All Forum Posts by: Arlen Chou

@Andrew Neal I would agree with @Curt Riffel about the various cities he mentioned. I personally don't think Allen has as much character as Frisco and it does not have as much of the country feel as Wylie. But you would save a ton in commute time. Colony is nice too, but it is a little farther away from Allen.  I would personally look west, just because I would want to be closer to DFW. DFW to Wylie feels far especially in traffic. With Colony and Frisco you head straight up Sam Rayburn Tollway and you don't have to deal with the crazy traffic on 635 to Richardson or even the George Bush Turnpike to Plano. Although the George Bush does not feel as bad to me as the 635.

@Courtney T. if they own their house and their rates are low, they should protect that loan. Don't let them refi into a higher rate just to get a little cash out.  As @Michael Strachan has suggested, a HELOC would be a great tool. If they have the lot size available, I would personally do a HELOC to pull cash out and do an ADU conversion of the garage or maybe even build an ADU on the lot. Depending on the City, permitting is straight forward. The best part is that they COULD protect their property tax base, or at least a part of it, to keep payments low.

@Laura Williams I think you answered your own question with your last 2 posts. There are many people here who will argue that appreciation is the icing on the cake, etc, etc, etc. However, in your situation holding these cash flow bleeding assets might be the right choice. First it is clear that the immediate financial impact to you of loosing money is not significant. Just because it would be for others does not make it a bad thing in your situation. 

Secondly your properties are in GREAT locations. Both Venice and Austin are in great appreciating areas. Apple just announced a new campus in North Austin 5k to 15k more jobs! That is a way from your holdings, but it will still have a positive affect on Austin as a whole.

Third you have clearly stated that this is not your main gig. What others would do to put food on the table has nothing to do with your decision. You have already said you want to go back to Venice some day. If that is the case, holding your current property will protect against future high property taxes via Prop 13. When you decide to go back to CA you might want to off load the Texas properties so you don't get hit hard on property taxes AND income taxes, but until then you could ride the appreciation wave that is hitting Austin.

In the end, you are doing this as a side gig and you have a ton of income flowing in from your W2. Just do you, and don't worry about maximizing every penny.

@Andrew Neal Wylie is a great area with big homes and lots of space. You also have Lavon Lake nearby. Frisco has been on FIRE for over a decade and the food scene is, in my opinion, much better. You cannot go wrong with either, they are just different life style choices. They are physically about the same distance from Allen.  I actually prefer the commute in from both of those cities into Allen vs fighting the traffic on the 75 in either direction... at least for now;-) Good luck to you in Texas!

@Andrew Neal even though I am based in CA, I have had an office in Texas for 15 years. I started in Richardson, moved to Plano and now I have my office in Allen. Are you tech? Where you live really will depend on the type of life style you want. If  you like more of a city life style, I would personally stay along the 75 corridor in the above cities and maybe up to McKinney. Going West into Frisco would be a great choice. Going East toward Wylie, would not be bad if you want a more laid back feel.

@Laura Williams there is too much assumption going on to create any type of a strategy. First, you probably should let everybody know WHERE each property is located. A property in Modesto Ca is very different than a property in Palo Alto Ca. Conversely a property in Austin Tx is very different than a property in Lubbock Tx. Second you have not stated if these are all SFR's or condo's or town homes. Thirdly you should let everybody know WHERE you are located so tax considerations can be folded into any suggestion. As an example, if you are in CA, you are getting killed on income taxes and property taxes on your Texas holdings. Remember your CA properties have Prop 13 working for them, so over time property taxes will be more tempered in CA vs Tx. Thirdly, you should let everybody know how long you lived in the last home and when you moved out. This goes directly to the point of capital gains taxes. Without this basic info, you will only get extremely generic opinions... but that is just my opinion ;-)

@Courtney T. that is a tough situation... It is not clear if they own their current home or if they are renting. Without more details as to their situation, a truly valuable strategy is impossible to create.  However, in my opinion, and you know what they say about opinions, entering real estate investing late in the game without a large amount of cash is DANGEROUS, especially when using a hard money loan in an area like the Bay Area. It sounds like they don't have a ton of cash and to risk that on a last roll of the dice is scary as F.

