All Forum Posts by: Matthew A.

$82,750 out of your pocket to lose $225 a month. I love doing math, so follow me here. 

Let's just imagine for a second that your home doesn't appreciate in 30 years. I know I know, that's a strange hypothetical but you can't guarantee me it will go up in value either. You also can't guarantee that the market won't crash in those remaining years, or that California won't be it's own country one day since they hate America ;). I wonder what currency they will use. Anyways back on topic.

Losing $225 a month on avg, is $81,000 over 30 years. Lets say the home is worth $300,000 by then. $300,000 minus $81,000 minus $11,500 in closing and rehab = $207,500 minus any recapture tax. so on and so forth. This is also assuming you don't pay any commission on the sale.

However $82,750 x 7% compound for 30 years in the stock market turns into roughly $630,000. A gain of $547,250 minus taxes. (7 more years makes it a million)

Well, what if your home doubles in value by 2047 and is worth $600,000. You're looking at $207,500+$300,000 = $507,500 less recapture and other tax. Still less than the market returns AND you don't need to spend a minute of your time to watch it grow. Take all of the hours you will be working on this place whether managing it yourself, or managing the managers and multiply that by what your time/hr is worth.

This is why investing in appreciation is not a good play in my mind. Seems everyone else has the opposite opinion, but I don't understand why. I think being lucky and able buy a house in LA for $400,000 when the market crashes and watch it turn into 1.2 Million 8 years later has blinded people. Even the uber successful ones. Also, before anyone jumps down my throat to say well, they made that money, what have you done? Even billionaires can make extremely bad financial decisions. Bill Ackman hired the #1 analyst in the world to go over Valeant's financials , and even after telling him it was a bad deal, he still bought and held through a 90% loss and 4 Billion Dollars. 

Forget what can or can't happen, you know you are going to lose $225 a month. Because face it, even if you manage it yourself now your hours of work just went through the roof. that $225 you got back by managing it yourself just went away in the 4-6 hours a month you have to work on it. 

I might only have a couple properties, a decent paying accounting job and some money from trading options so if you want to judge me off that, so be it. 

I just love breaking down numbers, and taking the opposite point of view.

GL on whatever you decide to do!

Matt

@Abraham Anderson

I'm a skeptic by nature, just how I operate... I would love to hear your actual numbers rather than all the motivational talk. Not that I'm not happy for you, or won't congratulate you, but you understand.

Where did you come up with the $260,000+ in cash to fund the down payment and closing costs? Did you do any sort of rehab?

Could you tell us what your total rents are and also write down what $ or % you are using for capex, vacancy, maintenance, lawn care, etc etc?

Also, since you brought up how you managed to make $100,000 your first year in insurance sales, I am actually more eager to hear about that, than the property lol. My girlfriends brother in law was the number one salesman for Northwestern Mutual years ago, and I believe he made $55,000 in his first year so to double that is rather impressive in my mind.

Matt

@Hau N. 

I would at least try to make your real estate numbers comparable to the average gains in the market of about 7-8% annually. That way, if/when you property appreciates hopefully, the mortgage is being paid down AND you are cash flowing, you'll be better off.

Now.. you can make your deal work for you, by changing your maintenance/capex/vacancy percentages.. 10% vacancy is rather high, and accounting for 36-37 days a year of it not being rented. 

The great thing about numbers, is you can make yourself believe it's a good deal, or be too conservative and make yourself believe it's a bad deal.

-Matt

Heck.. even 30 yr treasury bonds would be better. $60,000 @ 2.85% makes you $142.50 tax free a month on average and would be the definition of passive. Not that that I would choose a treasury bond over a low risk mutual fund that could easily net 6-8% a year. 

Just showing you, that in a click of a few buttons you could have that bond purchased and never look at it ever again. 

Or you can manage a property, deal with all the headaches it comes with it for potentially +-$35 in monthly cashflow.

Doesn't seem worth it. 

GL! 

$90,000 in tax free money today or potentially $200-300 a month in cashflow AFTER a refinance. It's an easy decision. I can hear Cramer hitting the sell sell sell button.

realized gains are much more fun than unrealized gains :). 

reinvest and keep the mula flowing. Just don't do it with 4% annual returns, because that's what $300 a month out of 90,000 gets you. Might as well buy bonds, and be the definition of passive income.

GL!

I don't understand why some people are so opposed to leveraging your money. Why not just make two offers for a cash deal/financing deal and see what they say. I would include in your offer, proof of funds to show if need be, you have the entire amount in cash to purchase the property, and get a guarantee from your lender that you can close in 30 days. 

Then at least after you close, you don't have to wait 6 months to get 70% of your cash back. You can go right back into another deal. Potentially get a few more in the meantime. 

GL!

I mean, either put it in a safe or put it all in a start up company. Go be an angel investor to some geeky high school kid who says he is going to create the next facebook :). Pretty much the only way your $1,000 will ever grow to anything significant over time. 

UNLESS, you go back 20 years and buy Amazon's IPO :)

GL!

@Laura Williams

For anyone to argue that NYC's crime/homeless stats have gotten better since De Blasio has their head so far up their you know what. I like how he decided it was more important to attend the anti police and left wing crazies in Germany, then pay respects to the NYPD officer assassinated sitting in her squad car. 

How anyone voted for that person, makes you think about the crazies that exist in this world.

"I make about $2600 a month and have only my truck payment of $560 a month"

More than 20% of your income goes towards your car each month, and that does what for you? You know the average multi-millionaire hasn't bought a car worth more than 40k in their entire life? Let that sink in for a minute. Also, why would you put extra money towards a car payment that depreciates? 

I was going to write a lot more to help, but you said you don't want to sell your car which means you're beyond helping in my book. sorry to say.

Keep living that "hood rich" life. 

GL

BS in Business Information Systems Analysis - Thought about getting my masters in Accounting since I get free tuition from Yale to go back to school.