All Forum Posts by: Tom Doan

Originally posted by Jeremy Namen:

haha that is ridiculous... but the proof is in the pudding.

At the time I had not been exposed to the real world and though I knew everything, I was graduating at the age of 20, so I thought I had the world conquered.

So you're telling me that you're using an overambitious idea of a sheltered graduate as "proof" that OSU is better than UT? There is no proof in the pudding.

Originally posted by Brian Hoyt:

Originally posted by Jeremy Namen:

Im not sure if this has been straightened out yet, but when you say UT, do you mean TEXAS? you must be talking about Texas. Only a longhorn would talk such nonsense. Go BUCKS!

I hung my head in shame when I read the OP say that he was from UT. What a poor, poor representation...Anyway, not even sure I know where a Buck comes from. Short for Buckeye?

Why would you hang your head in shame? Because I was about to be a 20-year old graduate who thought he had the whole world figured out and knew everything? I'm pretty sure most people go through that phase where they are overconfident in their abilities. An idea crept into my head, and with self preservation bias I thought it was marvelous. But obviously now that I'm working in the real world, it's not.

I am close to my Aston Martin though :)

Originally posted by Jeremy Namen:

Im not sure if this has been straightened out yet, but when you say UT, do you mean TEXAS? you must be talking about Texas. Only a longhorn would talk such nonsense. Go BUCKS!

Nonsense is judging someone solely by the university they attended.

I've been reading some topics here on this, but it seems like the legal issue depends on certain conditions.

I'm looking at a 4 br place in a residential neighborhood (TX), so it's nowhere near a college or anything, although it's a couple miles from a community college. Would it be legal in this situation to rent out the 4 rooms to different people or would I need more information?

What if I myself am living in one of the rooms? Would it be legal if I rented out the other three?

Or, what if I leased out the entire house to a group, would that be legal? For instance, say I find 4 different tenants and I bring them together for create one lease contract and if anyone leaves, then I would redo the contract. Would that be legal?

Renting out each rooms looks like a much bigger hassle, but it seems like you would be able to generate more cash this way.

Any help is greatly appreciated, this forum has already helped me out tremendously.

Originally posted by Corey Demuth:

Be wary of seminars where they make outrageous claims. I know a lot of people on here have talked about getting psyched up from going to Rich Dad, Poor Dad but I feel like some of the things they get into their head are just wacky.

Will you honestly get REO properties for 50 cents on the dollar, or even less? Not likely. Keep in mind you're not the only investor out there; the best REO properties often have investors lined up with cash offers and proof of funds. The banks can afford to be a lot pickier than you think.

Also to be honest with you, you will likely not get a mortgage until you have had a full-time job for several months. Your credit is probably not strong enough yet either. Trust me on this one, I'm speaking from experience.

I don't think I will be taking out the loan, my mother will either take it out herself and I'll just pay her the payments or she will co-sign for me.

Originally posted by Jon Holdman:

Re-selling an REO property for a higher value is entirely possible. How long it takes will depend on entirely on the market in your specific neighborhood. I've seen it done in a matter of months in some neighborhoods.

I'm pretty doubtful you can truly buy something at $120K that has an ARV of $300K unless it needs a ton of work. For flipping, apply the 70% rule. Buy at 70% of ARV, less fixup, and you'll make a profit of 10-15% of ARV. So, for a $300K house, 70% would be $210K. Subtract off the fixup, and that's what you can pay to get a $45K (if things go well) to $30K (more realistically) profit. If you need, say $30K in fixup, you could pay $180K.

If you really could pay $120, you can tack that $60K difference onto the profit. A $150K profit is out of the realm of possibility, even if absolutely no work is needed.

If work is minimal, its harder to justify a big jump up in value, so it has to set (i.e., season) longer before a lender will accept a new value.

Paying $120K (plus fixup) for a $1000 rental will suck cash out of your pocket. Read in the Rental Property forum before buying any rentals.

The speaker at the Rich Dad Poor Dad seminar kept boasting about how she's purchasing $120k REO duplexes for $20k and $300k REO properties for $120-150k, saying that it was an "ok" deal, not "great," and claimed those numbers are easily attainable. Puffery perhaps? She said they're not even fixer uppers, just minor repairs.

Ok, so hypothetically, say I can get a property for $210k. So at 7% and 30 years:
Mortgage: $1397
Desired cash flow: $200
Rent: $2661 [(1397+200)/.6]
Expenses: $665 (2661*.4)

I never thought about looking at the numbers that way because my boss was telling me about how he is leasing a $300k house for only a couple hundred over the mortgage payment amount so if he were to actually buy one, with all the other payments (insurance, etc.) he would actually be in the hole.

But is a $2661 rent relatively attainable in this market? It would seem to be that the duplex would be able to generate the same cash flow with much less money and cheaper rent would attract more tenants, I would just miss out on the capital gain of eventually selling the property at market value.

