All Forum Posts by: Nnabuenyi Anigbogu

With conventional you do not have to live in it depending on how you purchase it. If you buy it as a straight investment property it will be a higher downpayment and higher interest but you don't need to live there. If you buy it as owner occupied its a lower downpayment and lower interest but you have to live there for a year.

If you can afford to go conventional then do it. It is usually faster and cheaper over all. The only downfall is that it usually requires a higher downpayment upfront. If house prices in your area are above 60K then you 10K DP will not allow you to go conventional. In that case you would need to go with an FHA loan. However you will be required to live in it if you go with an FHA loan so be ready for that.

Nice. I just got back from Lagos a couple of days ago. Small world indeed. Chi town is as good as ever. Weather sucks though.

 If i had that kind of capital then yes it wont make sense to continue on the small scale that i am on right now with the individual buildings. There are many more areas within real estate to deploy capital that can outperform the stock market in my opinion. 

Keep in mind my appreciation was a factor of my area gentrifying. However there are plenty of people on here who do exactly what i did on a very regular basis. The difference is that they force appreciation as opposed to relying on the area. So they buy distressed, fix it up, rent it, then pull their money back out. I personally know multi millionaires doing this currently in Chicago. Some people do this on a larger scale (buy a $10 million building, force appreciation to $13 or $14 million in a year - 18 months, refinance and pull out initial downpayment + more then hold on to the building for cashflow). This is exactly what i did but on a bigger scale. One of the guys i borrow money from is worth in the 10's of millions (if not more). He lends his money on flips ond owns rentals. I and others pay him 5% of the funds upfront to borrow it and then make interest only payments every month at 15%. At an average of 6 months for a loan term he can turn the same money twice a year. The kicker is that he uses the rental property he accumulated as collateral to borrow money from the bank at around 3-4%. He then lends it at the rates i posted above. His ROI is infinite in this case because he borrows money at 4% and makes 15-30% (depending on how fast he turns it) then repays it. At this point he is almost printing money. And he is not the only one i know doing this. I might not ever be this successful but that is my target.

He could sell everything and put all his money in the market and live off of it easily till death but he is making much more money within real estate. If he never bought the rentals to begin with then he would not be able to generate the kind of return he is generating right now. It is more risky but that is why the returns are higher.

There are other examples and ways that people are making 20-50% a year on invested funds. If you can make over 20% a year on the market then by all means please stick with it.

Its not easy and requires work. However its just like any other business in America. If it works out you can generate massive wealth. If it does not you put in a lot of work without much return and it would have been better to just invest it in the market and wait. Your appetite for risk is the determining factor. I don't begrudge anyone who wants to invest in stocks then chill on the sidelines and wait. However you can make more by being active and when you enjoy it like i do its not too bad.

Hi Micheal, you may be right or wrong. Numbers can be manipulated to show whatever a person wants and im not here to convince you to change your investing style. I personally don't have a spreadsheet comparing the 30 year return in REI vs Stocks.

My only argument is that my specific situation with my Giddings property that you analyzed cannot be beat by the stock market in my opinion and here is why. I put down 100K to purchase a property and generate cashflow. In less than a year i am able to pull out 100% (some people pull out more) of my 100K. Now i still own the building, live for free and am making the 7% you had listed on your spreadsheet. The kicker is that im making all that money without any of my own money in the building. I am free to reinvest that 100k in the stock market and will only be 9-12 months of compounding behind someone who went straight to the stock market initially.

 I fail to see how taking that initial 100K and buying stocks with it can generate more returns than this scenario. Please enlighten me. 

What is the nature of the background checks? Tenant related or on a potential business partner?

My CPA expensed my background checks on the legal expense portion of my taxes. However these were background checks my LLC did on a potential equity partner prior to working with them. FOr tenant background checks i would assume it goes either under legal or other.

 I personally like to focus on A+ areas that are not usually affected by major price swings. Areas such as Uptown, Ravenswood, Albany Park, Portage Park, Irving Park etc. It is more expensive to flip in these areas but the profit is usually pretty good and you have more spread with which to play which can help if you delay or make a mistake. Finding deals in these areas are not easy though so hustle is needed.

Jason that is a good way of putting it. People i debate with often compare the non compounded return with a compounded one in order to show me how the ROI is better with the Stock market. I like the way you broke it down. For those of us investing with full time jobs, all the profit is reinvested and that should be factored into any ROI comparison to get a true picture.

 Bob, i think you are looking at it from a different perspective. The unit i live in is one of the cheaper units in the building (1 bed vs a 2 bd and 4 bd).

The reason my cashflow will increase a lot is because all the fixed costs of the building (especially mortgage and taxes) will not increase with my renting this unit out. 

I.E. right now i make $4100 a month from the other 3 units and $0 from the one i live in. My PITI is 2500 (Principal, Taxes, Insurance, Interest). If i rent out the unit i live in i will make about $1k a month more from it. Now i am making $5100 but my PITI is still $2500. So my cashflow a month goes up $1k (12K a year). Now this example does not include other costs (vacancy, repairs, etc which can fluctuate depending on how many units are rented ) but PITI is the biggest line item by far and it is fixed so any increase in rent is a direct increase in cash flow (again not factoring other costs for simplicity).

My rent amounts right now covers everything for me (PITI, Vacancy, Repairs, Capex, Reserves, ETC) and pays me about 1900 a year after all is paid. If i add another $1k a month in rent, most of the expenses stay the same or increase slightly (vacancy is 5% so $50 out of 1K, etc) so at the end of the year i make an extra 9-10K (12K minus any extra expenses from renting the extra unit)

Hope that clears it up.

The primary requirements with an FHA loan is that, you have no other FHA loan out at the time, you move into it within 60 days of closing, and that you live in it for at least on year. Everything else is pretty similar to conventional except the numbers (down payment, interest, PMI, etc)