All Forum Posts by: James Orr

Do you hear your friends and fellow real estate investors complaining that there aren't any deals. Hogwash! Come to this special class and watch as James magically turns water into wine... well, not exactly... magically turns non-deals into deals in our barren, deal-less, real estate wasteland. It will be amazing. Brian has not officially said that this is going to be the best class of the year and that James will be nominated for instructor of the year for both 2018 and retroactively for 2017 because this class will be so good. Brian has not officially said that people will be talking about the day James taught this class for generations. Brian has not officially said that people will wonder how they did deals before they knew these special alchemist like strategies. Brian did not officially say that this class will be AMAZING... maybe more AMAZING than any class he's ever taught before and ever will teach. All these things Brian did not officially say.

Join the Northern Colorado Real Estate Investor Group on September 5 for Deal Alchemy: How to Create Deals in a Deal-Less Market.

Agenda:
5:45pm - Registration Opens
6:00pm - Class Start and Introductions
8:00pm - Class Ends/Networking Begins

Class is free but RSVP is required as space is limited.

http://bit.ly/DealAlchemy

We teach a different class every week so check out our calendar to see what topics are coming up next!

https://www.meetup.com/Northern-Colorado-Real-Estate-Investor-Group/events/calendar/

Specializing in real estate and real estate investing in Fort Collins, Loveland, Greeley, Windsor, Timnath, Berthoud, and all of Northern Colorado.

Thanks to all who replied. I did run two scenarios to compare paying off the mortgage versus investing the same money at the interest rate of the mortgage and those that suggested you are getting the same interest rate as your mortgage will be happy to know the end results (Net Worth) are identical.

Cash flow does change but you have money and return in your "other 5% investment" (whether that's another property or stocks or whatever).

Thanks @Jared Skov. Yes, I agree that a lot of investors are not paying off low interest debt early.

I could go buy another rental (or several) with the money instead but in my market I wouldn't be getting cash flow properties. We're lucky if we're break-even on cash flow with 20% down payment. With 15 year loans, it would be WAY negative.

As you mentioned, this could be a way to remove some debt to achieve a lean or normal FIRE lifestyle over doing something longer term.

If you qualify for VA loans, you can use those for multi-family as part of the mix for acquisitions AND you can use them up to your VA limit (not just one time). So, you could, in theory, do something like this:

• Multi-Family with Home Possible 5%, a year later...
• Multi-Family with VA 0% down, a year later...
• Another Multi-Family with VA 0% down, a year later...
• Multi-Family with FHA 3.5% down, a year later...
• 5% Conventional Single Family Home, a year later.. times how ever many you want

I say in theory because it can be tricky sometimes to get an underwriter to go along with all the multi-families. Less challenges with doing single family, but some underwriters may push back.

Perhaps someone can help clarify my thinking on a financial question.

For this discussion let's assume we're talking about a $100,000 30 year fixed rate mortgage at 5% with a payment of $536.82 per month.

Not that you would do this, but... if, the day after you got your mortgage, you went into the bank and the paid $100,000 back you'd be getting essentially $536.82 per month more in cash flow for the next 30 years on a $100,000 investment. That means you'd be getting 6.44% return on your $100,000 for the next 30 years.

$536.82 * 12 = $6,441.86 per year

$6,441.86/$100,000 = 6.44%

First, is that right?

Of course, you would not longer be leveraged, so your returns from appreciation and depreciation would go way down. And, your return from debt paydown goes to zero. I do understand that.

Second, and here's the next question. Imagine I did NOT pay it off, but paid on the loan for 10 years (120 months). At that point, the balance would be $81,342.06.

If I went to the bank with $81,342.06 at that time and paid off the loan, I would, again, save myself the $536.82 per month payment for the next 20 years. And, my return on the $81K and change would be 7.92% per year.

$536.82 * 12 = $6,441.86 per year

$6,441.86/$81,342.06 = 7.92%

Is that right?

And, finally, if I did not pay it off early and we jump to year 20, I would owe $50,612.27. If I walk into the bank with that and pay it off, I save the monthly payment again for the next 10 years.

$536.82 * 12 = $6,441.86 per year

$6,441.86/$50,612.27 = 12.73% for 10 years.

What am I missing? Thanks in advance.

There are folks that will do the Nomad investing strategy and buy a home to live in with 0%, 3%, 3.5% or 5% down (or more), live there for a year (or more) and then convert it to a rental when they buy their next property to live in. This does get you slightly lower interest rates which can help with cash flow. In most cases you will have PMI (save VA loan if you qualify for that loan program).

If you're not willing to living in the property first as an owner occupant for year before converting it to a rental, as others have mentioned, you can do 15% with PMI for non-owner occupant. At 20% you won't have PMI. At 25% you are both borrowing less (which improves raw cash flow dollars) and typically getting an improvement to your interest rate (which also helps with cash flow).

I am not sure if you get an interest rate improvement at additional down payment levels... perhaps a lender knows the answer to that.

As for which loan program is better, it really depends on what happens in the market.

If it were me, I'd model whatever I decided to do with both optimistic market conditions and pessimistic market conditions and make sure you're comfortable with both. Property select is extremely important as well as mentioned above.

What do poker and real estate have in common? 

Our very own Brian Williams is a retired professional poker player and in this episode of the Nomad Real Estate Investing Podcast he explains how he uses poker strategy to evaluate risk and make decisions when investing in real estate. 

You can listen to Using Poker to Make Real Estate Decisions at any of the following:

• Spotify
• iTunes
• TuneIn
• Stitcher

We have over 100 episodes up on the podcast covering a variety of real estate investing topics so be sure to check it out.

@Chris Mason... that's FREAKIN' AWESOME!

In the past, we used to explain to Nomads that they should buy their multi-family property first (with VA or FHA) since they need to owner occupy to get those. One of the reasons was that it was hard to get an underwriter to understand why a owner occupant would want to move from a nice single family home to live in a duplex, triplex or fourplex. My guess is that they, incorrectly, believed why would someone in the right mind voluntarily go from living in a nice single family home to living in a less nice duplex, triplex or fourplex.

Do you think underwriters are going to be OK with Nomads moving from single family homes to multi-family now? Or, do you think this is only going to be for the unusual situation where someone is renting (but owns other property) or in another multi-family moving to a new multi-family?

I'd be super interested in adding some additional modeling for these new scenarios in our software as well. Exciting times!

@Wyatt Brumbaugh I have several clients that are using Fulfillment By Amazon (FBA) as a means of generating extra income to help with down payments and to qualify for buying additional investment properties. One of them mentioned in a class he taught recently for the Fort Collins real estate investor club, NCREIG, that he is making about $140K per year net from that side hustle.

For our most recent episode of the Nomad Real Estate Investing Podcast we interviewed another successful investor. 

To hear how he went from homeless and living in his car to owning multiple properties listen to Homeless & Bankrupt to $1M in Real Estate.

You can find us on iTunes, Spotify, Stitcher, and TuneIn.

We have over 100 episodes up on the podcast covering a variety of topics so be sure to check it out.