Investment properties are great, but let's get PERSONAL.
Real Estate Agent · Oklahoma City, OK · Member since 2020 · 471 posts · 462 votes
Investment properties are great, but let's get PERSONAL.
Most Popular Reply
Reading between the lines, Forrest, you keep on trying to flip Kiyosaki's dictum right around. I could be wrong, but it sounds like you and wife are caught in the classic American trap of wanting to live in a "NICE" place.
Your family is "outgrowing your current house," you say. I have a friend who live in a 5,200 ft2 place with four kids. He grew up on foodstamps right along with me, but found his ticket to the middle class through his job as a software guy and his decidedly middle-class-minded wife. He's concerned his McMansion just isn't big enough. He's actually pumping $50K into the place to turn his house's greatroom (yes, his place has a two-story greatroom) into a two-story addition that adds three more bedrooms and two more bathrooms, 1000ft2 of living space.
"A primary house is an essential part of life," you say. Is it? There are billions who don't have one. Ah, you mean an essential part of the life YOU want to lead. That's a whole different story. A centerpiece of your dreams. Not a fact of life. It points to a mindset where "THE FAMILY HOME" looms large, a mindset which millions of Americans share (or some might say have been brainwashed into). I can understand this, and the people who make their money off this dream can also understand it, and THE FAMILY HOME you seek will be priced accordingly.
So I really think you're trying to convince yourself that, despite what Kiyosaki points out, a big opulent personal residence is the right fit for you and won't drain your finances too bad. I'm sorry, but this is invariably not true. The numbers NEVER work out.
96 Replies
- Abbotsford, BC · Member since 2020 · 5 posts · 2 votes5y
@Forrest Faulconer
I’ve been thinking about this a lot. I’m considering purchasing my home on my company and renting from my company. This way, my company gets all the deductions and I can still use the home office deductions personally. And I can still control when/if I move next.
I’ll have to confirm with my accountant whether this is the best way to go.
- Real Estate Agent · Oklahoma City, OK · Member since 2020 · 471 posts · 462 votes5y
Originally posted by @Jonathan R McLaughlin:
@Forrest Faulconer like the post by the way, meant to jump on that concept not on you :)
For sure! I don't take what Kiyosaki or any one investor says as gospel at all, but it stirs up great debate!
- Real Estate Agent · Oklahoma City, OK · Member since 2020 · 471 posts · 462 votes5y
Originally posted by @Kathy Van Dokkumburg:
@Forrest Faulconer
I’ve been thinking about this a lot. I’m considering purchasing my home on my company and renting from my company. This way, my company gets all the deductions and I can still use the home office deductions personally. And I can still control when/if I move next.
I’ll have to confirm with my accountant whether this is the best way to go.
Wow, never thought about purchasing it through my LLC and renting it out personally, cool concept. Would love to get more logistics on this. Keep me updated!
Forrest
- Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes5y
Originally posted by @Jay Hinrichs:
@Jim K.@JD Martin@Steve Vaughan@James Wise Hey just wanted to tag some of my favorties BP buddies.
from my point of View personal residences have been very very good to me.. So I will say it depends on what part of the US your in.. mine were in the Bay Area and Portland.. What the gurus dont mention is the 500k tax free exemption for married couples.. And in both of those markets this has happened to hundreds of thousands of folks and myself included..
If I lived in areas that historically dont really appreciate especially bigger older homes.. then i would look at it completely different.
Plus for me its not math or whats best.. I just dont want anyone telling me what I can do in my home.. or when landlords decide they want to sell and One would have to move.. moving is as we know a royal pain.
Even at that we tend to move every 8 years like the average American but we take advantage of that 500k tax free when we do.. you dont have to 1031 to get cash you dont have to worry about recapture etc etc.
So thats one side of the coin. For good bad or indifferent home ownership is the back bone of the US.
