All Forum Posts by: Stephen Flynt

Keep in mind when it comes to HELOC's, that they can and will be cancelled in a recession. I found that out in 2008! I recommend that rather than paying down a mortgage, to set that money aside, because it will do you more good in your bank account when things get bad than having equity in a house that you can't get out. You also may find in a downturn that the equity you thought you had isn't really as much as you had planned for if the value of the property declines.

I would also hope those retiring in 2008 would not need to cash out their entire retirement account but rather were following something like the 5% withdrawal rule of thumb.  If they were in the position to have to cash out their entire retirement account, that would not even really be retirement would it lol.

I began using Stessa this year and really like it.

I would love to listen to a podcast that talked about how to get rich through buying and selling land as well as selling rights for timber, mining, what have you.  Does one exist??? Kinda kidding around in my question but would seriously love to learn more.  Seems like the right land purchase at the right time and right price could net much more for much less effort than doing rentals and flips (which I currently do).

Forgive my ignorance but how does a 1031 apply when selling a property at a loss?  

I get it why some are more comfortable with a paid off property and that if you're going to be leveraged at all you must have a plan for the times when you won't have rent money coming in, unexpected expenses, and all that, but curious if anyone ever does the math on return on equity for a paid off rental property and then thinks to themselves "Dang I could have just dollar cost averaged into an S&P 500 index fund all these years which has returned about 10% on average over the past 90 years"?

If you think about a paid off property hitting the 1% rule, it is probably returning 6-8% ROE, hitting the 1.5% rule is probably 9-11%.  These are rough ranges, some probably do better (and some probably do worse).  But is it worth dealing with tenants, repairs, maintenance, evictions, and all of that for an ROE in this range?  

Now of course if you're the type of person who's going to panic and sell their mutual fund after a sell-off like we had today, then being invested instead in real estate, even with "dead equity," is probably the best way to go.

Robert, all investing involves personal preferences and your personal comfort level with the risk / reward potential. We are all different, and approach things differently. The thing I try to urge everyone to do (so not really just directing this at you) is to make the effort to calculate the return on your investment. Then ask yourself, was it worth it? Most of the time, a paid for investment property (either paid for because it was bought with all cash to begin with or the loan has been repaid) is going to show an ROI of < 10%. There are exceptions of course, posters here on BP who buy very cheaply with all cash and are true local experts in their sub-market who may do better, and market appreciation may help you do better as well, but I suspect the vast majority of investors with paid for properties are earning < 10%. Take a simple example, a paid off house is worth $100K, you collect $1000 per month rent, perhaps your net income over a year is around $7000 long term (some years it will be higher, in other years when you replace a roof, or HVAC, it will be much lower), so that is a 7% ROI ($7,000 / $100,000). If the house appreciates 3% in the year, okay great now you're at 10% ROI. But you've put a lot of effort into that 10% ROI. Over the long term, investing in something like Vanguard's S&P 500 Index Fund VFINX will return 11% (that's what it's returned on average every year since its inception on 8/31/1976), and if you invested in it you did nothing but push a few buttons on your laptop. :-) So this is just food for thought, and to each his own, but when I look back at the work I've put into my investment properties over the years I now look for a minimum 20% ROI on every addition to my portfolio. In my market, this requires some leverage.

($730 x 12) / $140,000 = 6%. That's your ROI for paying off your mortgage early. I'd go borrow on that property again and look for an investment paying more than 6% but that's just me. :-)

I have to ask, when you say you hounded "them" to get a post-rehab inspection, are you saying you hounded MI/OP to do an inspection?  If so, why would you not have hired any third party inspector in the Indy area who would have been happy to inspect your house just as soon as he could put it on the schedule?  I realize this was probably a first-time investment for you and many others and not trying to be unduly critical but getting third-party (not seller-related) inspections is a pretty standard process when buying real estate.

@Simmy Ahluwalia I'd be interested in seeing whatever you come across.