Monthly Cash Flow vs CoC ROI
Member since 2021 · 4 posts · 4 votes
I'm analyzing a deal in Austin, TX that I would be buying all cash. I plan on holding long term and need some help. After putting the numbers in the calculator my monthly cash flow will be $700/mo. However the CoC ROI is 4%. I'm confused about this part. I thought if a property cash flows high the CoC ROI should also be high. Would this be a good deal? And if it came down to the two would you want Cash Flow or CoC ROI higher? Thanks!
@Eric Ching You can't really get an answer about if you want Cash flow or CoC higher because one is a percentage and the other is a (hopefully) positive number. Let's look at an example of why you can't necessarily say that if cash flow is good, your CoC return will be higher:
If you take two identical properties that are right next door to each other and you pay cash for them. House 1, you pay $200,000 for and House 2 you pay $250,000 for it. Let's assume they generate the same exact rent of $1,500 per month and after your expenses, each will generate $800 per month cash flow. Even though your monthly cash flow is identical for both properties ($800 per month), you paid an extra $50K for House 2 to generate the same cash flow.
House 1 CoC = 4.8%
House 2 CoC = 3.84%
My suggestion would be to look at your CoC return when comparing different properties so you have a good measuring stick to judge properties with different prices.
@Eric Ching You can't really get an answer about if you want Cash flow or CoC higher because one is a percentage and the other is a (hopefully) positive number. Let's look at an example of why you can't necessarily say that if cash flow is good, your CoC return will be higher:
If you take two identical properties that are right next door to each other and you pay cash for them. House 1, you pay $200,000 for and House 2 you pay $250,000 for it. Let's assume they generate the same exact rent of $1,500 per month and after your expenses, each will generate $800 per month cash flow. Even though your monthly cash flow is identical for both properties ($800 per month), you paid an extra $50K for House 2 to generate the same cash flow.
House 1 CoC = 4.8%
House 2 CoC = 3.84%
My suggestion would be to look at your CoC return when comparing different properties so you have a good measuring stick to judge properties with different prices.
CoC is a return on cash investment. Your investment is all cash so you will see a very low CoC return.
Cashflow = Rent - Expenses. this will be fairly large because you don't have a mortgage to pay.
Both can be good deals depending on what you want out of your investment, goals, etc.
@Eric Ching to answer your first question: it's a math equation. Based on your numbers, you're buying a $210K property. Yes, people want high monthly cash flow, but it becomes inefficient with low COC%. So in your case, I expect some people to recommend putting a down payment of 20%-25%.
Is it a good deal? That's up to your goals and this flows into your question about cash flow vs COC%. Do you strictly want a few properties that will cash flow you out of a job? Do you want to build a massive portfolio? What does Eric want? And that will give you the best answer for you. To answer the question directly, it's a blend of both. I would rather get $300/mo cash flow at 12% COC% than what you're getting, but that's MY preference. I would use the extra money to put into more properties to scale quicker.
There are two parts to calculating COCR. One part is the cash coming in, and the other is your cash going out. If you pay all cash for a property , there is no way to get anything but a terrible COCR.
If it came down to a choice between the two, I wouldn't buy the property. COCR tells you how much of your cash (cost) you get back in the first year (and only the first year). Cash flow comes every month.
@Eric Ching
I paid cash for my first two properties because I was more of a Dave Ramsey guy. My CoC was only around 5% after all my expenses. What a joke. Then I learned the power of leverage and started leveraging to scale up. My CoC sky rocketed when I took loans out and leveraged my way to 12 properties in 6 years. My cash flow is now 6k/month net from these things. And most are on 15 year loans. 3 are on 30 year loans. Paying cash for properties is a great strategy to acquire them for obvious reasons. But do a cash out refi to deploy that equity to scale up so you can make a lot more off your down payments.
@Eric Ching
The COC return is the comparison of the money you actually have in the deal and the return on it. You obviously had a hefty down payment to get only a 5% COC return with a $700/month cashflow. I would put a lower down payment and get a bigger loan then put your excess capital into another deal.
Leverage debt to create wealth faster
@Joe Villeneuve wouldn't CoC return be each year not just the first year?
@Joe Villeneuve wouldn't CoC return be each year not just the first year?
No. COCR is just a measure of how much you recover of your initial cash/cost for the first year.
@Eric Ching to answer your first question: it's a math equation. Based on your numbers, you're buying a $210K property. Yes, people want high monthly cash flow, but it becomes inefficient with low COC%. So in your case, I expect some people to recommend putting a down payment of 20%-25%.
Is it a good deal? That's up to your goals and this flows into your question about cash flow vs COC%. Do you strictly want a few properties that will cash flow you out of a job? Do you want to build a massive portfolio? What does Eric want? And that will give you the best answer for you. To answer the question directly, it's a blend of both. I would rather get $300/mo cash flow at 12% COC% than what you're getting, but that's MY preference. I would use the extra money to put into more properties to scale quicker.
Lower DP is always best. Your DP, as long as you have Positive CF, is your entire cost. When you spend more cash upfront, with the idea of getting a higher cash flow, all you're doing is paying for that added CF upfront. It's not a gain. You have to recover all of your cash.cost before it becomes a gain, so the more cash you start out spending, the more cash you have to recover, and the longer it takes before a profit is made.
@Joe Villeneuve
Trying to understand this. The equation for CoC return is:
Cash on Cash Return = (Cash Flow/Cash Invested) x 100
Couldn't you perform this for yearly cash flow/initial investment. This would be X% CoC for any given year?
Thanks
CoCR = Cash received in the first year only
Cash paid out in the first year only
There is not CoCR for ANY given year...just the first year.
What you are trying to do is figure out how fast you recover all of your cash/cost...which is important. That formula is:
Cash Cost (total...not just the first year, so this may increase with each year) = # of yrs to recover cash/cost & start profit
Cash flow per year
For me, this is my most important number
@Eric Ching to answer your first question: it's a math equation. Based on your numbers, you're buying a $210K property. Yes, people want high monthly cash flow, but it becomes inefficient with low COC%. So in your case, I expect some people to recommend putting a down payment of 20%-25%.
Is it a good deal? That's up to your goals and this flows into your question about cash flow vs COC%. Do you strictly want a few properties that will cash flow you out of a job? Do you want to build a massive portfolio? What does Eric want? And that will give you the best answer for you. To answer the question directly, it's a blend of both. I would rather get $300/mo cash flow at 12% COC% than what you're getting, but that's MY preference. I would use the extra money to put into more properties to scale quicker.
Lower DP is always best. Your DP, as long as you have Positive CF, is your entire cost. When you spend more cash upfront, with the idea of getting a higher cash flow, all you're doing is paying for that added CF upfront. It's not a gain. You have to recover all of your cash.cost before it becomes a gain, so the more cash you start out spending, the more cash you have to recover, and the longer it takes before a profit is made.
Well yes. From a strict numbers perspective, lower DP always makes the most sense. But that doesn’t necessarily make the most sense if someone’s goal is to only have a few properties with less headaches.
