All Forum Posts by: Nathan Rude

This is the same scenario as investing in a company like Amazon. You invest because while earnings are negative, revenue growth is extremely high and will likely bring you a lot of cash in the future.

0 Votes

Lots of people will tell you to invest and use income/gains from those investments to pay off debt. That can work in theory. It will also screw you over if you come across unexpected expenses. Maxing leverage will increase rate of return, but you're left with no equity and a lot of risk if something goes bad.

2 Votes

Respectfully, you need more cash. Your best bet is hustling and earning as much money as you can! You're 17, you have decades ahead of you. Don't try to jump in before you're financially ready.

Some advice might include finding somebody in the real estate business you can get a job from. You'll gain money, experience, and maybe even some business connections!

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@Benjamin Ford Everybody has a plan until they are punched in the mouth. Leverage is good until it isn't, and while taking on leverage to cashflow other debt payments seems like a good idea, the reality is you have a lot of debt, with very little equity. It doesn't take much for the house of cards to fall.

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15,000 a year income is barely over poverty line for one individual. Any sort of bills - food, living expenses, medical, insurance, transportation etc will eat that up instantly. A savings rate of 90% means you are spending 125 a month, which means your living expenses are being subsidized.

Lots of people will tell you to jump in head first, do seller financing, etc, but you can't afford to screw up, and you don't hear from all the people that got burned trying to do exactly that. Get that income up, then once you have the down payment and reserves, go for it!

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Originally posted by @Joe Villeneuve:

Originally posted by @John Lane:

@Joe Villeneuve

Could you explain or give me an example?

Say you start with $100k and reinvest all returns back into investment over a 5 year period.

We'll give you a 12% annual return in the form of value of the Stock on your Stocks with the understanding that the initial value of the stocks are equal to the cost of the stocks, and...

I'll take only a 5% annual return in the form of value of the REI with the understanding that my $100k is only 20% of the actual value of the REI. In addition, I also get $4k/year in cash flow (that I will NOT reinvest).

Stocks:
5 years of 12% returns equals $176k in value...and a Return/profit of $76k

REI:
5 years of 5% returns, but based on an original value of $500k equals $638k in value...and a return on just the value of $138k. Keep in mind though, when you first invested, you had already gained 400% in value.
When you add in the $4k/year in cash flow (which was not reinvested) you get a Total Return of $158k over that same 5 year period...investing the same $100k at the start.

Add to the REI return the equity accumulated per year from the pay down of the principle that the tenant is paying for you, and you have even greater returns.

In addition, since we would be accumulating (not reinvesting) the cash flow returns, at the end of the 5 year period, you would have enough cash ($20k) to invest in a $100k property with 20% ($20k) cost/investment...and add that to the next 5 years.

Joe is assuming property value always goes up. It doesn't. Lots of people who end up underwater on mortgages. Leverage can push you way up, but also pull you way down. Just be careful when somebody is telling you that you can't lose!

1 Vote

Originally posted by @Jeshua Patrick:

@Caleb Heimsoth not "hung up" on Dayton in particular. As I said in my OP, I talked to someone from there who has 20 doors and had favorable things to say. My curiosity was peaked, the listings on the MLS seemed to further support what he said, and census data indicated that the population decline that occurred there is likely over with efforts underway to revitalize that market so I reached out on here to try to learn more. I know you are a "work your market" kind of guy and I would normally agree; however, the competition here is so fierce that the true deals are gone within hours and unless you have the marketing systems in place to generate your own leads a smaller fish like me will never see it.

You will have this issue of deals getting picked up in hours in Dayton too. Lots of eyes on the market now.

1 Vote

As an occupant of Dayton, and not somebody with an agenda to sell, Dayton is an awesome place to invest. There are different areas to fit different investment strategies. Dayton has some of the largest employers in Ohio with the Air Force base and Kettering Health Network. There has been massive investments into downtown and whole neighborhoods are being flipped around. Furthermore, the Dayton area was ranked the number 2 area in the country for economic development projects.

https://www.daytondailynews.com/business/dayton-area-ranked-nation-for-economic-development-projects/CV1n4A1DvSZXY5tuzHdLqK/

Programs are in place to remove a lot of blighted property from neighborhoods to improve value. A big issue with Dayton is that some areas simply don't have house values to support fixing up the existing inventory. Once prices rise enough, I suspect there will be a flood of investment into the areas.

So not all doom and gloom as some would like you to believe.

2 Votes

@Nate Richards have you ever been in a class D neighborhood? You are advocating somebody living there and managing those types of tenants with 0 landlording experience. For one, it's not safe, and two - you have to REALLY know what you are doing and have nerves of steel to be able to start realizing high cashflow (on paper) that type of real estate provides.

You don't have to go far into these forums to hear horror stories of class D real estate, and the most successful people here try their best to steer people away from it. There's a reason for that.

While I think taking 300k in loans should be avoided at all cost, I don't think investing to band-aid that problem is a viable solution. Sometimes the best course of action is to do nothing, because doing something will only dig yourself deeper into trouble.

2 Votes

Originally posted by @Nate Richards:

@Elizabeth Susan Ademi, seems like a lot of “Negative Nancies” telling you to talk your wife out of pursuing her dream. In your situation I’d personally do the same as they advise,.... I’m debt averse.

However, a $300k loan is (guessing) about $2500/mo (for 20 years). It's NOT difficult to generate that amount of income thru REI and then when the loan payment is offset by rental income you will be grateful.

Look at C or D class 4 units. The price per unit will drop, (but higher total purchase). YES they are labor intensive (tenant turnover) but will cash flow well. Which is what you NEED! Your cash burn rate is high so you need cash flow.... Not a pretty twinplex with the "Home Depot special" rehab already done, but a "handyman special" in a rougher part of town. Step 2 is the twinplex and then the SFR at Step 3,...Step 5 if you're strategy is to max out your Traditional Loans.

Good luck!

You're recommending somebody with 300k in debt, no cash, no future cashflow, and NO experience to purchase class D multifamily??? That sounds like a great recipe for distaster if I've ever seen one!

OP - don't take this horrible advise. It will ruin you.

3 Votes

All Forum Posts by: Nathan Rude

Nathan Rude has started 4 posts and replied 48 times.

Post: How do you value a cash flow negative business?

Post: Should I get out of debt before investing?

Post: Wanting to start Renting Property at 18 With $3000 to my name

Post: Using Rentals to Pay For Student Loans

Post: Real estate investing on a $15,000 annual income

Post: Is real estate a better investment than the stock market ?

Post: Disney Cruise inspiring OOS investing in Dayton OH

Post: Disney Cruise inspiring OOS investing in Dayton OH

Post: $300,000 in student loan debt

Post: $300,000 in student loan debt