All Forum Posts by: Kalo (Kyle) Atanasoff

 Great point! I would like to think in a way that investment in general, and the real estate investment, start with a solid economic reason - "Why do you Invest, where you invested".

To elaborate on below - Vegas is a great example where no real economic driver exists and when you invest there, you should be aware that is a highly volatile market (side note: i both 2 properties there in 2011 and 2012 and i sold both this year) and you should pay an extra attention and be prepare to reposition capital.

It's clear, if you invest in Vegas or Orlando (just 2x entertainment cities) you will expect ups and downs and you need to position yourself with extra reserves and extra caution if you are planning to stay in these market for long term. 

  why do people pay $20m cash for a manhattan condo? Its a safe place to park money. Also at some point I want max cash flow and minimal risk to that cash flow. If I have no mortgage the cash flow is more secure. And I dont have to manage 100 units making me $100/month each. 

 Because, if you are a “regular” person meaning don’t make 5M a year W2 / legit bussiness which shows on tax returns, you can’t qualify for 20M loan

Also it mean, that people who buy 20M condo, chances are they have 100M-200M cash sitting and not doing anything.

Return of equity is 0, as it also the cash sitting in a bank.

Debt is cheap now days: 4-5%, but if you have “unlimited cash”, then not need to pay 4-5%

As far as max cash flow and minimum risk - it’s something a lot of members discussed already.

And last but not least - let’s not go off topic. The reason for this debate was because someone got his first rental property and thinking about his next steps.

Chances are (I could be wrong) he did not bought 20M condo all cash as his first rental, but 100k house with 20% down.

 True, I am 100% with you on that.

The point here is, when you analyze, you do based on what you know now (what is known as a fact today) and on what is highly likely to happened (again from today) and to accept the fact that things might change tommrow.

Life happened every day, that’s why  we need to stay firm with our direction but flexible with our approach.

@Jay Hinrichs

Agree on all with a little caveat that a lot of people with a lot of debt rode just fine through 2007-2009 because they bought right, meaning for cash flow (not appreciation) in "B" class areas.

@Account Closed : Why would I ever want to own investment property free and clear (no debt)? For my personal residence - yes, i would love to own it free and clear as it's not an investment but rather liability which I want to minimize as much as possible. 

@Anthony Dooley

Return on investment is a function of how much you have to invest. If you have $1 000 000 to invest, would you:

1. Invest all cash on 10x $100 000 properties (not counting closing cost) with a return of 10% / annually 

OR

2. Leverage and invest at 40x $100 000 properties ($20k down + $5k closing cost, 30 yeas fix rate loan) with a return of 10% where you have better asset protection (my keeping lower equity and higher bank position), you are hedge against inflation (agree with me, in 30 years $1 000 000 purchasing power will be less compare than $1 000 000 today) 

Here is how looks mathematically:

1. 10% on $1 000 000 (10x $100 000) = $100 000 / annually 

- No interest tax deduction

- No loan paydown benefit

2. 10% on 1 000 000 (40x $100 000) = $400 000 / annually - debt service 

+ full tax benefits

+ loan pay down

+ hedge against inflation for 30 years

+ better asset protection (by maintaining lower equity  position)   

+ (not guaranteed of course) if appreciation happens, it happens on the all full asset amount, example:

If appreciate 10%:

In case "1" you will have 10% on $1 000 000 = $1 100 000

In case "2" you will have 10% on all 40x properties (40x $100 000 = 4 000 000) = $1 400 000

As far as cash flow, as long you buy "right" CAP 8% and higher you will have stronger cash flow on leveraged asset + all additional benefits.

@Anthony Dooley

Not need to agree with, but the return on equity is always zero (0). Why would you want to keep it "behind the walls"? How about opportunity cost?In addition, when you have leverage you have the other benefits which @Ali Boone mention. Protection from lawsuits is a big item to consider as well, especially in higher price range properties. 

Financially free always betas debt free, and taking on more "smart" debt is not only opposite of risky but actually the goal for the most seasonal investors. 

Looking for recommendation for a great property manager around JAX airport / Amazon center (for SFR)

+1

Anyone using Quicken 201X Rental Property? I've seen a lot of positive feedback as a way to manage your money and manage your properties whtin one app ?