Typically the counter to that is “having more properties is less risk because of vacancy %, etc etc”, which, again is true. But if I didn’t want to pay the mortgage out of pocket if I had a vacancy, it’s not the best option.
Again, from a numbers perspective, spreading out your investments make the most sense, but from a goals/peace of mind perspective, it’s not always the case.
@Eric Ching to answer your first question: it's a math equation. Based on your numbers, you're buying a $210K property. Yes, people want high monthly cash flow, but it becomes inefficient with low COC%. So in your case, I expect some people to recommend putting a down payment of 20%-25%.
Is it a good deal? That's up to your goals and this flows into your question about cash flow vs COC%. Do you strictly want a few properties that will cash flow you out of a job? Do you want to build a massive portfolio? What does Eric want? And that will give you the best answer for you. To answer the question directly, it's a blend of both. I would rather get $300/mo cash flow at 12% COC% than what you're getting, but that's MY preference. I would use the extra money to put into more properties to scale quicker.
Lower DP is always best. Your DP, as long as you have Positive CF, is your entire cost. When you spend more cash upfront, with the idea of getting a higher cash flow, all you're doing is paying for that added CF upfront. It's not a gain. You have to recover all of your cash.cost before it becomes a gain, so the more cash you start out spending, the more cash you have to recover, and the longer it takes before a profit is made.
Well yes. From a strict numbers perspective, lower DP always makes the most sense. But that doesn’t necessarily make the most sense if someone’s goal is to only have a few properties with less headaches.
Typically the counter to that is “having more properties is less risk because of vacancy %, etc etc”, which, again is true. But if I didn’t want to pay the mortgage out of pocket if I had a vacancy, it’s not the best option.
Again, from a numbers perspective, spreading out your investments make the most sense, but from a goals/peace of mind perspective, it’s not always the case.
Uhhhh???
The numbers ARE the goals...the ones with $ signs in front. How you get there is up to you, but the most efficient way is spending less cash.
The mistake you're making is assuming you go at this one property at a time. You don't. Every decision to buy should be made on what you know you are doing next, ...and every "next" should be an exponential move. When your decisions give you linear returns, it takes longer, and you actually are involved with more properties....just in a row.
The exponential returns should be based on expansion at every step. Expansion doesn't have to mean more properties at the same time. It just means you are handling, and profiting, with more dollars.
@Eric Ching to answer your first question: it's a math equation. Based on your numbers, you're buying a $210K property. Yes, people want high monthly cash flow, but it becomes inefficient with low COC%. So in your case, I expect some people to recommend putting a down payment of 20%-25%.
Is it a good deal? That's up to your goals and this flows into your question about cash flow vs COC%. Do you strictly want a few properties that will cash flow you out of a job? Do you want to build a massive portfolio? What does Eric want? And that will give you the best answer for you. To answer the question directly, it's a blend of both. I would rather get $300/mo cash flow at 12% COC% than what you're getting, but that's MY preference. I would use the extra money to put into more properties to scale quicker.
Lower DP is always best. Your DP, as long as you have Positive CF, is your entire cost. When you spend more cash upfront, with the idea of getting a higher cash flow, all you're doing is paying for that added CF upfront. It's not a gain. You have to recover all of your cash.cost before it becomes a gain, so the more cash you start out spending, the more cash you have to recover, and the longer it takes before a profit is made.
Well yes. From a strict numbers perspective, lower DP always makes the most sense. But that doesn’t necessarily make the most sense if someone’s goal is to only have a few properties with less headaches.
Typically the counter to that is “having more properties is less risk because of vacancy %, etc etc”, which, again is true. But if I didn’t want to pay the mortgage out of pocket if I had a vacancy, it’s not the best option.
Again, from a numbers perspective, spreading out your investments make the most sense, but from a goals/peace of mind perspective, it’s not always the case.
Uhhhh???
The numbers ARE the goals...the ones with $ signs in front. How you get there is up to you, but the most efficient way is spending less cash.
The mistake you're making is assuming you go at this one property at a time. You don't. Every decision to buy should be made on what you know you are doing next, ...and every "next" should be an exponential move. When your decisions give you linear returns, it takes longer, and you actually are involved with more properties....just in a row.
The exponential returns should be based on expansion at every step. Expansion doesn't have to mean more properties at the same time. It just means you are handling, and profiting, with more dollars.
Well, no, they’re not. Because if it was solely about the numbers, there’s other ways to get higher returns for your money in 2021 than real estate. Bitcoin and NFTs, as a popular example, or you can go and buy yourself a bread route and make about 200% on your money. (600% on your money or so, if you get a chip route.)
But, we choose real estate because of the peace of mind, and it falls within most people’s risk tolerance, and you can become financially free through it. And yes, there’s great returns as well. Not everyone wants to be a real estate mogul, and that’s okay. For them the best course of action may be to buy a house at a time.
@Eric Ching to answer your first question: it's a math equation. Based on your numbers, you're buying a $210K property. Yes, people want high monthly cash flow, but it becomes inefficient with low COC%. So in your case, I expect some people to recommend putting a down payment of 20%-25%.
Is it a good deal? That's up to your goals and this flows into your question about cash flow vs COC%. Do you strictly want a few properties that will cash flow you out of a job? Do you want to build a massive portfolio? What does Eric want? And that will give you the best answer for you. To answer the question directly, it's a blend of both. I would rather get $300/mo cash flow at 12% COC% than what you're getting, but that's MY preference. I would use the extra money to put into more properties to scale quicker.
Lower DP is always best. Your DP, as long as you have Positive CF, is your entire cost. When you spend more cash upfront, with the idea of getting a higher cash flow, all you're doing is paying for that added CF upfront. It's not a gain. You have to recover all of your cash.cost before it becomes a gain, so the more cash you start out spending, the more cash you have to recover, and the longer it takes before a profit is made.
Well yes. From a strict numbers perspective, lower DP always makes the most sense. But that doesn’t necessarily make the most sense if someone’s goal is to only have a few properties with less headaches.
Typically the counter to that is “having more properties is less risk because of vacancy %, etc etc”, which, again is true. But if I didn’t want to pay the mortgage out of pocket if I had a vacancy, it’s not the best option.
Again, from a numbers perspective, spreading out your investments make the most sense, but from a goals/peace of mind perspective, it’s not always the case.
Uhhhh???
The numbers ARE the goals...the ones with $ signs in front. How you get there is up to you, but the most efficient way is spending less cash.
The mistake you're making is assuming you go at this one property at a time. You don't. Every decision to buy should be made on what you know you are doing next, ...and every "next" should be an exponential move. When your decisions give you linear returns, it takes longer, and you actually are involved with more properties....just in a row.
The exponential returns should be based on expansion at every step. Expansion doesn't have to mean more properties at the same time. It just means you are handling, and profiting, with more dollars.