Again I find myself in Jay's camp. I lived in a perfectly comfortable, paid for, 2500 sq. ft. home and a year away from becoming empty nesters. Regardless, the entrepreneur in me took over when the crash peaked and I bought a 7000 sq. ft., 5 bedroom, 6 bath home. Why? Well, first, because I wanted it and was sufficiently along in my RE investments to afford it. Second, I felt it was a huge bargain at a $240,000 discount to it's previous sales price.
Fast forward 10 years. My old house has been bringing in $1700 per month in rental income and has appreciated $100k. The new house has appreciated $150k (somewhat of a less rate then I'd hoped but still decent) and my original 15 year mortgage on the new place was paid off last year.
Mostly all asset now and I get to live in a really, really nice home. Don't regret it for a second.
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Gary L Wallman:
Originally posted by @Jay Hinrichs:
@Jim K.@JD Martin@Steve Vaughan@James Wise Hey just wanted to tag some of my favorties BP buddies.
from my point of View personal residences have been very very good to me.. So I will say it depends on what part of the US your in.. mine were in the Bay Area and Portland.. What the gurus dont mention is the 500k tax free exemption for married couples.. And in both of those markets this has happened to hundreds of thousands of folks and myself included..
If I lived in areas that historically dont really appreciate especially bigger older homes.. then i would look at it completely different.
Plus for me its not math or whats best.. I just dont want anyone telling me what I can do in my home.. or when landlords decide they want to sell and One would have to move.. moving is as we know a royal pain.
Even at that we tend to move every 8 years like the average American but we take advantage of that 500k tax free when we do.. you dont have to 1031 to get cash you dont have to worry about recapture etc etc.
So thats one side of the coin. For good bad or indifferent home ownership is the back bone of the US.
Again I find myself in Jay's camp. I lived in a perfectly comfortable, paid for, 2500 sq. ft. home and a year away from becoming empty nesters. Regardless, the entrepreneur in me took over when the crash peaked and I bought a 7000 sq. ft., 5 bedroom, 6 bath home. Why? Well, first, because I wanted it and was sufficiently along in my RE investments to afford it. Second, I felt it was a huge bargain at a $240,000 discount to it's previous sales price.
Fast forward 10 years. My old house has been bringing in $1700 per month in rental income and has appreciated $100k. The new house has appreciated $150k (somewhat of a less rate then I'd hoped but still decent) and my original 15 year mortgage on the new place was paid off last year.
Mostly all asset now and I get to live in a really, really nice home. Don't regret it for a second.
Gary, I just drool when i see what your money can buy in your part of the country.. compared to Say Palo Alto were my old house was 3 and 1 and just the 6k sq ft lot is worth 2 mil OR MORE .. when i sold it in 92 for just under 500k I thought NO way it could go higher NO friggen way.. :(
Paid for personal residence or two I think is the goal of the vast majority of Americans.. Not necessarily BP members as they see real estate through a completely different lens..
Very good Arlen! Great strategy. I live in NYC and appreciatioin used correctly you can do very creative and amazing things.
- Member since 2019 · 9 posts · 7 votes5y
My husband and I always purchased a fixer upper so we made money each time we moved. The last one we cashed out and moved into one of our rentals while we built our “forever” home on some land we had purchased a few years prior. We hired o all our own subs and did most of the plumbing and electrical ourselves so ended up saving around $100k over a turn key build. We now utilize our home for the occasional wedding and plan on ramping that part up so that our house is a profit center. I also breed, train and sell horses on our farm but that is an entirely different thing. We seem to find a way to monetize most things and our personal house is no exception.
- Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes5y
@Brett Murdock
Moving forward I’m targeting stuff at 1.3% +
Typically there is plenty of that available in Tulsa - pre inventory 2020 shortages.
- Rental Property Investor · Long Beach, CA · Member since 2018 · 27 posts · 12 votes5y
@Forrest Faulconer I never agreed with the idea that you’re home is not an asset. I think it’s obvious that it is an asset giving that you include it in your net worth. So I dismiss the idea. Also, I own my residence and I plan on buying a bigger place next year as well and renting my current residence.
