All Forum Posts by: Jeremy D

This is one of my first posts, but I think that I finallyh have worthwhile insight:
I seriously question the wisdom of paying off a below market rate mortgage when you are planning on getting a new one anyway. You are winning big to having a 6% mortgage. If you were to get a new one in the current environment (assuming we're talking 30yr conventional fixed rate), you would be paying 7%. Instead of paying off your current mortgage, you could save that money as equity in your next home. Put it this way:
You have a 100k home w/ 20k of equity and 80k from the bank @ 6%. You are planning on paying off your current mortgage and then getting a 2nd house. Your new balance sheet might look like:
2 * 100k homes w/ 120k equity and 80k from the bank @ 7%. Why not instead keep the below market mortgage and get a balance sheet like:
2 * 100k homes w/ 120k euqity and 80k from the bank @ 6%?
Besides the obvious fact that you have a cheaper liability, you'll also save on the friction costs that come with getting a new loan (broker fees, etc...). I know that it feels nice to "Delever" but there are two ways to do that: You can pay off liabilities or you can build equity. I recommend that you build equity. You can always use that cash to pay off the mortgage if there's some legitimate credit related reason. Another plus: you keep the cash in case you have an unforeseen change in circumstances.

Hi. My name's Jeremy Davidson. My background in real estate is close to none. I rent for now... am hoping to accumulate some dough so I can do some REI (picked that up from lurking here for a little while). My business goals are to wholesale a little bit, selling to investors if I can find them, but also to be an investor myself. So I guess that my plan is to put bids on properties as if I'm going to hold them to the river (i.e. make sure that they're positive cash flow after paying everybody that needs paying / generate sufficient IRRs), but to the extent that I can, I'd like to flip them for a quick profit.
Obviously, I'm not ready to commit a ton of capital, or I wouldn't lead with the word "guess". Hopefully, when I'm ready to go, I won't be guessing.
I'm a pragmatist, and realize that I'll probably have to pay tuition in the form of mistakes at some point, but I want to go in with as much information as possible. I view the RE market as a place with a lot of opportunities in the near term, and I think that the opportunities are just likely to get better as capital mkts events unfold (I saw a graph somewhere of Subprime > Alt-A / Opt. ARM resets that more/less illustrates this point). I want to dip my toes in now, maybe take some small "learning lumps", so that I can be in a position to take full advantage when "the time is right."
I have no network as of right now, but am very open to building one, so please PM me or whatever it is that people do to network. I don't have a lot to offer in terms of experience or contacts - but I'm also not trying to sell anything, so hopefully that's a plus.