Well, no, they’re not. Because if it was solely about the numbers, there’s other ways to get higher returns for your money in 2021 than real estate. Bitcoin and NFTs, as a popular example, or you can go and buy yourself a bread route and make about 200% on your money. (600% on your money or so, if you get a chip route.)
But, we choose real estate because of the peace of mind, and it falls within most people’s risk tolerance, and you can become financially free through it. And yes, there’s great returns as well. Not everyone wants to be a real estate mogul, and that’s okay. For them the best course of action may be to buy a house at a time.
We're talking about REI,...not BitCoin, etc... I can talk about the problems with each of your alternative options, but that's for a different forum. We're talking about REI here.
Nobody mentioned a goal of being a RE Mogul.
Read closely what I said above. Expansion doesn't have to mean more properties at the same time. Expansion means more dollars to work with at a time, and as far as REI goes, that can mean different and or bigger properties.
@Eric Ching high cash flow doesn't mean high COC return. You need to understand the numbers behind the calculator. Higher cash into the deal gives you lower return. That is the power of leverage (financing). The term leverage actually means "to gain advantage". Lets work through an over simplified example. I don't include all expenses, but ignore that for the sake of education.
Property details
$100,000 house
$2000 taxes
$1000 insurance
$1000 rent payment
Option 1 - All cash purchase
Cash invested 100% = $100,000
Yearly expense (tax and insurance) = $3000
Yearly cash flow = $9000
COC return = 9%
Option 2 - 30 year financing at 4%
Cash invested 25% down = $25,000
Monthly payment = $608.06
Yearly cash flow = 4696.80
COC return= 18.78%
Option 3 - 30 year financing at 4% with low down payment
Cash invested 5% down = $5,000
Monthly payment = $703.54
Yearly cash flow = $3557.52
COC return= 71.15%
Look at the numbers and you see that real estate has an advantage mostly when you have leverage. If you are paying all cash, you could get similar return in the stock market with less effort.
Bottom line is using leverage allows you to get at least 4 to 1 benefit from your cash. I say that because typical investment loans require 25% down, which means given the same cash you could do four deals instead of one. Each deal has higher COC return AND you are acquiring appreciating assets where you tenants are paying your down your debt. That means you get equity through debt pay down and appreciation. On top of that you have four times the long term assets and end up paying less taxes per property due to interest deduction.
Feel free to share more details on your deal, but on the surface it seems like a bad investment. I can buy a dividend stock that pays 6%. You will have appreciation and some other benefits, but I would dig a little deeper on this deal. My guess is the property may not even cash flow with 25% down, which tells you this is not a great investment property.
@Eric Ching to answer your first question: it's a math equation. Based on your numbers, you're buying a $210K property. Yes, people want high monthly cash flow, but it becomes inefficient with low COC%. So in your case, I expect some people to recommend putting a down payment of 20%-25%.
Is it a good deal? That's up to your goals and this flows into your question about cash flow vs COC%. Do you strictly want a few properties that will cash flow you out of a job? Do you want to build a massive portfolio? What does Eric want? And that will give you the best answer for you. To answer the question directly, it's a blend of both. I would rather get $300/mo cash flow at 12% COC% than what you're getting, but that's MY preference. I would use the extra money to put into more properties to scale quicker.
Lower DP is always best. Your DP, as long as you have Positive CF, is your entire cost. When you spend more cash upfront, with the idea of getting a higher cash flow, all you're doing is paying for that added CF upfront. It's not a gain. You have to recover all of your cash.cost before it becomes a gain, so the more cash you start out spending, the more cash you have to recover, and the longer it takes before a profit is made.
Well yes. From a strict numbers perspective, lower DP always makes the most sense. But that doesn’t necessarily make the most sense if someone’s goal is to only have a few properties with less headaches.
Typically the counter to that is “having more properties is less risk because of vacancy %, etc etc”, which, again is true. But if I didn’t want to pay the mortgage out of pocket if I had a vacancy, it’s not the best option.
Again, from a numbers perspective, spreading out your investments make the most sense, but from a goals/peace of mind perspective, it’s not always the case.
Uhhhh???
The numbers ARE the goals...the ones with $ signs in front. How you get there is up to you, but the most efficient way is spending less cash.
The mistake you're making is assuming you go at this one property at a time. You don't. Every decision to buy should be made on what you know you are doing next, ...and every "next" should be an exponential move. When your decisions give you linear returns, it takes longer, and you actually are involved with more properties....just in a row.
The exponential returns should be based on expansion at every step. Expansion doesn't have to mean more properties at the same time. It just means you are handling, and profiting, with more dollars.
Well, no, they’re not. Because if it was solely about the numbers, there’s other ways to get higher returns for your money in 2021 than real estate. Bitcoin and NFTs, as a popular example, or you can go and buy yourself a bread route and make about 200% on your money. (600% on your money or so, if you get a chip route.)
But, we choose real estate because of the peace of mind, and it falls within most people’s risk tolerance, and you can become financially free through it. And yes, there’s great returns as well. Not everyone wants to be a real estate mogul, and that’s okay. For them the best course of action may be to buy a house at a time.
We're talking about REI,...not BitCoin, etc... I can talk about the problems with each of your alternative options, but that's for a different forum. We're talking about REI here.
Nobody mentioned a goal of being a RE Mogul.
Read closely what I said above. Expansion doesn't have to mean more properties at the same time. Expansion means more dollars to work with at a time, and as far as REI goes, that can mean different and or bigger properties.
Well, yes. We ARE talking about REI, but the point still stands. If the goal was only about the numbers, there's better options out there than REI. And that translates into my point of there's reasons outside of just the numbers that people get into REI. And peoples goals for those reasons varies from person to person.
People feel more peace with no debt at all, and there’s nothing wrong with that. It may be inefficient, but believe it or not, there’s people in the world who don’t care about efficiency
@Eric Ching to answer your first question: it's a math equation. Based on your numbers, you're buying a $210K property. Yes, people want high monthly cash flow, but it becomes inefficient with low COC%. So in your case, I expect some people to recommend putting a down payment of 20%-25%.
Is it a good deal? That's up to your goals and this flows into your question about cash flow vs COC%. Do you strictly want a few properties that will cash flow you out of a job? Do you want to build a massive portfolio? What does Eric want? And that will give you the best answer for you. To answer the question directly, it's a blend of both. I would rather get $300/mo cash flow at 12% COC% than what you're getting, but that's MY preference. I would use the extra money to put into more properties to scale quicker.
Lower DP is always best. Your DP, as long as you have Positive CF, is your entire cost. When you spend more cash upfront, with the idea of getting a higher cash flow, all you're doing is paying for that added CF upfront. It's not a gain. You have to recover all of your cash.cost before it becomes a gain, so the more cash you start out spending, the more cash you have to recover, and the longer it takes before a profit is made.
Well yes. From a strict numbers perspective, lower DP always makes the most sense. But that doesn’t necessarily make the most sense if someone’s goal is to only have a few properties with less headaches.