- Fort Wayne, IN · Member since 2018 · 33 posts · 25 votes5y
@Forrest Faulconer
What about buying and doing the rehab before you move in? Do you have access to flip funding?
- Investor · Dublin, CA · Member since 2016 · 344 posts · 228 votes5y
@Forrest Faulconer this pandemic has forced everyone to work from home and kids taking online classes. I live in an area where smallest SFR starts at $1M. Before, we were not worried about our current house but all four of us needing space for virtual meetings is forcing us to buy a little larger home.
Market is so crazy that any property doesn’t sit on the market for more than a week. We are going to wait a little longer before making a move. I do like h th e idea of rehabbing a distressed property.
- Real Estate Agent · Oklahoma City, OK · Member since 2020 · 471 posts · 462 votes5y
@Lauren McCarley
I have seriously considering building new as well, I could do most of the work myself and save a TON.
- Real Estate Agent · Oklahoma City, OK · Member since 2020 · 471 posts · 462 votes5y
@Simeon Miller
For sure! Give us a few months to get in and get some work done. I just took a month before moving into our current house to remodel the kitchen. Very much worth the extra monthly payment or two.
- Abbotsford, BC · Member since 2020 · 5 posts · 2 votes5y
@Forrest Faulconer
I’m in Canada so rules are likely different... trying to get all the info I can to make an educated decision here.
- Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes5y
Originally posted by @Jay Hinrichs:
Originally posted by @Gary L Wallman:
Originally posted by @Jay Hinrichs:
@Jim K.@JD Martin@Steve Vaughan@James Wise Hey just wanted to tag some of my favorties BP buddies.
from my point of View personal residences have been very very good to me.. So I will say it depends on what part of the US your in.. mine were in the Bay Area and Portland.. What the gurus dont mention is the 500k tax free exemption for married couples.. And in both of those markets this has happened to hundreds of thousands of folks and myself included..
If I lived in areas that historically dont really appreciate especially bigger older homes.. then i would look at it completely different.
Plus for me its not math or whats best.. I just dont want anyone telling me what I can do in my home.. or when landlords decide they want to sell and One would have to move.. moving is as we know a royal pain.
Even at that we tend to move every 8 years like the average American but we take advantage of that 500k tax free when we do.. you dont have to 1031 to get cash you dont have to worry about recapture etc etc.
So thats one side of the coin. For good bad or indifferent home ownership is the back bone of the US.
Again I find myself in Jay's camp. I lived in a perfectly comfortable, paid for, 2500 sq. ft. home and a year away from becoming empty nesters. Regardless, the entrepreneur in me took over when the crash peaked and I bought a 7000 sq. ft., 5 bedroom, 6 bath home. Why? Well, first, because I wanted it and was sufficiently along in my RE investments to afford it. Second, I felt it was a huge bargain at a $240,000 discount to it's previous sales price.
Fast forward 10 years. My old house has been bringing in $1700 per month in rental income and has appreciated $100k. The new house has appreciated $150k (somewhat of a less rate then I'd hoped but still decent) and my original 15 year mortgage on the new place was paid off last year.
Mostly all asset now and I get to live in a really, really nice home. Don't regret it for a second.
Gary, I just drool when i see what your money can buy in your part of the country.. compared to Say Palo Alto were my old house was 3 and 1 and just the 6k sq ft lot is worth 2 mil OR MORE .. when i sold it in 92 for just under 500k I thought NO way it could go higher NO friggen way.. :(
Paid for personal residence or two I think is the goal of the vast majority of Americans.. Not necessarily BP members as they see real estate through a completely different lens..
Jay,
I am indeed fortunate to live in an area with reasonable real estate values. I've lived in both Westchester County, New York and Fairfield County, Connecticut. Don't miss the overpriced housing or anything else about the area for that matter.
I'm still a real estate guy though. Have well over a 100 paid for doors within 15 minutes of my backyard. Wouldn't have purchased the fancy house without my financial foundation being well in place.
