All Forum Posts by: Ken Teng

Greg Hamer Too much money chasing some asset will drive up price and drive down profits. I am not sure if that is happening in Indy or not, but worth noticing. Currently across us, the house price is already high. Especially in the apartment sector, huge influx of invest has driven profits down a lot

Look outside San Diego, that is my advice. It is in a bubble

I agree it makes much more sense to invest in Midwest than in the Bay Area.

However, just an observation. The hotness of a market is negatively related to the profitability. I hear a lot about Indy (also Cleveland) recently to the extent that I start to doubt the profitability. Also there is a mild correction to the market coming (expected by most). Anyways, run your numbers and have boots on-ground.

If anything goes wrong in LLC A, your own assets and assets in other LLCs won't be affected. That is the purpose of an LLC.

However, if you go bankrupt yourself, your LLC will be used to pay the creditors. How that is done depends on the laws in each state. Talk to your lawyer.

First of all, using a loan as a down-payment is something banks frown on. You may want the money out for some seasoning time, so that the bank will consider that your money.

Second, using loan as a down-payment gives you a lot of risks, as you are leveraging huge (the fundamental reason why banks do not like it). Cash flow won't be great, factoring in the interest rate. So you need to rely on appreciation. If the property depreciates, you are in a big trouble. A gentle depreciation is expected by most in the coming 1-2 years. So maybe you need to give it a second thought.

If you still want to go any how (yeah, you can still go, higher risk leads to higher return, though it is a big bet), the cash-out decision depends on your situation. If you need the cash right away, you can choose the conventional cash-out refi (I don't think you can get as low as 4%) or Home Equity Loan (HEL). If you do not know when you will need the money, go for HELOC, which works more or less like a big credit card, usually with a variable rate (some banks allow you to lock when you take a big chunk out at a slightly higher rate).

I would say buy.

Pro:

1, Mortgage rate is still low, despite the mild recent increase.

2, The principle of the mortgage is your money, while the rent is not. You can deduct property tax and mortgage interest.

3, In the long term, the house price in CA will increase. Just think about the huge amount of money FED printed. When they hit the market, what inflation rate will we see?

Con:

1, In the short term, the house price may dip a little, as the real estate may see a correction in the coming 1-2 years

If you are talking about performing mortgage, you can buy REIT and other financial derivatives. This is by far the easiest.

If you are talking about underperforming mortgage, you can buy some lists of people who owe money and then you collect money from them.

Owned by the government? Government can sometimes foreclose on properties, if they owe the government money.

The question to ask is whether you have anything to lose? Your primary residence? Your stocks? Your savings? If yes, go for it.

One thing to notice is that with an LLC, you may find it harder to get financed by institutions.

BTW, your social security and 401k are usually protected from bankruptcy.

1, Seller financing has higher rates, ~7% or higher. Be ready to handle that. I guess in Portland, this may not work out.

2, Usually the problem is how to find those motivated sellers that are willing to do seller financing. You can start your marketing now, e.g., direct mail.