Typically the counter to that is “having more properties is less risk because of vacancy %, etc etc”, which, again is true. But if I didn’t want to pay the mortgage out of pocket if I had a vacancy, it’s not the best option.
Again, from a numbers perspective, spreading out your investments make the most sense, but from a goals/peace of mind perspective, it’s not always the case.
Uhhhh???
The numbers ARE the goals...the ones with $ signs in front. How you get there is up to you, but the most efficient way is spending less cash.
The mistake you're making is assuming you go at this one property at a time. You don't. Every decision to buy should be made on what you know you are doing next, ...and every "next" should be an exponential move. When your decisions give you linear returns, it takes longer, and you actually are involved with more properties....just in a row.
The exponential returns should be based on expansion at every step. Expansion doesn't have to mean more properties at the same time. It just means you are handling, and profiting, with more dollars.
Well, no, they’re not. Because if it was solely about the numbers, there’s other ways to get higher returns for your money in 2021 than real estate. Bitcoin and NFTs, as a popular example, or you can go and buy yourself a bread route and make about 200% on your money. (600% on your money or so, if you get a chip route.)
But, we choose real estate because of the peace of mind, and it falls within most people’s risk tolerance, and you can become financially free through it. And yes, there’s great returns as well. Not everyone wants to be a real estate mogul, and that’s okay. For them the best course of action may be to buy a house at a time.
We're talking about REI,...not BitCoin, etc... I can talk about the problems with each of your alternative options, but that's for a different forum. We're talking about REI here.
Nobody mentioned a goal of being a RE Mogul.
Read closely what I said above. Expansion doesn't have to mean more properties at the same time. Expansion means more dollars to work with at a time, and as far as REI goes, that can mean different and or bigger properties.
Well, yes. We ARE talking about REI, but the point still stands. If the goal was only about the numbers, there's better options out there than REI. And that translates into my point of there's reasons outside of just the numbers that people get into REI. And peoples goals for those reasons varies from person to person.
People feel more peace with no debt at all, and there’s nothing wrong with that. It may be inefficient, but believe it or not, there’s people in the world who don’t care about efficiency
We are talking about REI in this forum...and in this discussion. Your points are valid, outside this conversation. We're not talking about the global world, we're talking about the choice between the ones mentioned using REI. Yes, the outside world influences the decisions inside REI, but this discussion had already made the choice of using REI.
The rest of your comments sound great, sound, and reasonable influences on how and why to get here. However, we are past that, and are making a decision based on the fact we are already here.
People who don't care about the efficient use of their cash, will always be spending more than they should, and complaining about how much things cost...more than others. They will also complain about how long it takes to get to there financial goals, and can't figure out why it takes them longer than others.
There are only two reasons why you get into REI:
1 - To accomplish two financial goals
A - Make enough lump sum profit to pay off all your PERSONAL debt.
B - To have enough cash flow to cover all your monthly bills.
2 - To have fun.
As far as debt is concerned, once you learn the difference between debt and leverage, not all "people out there feel more peace without debt". They do feel more peace with leverage. They understand the difference between cost and expense, the importance of using their cash and not spending their cash, and what the 3 parts of risk are, and how to control it with leverage.
@Eric Ching to answer your first question: it's a math equation. Based on your numbers, you're buying a $210K property. Yes, people want high monthly cash flow, but it becomes inefficient with low COC%. So in your case, I expect some people to recommend putting a down payment of 20%-25%.
Is it a good deal? That's up to your goals and this flows into your question about cash flow vs COC%. Do you strictly want a few properties that will cash flow you out of a job? Do you want to build a massive portfolio? What does Eric want? And that will give you the best answer for you. To answer the question directly, it's a blend of both. I would rather get $300/mo cash flow at 12% COC% than what you're getting, but that's MY preference. I would use the extra money to put into more properties to scale quicker.
Lower DP is always best. Your DP, as long as you have Positive CF, is your entire cost. When you spend more cash upfront, with the idea of getting a higher cash flow, all you're doing is paying for that added CF upfront. It's not a gain. You have to recover all of your cash.cost before it becomes a gain, so the more cash you start out spending, the more cash you have to recover, and the longer it takes before a profit is made.
Well yes. From a strict numbers perspective, lower DP always makes the most sense. But that doesn’t necessarily make the most sense if someone’s goal is to only have a few properties with less headaches.
Typically the counter to that is “having more properties is less risk because of vacancy %, etc etc”, which, again is true. But if I didn’t want to pay the mortgage out of pocket if I had a vacancy, it’s not the best option.
Again, from a numbers perspective, spreading out your investments make the most sense, but from a goals/peace of mind perspective, it’s not always the case.
Uhhhh???
The numbers ARE the goals...the ones with $ signs in front. How you get there is up to you, but the most efficient way is spending less cash.
The mistake you're making is assuming you go at this one property at a time. You don't. Every decision to buy should be made on what you know you are doing next, ...and every "next" should be an exponential move. When your decisions give you linear returns, it takes longer, and you actually are involved with more properties....just in a row.
The exponential returns should be based on expansion at every step. Expansion doesn't have to mean more properties at the same time. It just means you are handling, and profiting, with more dollars.
Well, no, they’re not. Because if it was solely about the numbers, there’s other ways to get higher returns for your money in 2021 than real estate. Bitcoin and NFTs, as a popular example, or you can go and buy yourself a bread route and make about 200% on your money. (600% on your money or so, if you get a chip route.)
But, we choose real estate because of the peace of mind, and it falls within most people’s risk tolerance, and you can become financially free through it. And yes, there’s great returns as well. Not everyone wants to be a real estate mogul, and that’s okay. For them the best course of action may be to buy a house at a time.
We're talking about REI,...not BitCoin, etc... I can talk about the problems with each of your alternative options, but that's for a different forum. We're talking about REI here.
Nobody mentioned a goal of being a RE Mogul.
Read closely what I said above. Expansion doesn't have to mean more properties at the same time. Expansion means more dollars to work with at a time, and as far as REI goes, that can mean different and or bigger properties.
Well, yes. We ARE talking about REI, but the point still stands. If the goal was only about the numbers, there's better options out there than REI. And that translates into my point of there's reasons outside of just the numbers that people get into REI. And peoples goals for those reasons varies from person to person.
People feel more peace with no debt at all, and there’s nothing wrong with that. It may be inefficient, but believe it or not, there’s people in the world who don’t care about efficiency
We are talking about REI in this forum...and in this discussion. Your points are valid, outside this conversation. We're not talking about the global world, we're talking about the choice between the ones mentioned using REI. Yes, the outside world influences the decisions inside REI, but this discussion had already made the choice of using REI.
The rest of your comments sound great, sound, and reasonable influences on how and why to get here. However, we are past that, and are making a decision based on the fact we are already here.
People who don't care about the efficient use of their cash, will always be spending more than they should, and complaining about how much things cost...more than others. They will also complain about how long it takes to get to there financial goals, and can't figure out why it takes them longer than others.
