All Forum Posts by: Pete Barrow

>2) Buying for appreciation in western markets.

When I hear things like this, I remember reading that, if you had bought into the stock market at its 1929 peak, you would not have broken even until around 1945. 

It depends on what you buy. If you buy a listed house through a broker you are unlikely to save much by paying cash. If you buy through a wholesaler, you might save substantial money but will probably have to come up with quick cash. If you dig up your own deal from a homeowner who wants to sell a possibly distressed house quickly, you can get a deep discount by having cash and being able to close quickly. 

The saying is, "You make the money when you buy." I don't see how it's possible to buy houses at retail, pay a contractor to rehab them, pay for management, and make any money.  

You will need to do a lot of reading to get an understanding of this topic. Basically it means that the amount of rent you will get is worthwhile compared to what you spend. 

One very crude measurement is the "1% Rule". If the monthly rent is at least 1% of the price of the house, it's worth considering. Say, a $50,000 house that rents for >$500. 

Of course there's a lot more to it. For me, a junked-up house that I can get cheap and rehab is ideal. For someone else, a fully-rehabbed house that costs more but is ready to rent, is better. 

The main thing you need to know about good deals, is that there don't seem to be any right now. 

>Over $1M in debt. But also around 0.4M more in assets with most of the growth happening in the last year. The cash intensive situations do concern me. Which is why I am building buffer in each of the properties for the repairs and capex. Not sure how I'll bucketize all my reserve money...but I've been stashing away money in each account for the inevitable rainy day. Now once I reach a certain threshold lets say $10K-$15K not sure if I'll reserve more per property. 

Debt is not a problem if your reserves are healthy enough. 

The people I know who went broke in the last crisis were A) Highly leveraged flippers in high-end areas who were stuck in big projects when the market turned down, or B) Highly leveraged landlords in high-end areas where the population dropped sharply because of industry downturns. 

These people lost everything, millions, and the thing they had in common was lots of debt and thin reserves. 

You can find TV shows from 2007 of financial experts mocking Peter Schiff for saying housing was going to crash. Everyone was very sure that since stuff had been going up, it would keep going up. Anybody who ever threw a ball in the air should have known better.  

Not clear if this covers drain or only supply. 

A break in either line will cause serious problems. 

The cheapest quote I ever heard for digging up and replacing a main line was about $3k, the highest about $13k. 

Find out if that $5/mo price is locked in for life. There is almost no chance that you have a problem in the next 20-30 years, but $60/year is almost no money. More likely, by the time you have a problem, that fee will have crept way up. 

The books and podcasts don't talk about this enough. You have to constantly be rethinking your plans and changing or discarding them...in this business and I guess in any other. 

I'm a big believer in hands-on projects like this, keeping costs down while getting quality work, especially when you're starting out. Most people will move away from the hands-on stuff as they accumulate money and can hire stuff out, but there's no law saying you have to. 

I guess that's progress of a sort. 

I lived in Silver Spring for 35 years, worked in the trades, always daydreamed about getting into REI. But it never happened for me until my son moved out to Indy and I followed him here.

Problem where you are is that DC area is expensive and competitive, Baltimore is sketchy, as far as I know neither place is landlord-friendly. Rent-to-value ratios are not good, property taxes are high, etc etc etc. 

You should be going to REIA meetups and getting to know people in the business. Maybe you can make a go of it there, because you can keep costs down with your skill set. We actually moved to get to a more affordable investment market.

If you're looking for sense in old plumbing and wiring runs, you're gonna go mad.

Often stuff like this comes from many generations of people coming in and doing little repairs without thinking the whole system through, just trying to get something to work in the moment. After awhile it adds up to a crazy patchwork.

I would definitely pull all that out and simplify it, unless you feel you need a heated toilet. And BTW it will only be heated for awhile after each flush.  

ps Take a look for any copper supply lines in your house that have red stamping on them. That is thinwall stuff and will develop pinholes over time. Type K is green stamped and thickest, type L is blue stamped and medium thick, type M is red stamped. You might think about eventually getting all the M copper out of your house. I've seen it develop tiny pinholes, emitting a fine mist almost too small to see, but big enough to flood your basement.