All Forum Posts by: Mohit Madaan

I have always looked at it as, go with the highest term your lender will allow and later treat it the way you want to, at least you have an option.

Example - $100,000 loan at 5% for 15 years or 30 years?

$536.82 a month on 30 years

$790.79 a month on 15 years

Take the 30 years loan and if you want you can throw extra $200 a month towards principle, you can end up paying it off in 15 years, just like the 15 year loan but if there is a tough time or things are bad, you have an option to not throw that extra $200 a month or so. Gives you so much flexibility.

Of course, you need to be disciplined to do this.

Thats an opinion of 1 person and god knows based on what?

not saying there isn't anything worth it, but then how do you even trust these opinions?

 But isn't this if everything goes as planned in the sunny state of California? How about some worst case scenario math?

California prices are near the peak right now or close to where they were in 06-07. Cost of houses have doubled in most counties in last 5-6 years and we all know that average income hasn't doubled in that time. How will this growth sustain without income growth? Not saying, the market will crash (it can though) but it could very easily stop to grow anymore and then you are looking at a whole different comparison which could look something like this (assuming appreciation is pretty much the same in both markets)

Midwest strategy

• Invest 30k in the Midwest. Leverage 5:1 with 80% loans = Three 50k houses for total purchase price of $150k. Mortgages = 120k. You make $100/door after expenses. In five years your loan will be down to about 111k, and your properties might be worth 160k. Equity = (160k - 111k) = 49k. Add in the 18k in profits, and you're up to 67k in capital. Cash over cash ROI = (67-30)/30 = 123%. Not bad, about 17.5% annual ROI. That assumes you're hitting 100/door number. And you might not.

Sacramento strategy

• Same 30k investment. Leverage 5:1 and get one 150k property. Rent for 1300/month. Don't plan on guaranteeing any cash flow right away, but it will pay for expenses. You should be able to generate more cash later as rents are likely to continue to increase. In five years that property is worth 160k (200k). (Annual 6% increase). Mortgage also = 111k. Equity = 49k 89k, Cash over cash ROI = 63% 196%, about 9.00% 24% annual ROI.

Now, i understand saying California home prices will not appreciate at all in next 5 years is not fair but so is assuming they will continue to climb by 6% year after year, so lets meet in middle here, shall we? Assuming California home prices are up by 3%. Fair enough?

Midwest strategy

• Invest 30k in the Midwest. Leverage 5:1 with 80% loans = Three 50k houses for total purchase price of $150k. Mortgages = 120k. You make $100/door after expenses. In five years your loan will be down to about 111k, and your properties might be worth 160k. Equity = (160k - 111k) = 49k. Add in the 18k in profits, and you're up to 67k in capital. Cash over cash ROI = (67-30)/30 = 123%. Not bad, about 17.5% annual ROI. That assumes you're hitting 100/door number. And you might not.

Sacramento strategy

• Same 30k investment. Leverage 5:1 and get one 150k property. Rent for 1300/month. Don't plan on guaranteeing any cash flow right away, but it will pay for expenses. In five years that property is worth 173k. (Annual 3% increase). Mortgage also = 111k. Equity =23k, Cash over cash ROI = 77% 196%, about 10% 24% annual ROI.

We are still looking at Midwest to be better strategy. Now, most of us know, we can all make this argument in favor of what/where we want to invest but in order to see 6% Appreciate every year for next 5 years, we will have to get very lucky here. I mean, look at this chart, this will look one scary chart in 2021 after 6% growth every year in California.

Just my 2 cents.

@Christine Swaidan Just curious, how much is each gift card that you bought?

 I am pretty much in the same situation like you are, don't want to flip, don't have much family in other states & long term goal is to buy & hold... Have you narrowed it down to certain markets that you don't mind sharing?

 So you are willing to invest $450k without spending $1k (flights etc) and a day of your life go look?

Say, you live in area where its impossible to invest locally for one or the other reasons such as local price too high, your state is nearing the peak (example - California) etc. Besides all the reasoning for not investing out of state, you still want to do it because you are confident or you just want to get in the game etc. The big question is how do you pick the market and that's what alot of investors are struggling with and here are few things i would like to discuss with you good people.

• Price point - say i have 250k for down payment and i want to start with a million dollar or so multi family with a price of about 25k a Door, i can obviously get rid of larger markets such as NYC, Chicago, Miami, pretty much most of the metros in the country
• Do you start building relations and invest in market where you feel you have strong 'Boots in the ground'
• Do you invest in area where you are most likely to visit for other purposes such as family, other businesses etc?
• Do you just pick a market based on your strategy (flipping, buy & hold etc) and then find 'boots on the ground'?

Please throw some light and give your 2 cents on such dilemna other investors are facing as well.

 now that's a good one... Do you write jokes professionally or is that something you do on side while investing in real estate?

Great video, please do not hesitate to contact me if you want funding partner for your next project.

Sent you a pm with my personal email, add me to the list please