weekends which was over 3 hours away in Lake Tahoe.

After college, I took the summer off and chilled in Lake Tahoe while mapping out my next plan. It was one of the best decisions I ever made. 

Never sell/flip unless you can exchange and create a better deal. Trust me, you will thank me 10 years from now. 

You have a great problem here. Here's what I'd consider in your shoes.

1. Forget a primary residence. Its cheaper to rent in San Diego then buy due to a whole host of factors-price, market cycle, taxes and insurance.
2. Depending on your ability to get a loan, $600,000 allows you to buy 2.4m in investment properties assuming 25% down. The key question is will this allow you to cash flow? If not, see next point.
3. As people have mentioned, house hack with a FHA loan then take leftover money to invest in other deals. Ideally, a 4 plex. A nice 2 unit if fine.
4. Again, the deal needs to put money in your pocket each month to pay you for the hassle of operating a business.

The bigger question is this: Do you want to start an income property business in San Diego?

$600,000 gives you lots of options.

Don't rush into a deal.

Be very careful and consider sitting on the money for at least a year until you figure out your long term goals.

A 1.2M primary residence might not be the best choice since you are already questioning this idea on a forum.

@Harrison Liu

Forgot to mention I've seen my share of market cycles. While everyone was piling into dot com, I was buying real estate in 1998. Looking forward to the next crash. 

@Harrison Liu  

 All I can say is I expanded my portfolio from 68 units to 121 units since 2008. As people lost their homes and sought housing, it pushed my rents higher. The worst period for me was leading up to the housing crisis where my tenants were buying homes with NINJA loans. 

@Harrison Liu

I invest in the Midwest. 

Alex, one of the key assumptions your blog friend makes about dividend growth investing is the past track record of rising dividends will continue. In other words, either you or he can accurately predict which dividend stocks will perform better than the market.

If 97% of professional investors can't beat the market, what's your edge?

Not to sound harsh, but beating the market over an extended time period is next to impossible. Throw out this comment if you are lucky.

Worse, I see a lot of dividend investors who chase yield while ignoring all the risks that come with a concentrated portfolio. If you own less than 50 stocks, you have a concentrated portfolio.

For example, I know a guy who lives off of his General Electric (GE) dividends for retirement. His income cratered during the 2008 crash when they slashed the dividend from $1.24/share to .46/share. Today, the dividend is .95/share. 

By the way, he owned a substantial amount of shares since he inherited them from his Grandfather who worked there all his life as a senior engineer.

I believe, he was cashing in around $35,000 per year in dividends and then his income was cut by more than half along with the value of his investment.

Keep in mind, GE was a "dividend aristocrat" and one of the first companies in the Dow Jones Industrial Average back in the day when the Dow was only 12 stocks compared to 30 today.

Real estate is a business. It offers higher returns than stocks due leverage, high barriers of entry along with large capital inflows as you maintain the asset. All of this can be mitigated by hiring the right property manager, buying for cash flow and maintaining the proper cash reserves for roofs, appliances, plumbing and heating.

It's not a set it and forget it investment like buying index funds (less risky than buying individual stocks).

If you believe in set it and forget it for individual stocks, consider the GE example or other dividend powerhouses like Enron, MCI Worldcom, Bear Stearns, Lehman Brothers, Citigroup, and on and on and on.......

Your famous blogger mentioned how the yield on cost will easily surpass a turn key rental.

In my experience, nothing could be further from the truth.

As rents rise with inflation, your yield continues to accelerate. Unlike a company that decides to cut their dividend, my rent yield continues to climb. This was my experience during the 2008 crash. When my investment portfolio fell 50%, my real estate portfolio fell by 10-15% in value, but my rents continued to march higher.

I just looked up one of my rentals that I purchased in 2000. The annual yield on cost 19.3%. This number does not include other returns like appreciation, principal payments by tenants and tax write offs.

I'm not a turn key investor since I like value add deals and live in an area where it makes sense to buy and hold for cash flow and modest appreciation.

All investments have risks. I just don't want you to get the impression that dividend growth investing is all unicorns and rainbows. 

Who say's there are no deals out there and the market is a bubble? Very impressive. You are easily on track to replacing your 100k in annual insurance earnings over the next 5 years. 

The most important part of your journey is your grit. Glad you kept on pushing forward despite the obstacles thrown at ya. 

The obstacle is truly the way. 

Hey Josh and Brandon, looks like a great podcast guest

If I were in your shoes, I would contribute just enough to max out the employer match.

401k loans are fine. Just be aware that you would have to pay it back or suffer a large tax hit if you were to lose your job with the company.

Ideally, a home equity line of credit is a better option if you are having trouble raising the large down payments.

Next, I wouldn't worry about the car loan if the interest rate is low. As long as you are earning 10% or more on your real estate, you come out ahead. Ex., car loan 5% cash on cash return 10%. Just like a bank, you borrow cheap and reinvest at a higher return.

Just be careful with expensive cars until you are set financially. I once sold an expensive car to help raise the cash for a closing. I simply bought a cheaper used one to replace the nice car.

Bottom line, I like having my rentals pay off my vehicles and other lifestyle items.

Lastly, not a fan of a self directed Ira for cash flowing real estate. Too complicated to get into it here. All I can say is you lose all the tax benefits of real estate and tie up your money till age 59 1/2 when you purchase cash flowing rentals to in your Ira.

Better to buy notes, private equity or land in the IRA. Plus, it might be a mute point if all your money is in a 401k.

Beware of financial advisors positioning life insurance as an investment. Just my opinion, mind you. You only need life insurance if someone will be harmed financially if you were gone.

Cheap term insurance fits the bill for 99% of people. For the 1%, you can use expensive whole life or variable/universal life to cover estate taxes. Works well if you have 10 million or more net worth.

Q? How many people became millionaire's investing in life insurance?

I'm sure I will ruffle some feathers with the latter two comments.

If your goal is passive income today/early retirement, keep doing what your are doing and shoot for 1 property a year over ten years. Coupled with a 401k, you would be set for life-assuming you don't screw it up!