If I can get a duplex for $70k (100k*.7), then at 7% for 30 years:
Mortgage: $465
Desired cash flow: $200
Total rents: $1108 [(465+200)/.6]
Expenses: $443 (1108*.4)

So worked out on paper, both properties can theoretically generate the same cash flow, unless my rent numbers for the duplex are too optimistic. But the $300k is a beautiful property and is sitting in my neighborhood, a very nice one, and the duplex is a bit on the run down side.

In your opinion, which would you say is a better deal?

Thanks for the help, it is greatly appreciated.

I'm a student so I don't really have a ton of cash sitting in the bank. However, looking at some REOs and after recently attending a Rich Dad, Poor Dad workshop, I was told that it wasn't unrealistic to be able to get a $100k house for about $20-40k.

So I figured I could try to make some bids on some low value properties with a manageable mortgage payment, such as a $100k duplex. If I could score one for relatively cheap, then I could still generate positive cash flow even with ridiculously cheap rents. Then once the market picks up, I figured that I could sell it for market value and make that cash off the top.

Is it realistic to be able to sell an REO property at market value later on?

I was also looking at a $300k home, and if I want to take on that I have a willing partner to help me out, so I figured if with a little luck we can get the house super cheap (for the purpose of this convo, I'll say $120k), not only would a $1000 rent seem like a steal to a tenant, but selling it at market value would make $150k cash.

Is my thinking/strategy flawed by any means? I left out any maintenance costs, etc.

My current living situation: I may sound like a loser, but I'm living with my parents so I can live frugally for now. I have a part time job which I plan on holding onto until I graduate and other than minor expenses such as an occasional lunch and gas, I essentially live for free. So I can afford using all of my wages to the mortgage payment if necessary.

Originally posted by Mike Seluk:

Tom, this is totally the wrong place to be asking this question. The car disease is just one of those things - 'If I have to explain, you wouldn't understand'.

Go read Dave Ramsey's book like everyone else said to - pay attention to the part in there that says, "Saving money without a goal in mind is pretty pointless", or something to that effect.

It might not be the best 'first' purchase out of school, but don't ever let anyone ever tell you that you shouldn't get something you really want. Cars like that can be impractical, yep, but so are a lot of things that people do. I'd never let someone who's married with kids tell me about impracticality.

Besides...I really can't understand how THAT particular engine - the Gallardo's 5 liter V10 could POSSIBLY be that maintenance intensive. It's motor is basically 2 Jetta 2.5L motors - the cylinder head is essentially the same, the bore and stroke are the same, they're both naturally aspirated...what's left? Why can't it also go for a gazillion miles of day in and day out driving like a Jetta?

When I was curious about buying a car like that for daily driving, I basically went to a Ferrari forum and asked who did their own maintenance and who drove their cars a lot. Turns out the V8 Ferrari's are pretty reliable, and you can service them yourself, more or less. That really turned me on to the 348/355/360s. And there are a TON of those down here. Also, I'm really into the Ford GT, since that's basically a truck motor with a blower - something Ford knows well.

I definitely agree, the posters here have the mindset on investing their cash and being frugal until you become rich, which tips the scale a bit. I should make the same post in a Lambo forum and see what kind of response that I get.

Although I want to invest and all of that, I also want an exotic car to enjoy in my youth, after all, you only get one life to live, once your youth is over, it's not coming back. So my goals and aspirations somewhat conflict. That's why I just proposed buying a Lamborghini and delaying my investments for the term of the car loan, but my suggestion has been met with some criticism.

However I do appreciate all the perspective and advice everyone is giving me, I guess it's up to me whether or not to follow it.

Originally posted by Dave Kennedy:

90k at 8% for 5 yrs is 1,824/mnth.

1,824/mnth for 30 yrs at 6% would allow you to get a 304k loan.

Go buy a multi unit that cashflows in TX for that.

Then buy a used honda/toyota for 6-10k cash.

When I got my first job out of college...3 yrs ago I went out and purchased a new Honda Pilot (SUV) for 25k, put a bit down and then financed the rest of 66 months. My payments are $433 and I regret buying it. Had I been smart I would have got one with 40-50k miles on it that was 2 yrs old for 18k.

I love the car but hate the payments. I am actually just thinking about paying it all off soon and taking the hit too savings. Because over the long run of the loan I am actually paying closer to 36k when you add in my down payment and the interest of the loan.

Keep in mind this is a Honda Pilot...hardly a lavish car but still probably more then I needed just out of college.

I would have not had that debt on my books so I could be approved for more money for RE. Because right now my car is costing potentially 76k of "lending power" on a 30 yr loan.

I think the reason for wanting to go purchase something just out of college is that reward/success factor. You are now looking at a salaried job as opposed to working for $10/hr. I remember when I signed my contract for my first job at Fidelity I thought ...wow 37k....thats so much money!! lol....it is to a college kid. But it doesn't go as far as you think. I'm not sure what kind of salary you are targeting but i'd guess it falls short to justify buying a Lambo.

I can see your point, the car is awesome, the payments aren't. But I know that 37k won't take you far at all, even if Uncle Sam lets you keep all of it. But your post provided with me some perspective, thanks.

In your opinion, what is/are the most helpful or informative book(s) you have read?