All Forum Posts by: Patrick G.

So if the plaintiff sues, judges awards $100k in damages, the lender gets paid out before the plaintiff?

I see your point then. The debt does lower your exposure in a lawsuit.

What is the legitimate Equity Stripping, google? only pops up with scammy type of stuff.

The Non-recourse loans really seem like a great deal, I've done a bit of searching and it seems a lot are tied to self directed IRA's. So I know they are out there, but on this forum, I am getting the sense they are not the norm. You use them which is great, but reading the forums investors are talking about the rising interest rate, and the FHA 10 loan limits, which is leading me to believe that most investors here are using full recourse loans.

Ned, It does not protect you in any way from the risks associated with the debt. If you have 20k equity into a 100k house, you get sued and the plaintiff takes the house. You are out 20k and the bank is out 80k. However that doesn't dismiss the loan. The bank is then going to come after the person who signed the loan. So you are still going to lose the extra 80k, only it's been going to be through wage garnishments, or getting your bank accounts frozen, or your car repossessed. And now you have interest and lawyer fees added on.

As J Scott pointed out, there has been a lot of debt forgiveness thrown around. I personally know, I had a family member go into default on there home, they received debt forgiveness on their second mortgage and a non-recourse short sale on their first mortgage. But you can't bank on that. That can't be the plan.

J Scott, Does this really happen? Do you really get those loans? Could I get one? This is a completely new concept to me. If I can get a non-recourse loan, I will sign up tomorrow. I really want just small rowhome in Baltimore City to rent out. A $40k home could bring in up to $1,200 in gross rent, I could put $5k down and my wife and I have over an 800 credit score.

Okay guys,
If you can take out loans, and not pay them back if investments fail, then you are 100% right, the numbers are much better, I can't compete with that.

Look, I've had three home loans, you guys have probably had thousands between you. If you say that the banker is okay with a non-recourse loan and he's letting you sign papers stating that you can walk away from the house, then I can't argue. And yes that would not be unethical if you are just following the contract.

I haven't heard of loans like that. The only loans I've heard of are typical bank loans that say if you stop paying they will take the property , garnish your wages and do whatever we have to do to recoup the full loan amount. I've heard of non-recourse bankruptcies, but not non-recourse loans.

NO, clearly NO

Both scenario risk $100k.

I'm kinda shocked you would sign your name for $80k and walk away and shrug your shoulders.

Dion,
We just won't agree on this.

If you were to say all that to a loan officer, you wouldn't get the loan.

Okay, So instead of paying yourself $100 per month for 'self insurance'. The analysis should pay $100 a month to an actual insurance company.

Maybe we are not talking about the same scenerio.
If you invest $20k into a $100k house five(5) times, then you are on the hook for $500k. You pay $20k now and are signing your name and saying I will pay $80k over so many years, regardless of the market, I will pay this money.

Unless you are saying that you would take out 5 loans for $80k a piece and then if the market went bust, you would just walk away and accept the "ding" on your credit. To me that equivelant to stealing. You are not signing a loan saying "If things work out I will pay back this money" you are signing a loan saying "I will pay this money back whether or not things work out"

Do you agree?

I consider the COCR small in comparision with the potential gain using inflation. I also consider it small in comparision to the added risk of going bankrupt for a first time investor taking out that 80%LTV. That is a personal measure of risk. The extra 10% a year may be worth the risk of going banktupt to others.

I will accept your numbers, but it gets a smaller when you factor in the loan costs, and vacancy.

For me right now, I wouldn't risk it for the 10% extra. However if I already had two or three investments free and clear, then I may consider it. As I mentioned before, the main interest for me, would be earning appreciation on borrowed money. I would consider the 10% "icing on the cake", not visa versa.

So Bryce, out of curiousity, since you recently ran the comparision. You looked at 80% LTV, which avoids PMI. Which is great. If you ran the same numbers and paid yourself $100 a month to self insure, what does that do to your ROI?

I did it a while ago, rough numbers of course, comparing one house to 5 leveraged house, and the 5 leveraged houses still came out ahead, but it was only a very small difference.

I don't think you are being selfish.
I would imagine a lot of realtors may use thier spouse's name to avoid that fee.