All Forum Posts by: Thomas Lorini

Congrats on your success! This is inspiring! 

Amazing! Congrats! 

I think this is a great deal regardless. I also did a cashout refi of one of my buildings and bought two additional apartments and a bach pad for myself just out of that.  keep up the great work :)

This was a good deal and a big step toward financial freedom but there's no reason to hype up the deal by characterizing it as zero down because it's definitely not.  Others have already mentioned the $50K in borrowed equity plus closing costs.  One thing people forget to consider is that by refinancing the old property you just donated all of the interest of the original loan which would be an additional cost toward the first property.  

This deal wasn’t started from absolute scratch, but is an excellent example of staying off your *** by putting your assets to work. It also reminds us that in real estate, the only thing that may beat location is financing!! Awesome job.

@Shiloh Lundahl, THANK YOU!  exactly... I agree with you:  Keith Weinhold, as well as Kiyosaki, are not big fans of equity sitting around not being used either.  you have to be smart, and make sure you have plenty of margins, but the argument that the bank is taking the larger risk when your equity is smaller floats my boat...I have no problem borrowing against properties flush with equity to grab something else that creates a solid cash flow after ALL true expenses..., including equity interest charges; if it's OPM, its an INFINITE RETURN ON MY MONEY, which to me is Zero, if its not coming out of my pocket. 

@Aaron Mazzrillo, how in the world do you build an empire if you don't use equity?  I'm glad your mentor had the luxury of waiting to build up down payments before he moved on property, but I sure don't!  I think a better rule is knowing your market, keeping safe margins and not making dumb purchases.

That downturn did nothing to my tenants but make them settle in and weather the storm.  

@Thomas Lorini, good on ya buddy!  excellent deal, I say, and good job weathering a lot of harsh responses.  I don't remember you saying that first time buyers with no money and no equity can do the same thing as you FOR FREEE!    Perhaps they could if they found a good partner like you to help them with their deals and learn how not to make dumb purchases.  And it looks to me like the equity you bought into on that deal, as well as growing rents, easily justifies the tiny payment on the equity you used to make it happen.

But I love leverage (except car payments!!) and hope to share a mai-tai with you in the islands when all is said and done!

@Aaron Mazzrillo I get what your saying about how risky it is to take out all the equity. However, I disagree with you on who holds the risk. For example, If I have 2 properties, each worth 200k. One has 100k equity and the other that has only 15k equity and both tenants move out and I have a hard time filling them and I get behind in my mortgage payments to the bank, which one is the bank going to foreclose on first? The one that has almost no equity or the one that has 100k in equity? 

The higher leverage the more risk the bank has, the lower leverage the more risk I have. The bank will probably be willing to work with me more on the property with little equity than the one with more equity because they are less likely to get all of their money back by forclosing on the property with little equity. So they may be more willing to extent the time period or something to get the note performing again. Whereas with the property with more equity they are much more likely to get all of their money back including all forclosure fees, etc. if hey foreclose on that property.

The key to all of this is to make sure your property cash flows, then you can ride out the bad times. And where did you hear it was the investors stripping equity in 2006 that caused the financial meltdown? Remember subprime loans were given to homeowners who didn’t earn enough to pay their mortgage when rates adjusted. I don’t know about your neighborhood, but in mine it wasn’t renters that were walking away from their homes it was the homeowner that realized that they were paying a mortgage on a home that was worth half of what they owed so they stopped paying and walked away. Investors who were cash flowing before the crash rode out the financial storm and continued to cash flow and tried to get more properties when houses were at a deep discount. From what I have read and seen, flippers are the ones that tend to get hurt the worse during down turns more than the buy and hold investors.

Keith Weinhold explained the concept of who holds the risk mentioned above in detail on his get rich education podcast #163. Defiantly a mindset shifting podcast worth listening to.

https://itunes.apple.com/us/podcast/get-rich-education/id927263663?mt=2&i=1000395028869

@Aaron Mazzrillo

Your one of the few on here that get it. Its honestly by definition a Ponzi scheme in its truest form.  The presenter paints a rosy picture of a deal on BP. He/She then goes and does another deal gutting all or a portion of the prior deal. Each and every deal this is done to becomes a weaker player in the portfolio. The "glory story' that was offered up for the newbies to fawn over is no longer in place. Then as you do deal after deal what have you built? A lot of very weak properties that collapse under the least amount of stress because you have stripped all value from them. Your equity is just tied up in that next deal. No Thanks ! You are 100% correct on another subject about what happened 10 short years ago. These type of deals are "part" of the reason housing collapsed. The bank not doing their due diligence on borrowers as well but thats a two way street. Your typical investor on this site was jumping all over those loans. Lets keep in mind.....banks offered a product that was being asked for.  In the end.... Its a very risky way to make money. I maintain I do not think the banks should loan on any of these properties without 20% down for owner occupied and 30% for investment.  A little thing called "skin in the game" is a powerful tool to vet out deals and to not get overextended.  Some of these stories you read on BP those investors...gamblers really own nothing. My comments are directed at the folks starting out. Seeing how much you can borrow is not the path to wealth. It the path to bankruptcy in many cases. 

@ Shiloh Lundahl wrote the following "The higher leverage the more risk the bank has, the lower leverage the more risk I have" 

My goodness I read this stuff and just cringe. Did we not learn anything from the 2009 recession? FYI you share that risk with the bank. The fact you dont understand this is troubling and to boot to drive your point you "THINK" you have leverage over the bank if they foreclose on you cause you owe a lot?  The bank can end you ability to borrow hence shutting you out from whatever you are doing. As well owning properties entirely with no loans..leverage...that my friend is called power.........not risk .Banks and investors are at your feet monthly wanting to lend or buy your proprieties for a gain.