There are only two reasons why you get into REI:
1 - To accomplish two financial goals
A - Make enough lump sum profit to pay off all your PERSONAL debt.
B - To have enough cash flow to cover all your monthly bills.
2 - To have fun.
As far as debt is concerned, once you learn the difference between debt and leverage, not all "people out there feel more peace without debt". They do feel more peace with leverage. They understand the difference between cost and expense, the importance of using their cash and not spending their cash, and what the 3 parts of risk are, and how to control it with leverage.
Yes, we are talking about REI on this forum and conversation, but my point still stands. If the point of investing was 100% about the numbers, you shouldn't be here.
Well, no.. we’re not. The purpose of the last question was, “which is better?” So no decision has been made yet.
again, you keep trying to talk about efficiency, but that’s not the discussion. I’m saying there are other things that go into it other than efficiency. Which you seem to keep side stepping.
it sounds to me that you don’t talk to others outside of those who think just like you. because there’s significantly more reasons than the two you listed to get into real estate. It may be why YOU got into real estate, but that doesn’t mean everyone else has.
you are aware that leverage is STILL debt, right? Even if you want to get cute with it, it’s considered good DEBT. Again, not everyone sees the world that narrowmindedly
@Eric Ching to answer your first question: it's a math equation. Based on your numbers, you're buying a $210K property. Yes, people want high monthly cash flow, but it becomes inefficient with low COC%. So in your case, I expect some people to recommend putting a down payment of 20%-25%.
Is it a good deal? That's up to your goals and this flows into your question about cash flow vs COC%. Do you strictly want a few properties that will cash flow you out of a job? Do you want to build a massive portfolio? What does Eric want? And that will give you the best answer for you. To answer the question directly, it's a blend of both. I would rather get $300/mo cash flow at 12% COC% than what you're getting, but that's MY preference. I would use the extra money to put into more properties to scale quicker.
Lower DP is always best. Your DP, as long as you have Positive CF, is your entire cost. When you spend more cash upfront, with the idea of getting a higher cash flow, all you're doing is paying for that added CF upfront. It's not a gain. You have to recover all of your cash.cost before it becomes a gain, so the more cash you start out spending, the more cash you have to recover, and the longer it takes before a profit is made.
Well yes. From a strict numbers perspective, lower DP always makes the most sense. But that doesn’t necessarily make the most sense if someone’s goal is to only have a few properties with less headaches.
Typically the counter to that is “having more properties is less risk because of vacancy %, etc etc”, which, again is true. But if I didn’t want to pay the mortgage out of pocket if I had a vacancy, it’s not the best option.
Again, from a numbers perspective, spreading out your investments make the most sense, but from a goals/peace of mind perspective, it’s not always the case.
Uhhhh???
The numbers ARE the goals...the ones with $ signs in front. How you get there is up to you, but the most efficient way is spending less cash.
The mistake you're making is assuming you go at this one property at a time. You don't. Every decision to buy should be made on what you know you are doing next, ...and every "next" should be an exponential move. When your decisions give you linear returns, it takes longer, and you actually are involved with more properties....just in a row.
The exponential returns should be based on expansion at every step. Expansion doesn't have to mean more properties at the same time. It just means you are handling, and profiting, with more dollars.
Well, no, they’re not. Because if it was solely about the numbers, there’s other ways to get higher returns for your money in 2021 than real estate. Bitcoin and NFTs, as a popular example, or you can go and buy yourself a bread route and make about 200% on your money. (600% on your money or so, if you get a chip route.)
But, we choose real estate because of the peace of mind, and it falls within most people’s risk tolerance, and you can become financially free through it. And yes, there’s great returns as well. Not everyone wants to be a real estate mogul, and that’s okay. For them the best course of action may be to buy a house at a time.
We're talking about REI,...not BitCoin, etc... I can talk about the problems with each of your alternative options, but that's for a different forum. We're talking about REI here.
Nobody mentioned a goal of being a RE Mogul.
Read closely what I said above. Expansion doesn't have to mean more properties at the same time. Expansion means more dollars to work with at a time, and as far as REI goes, that can mean different and or bigger properties.
Well, yes. We ARE talking about REI, but the point still stands. If the goal was only about the numbers, there's better options out there than REI. And that translates into my point of there's reasons outside of just the numbers that people get into REI. And peoples goals for those reasons varies from person to person.
People feel more peace with no debt at all, and there’s nothing wrong with that. It may be inefficient, but believe it or not, there’s people in the world who don’t care about efficiency
We are talking about REI in this forum...and in this discussion. Your points are valid, outside this conversation. We're not talking about the global world, we're talking about the choice between the ones mentioned using REI. Yes, the outside world influences the decisions inside REI, but this discussion had already made the choice of using REI.
The rest of your comments sound great, sound, and reasonable influences on how and why to get here. However, we are past that, and are making a decision based on the fact we are already here.
People who don't care about the efficient use of their cash, will always be spending more than they should, and complaining about how much things cost...more than others. They will also complain about how long it takes to get to there financial goals, and can't figure out why it takes them longer than others.
There are only two reasons why you get into REI:
1 - To accomplish two financial goals
A - Make enough lump sum profit to pay off all your PERSONAL debt.
B - To have enough cash flow to cover all your monthly bills.
2 - To have fun.
As far as debt is concerned, once you learn the difference between debt and leverage, not all "people out there feel more peace without debt". They do feel more peace with leverage. They understand the difference between cost and expense, the importance of using their cash and not spending their cash, and what the 3 parts of risk are, and how to control it with leverage.
Yes, we are talking about REI on this forum and conversation, but my point still stands. If the point of investing was 100% about the numbers, you shouldn't be here.
Well, no.. we’re not. The purpose of the last question was, “which is better?” So no decision has been made yet.
again, you keep trying to talk about efficiency, but that’s not the discussion. I’m saying there are other things that go into it other than efficiency. Which you seem to keep side stepping.
it sounds to me that you don’t talk to others outside of those who think just like you. because there’s significantly more reasons than the two you listed to get into real estate. It may be why YOU got into real estate, but that doesn’t mean everyone else has.
you are aware that leverage is STILL debt, right? Even if you want to get cute with it, it’s considered good DEBT. Again, not everyone sees the world that narrowmindedly
Simple question for you. How long have you been investing in Real Estate?
@Eric Ching to answer your first question: it's a math equation. Based on your numbers, you're buying a $210K property. Yes, people want high monthly cash flow, but it becomes inefficient with low COC%. So in your case, I expect some people to recommend putting a down payment of 20%-25%.
Is it a good deal? That's up to your goals and this flows into your question about cash flow vs COC%. Do you strictly want a few properties that will cash flow you out of a job? Do you want to build a massive portfolio? What does Eric want? And that will give you the best answer for you. To answer the question directly, it's a blend of both. I would rather get $300/mo cash flow at 12% COC% than what you're getting, but that's MY preference. I would use the extra money to put into more properties to scale quicker.