Gary
Originally posted by @Gary L Wallman:
Originally posted by @Jay Hinrichs:
Originally posted by @Gary L Wallman:
Originally posted by @Jay Hinrichs:
@Jim K.@JD Martin@Steve Vaughan@James Wise Hey just wanted to tag some of my favorties BP buddies.
from my point of View personal residences have been very very good to me.. So I will say it depends on what part of the US your in.. mine were in the Bay Area and Portland.. What the gurus dont mention is the 500k tax free exemption for married couples.. And in both of those markets this has happened to hundreds of thousands of folks and myself included..
If I lived in areas that historically dont really appreciate especially bigger older homes.. then i would look at it completely different.
Plus for me its not math or whats best.. I just dont want anyone telling me what I can do in my home.. or when landlords decide they want to sell and One would have to move.. moving is as we know a royal pain.
Even at that we tend to move every 8 years like the average American but we take advantage of that 500k tax free when we do.. you dont have to 1031 to get cash you dont have to worry about recapture etc etc.
So thats one side of the coin. For good bad or indifferent home ownership is the back bone of the US.
Again I find myself in Jay's camp. I lived in a perfectly comfortable, paid for, 2500 sq. ft. home and a year away from becoming empty nesters. Regardless, the entrepreneur in me took over when the crash peaked and I bought a 7000 sq. ft., 5 bedroom, 6 bath home. Why? Well, first, because I wanted it and was sufficiently along in my RE investments to afford it. Second, I felt it was a huge bargain at a $240,000 discount to it's previous sales price.
Fast forward 10 years. My old house has been bringing in $1700 per month in rental income and has appreciated $100k. The new house has appreciated $150k (somewhat of a less rate then I'd hoped but still decent) and my original 15 year mortgage on the new place was paid off last year.
Mostly all asset now and I get to live in a really, really nice home. Don't regret it for a second.
Gary, I just drool when i see what your money can buy in your part of the country.. compared to Say Palo Alto were my old house was 3 and 1 and just the 6k sq ft lot is worth 2 mil OR MORE .. when i sold it in 92 for just under 500k I thought NO way it could go higher NO friggen way.. :(
Paid for personal residence or two I think is the goal of the vast majority of Americans.. Not necessarily BP members as they see real estate through a completely different lens..
Jay,
I am indeed fortunate to live in an area with reasonable real estate values. I've lived in both Westchester County, New York and Fairfield County, Connecticut. Don't miss the overpriced housing or anything else about the area for that matter.
I'm still a real estate guy though. Have well over a 100 paid for doors within 15 minutes of my backyard. Wouldn't have purchased the fancy house without my financial foundation being well in place.
Gary
I think that's the real takeaway here. There are ways to turn your primary residence into a moneymaker. Househacking and live-in flipping are two of them. But by and large, neither of these strategies fit in well with the American dream of A Nice Family Home. Most people who try to follow the dream end up house poor.
The marketers really know how to sell us that Home. The trigger words they use are obvious, but still insidiously powerful. You WORK HARD. You DESERVE it. It HOLDS ITS VALUE. Your CHILDREN deserve a home they CAN GROW UP HAPPY in. A home you can CHERISH THE MEMORIES in. GOODS SCHOOLS. A SAFE NEIGHBORHOOD.
Some woud call me a slumlord. I'm pretty sure all I really deserve is a noose and a ticket to Hell. I don't have kids. I barely have a W-2 job. I live in a city that is often described a "bleak," among other less-complimentary terms. I am perfectly happy living in a paid-off $50K over-under duplex with a fresh 30-year roof and renting out the upstairs to fully cover my expenses. I derive a savage joy from living free in this messed-up world, surrounded by drones destroying their ability to build wealth in the name of keeping up appearances. I had a very expensive liberal arta education that other people paid for. I try not to put on airs.
Can a man ask more? Can a world offer less?
Kiyosaki tells people not to buy houses as a measure of their wealth. Asset, investment, do the words really matter? Save up your pile first, buy all the toys you want later. But quite frankly...what a total waste of money earned, pilfered from the tightfisted god Mammon's treasurehouse. I keep on finding that my need for toys just gets smaller and smaller as I make more and I watch other people make idiotic personal money decisions.
