All Forum Posts by: Rick Reed

With the very helpful advice and feedback from folks here and on some of the members' websites, I've taken the plunge and purchased my first rental.

So thank you all for your help, both solicited, and unsolicited!

I'm curious to see what others think about the following deal:

- East Plano, TX 2 bed, 1.5 bath townhouse

- Walking distance to CVS, 7-11, an elementary school, and a middle school.

- List price $70k. Purchased at $63k. Comps are around $72k

- All cash purchase, so closing costs should be around $600

- Repairs should be under $3k (paint, carpet, drywall repairs)

- Rent should be around $950-$1050 (two PMs and a Realtor pulled existing rental amounts)

- Total monthly expenses $513:

$105 Taxes

$33 Insurance

$67 Vacancy (7%)

$48 Repairs (5%)

$95 PM (10%)

$165 HOA (includes water)

- Monthly cash flow should be around $437

Have I missed anything important? Thoughts? Comments?

@Jessica G. Is this another deal you're working on? I recall you were working on a deal somewhere near or in Allen. Just curious how that deal worked out (if you don't mind me asking).

Being new to TX I've never heard that before. Thanks for claifying.

Fox & Jacobs? Is that the name of a builder?

Welcome. It's nice to see someone else from the area.

You'll find a wealth of information on this site and in the forums, so enjoy!

This is very unscientific, but I'll say it anyway just to say that there is no point in "this vs that" when it comes to investing. And further more, how long have you "been in the stock market"? Are you investing long term? Day trading? For how many consecutive years have you been seeing 30% plus returns? Without any details it's tough to see what you are doing in order to compare apples to apples.

Anyway, I'll argue both sides from my own experiences.

First, the stock market:

I have money in an IRA that I have quadrupled over the course of 6 years. I bought Visa at $60 share shortly after they went public. The stock has taken off since it's IPO and I've reinvested my quarterly dividends. So I could easily sit here and say the stock market has provided me with a tax free 400% return in 6 years. That is a true statement and everyone would probably question it and think I'm wealthy and/or full of BS. Neither of which is true.

I also took out a HELOC to purchase $100k worth of shares in VMware (VMW) shortly after they went public. At one point I was up 50%, got greedy and they hype wore off. I only ended up making a few $k, but it was enough to more than cover the interest on the HELOC so I did profit some.

I also invested $25k in stocks of PMI. Long story short, they went bankrupt during the "housing crisis". I lose!

REI:

We sold our house in MD for a profit of $230k after only 5 years of ownership. Since it was our primary residence and we lived there for more than 2 years, it was totally tax free.

I currently have a contract on an investment property that I will rent out. It should provide me with close to a 10% annual ROI. HOWEVER, I can borrow against that house if I need to since I'm paying all cash. I can also deduct it's depreciation for the next 27.5 years along with most of the expenses. It should appreciate over the years, and rent should increase over the years as well. That's a threefold win: 1) tax deductions, 2) rental income, 3) appreciation.

So from my experience, not from someone else's spreadsheets or analysis, I can easily say that the stock market has provided me with great returns. I can also say that real estate has provided me with awesome returns as well. Both statements are true and I've stated just the facts of my transactions to make those points. Which is better? Who cares? Do what works best for you. And if you're really unsure of what to do, diversify!

There is no right or wrong answer here. To further that point, Bill Gates made billions on licensing software. No one here is talking about that as an investment strategy. Do what you're good at and the money will come.

I was once told by someone that, "Wealth can be passed through generations. Being rich is one bad cocaine addiction away from being poor.". That's obviously meant to be somewhat humorous. As others have stated, I think it's more of a perspective than a dollar amount.

Some folks can live carefree off of $100k a year (or less) until the day they die and still have assets left to pass on. Some folks can't manage to live off of millions of dollars a year without going broke. Who's rich, who's wealthy?

I always remind my step-daughter, "How much you spend matters more than how much you make." Look no further than MC Hammer and a LOT of athletes as to why.

...and don't confuse an education with textbooks and tuition. If you can't learn from life in general, the debate of being rich vs wealthy doesn't matter at all.

Just my $.02.

I started out on the railroad in PA as a brakeman/conductor. One of the old timers I worked with told me he was making more money in rentals than he was on the railroad. That piqued my curiosity. After 17 years of working as a network admin/engineer, building our (almost dream) home, we've saved enough to finally take the plunge.

We're making our first offer this week. Thanks to the folks of BP for the encouragement and the education. Still lots to learn though!

Given that the 1% to 2% rules are more guidelines than rules, do you have a guideline of your own, or do you look solely at each potential deal for its own unique merits? Of so, how do you filter the gems from the junk?

Interesting. Why would someone do such a thing? That doesn't sound like a solid investment at first glance.

Sorry, didn't mean to high jack a thread.