All Forum Posts by: Andrew Ware

I’d tell Jay Hinrichs to follow his gut all day long and buy it. Then again he wouldn’t need to come here and ask. The part about new investors that concerns me taking these kinds of deals is that there isn’t just a market meltdown to worry about. Personal or family meltdowns can cause as much or more havoc. And lack of experience can cause more trouble. Put a couple of those things together and you can cause a lot of financial damage to yourself for years. As far as the lawsuits I was just using that to sub in for any of the things that can happen. Yes it’s brand new you probably won’t lose your roof, but that doesn’t mean other things don’t happen. I’m not saying you can’t make money at it because you clearly can. But in any of these appreciation posts I’ve never seen people say it’s a screaming good deal. It’s gambling and it will probably make you money if you can hold it long enough.

I agree with Jay Hinrichs that this is a rough place to get advice about appreciation plays and I am one of those people. But I have evolved and nuanced my opinion over time. I still believe it’s a mistake for beginners to start with a house that is only good if the market goes way up. I don’t want to see a situation where you don’t have any wiggle room the market goes down, there is a big expense with the property like a lawsuit, or you make mistakes because you are a new property owner. This is a blueprint for a big financial loss. But if you have good financials without counting only on your job or have other money you can tap into. Or have other properties that can help ride out any storms. And you should also have experience dealing with tenants and properties. I think that having strong appreciation is an important part of wealth building. It sounds like you are more in the former group.

I just want to clarify what I said in my post. Yes I think people who are taking their money and future seriously should take the match. I’m less enamored with the 401k in general and think there are better, less controlled options. I posted because the theoretical person who gets burned by the lack of control is me. And I should also point out if I had been wiser with my money and had other non-401k investments it would have been fine. So here’s how it happens. Get out of school and start putting money into your 401k in 1999-2000 through about 2010. That’s the so called lost decade. I did little better than what I and my employer put in. I had my money in mutual funds because index funds were not available on my plan until more recently. Fees chewed up what little gain I made. Then I started needing money and took out a loan against it. I put money into a cash position because I was afraid of another crash and I had never really made money (except for matching.) I continued to fund it to get the match. My timing was very poor but I expected more of the same I had seen in my adult life. And I had all of my money in the 401k because I was told it’s a great option and you can’t lose. Well you can if you make bad decisions, you can if you are uneducated or neglect it, you can if that’s your only investment vehicle and life circumstances punch you in the mouth and you don’t have the flexibility. I do support utilizing the match. But it’s only a mostly no brainer. Most people reading this forum would not put themselves in the same position I did through neglect and mismanagement. As a side note. Please realize that the fees can kill you. Up to 3% doesn’t sound like a lot but it’s huge compared to the 7% you hope to gain on average.

This is one of the topics that is a religious war on this site. Shawn calling them horrible is ridiculous. Limited, yes. Drawbacks, yes. Horrible, not unless your plan has high fees which plenty do. I personally regret having as much money in there as I do. And I have stopped funding mine despite the match and I have a decent plan with low fees and very low fees in index funds. Why you say? Because life circumstances (and some mediocre decisions too) ran up my credit card debt. Though I don’t really regret doing what I needed to do. There is no way I’m going to beat the interest with the products available. I can’t even withdraw it without leaving my company. My biggest complaint is that I wish I had it available for real estate investing. Because real estate is a game I can play and win opposed to stocks which I have little influence over. I can go in or out but it seems like everything in my plan goes up or down at basically the same rate following the market. I’ve seen the math that shows why it makes sense to buy at a constant rate. And I did it. But what I saw was for years at a time I got a lousy return. Then the market would jump and it would be okay but not great. If I had a way to bet against the market in it I’d be a lot happier. And before you call me an idiot for not understanding how all that works. That’s my point. I shouldn’t be in stocks. 90% of people don’t get it and do it wrong too. The best thing that can be said about the match is you can usually borrow half at decent rates which happens to be the matches money. There are other downsides too. Yes the 401k is pretax now but you pay when you take distributions. Yes the match is great but think diluting your focus is not helpful. Even though I don’t like it much now, they have their place and are a decent option with the match.