Do I want stuff? Sure. It's just now it's more along the lines of endowing a charity than buying a house I don't need.
- Investor | Syndicator | Instructor · Cincinnati, OH · Member since 2008 · 435 posts · 198 votes5y
@James Wise I had a lot of respect for you and your firm until this comment. Sub2 isn't illegal and it is just another tool that can help a seller quickly. I've completed 3 Sub2 homes and each seller was grateful that I took care of their needs. It can be wrong if the buyer doesn't fulfill their obligation, but that's another issue.
- 5yWale LawalBusiness MemberReal Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
At the end of the day, it depends on what you believe in and makes you sleep well at night.
NETWORTH BUILDERS5236 Reviews - 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Gary L Wallman:
Originally posted by @Jay Hinrichs:
Originally posted by @Gary L Wallman:
Originally posted by @Jay Hinrichs:
@Jim K.@JD Martin@Steve Vaughan@James Wise Hey just wanted to tag some of my favorties BP buddies.
from my point of View personal residences have been very very good to me.. So I will say it depends on what part of the US your in.. mine were in the Bay Area and Portland.. What the gurus dont mention is the 500k tax free exemption for married couples.. And in both of those markets this has happened to hundreds of thousands of folks and myself included..
If I lived in areas that historically dont really appreciate especially bigger older homes.. then i would look at it completely different.
Plus for me its not math or whats best.. I just dont want anyone telling me what I can do in my home.. or when landlords decide they want to sell and One would have to move.. moving is as we know a royal pain.
Even at that we tend to move every 8 years like the average American but we take advantage of that 500k tax free when we do.. you dont have to 1031 to get cash you dont have to worry about recapture etc etc.
So thats one side of the coin. For good bad or indifferent home ownership is the back bone of the US.
Again I find myself in Jay's camp. I lived in a perfectly comfortable, paid for, 2500 sq. ft. home and a year away from becoming empty nesters. Regardless, the entrepreneur in me took over when the crash peaked and I bought a 7000 sq. ft., 5 bedroom, 6 bath home. Why? Well, first, because I wanted it and was sufficiently along in my RE investments to afford it. Second, I felt it was a huge bargain at a $240,000 discount to it's previous sales price.
Fast forward 10 years. My old house has been bringing in $1700 per month in rental income and has appreciated $100k. The new house has appreciated $150k (somewhat of a less rate then I'd hoped but still decent) and my original 15 year mortgage on the new place was paid off last year.
Mostly all asset now and I get to live in a really, really nice home. Don't regret it for a second.
Gary, I just drool when i see what your money can buy in your part of the country.. compared to Say Palo Alto were my old house was 3 and 1 and just the 6k sq ft lot is worth 2 mil OR MORE .. when i sold it in 92 for just under 500k I thought NO way it could go higher NO friggen way.. :(
Paid for personal residence or two I think is the goal of the vast majority of Americans.. Not necessarily BP members as they see real estate through a completely different lens..
Jay,
I am indeed fortunate to live in an area with reasonable real estate values. I've lived in both Westchester County, New York and Fairfield County, Connecticut. Don't miss the overpriced housing or anything else about the area for that matter.
I'm still a real estate guy though. Have well over a 100 paid for doors within 15 minutes of my backyard. Wouldn't have purchased the fancy house without my financial foundation being well in place.
Gary
Growing up in Cupertino in the 60s prices were just like anywhere else in the country. A new home was 18 to 30k..
and the depending on what Locheed was doing dictated the economy.. but then Tech exploded and the rest is history..
100 doors paid for Oh my gosh all that dead equity !!! LOL I like those monster balance sheets all assets NO Debt !!!
I watch the folks on this site trying to buy rentals with as little out of pocket as they can becasue it looks better in coc formulas
- Member since 2020 · 437 posts · 675 votes5y
@Forrest Faulconer
“Gurus” will tell you whatever they need to make sure you need them, you subscribe to their courses, buy their books, attend their seminars and lectures and quote them even if most people who are truly rich never follow those gurus or have heard about them. If you are taking their advise in your personal life instead of following your own path, then good luck to you. It is absolutely in the interest of every guru that his target market stays naive and poor.