Lower DP is always best. Your DP, as long as you have Positive CF, is your entire cost. When you spend more cash upfront, with the idea of getting a higher cash flow, all you're doing is paying for that added CF upfront. It's not a gain. You have to recover all of your cash.cost before it becomes a gain, so the more cash you start out spending, the more cash you have to recover, and the longer it takes before a profit is made.
Well yes. From a strict numbers perspective, lower DP always makes the most sense. But that doesn’t necessarily make the most sense if someone’s goal is to only have a few properties with less headaches.
Typically the counter to that is “having more properties is less risk because of vacancy %, etc etc”, which, again is true. But if I didn’t want to pay the mortgage out of pocket if I had a vacancy, it’s not the best option.
Again, from a numbers perspective, spreading out your investments make the most sense, but from a goals/peace of mind perspective, it’s not always the case.
Uhhhh???
The numbers ARE the goals...the ones with $ signs in front. How you get there is up to you, but the most efficient way is spending less cash.
The mistake you're making is assuming you go at this one property at a time. You don't. Every decision to buy should be made on what you know you are doing next, ...and every "next" should be an exponential move. When your decisions give you linear returns, it takes longer, and you actually are involved with more properties....just in a row.
The exponential returns should be based on expansion at every step. Expansion doesn't have to mean more properties at the same time. It just means you are handling, and profiting, with more dollars.
Well, no, they’re not. Because if it was solely about the numbers, there’s other ways to get higher returns for your money in 2021 than real estate. Bitcoin and NFTs, as a popular example, or you can go and buy yourself a bread route and make about 200% on your money. (600% on your money or so, if you get a chip route.)
But, we choose real estate because of the peace of mind, and it falls within most people’s risk tolerance, and you can become financially free through it. And yes, there’s great returns as well. Not everyone wants to be a real estate mogul, and that’s okay. For them the best course of action may be to buy a house at a time.
We're talking about REI,...not BitCoin, etc... I can talk about the problems with each of your alternative options, but that's for a different forum. We're talking about REI here.
Nobody mentioned a goal of being a RE Mogul.
Read closely what I said above. Expansion doesn't have to mean more properties at the same time. Expansion means more dollars to work with at a time, and as far as REI goes, that can mean different and or bigger properties.
Well, yes. We ARE talking about REI, but the point still stands. If the goal was only about the numbers, there's better options out there than REI. And that translates into my point of there's reasons outside of just the numbers that people get into REI. And peoples goals for those reasons varies from person to person.
People feel more peace with no debt at all, and there’s nothing wrong with that. It may be inefficient, but believe it or not, there’s people in the world who don’t care about efficiency
We are talking about REI in this forum...and in this discussion. Your points are valid, outside this conversation. We're not talking about the global world, we're talking about the choice between the ones mentioned using REI. Yes, the outside world influences the decisions inside REI, but this discussion had already made the choice of using REI.
The rest of your comments sound great, sound, and reasonable influences on how and why to get here. However, we are past that, and are making a decision based on the fact we are already here.
People who don't care about the efficient use of their cash, will always be spending more than they should, and complaining about how much things cost...more than others. They will also complain about how long it takes to get to there financial goals, and can't figure out why it takes them longer than others.
There are only two reasons why you get into REI:
1 - To accomplish two financial goals
A - Make enough lump sum profit to pay off all your PERSONAL debt.
B - To have enough cash flow to cover all your monthly bills.
2 - To have fun.
As far as debt is concerned, once you learn the difference between debt and leverage, not all "people out there feel more peace without debt". They do feel more peace with leverage. They understand the difference between cost and expense, the importance of using their cash and not spending their cash, and what the 3 parts of risk are, and how to control it with leverage.
Yes, we are talking about REI on this forum and conversation, but my point still stands. If the point of investing was 100% about the numbers, you shouldn't be here.
Well, no.. we’re not. The purpose of the last question was, “which is better?” So no decision has been made yet.
again, you keep trying to talk about efficiency, but that’s not the discussion. I’m saying there are other things that go into it other than efficiency. Which you seem to keep side stepping.
it sounds to me that you don’t talk to others outside of those who think just like you. because there’s significantly more reasons than the two you listed to get into real estate. It may be why YOU got into real estate, but that doesn’t mean everyone else has.
you are aware that leverage is STILL debt, right? Even if you want to get cute with it, it’s considered good DEBT. Again, not everyone sees the world that narrowmindedly
Simple question for you. How long have you been investing in Real Estate?
C'mon Joe V. You have a system and a philosophy that works for you and the good folks who follow your concepts. But let's not pull the argument from authority card. It doesn't take a seasoned veteran in REI to see that you two simply have philosophies that might not fully comport with each other.
There are plenty of REI investors who simply want a place to park their capital and keep up with inflation and there are plenty of REI investors who want to utilize the maximum amount of leverage to grow their capital as quickly as possible. And then there are folks like me who fall somewhere in between that spectrum.
@Eric Ching to answer your first question: it's a math equation. Based on your numbers, you're buying a $210K property. Yes, people want high monthly cash flow, but it becomes inefficient with low COC%. So in your case, I expect some people to recommend putting a down payment of 20%-25%.
Is it a good deal? That's up to your goals and this flows into your question about cash flow vs COC%. Do you strictly want a few properties that will cash flow you out of a job? Do you want to build a massive portfolio? What does Eric want? And that will give you the best answer for you. To answer the question directly, it's a blend of both. I would rather get $300/mo cash flow at 12% COC% than what you're getting, but that's MY preference. I would use the extra money to put into more properties to scale quicker.
Lower DP is always best. Your DP, as long as you have Positive CF, is your entire cost. When you spend more cash upfront, with the idea of getting a higher cash flow, all you're doing is paying for that added CF upfront. It's not a gain. You have to recover all of your cash.cost before it becomes a gain, so the more cash you start out spending, the more cash you have to recover, and the longer it takes before a profit is made.
Well yes. From a strict numbers perspective, lower DP always makes the most sense. But that doesn’t necessarily make the most sense if someone’s goal is to only have a few properties with less headaches.
Typically the counter to that is “having more properties is less risk because of vacancy %, etc etc”, which, again is true. But if I didn’t want to pay the mortgage out of pocket if I had a vacancy, it’s not the best option.
Again, from a numbers perspective, spreading out your investments make the most sense, but from a goals/peace of mind perspective, it’s not always the case.
Uhhhh???
The numbers ARE the goals...the ones with $ signs in front. How you get there is up to you, but the most efficient way is spending less cash.
The mistake you're making is assuming you go at this one property at a time. You don't. Every decision to buy should be made on what you know you are doing next, ...and every "next" should be an exponential move. When your decisions give you linear returns, it takes longer, and you actually are involved with more properties....just in a row.
The exponential returns should be based on expansion at every step. Expansion doesn't have to mean more properties at the same time. It just means you are handling, and profiting, with more dollars.
Well, no, they’re not. Because if it was solely about the numbers, there’s other ways to get higher returns for your money in 2021 than real estate. Bitcoin and NFTs, as a popular example, or you can go and buy yourself a bread route and make about 200% on your money. (600% on your money or so, if you get a chip route.)
