All Forum Posts by: Wilson Churchill

 RE can and should generate a return higher than 6%. Although you would have a mortgage payment, you also have rent payments.

The only way to financially compare the results accurately would be to do a present value analysis: Compare all cash inflows and outflows over time and find their present value.

 You can also put your money to work in two places at the same time by buying a house, and another house, as opposed to an insurance contract and a house.. Leverage in either case. With the first investment being a house, I receive payments. If I purchase an insurance contract, I have to make payments every month. So there is a trade-off in terms of both rate of return and cash flow.

 Losing 40% would be much more likely if I allowed my money to sit in one of the many mutual funds that are promoted by financial planners. During the last crash, it was something around 70 or 80% of mutual funds that lost 50% of their value. I moved my work 401k into a self-directed account about a week before this latest decline, and am up about 15% since.. These results aren't typical, but it is fair to say that no one will watch my money and cut my losses as diligently as I will.

 Stocks can easily outperform 4 to 7% returns. Also, I wouldn't be required to make payments to the account unless I wanted to. I agree with using a line of credit. Keeping interest costs to a minimum is part of my business plan.

I am not interested in life insurance, but would be happy to get lower prices for my fire insurance..

So we're comparing investing in an insurance contract and one house, as opposed to just one house? So the implied difference is leverage.. Yet the greatest benefit of RE is leverage..

So why not just buy the house and borrow against the house, rather than buy the insurance, then buy a less expensive house by borrowing against the insurance? Yes, there will be a timing difference depending on how quickly you can borrow against the policy vs the house. With the contract, I am committed to making payments every month, whereas with the home I am not.

If it is so much more profitable to buy insurance contracts, then why not invest strictly in insurance contracts? How many people have become millionaires by investing in insurance contracts?

So you could buy a contract for 100k, then borrow 85k. I suppose you could then buy another contract for 85K, and then borrow 72.25k. Of course, you would then have to make payments on every contract established in this way.

Alternatively you could buy SFR RE. Assuming each house is cash flow positive with 100% financing, you could buy an indefinite number of homes, each of which make payments to you.

Where is the advantage I am missing here?? I could see using a similar strategy for cash reserves. For example, you could invest in stocks and borrow half on margin to invest. You could earn a much higher rate of return if you know how to trade the markets and understand market pressures. And no monthly payment would be required, unless you take a margin loan.

You could always make your own tile countertops with wood and cement board.

If it is a slab floor, I would install the least expensive ceramic I could find. If not a slab floor, I would look at either laminate flooring or vinyl tiles.

Her sister can accompany her to eviction court then...

Absolutely! The more cash you can get at a low interest rate, the better, so long as the money is used to obtain a higher rate of return than the interest rate on the loan. Consider an equity loan in the second position rather than a refinance to save on closing costs, depending on the rates.

I'm going to go against the grain on this one and say yes, but only under certain circumstances. First, this should only be attempted by someone that has plenty of capital and cash flow already. Just one unexpected expense can run in the thousands. A bad sewer line that requires a street break will easily run over 10,000, including the city bond, for example. Second, there should be an expectation of appreciation of rents and prices. Relying strictly on principal pay-down is way to unrewarding for the effort required, in my opinion. So, as long as you can get your cash back out of it, fine..

Personally, I focus on cash flow and will continue to do so until I meet my first long-term goal in terms of cash flow.