All Forum Posts by: John Kunick

@Nicole Heasley Beitenman, RE: student loan crisis.

Per my post above, I was one of those shaking my head at the stupidity of those taking loans out for real estate in early-to-mid 2000's.  While I understand their motivation, the key is they were like sheep being led to financial slaughter due to government intervention.  Therefore, I was setting a lot of money aside to buy up cheap homes once the house of cards fell.  I am thankful for the opportunity that was presented.

I know there will be some that will find my comments troubling as they may think I was looking to profit off of someone else's misfortune.  Unfortunately, I was telling lots of people back in early 2000's not to invest nor to take the easy money to buy a personal residence unless they could put a large downpayment.  To be honest, I think many of them deserve what they got as there were lots of people telling them not to do it.

However, on the student loan crisis - which I see a lot of similarities in terms of government intervention driving up college costs due to easy money - I don't see any ways to either prevent a collapse or how an investor can find opportunities by picking up the pieces.

Anyone see any good ways to avoid the collapse?  Any ways to pick up the pieces?

@Kraig Kujawa, totally agree about resting easy via cash flow.

Here are other key things perhaps many on this thread will consider about how different we are now vs. 2007:

1.  The real estate bubble in 2007/2008 was primarily based on government-induced loans that were then backed by government via taxpayer.  In short, due to government intervention in the market place and the consequent greed, money was too easy to get.  There were people getting loans that had no business getting loans and the house of cards fell.  This is not currently the issue.  While loans are easier now than they were five years ago, they are nothing like it was in the early-to-mid 2000's.  No comparison.

2.  Those people that were getting loans that shouldn't have, are now renting and that has propped up the rental demand and thus the cash flow for investing.

3.  Savings rate - In mid-to-late 2000's, the savings rate was 1-2%.  It is now almost 7%

4. Not all markets are like California - Like many have commented on this thread, CA seems to be out of bounds. Perhaps there are other markets like that. But, there are still many markets where real estate has acted normally the last ten years. Even in Tulsa, where I own a significant portfolio of SFH, the prices still have room to run up. Sure, they are not as attractive as they were after the crash, but there are still bargains to be had - and rents have increased as prices have gone up.

5.  Equity - In early 2000's there was very little equity in most rental properties (and real estate in general).  That is not the case now perhaps due to loan requirements.  This will curb panic selling should a recession hit.

So, all in all, I see a lot of differences between now and 2007.  That is not to say that a recession or correction might not take place (they are usually psychologically driven), but I do believe the fundamentals are significantly different now

David Dietrich/Mr. Fix It

IMO, since it is only one property, you are better off selling it unless you are making a LOT of cash flow OR you are thinking you may be moving back in near future.  It would be different if you had several properties to help spread out the risk, but just one makes it risky and probably not worth the headache.

All, I have had this exact situation a couple of times while building my portfolio.  To me, there is both a legal way to handle it and also a "professional courtesy" way to do so..  Since the legal way to handle it varies by state, I won't address it here other than to say all of my properties are in Oklahoma where I live.  The law would typically favor the landlord and compel the tenant to fulfill the lease commitment and "follow the land".  HOWEVER, I would never want it to get to that point, so this is what I've done in EVERY situation and it has always worked.  First, before agreeing to purchase the property, I meet with the tenant(s) in person.  I explain what is happening and review their lease with them.  I let them know my intentions are to honor their lease with no changes until such time as the lease is up for renewal.  I ask them if they fully understand their obligations under the lease and review those with them.  I then get their personal agreement to fulfill their commitment.  This has ALWAYS worked and led to a longer-term trustful relationship built on mutual agreement and professional courtesy.  My desire is to never let this type of situation end up in court.  IMO, that is a lose/lose.

Hi Nick, great meeting you the other night at the investors dinner.  Best of luck!

Welcome, Kevin.  This is a great site with lots of useful information.  Let me know if I can help since I also live in Tulsa.

I can not make it as I have a church meeting, but please keep me informed of future meetings.

Wade, if you want current cash flow, then take the $600,000 and either pay cash for 5-6 properties - or put 20% down on ten properties (the max # of mortgages currently allowed).  I've done both at various times and there are pros/cons.  Feel free to contact me and I can meet with you and show you what we've done.

Wade, I totally agree with @Derek Dombeck said. I am a REI in Tulsa (in your backyard) that was fortunate enough to get into SFH using my cash flow from my primary job to build a large portfolio of SFH. But, I was also frustrated with the performance of my stocks, mutual funds and especially my 401k. So, I rolled the 401k into a self-directed IRA and now have a much larger portfolio of properties earning ~16% cash flow. I also sold a bunch of my stocks and bought both SFH and minority interests in MFH - just to get some diversification within the REI. I still have some stocks, but I no longer have ALL stocks.

Just wondering if you could use a SDIRA to avoid paying the taxes?  That would give you a lot of extra $ to build long-term cash flow.

BTW, I just retired at age 55 using the cash flow strategy you mention. I now just focus on the REI and collecting checks! You can do it!