I try to never assume I’m right when giving answers and I treat others the same way. Even though you should all believe everything I say because I put the “J” in Jenius. Just yesterday I gave an answer that I’m confident in for most posters asking that question. It got a fair number of likes mostly because it is a popular opinion and I was the first reply. But it would not be right for everyone in every situation (though those people should know they are to that level and I tried to indicate that in my reply.) I try to restrain myself to only give input when I believe I have some insight. I don’t have lots of real estate deals and none in the US yet so i am limited. I also fully believe in “Trust but verify.” These boards are opinions. Most of the law is opinion about whether it applies or not. And we spend a great deal of time trying to figure out what is the best way to maximize our benefit. Well there is no one answer. I can say which is better a Bugatti or a minivan? I’m sure some people will have a concrete answer on that one but it kinda depends on the situation doesn’t it?

It’s so hard answering questions without knowing someone’s background and experience. It’s encouraging that you have other properties. I personally believe you should look at the portfolio as a whole and individually. There is a place for appreciation and cash flow. I wouldn’t be too worried if you were losing a little bit of money, for a short period of time in a highly appreciating market in favorable market conditions. But in this case you are subsidizing 20% while managing yourself (which pulls away more wiggle room.) If you are planning on a long term hold you *will* have cap ex. Taxes will go up. It’s going to take a while to get to zero. I don’t know the Harrisburg market so it may or may not be appreciating. If the house is in the path of progress or you were planning on changing the use to realize more gain then that would change things. And we are in year ten of a seven year cycle. I don’t know the future but that’s not a position I’d bet on. And betting is exactly what you are proposing. It’s one thing to bet on something with good fundamentals. And it’s also a different situation if you have a knowledge advantage. But you appear to be planning to bet on the market to continue to rise significantly in the long term. That is a risky bet without the promise of 5x or 10x returns to offset the risk.

By the way that was as kind as I could be. I did not intend in any way to put you down. You need to hear it straight. Spend a lot of time analyzing deals. Bad deals jump out at you. Get so you can tell the difference between a good deal and a great deal

No. There would have to be a really compelling reason to buy a rental property and knowingly lose money monthly. Because why would you buy a house that loses money when you could buy one that makes money? It won’t just be the monthly loss by the way. You are going to have cap ex and other expenses. And it’s going to feel like an albatross around your neck when you are paying 10k for a roof. There are a plenty of reasonable plans including areas that are pure appreciation plays. I haven’t heard any of that from you. This feels more like you have an emotional connection to the house. That is not a good way to choose an investment. This is just a bad deal for no reason. Please spend a lot more time learning real estate before you jump into something. Start with The Bigger Pockets beginner guide, Rich Dad Poor Dad and Millionaire Real Estate Investor.

Happy Thanksgiving to you too David! I remember this post from months ago and this is wonderful news! People are going to say to take the money in savings and apply it toward the balance. Beyond a small emergency fund that makes a good deal of sense. But, I say stick with what is working for you.

It’s a safe bet that spending 10k of credit card debt on *anything* that you don’t know the return on is a terrible idea. You are just gambling at that point. In the marketing world you test, test, test then start throwing money at it when you have a winner. If I knew I’d make 3x on my money I’d use the credit line in a heartbeat (the amount of time for return is also an important variable but let’s skip that.) I’m going to go out on a limb and say that you were excited to start as a realtor. Then you found out there are a bunch of not fun parts. My job job is training people and you are experiencing what I refer to as the “sucky middle”. The trick is to hang in long enough and stop doing the things that are awful and/or unproductive. Seriously, stop cold calling. No rainmaker is going to cold call. Go find what the successful people are doing, find your unique advantage, and do that. My point is that as a realtor, wholesaler, or something new you are going to experience the sucky middle. If being a realtor is just not the right fit then leverage those skills to something else. But the grass isn’t greener on the other side you make your own grass greener.