All Forum Posts by: Ryan D.

This is pretty straightforward: you invest $3800 for a $648/yr ($54/m) cash flow. This is $648/$3800 = 17% ROI. Do you want to invest your money for a 17% return - does 17% meet your minimum criteria for investment? If yes, then do it, otherwise pass.

Is each building on its own parcel, or both on one? It sounds like two parcels, two completely separate residential buildings- which is better for you. Residential financing terms are much better (30 yr amortisation, no balloon, lower interest rate). I would pursue as two separate financed deals negotiated in the same purchase agreement (assuming state law permits this). Will most likely be based on comps (in my experience).

Net worth is nice on paper, but you cant eat it, or put it in your gas tank. Cash flow pays the bills. 

@Bill F. your right about there being no nation-wide RE market, though RE markets nation-wide are ALL being impacted by the (overvalued) stock market. Middle class incomes have been more-or-less flat for many years, and house-hold savings rates are declining, so where else is everyone getting the money to drive up housing prices? Price is a determined by supply/demand AND how much capital buyers have. 

The stock market will eventually correct (it always does) and this will impact housing markets across the country. Its true that high-end markets will be more strongly impacted than middle-tier markets (the wealthier one is, the more capital they tend to have in stocks), and the effects will not be isolated to just a few coastal metros. 

Its certainly foolhardy for anyone to say they can precisely time the end of the cycle, but it think its pretty clear that market data shows we are nearer to the end of this cycle then we are to the beginning. 

@Account Closed

Pat Jackson - what he was trying to say is that capital you have in the form of equity in a property is not working for you. If you have a property worth 200k, and it goes up in value by $6k in a year, it doesn't make any difference if you have $0 or $100k in equity in the property, it will go up by the same $6k in either case. Now, for example suppose you are an investor who can earn 10% on your money - you can take $100k and earn $10k per year, which is $833/month ($10k/year divided by 12months). Thus if you choose to leave your hypothetical $100k in the form of equity in your property, you miss out on the opportunity to earn $833/month on this money. That $833 is called the Opportunity Cost of the money - its the difference between the return you are actually making on the money ($0 if you leave it as equity) and the return you could make ($833/m) if you invested elsewhere.

Thanks @Terry Lao, interesting graphic. Of course there's no reliable way to predict exactly when the market will peak, but there are definitely ways to qualitatively observe the increasing level of market saturation, and thus get a better confidence that we are nearer to the end of the cycle than we are to the middle. There are lots of quantitative metrics ("mainstream" as you say) to observe here (P/E for the S&P - see chart below, margin levels, ratio of total market cap to GDP, etc), & anyone with access to google can see the same numbers. What I'm looking for are the more direct experiences RE investors are are seeing. I am seeing an acceleration of newbies enter RE, lending standards slipping again, lots of unsolicited purchase offers, and prices in my local markets making good investments much harder to find than they were just a year ago, all of which I take as early indicators that the cycle is soon to level out.

Everyone is aware the market is significantly overvalued, but what as RE investors are we doing to better position ourselves to be prepared for the cycle changes, whenever it eventually does. Of course, if congress passes the tax bill, this will all be impacted. 

I've been slowing moving more assets to cash, to be in a better place for when assets are available at more profitable prices - things like turning off dividend reinvestment, and slowing down my accelerating of debt repayment in favor of holding the cash. 

You can definitely get a 30 year fixed mortgage on an investment property (not just an ARM). You can also get a HELOC (though expect a lower LTV vs the 30 year fixed). They key is that not every bank will offer either of these products on an investment property, so you'll have to call several before you find the right one for your situation - I had to go through 20 before finding one to offer the right HELOC on my properties in California.

Have the utilities in your name, and bill the tenants. You can do this via a third party company (look up RUBS, ratio utility billing service) where the monthly bills are passed on proportionally. Alternately, you can do it yourself and take the average of the past 12 months bill's and divide by the number of tenants who live in the building & bill accordingly, etc.

Easiest solution here is to get a good management company- they'll be in between you and the tenants, and it's their job to deal with (& filter out) this type of BS.