Realistically, it does not sound like they are in a financial position to "retire". But again, there is not much to go on in the original post, so I have to make some serious assumptions.  If full retirement is what they really want to do, they should seriously consider moving to central valley once he is fully retired. They should also seriously consider doing retail arbitrage or some other side gig to supplement their income and also give them something to do in retirement.

Sorry I was not able give you a magic bullet.

@Jon S. protect that rate on your home, rates are just going to go up. The issue is that you think the value of you primary is $700k but you still have $550k in loans. To pull out $100k you would need to do a cash out refi of $650k, that is over a 90% LTV. I am pretty sure you are not going to get that, at least NOT with a reasonable rate/terms. Even in your current situation you are over a 75% LTV. I am surprised that you were able to get such a favorable loan in the first place. You might talk to your lender and see if they will do a HELOC. They might give you some money. But honestly speaking I think reaching $100k might be difficult. Sorry to rain on your parade.

@Demitri DeRice congratulations on taking the first step and deciding that you want to get into real estate investing. There are many forms of making money in real estate.  However, there are 3 basic things that you can start doing right now:

1) Learn about real estate: read books, listen to pod casts and watch videos as @James Enright and @Seth Ferguson have pointed out and go to meet ups.  You did not say where you are located, but you should go to meetup.com and look for meet ups in your area and start getting to know people near you. Your goal must be to start focusing down all of the information so you can decide how you want to be involved in real estate: flipper, whole seller, buy and hold, short term rental, etc. 

2) Build cash: get a job or a side job or start retail arbitraging... what ever you can to build cash. Live like a monk; don't spend money on stupid stuff.

3) When you turn 18 get a credit card and sit on it. You need to start building credit. Spend a few dollars every month and pay it off right away. DO NOT allow yourself to do any "retail therapy". The idea is to open up a credit card and keep it active. In the future banks will want to see your credit history and time is a factor.

All three of these steps you can do in parallel and they will not cost you anything. There are a few flashy people who talk about making it big right away, but the VAST majority of people play the long game to wealth. Have patience and stay focused and you will make it.

Good luck to you! 

@Dominik Perrenoud from your post, it is obvious to me that you already know it is a mindset shift you need to move from where you are to where you want to be. You just have not found that event, place or thing that will create the shift.  

For me there were 2 very distinct moments in my life. In high school I worked in the kitchen of a convalescent home. Being around people at the end of their lives and talking to them about what they did and hearing about what they wanted to do, really puts life in perspective. People never regretted the things that they did, even if they were wrong or if it was not the best decision. But many regretted not having the money to be living the balance of their lives outside of a convalescent home... and many attributed their situation to poor financial decisions when they were young.  

The second moment that effected my mindset was more recent. I was doing business in the Philippines for many years. I traveled there almost every month for years and got to know the people beyond the aspect of business. I went to a Christmas party where the home was nothing more than a shack with a single bare light bulb and no running water. These people had nothing but it was seriously one of the most memorable moments in my life.

My mindset has never been the same since either experience. If you want to make a mind shift, actively choose to see the world for more than a nice pad and a useless carbon fiber wings on a car that will probably never be on a track.

To fight the millions of Instagram posts and heavy marking in mass media that try to drive me toward useless consumer spending, I try to keep my mind and desires in check by getting a does of reality.

Last year I took several weeks to motorcycle through Vietnam and took donations to several orphanages. That was a serious eye opener. I also went to El Salvador to help build a house for Habitat for Humanity... another reality check.

I am not saying go quit your job and become a monk. I am saying that for me, seeing that most of the 7.7 billion people in this world have less than me and that they can be happy without the extra bling that social media throws at us, puts my spending in perspective. Perhaps if you spend some time and consistently volunteer to feed the homeless or get on a plane and go to a third world country to volunteer on a clean water project, the reality of larger world will make your desires to spend on bling less significant. 

Anyway, it is great that you already acknowledge that you need a mind shift, you just need to find the tool to put yourself right... what ever that means.

Good luck to you!