But, we choose real estate because of the peace of mind, and it falls within most people’s risk tolerance, and you can become financially free through it. And yes, there’s great returns as well. Not everyone wants to be a real estate mogul, and that’s okay. For them the best course of action may be to buy a house at a time.
We're talking about REI,...not BitCoin, etc... I can talk about the problems with each of your alternative options, but that's for a different forum. We're talking about REI here.
Nobody mentioned a goal of being a RE Mogul.
Read closely what I said above. Expansion doesn't have to mean more properties at the same time. Expansion means more dollars to work with at a time, and as far as REI goes, that can mean different and or bigger properties.
Well, yes. We ARE talking about REI, but the point still stands. If the goal was only about the numbers, there's better options out there than REI. And that translates into my point of there's reasons outside of just the numbers that people get into REI. And peoples goals for those reasons varies from person to person.
People feel more peace with no debt at all, and there’s nothing wrong with that. It may be inefficient, but believe it or not, there’s people in the world who don’t care about efficiency
We are talking about REI in this forum...and in this discussion. Your points are valid, outside this conversation. We're not talking about the global world, we're talking about the choice between the ones mentioned using REI. Yes, the outside world influences the decisions inside REI, but this discussion had already made the choice of using REI.
The rest of your comments sound great, sound, and reasonable influences on how and why to get here. However, we are past that, and are making a decision based on the fact we are already here.
People who don't care about the efficient use of their cash, will always be spending more than they should, and complaining about how much things cost...more than others. They will also complain about how long it takes to get to there financial goals, and can't figure out why it takes them longer than others.
There are only two reasons why you get into REI:
1 - To accomplish two financial goals
A - Make enough lump sum profit to pay off all your PERSONAL debt.
B - To have enough cash flow to cover all your monthly bills.
2 - To have fun.
As far as debt is concerned, once you learn the difference between debt and leverage, not all "people out there feel more peace without debt". They do feel more peace with leverage. They understand the difference between cost and expense, the importance of using their cash and not spending their cash, and what the 3 parts of risk are, and how to control it with leverage.
Yes, we are talking about REI on this forum and conversation, but my point still stands. If the point of investing was 100% about the numbers, you shouldn't be here.
Well, no.. we’re not. The purpose of the last question was, “which is better?” So no decision has been made yet.
again, you keep trying to talk about efficiency, but that’s not the discussion. I’m saying there are other things that go into it other than efficiency. Which you seem to keep side stepping.
it sounds to me that you don’t talk to others outside of those who think just like you. because there’s significantly more reasons than the two you listed to get into real estate. It may be why YOU got into real estate, but that doesn’t mean everyone else has.
you are aware that leverage is STILL debt, right? Even if you want to get cute with it, it’s considered good DEBT. Again, not everyone sees the world that narrowmindedly
Simple question for you. How long have you been investing in Real Estate?
Simple question for you, do you believe you know more than Dave Ramsey? I don’t fully subscribe to everything he says, but he’s not wrong when it comes to the mentality behind what I’m saying. I can play the authority game too my guy!
@Eric Ching to answer your first question: it's a math equation. Based on your numbers, you're buying a $210K property. Yes, people want high monthly cash flow, but it becomes inefficient with low COC%. So in your case, I expect some people to recommend putting a down payment of 20%-25%.
Is it a good deal? That's up to your goals and this flows into your question about cash flow vs COC%. Do you strictly want a few properties that will cash flow you out of a job? Do you want to build a massive portfolio? What does Eric want? And that will give you the best answer for you. To answer the question directly, it's a blend of both. I would rather get $300/mo cash flow at 12% COC% than what you're getting, but that's MY preference. I would use the extra money to put into more properties to scale quicker.
Lower DP is always best. Your DP, as long as you have Positive CF, is your entire cost. When you spend more cash upfront, with the idea of getting a higher cash flow, all you're doing is paying for that added CF upfront. It's not a gain. You have to recover all of your cash.cost before it becomes a gain, so the more cash you start out spending, the more cash you have to recover, and the longer it takes before a profit is made.
Well yes. From a strict numbers perspective, lower DP always makes the most sense. But that doesn’t necessarily make the most sense if someone’s goal is to only have a few properties with less headaches.
Typically the counter to that is “having more properties is less risk because of vacancy %, etc etc”, which, again is true. But if I didn’t want to pay the mortgage out of pocket if I had a vacancy, it’s not the best option.
Again, from a numbers perspective, spreading out your investments make the most sense, but from a goals/peace of mind perspective, it’s not always the case.
Uhhhh???
The numbers ARE the goals...the ones with $ signs in front. How you get there is up to you, but the most efficient way is spending less cash.
The mistake you're making is assuming you go at this one property at a time. You don't. Every decision to buy should be made on what you know you are doing next, ...and every "next" should be an exponential move. When your decisions give you linear returns, it takes longer, and you actually are involved with more properties....just in a row.
The exponential returns should be based on expansion at every step. Expansion doesn't have to mean more properties at the same time. It just means you are handling, and profiting, with more dollars.
Well, no, they’re not. Because if it was solely about the numbers, there’s other ways to get higher returns for your money in 2021 than real estate. Bitcoin and NFTs, as a popular example, or you can go and buy yourself a bread route and make about 200% on your money. (600% on your money or so, if you get a chip route.)
But, we choose real estate because of the peace of mind, and it falls within most people’s risk tolerance, and you can become financially free through it. And yes, there’s great returns as well. Not everyone wants to be a real estate mogul, and that’s okay. For them the best course of action may be to buy a house at a time.
We're talking about REI,...not BitCoin, etc... I can talk about the problems with each of your alternative options, but that's for a different forum. We're talking about REI here.
Nobody mentioned a goal of being a RE Mogul.
Read closely what I said above. Expansion doesn't have to mean more properties at the same time. Expansion means more dollars to work with at a time, and as far as REI goes, that can mean different and or bigger properties.
Well, yes. We ARE talking about REI, but the point still stands. If the goal was only about the numbers, there's better options out there than REI. And that translates into my point of there's reasons outside of just the numbers that people get into REI. And peoples goals for those reasons varies from person to person.
People feel more peace with no debt at all, and there’s nothing wrong with that. It may be inefficient, but believe it or not, there’s people in the world who don’t care about efficiency
We are talking about REI in this forum...and in this discussion. Your points are valid, outside this conversation. We're not talking about the global world, we're talking about the choice between the ones mentioned using REI. Yes, the outside world influences the decisions inside REI, but this discussion had already made the choice of using REI.
The rest of your comments sound great, sound, and reasonable influences on how and why to get here. However, we are past that, and are making a decision based on the fact we are already here.
People who don't care about the efficient use of their cash, will always be spending more than they should, and complaining about how much things cost...more than others. They will also complain about how long it takes to get to there financial goals, and can't figure out why it takes them longer than others.
