All Forum Posts by: Samir Shahani

@Glidden Rivera

Personally, I like real estate a lot more because my returns are lot better using a long term buy and hold strategy w/ standard leases.  I have proven to myself that this option will far outpace the alternative, which for me, is investing in the SP500 index. 

Like you pointed out, an index fund will provide a steady set it and forget it approach.  Whereas real estate requires a heck of a lot more effort, time, coordination, etc.  That effort and time should be worth it.  From my point of view, if you decide to pursue real estate - you should be making a great deal more money using your cash in real estate vs. your cash in the SP500 in order to make it worth it.

The most important aspect is how much %return you get on the $ you invest.  Less important - is how much of an asset you own (if you own 10% of a million dollar real estate asset or 100k of a stock, its the same equity!).  Sure you have control over a larger asset, but its leveraged.  Which means if the market turns or something unbearable happens, you not only lose the money you have invested - you are potentially risking the 80% that isn't yours!  All real estate investors should be very aware of this fact.   The leverage is great as a tool, but it comes with real risk. 

If I'm getting 12% return on my real estate equity and 10% on my stock equity - sure the wiser choice is to go with the real estate option.  But is that 2% worth all the extra effort? 

20% certainly is - but 2% maybe not.   That's a personal decision you should decide and then prove that to yourself its actually happening.  My guess, without knowing anything else, is that you may make a bit more in the coordination you are doing, but you are risking a lot more and spending a lot more time than your safe alternative which is the Index.

 Why not just buy the sp500 index??????

@Glidden Rivera My personal and general way to look at these situations is - are you finding that this is the best way to utilize your cash? 

Diving a bit further into your situation - it looks like you are buying the home to rent it out - using a normal lease?

Then, in this case, you find a tenant who is willing to sign a contract which is lease to buy w/ a 10k down payment? Is that accurate? 
Presumably you locked up 20% down payment in this situation?  

I think that the point of being a long term asset holder is that you can really unlock the potential of compound gains over the long term.  Your strategy could maybe work for the short term - but there may be better uses of your money.   I am not trying to kill your dream, just adding some food for thought. 

You may see a much higher rate of return using a long term buy-and-hold strategy w/ standard leases.  You own the asset long term and you derive the many benefits associated with that.  The trade off , of course, is you must maintain the property. 

(**Quick asterisk, in your situation you mentioned that you will refinance the house - if you planned to do this to pull out equity - you can do that anyways and fill it with a standard lease.  If you do the math you will find out that this is far more favorable in the long run than selling the property with a lease to buy option) 

@Stan F.

My first thought is that if you are aiming for 6-7% , you will likely get less (there is always unknowns and happenstance in real estate) 

And at less than 6-7% , you are way better off from almost every point of view investing in the sp500.

From my point of view, the whole goal is to crush the sp500 (that’s always the baseline/benchmark comparison - see Berkshire annual reports for last 50 years) 

In real estate, if organized correctly, you can crush the sp500. Total ROI on many leveraged rental units exceed 30%:

15%+ Cash on cash return 

10%+ appreciation (leveraged asset)

3-5%+ loan pay down 

X% tax deductions 

On the last point, and to your question, your best bet is to consult with a tax specialist. But in my case, the result of the tax benefits basically results in my cash flow from rental units being post tax / tax free 

@Lee Perry

Give the tenant cash for your keys and avoid the troubles of eviction !

@Donte Handy

What was the split on labor and materials?

From my point of view you always have to consider the hourly rate.

300 bucks - 100 (high end locks) = 200 in labor

Did he take 6 hours to change the locks ? If so then it’s probably fair .

More likely, he took about an hour and got over 200+ / hr from you

That’s more than a high priced lawyer!

My suggestion - find a good handyman and create a long term relationship with him or her . Constantly check it they are taking advantage or not ^^

@Stan F.

Based on your post, it looks like you are getting 300/month , is that after all overheads , future capex, vacancy, and management ? If no, you have to recalculate to make sure you are taking into account all future expenses and deducting it from your cash flow

Regarding the ROI itself ... 300*12 = 3600

With an investment of 55000, you are getting in the mid single digits cash on cash return ...

You can do better.

@Darren Finan

My opinion is - that it’s up to you.

I have some units with and some without.

I’ve done countless showings and I can’t ever remember a time where my tenant asked me about a dishwasher

It’s a “nice to have” not a “need to have”

Having said that - given the option - its always a nice selling point.

E.g. in the units I do have dishwashers - I mention it!

@Shiloh Lundahl

Very interesting model ... if I understand correctly - basically you are doing a BRRRR + Rent to Own with favorable terms.

This is being financed partly by hard money (for the initial purchase) and partly by private investment (for the rehab) 

My only question with regards to the model is -> Do those private investors have a debt or equity relationship? E.g. if they are guaranteed payback at 8% then its basically just a Promissory note - right? 

My other question - why not just own the property for the long term? A lot of magnificent things happen in real estate when you plan and own for the long term.

If you can do it, do it! Looks like a fantastic outcome, +50k