For example “Gurus” will tell you
1) Don’t own a home
2) 9 to 5 job is a waste
3) College is a waste
Tell that to the couples who in my upscale Bay Area neighborhood, many of whom were likely not even born in this county but are taking in 7 figure incomes thanks largely to their education and sitting on significant net worth’s part of which comes from the equity built in their primary home. Most have not likely heard of the gurus or their books you are quoting but are living the American dream!!!!
- Real Estate Agent · Oklahoma City, OK · Member since 2020 · 471 posts · 462 votes5y
Originally posted by @Justin Thorpe:
@Forrest Faulconer
“Gurus” will tell you whatever they need to make sure you need them, you subscribe to their courses, buy their books, attend their seminars and lectures and quote them even if most people who are truly rich never follow those gurus or have heard about them. If you are taking their advise in your personal life instead of following your own path, then good luck to you. It is absolutely in the interest of every guru that his target market stays naive and poor.
For example “Gurus” will tell you
1) Don’t own a home
2) 9 to 5 job is a waste
3) College is a waste
Tell that to the couples who in my upscale Bay Area neighborhood, many of whom were likely not even born in this county but are taking in 7 figure incomes thanks largely to their education and sitting on significant net worth’s part of which comes from the equity built in their primary home. Most have not likely heard of the gurus or their books you are quoting but are living the American dream!!!!
Yep, Rich Dad Poor Dad is one of the only "guru" type books I have read in recent memory. I find most of my inspiration from reading about great historical figures and picking up on what made them stand out. It's NEVER something like 5 steps to this and that, or do this one thing to be successful. Nothing truly great comes without sacrifice, failure, and hard work. Thanks for the post!
- Rental Property Investor · Murrieta, CA · Member since 2020 · 338 posts · 344 votes5y
@Forrest Faulconer
Why not sell your personal home and use the money to buy investments. A house is a liability because you always have to pay for it. If you buy an investment you get more write offs, make money instead of paying money, and your not locked into the property.
- Hayward, CA · Member since 2017 · 48 posts · 55 votes5y
I agree with those that have previously stated that a primary residence is a mediocre investment, but I think the original question is what is an investor's approach to primary residences.
I have devised a plan that I have yet put into action, but I believe is a solid approach to tax harvesting a primary residence equivalence. It would go something like this.
Agree with a friend that an exchange will be made. I find a suitable house for myself and loan the down payment to a friend who purchases it in their name. They then rent the property to me for a nominal amount and write off all depreciation, interest, and expenses. Similarly, they find a property for themselves and loan me the down payment, I purchase it and charge them the same rent amount. I take all write offs with the property in a similar fashion.
I am not really sure what the best exit strategy would be. Ideally the ultimate sale should take into account the $500k capital gain exclusion. Maybe 1031 exchanging it to one another, and then sell, but I'm not sure if that can work without renting it out for a period of time to someone else after the 1031 exchange.
- Realtor · Jacksonville, FL · Member since 2019 · 95 posts · 87 votes5y
@Forrest Faulconer One thing you can do is a FHA 203K loan as long as you are okay buying something that needs a little love. Nothing major in renovation work but something you can buy at a discount and add instant equity. At that point you aren't buying retail price, thinking about it with the investment mind, and have a lovely home. The renovation loan and purchase price are all added together toward the long term loan so same type of amount of money out of pocket if not less depending on the amount you want to put down.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes5y
Originally posted by @Bill P.:
@James Wise I had a lot of respect for you and your firm until this comment. Sub2 isn't illegal and it is just another tool that can help a seller quickly. I've completed 3 Sub2 homes and each seller was grateful that I took care of their needs. It can be wrong if the buyer doesn't fulfill their obligation, but that's another issue.
Sub 2 = Mortgage Fraud
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