There are only two reasons why you get into REI:
1 - To accomplish two financial goals
A - Make enough lump sum profit to pay off all your PERSONAL debt.
B - To have enough cash flow to cover all your monthly bills.
2 - To have fun.
As far as debt is concerned, once you learn the difference between debt and leverage, not all "people out there feel more peace without debt". They do feel more peace with leverage. They understand the difference between cost and expense, the importance of using their cash and not spending their cash, and what the 3 parts of risk are, and how to control it with leverage.
Yes, we are talking about REI on this forum and conversation, but my point still stands. If the point of investing was 100% about the numbers, you shouldn't be here.
Well, no.. we’re not. The purpose of the last question was, “which is better?” So no decision has been made yet.
again, you keep trying to talk about efficiency, but that’s not the discussion. I’m saying there are other things that go into it other than efficiency. Which you seem to keep side stepping.
it sounds to me that you don’t talk to others outside of those who think just like you. because there’s significantly more reasons than the two you listed to get into real estate. It may be why YOU got into real estate, but that doesn’t mean everyone else has.
you are aware that leverage is STILL debt, right? Even if you want to get cute with it, it’s considered good DEBT. Again, not everyone sees the world that narrowmindedly
Simple question for you. How long have you been investing in Real Estate?
Simple question for you, do you believe you know more than Dave Ramsey? I don’t fully subscribe to everything he says, but he’s not wrong when it comes to the mentality behind what I’m saying. I can play the authority game too my guy!
That was a simple question...that got answered...which explains a lot. Thanks.
@Eric Ching to answer your first question: it's a math equation. Based on your numbers, you're buying a $210K property. Yes, people want high monthly cash flow, but it becomes inefficient with low COC%. So in your case, I expect some people to recommend putting a down payment of 20%-25%.
Is it a good deal? That's up to your goals and this flows into your question about cash flow vs COC%. Do you strictly want a few properties that will cash flow you out of a job? Do you want to build a massive portfolio? What does Eric want? And that will give you the best answer for you. To answer the question directly, it's a blend of both. I would rather get $300/mo cash flow at 12% COC% than what you're getting, but that's MY preference. I would use the extra money to put into more properties to scale quicker.
Lower DP is always best. Your DP, as long as you have Positive CF, is your entire cost. When you spend more cash upfront, with the idea of getting a higher cash flow, all you're doing is paying for that added CF upfront. It's not a gain. You have to recover all of your cash.cost before it becomes a gain, so the more cash you start out spending, the more cash you have to recover, and the longer it takes before a profit is made.
Well yes. From a strict numbers perspective, lower DP always makes the most sense. But that doesn’t necessarily make the most sense if someone’s goal is to only have a few properties with less headaches.
Typically the counter to that is “having more properties is less risk because of vacancy %, etc etc”, which, again is true. But if I didn’t want to pay the mortgage out of pocket if I had a vacancy, it’s not the best option.
Again, from a numbers perspective, spreading out your investments make the most sense, but from a goals/peace of mind perspective, it’s not always the case.
Uhhhh???
The numbers ARE the goals...the ones with $ signs in front. How you get there is up to you, but the most efficient way is spending less cash.
The mistake you're making is assuming you go at this one property at a time. You don't. Every decision to buy should be made on what you know you are doing next, ...and every "next" should be an exponential move. When your decisions give you linear returns, it takes longer, and you actually are involved with more properties....just in a row.
The exponential returns should be based on expansion at every step. Expansion doesn't have to mean more properties at the same time. It just means you are handling, and profiting, with more dollars.
Well, no, they’re not. Because if it was solely about the numbers, there’s other ways to get higher returns for your money in 2021 than real estate. Bitcoin and NFTs, as a popular example, or you can go and buy yourself a bread route and make about 200% on your money. (600% on your money or so, if you get a chip route.)
But, we choose real estate because of the peace of mind, and it falls within most people’s risk tolerance, and you can become financially free through it. And yes, there’s great returns as well. Not everyone wants to be a real estate mogul, and that’s okay. For them the best course of action may be to buy a house at a time.
We're talking about REI,...not BitCoin, etc... I can talk about the problems with each of your alternative options, but that's for a different forum. We're talking about REI here.
Nobody mentioned a goal of being a RE Mogul.
Read closely what I said above. Expansion doesn't have to mean more properties at the same time. Expansion means more dollars to work with at a time, and as far as REI goes, that can mean different and or bigger properties.
Well, yes. We ARE talking about REI, but the point still stands. If the goal was only about the numbers, there's better options out there than REI. And that translates into my point of there's reasons outside of just the numbers that people get into REI. And peoples goals for those reasons varies from person to person.
People feel more peace with no debt at all, and there’s nothing wrong with that. It may be inefficient, but believe it or not, there’s people in the world who don’t care about efficiency
We are talking about REI in this forum...and in this discussion. Your points are valid, outside this conversation. We're not talking about the global world, we're talking about the choice between the ones mentioned using REI. Yes, the outside world influences the decisions inside REI, but this discussion had already made the choice of using REI.
The rest of your comments sound great, sound, and reasonable influences on how and why to get here. However, we are past that, and are making a decision based on the fact we are already here.
People who don't care about the efficient use of their cash, will always be spending more than they should, and complaining about how much things cost...more than others. They will also complain about how long it takes to get to there financial goals, and can't figure out why it takes them longer than others.
There are only two reasons why you get into REI:
1 - To accomplish two financial goals
A - Make enough lump sum profit to pay off all your PERSONAL debt.
B - To have enough cash flow to cover all your monthly bills.
2 - To have fun.
As far as debt is concerned, once you learn the difference between debt and leverage, not all "people out there feel more peace without debt". They do feel more peace with leverage. They understand the difference between cost and expense, the importance of using their cash and not spending their cash, and what the 3 parts of risk are, and how to control it with leverage.
Yes, we are talking about REI on this forum and conversation, but my point still stands. If the point of investing was 100% about the numbers, you shouldn't be here.
Well, no.. we’re not. The purpose of the last question was, “which is better?” So no decision has been made yet.
again, you keep trying to talk about efficiency, but that’s not the discussion. I’m saying there are other things that go into it other than efficiency. Which you seem to keep side stepping.
it sounds to me that you don’t talk to others outside of those who think just like you. because there’s significantly more reasons than the two you listed to get into real estate. It may be why YOU got into real estate, but that doesn’t mean everyone else has.
you are aware that leverage is STILL debt, right? Even if you want to get cute with it, it’s considered good DEBT. Again, not everyone sees the world that narrowmindedly
Simple question for you. How long have you been investing in Real Estate?
Simple question for you, do you believe you know more than Dave Ramsey? I don’t fully subscribe to everything he says, but he’s not wrong when it comes to the mentality behind what I’m saying. I can play the authority game too my guy!
That was a simple question...that got answered...which explains a lot. Thanks.
Was it? I wasn’t aware you had more experience and results than Ramsay. Good for you. But if we’re both being honest, we both know ya don’t.