All Forum Posts by: Kyle Lush

@Steve Vaughan

I can kind of see how NW would be more of a factor as you age, especially if you plan on selling off and liquidating your assets but right now I'm (relatively) young at 30 and just starting out and I think for my goals I'm probably best off concentrating on mainly on cashflow.

Also,

@Bettina F.

You had asked if I was single. I am single and have considered house hacking but since I bought my house just last year with 0% down and wasn't thinking of it as an investment I don't have much equity in it at all and would take a loss after selling costs if I were to sell it now. I also really like my house now but haven't completely ruled out selling it at some point in the future and doing a house hack of a small multi-family property. If I had been thinking real estate and found BP a year earlier that is what I would have done.

@Jay Hinrichs

Thank you! The littlest things can be frustrating at times haha

Wow. Lots of great replies and information in here. Thanks to everyone who responded. Not to go off topic but I have a question related to the forums and the website. How do I properly respond to individual comments in this thread and "mention" or "tag" the individual that made them. I tried just typing the @ symbol before their name but it doesn't show up blue so I don't think that it worked.

@Dan Schwartz

Now that I think about it your calculation makes way more sense than mine. Since the $80,000 liability is backed by the value of the property, if I were to sell the property and had $20,000 in equity I would then have $20,000 in cash (not considering selling costs). I would not lose $60,000. That doesn't make any sense. I guess I don't actually have a negative net worth! haha

@Dan Schwartz

Hmmm.... it sounds like maybe I'm misunderstanding the calculation for net worth? I was under the impression it would go something like this.

$20,000 down on a $100,000 property.

$20,000 Equity

$80,000 liability

$20,000-$80,000 = -$60,000 impact to net worth

I thought the equity just was added to the "assets" column and the liability was added to the "liabilities" column and it was a simple assets-liabilities calculation to obtain net worth.

That's why I said 50% down. Equity = liability

Your example sounds like you just take the total property value minus the liability to obtain the impact on your net worth? Does that hold true only for investment properties or for your personal home as well because if that's the case I don't actually have a negative net worth.

Hi BP friends. I'm an aspiring real estate investor and I have a question regarding cashflow vs net worth when starting out.

I've made an introduction thread before but once again my situation is as follows. I am 30 years old and currently work a full time job as an engineer. I am going to invest in real estate in order to obtain the passive income needed to quit my full time job and free up my life to spend doing the things that I love while continuing to invest. I will do this by investing in large multifamily properties. I don't know how I will get started in large multifamily properties but I have several ideas (partnerships, starting with smaller properties and scaling, doing some flips to raise capital, etc.). 

I am currently paying off my remaining student loan debt which I hope to have gone in September. My only other debt that I have is my home, which I bought last November, before really having an investor mindset, using a USDA Rural Development loan and 0% down. The debt that I owe on my house makes it so that I have a negative net worth, which will still be negative, even after paying off my student loan debt.

I'm wondering if I should be concerned about this. Should I concentrate on bringing my net worth up through saving or investing using other, unleveraged means for a few years before investing in real estate? What I am thinking about is the fact that if I start investing in properties using 20% down.... or anything below 50% down it will not help my net worth as there will be more debt than there is equity. This will get better with time because of loan paydown and appreciation but then if you were to pull cash out in order to finance another property again with 20 or 25% down it would hurt your net worth. I'm wondering how I should approach this.

Not worry about my net worth and just focus on getting that cashflow started and scaling as quickly as possible?

Start off only going into deals with at least 50% down or 50% of ARV?

Save and invest through other means until my net worth is positive and then ensure that it stays that way?

I've searched online and read various articles and blogs about cashflow and appreciation. Much of what I have found says that cashflow is king and that net worth just looks good on paper as cashflow really enables you to live and invest now and banks look more at cashflow and debt/income than they do your net worth (my current debt/income is 14.9%). I agree with all of this and my main goal is really to build passive income as opposed to just a huge net worth but isn't a negative net worth something that needs to be addressed and thought about? Seems almost like an indicator that my life as a whole is "overleveraged" and it should at least be kept positive. Please let me know your thoughts and opinions!

Thanks

Welcome Nicholas! I'm also in MN and brand new to REI and just looking to get started. BP is an awesome place with great tools and resources and awesome people. House hacking is a great way to get started. I wish I had started thinking about it seriously earlier as I would have probably purchased a small multi-family instead of the single family I'm currently living in!

Welcome! I'm a brand new investor in MN as well. I haven't made it to any meet ups yet but look forward to it. I'm about 2 hours west of the cities.

Welcome Cory and thank you for your service!

Welcome! I'm also an engineer (Mechanical Engineering degree working as a Manufacturing Engineer) living in Minnesota looking to get into real estate and trying to learn as much as possible. This website seems to be a great place! Enjoy your stay and good luck with your investing career!