All Forum Posts by: Account Closed

Yes, you do. You can buy a 25k house for cash or finance a 100k house. But the question is What's your goal? If you plan to just buy the one house, it's not a good idea. Out of state investing takes time and effort to learn the market in another place, building a trusted team etc. not worth it for one house. There are turn key suppliers but as with any investment you have to do due diligence. If you are not willing to spend the time, you are likely to get burned.

Financing is not hard. You can use conventional loans for up to 10 mortgages. You have to watch the DTI ratio though.

Try not to take this as a discouraging message but you don't have the right mindset to be an investor. You have no business having 40k in car loans. My first advice is sell the cars. You can pay cash for a $5,000 or less car that will get you to work. Investing is about making a choice to accumulate money rather than spend. If your mindset is not right, you will likely not succeed as an investor.

Above all an investor understands how money works. That debt should only be used when it can increase your assets. They understand the difference between depreciating and appreciating and income producing assets.

So I suggest that investing is more than about just tying to buy a property. If you start thinking like a investor first, you will do better.

Amie D. Its a good question. If you are doing local investing, its probably possible to get good deals even in a hot market. You could make a non contingent cash offer and take a look at the property before buying. As an out of state investor, hot markets are tough. You will likely overpay or not get any deals at all given constraints of time, inspections etc. As an out of state investor from expensive CA, I look at not so hot but still attractive markets. My first target was Indy but now looking into others like KC, Charlotte, OKC etc. Havent decided where to invest next but will soon.

BTW totally see the point about weather in Seattle. I think SEA is a great city but lack of sun would make me suicidal!

I'm with Ali Boone on the lifestyle! If I cant make the numbers work with professional PM, I am not going to do it. I think neighborhood attract tenants and not properties. My typical rental gets a bout $800-$850 in rent. Most tenants are working class families. I paid $40-$50K for those homes. I see other homes for $80K that may get $900-$950 for rent. I always wonder why people would not pay the extra $100 for living in a house and neighborhood 2X better. But they dont. People feel comfortable in neighborhoods with other people like them I suppose. And paycheck to paycheck $100/month is a real expense (although they probably pay more for their cell phone bill!). The people paying $900+ are a different set and want to live in a different neighborhood and so thats where they go.

$800 rent on a $140K house is not a great deal. You could easily sell the home and net about $120K. Buy two $60K homes each renting for $800 and you have doubled your rental income. Or take the $120K and buy $500K worth of other rental homes with leverage. Either way, you will do a lot better.

Everyone has great points about control and risk. One more critical advantage of owning is leverage. With $20K I control $100K in assets. With current low mortgage rates and home prices I can get homes where the cash flow pays off the mortgage in under 10 years even after all expenses. So effectively I get 5X my initial investment in 10 years. I dont think a REIT will do that for me. Not to say they are bad. I own several REITs but I buy REITs in sectors I cannot invest directly like hospitals or NNN REITS.

Scott W.

Not to sidetrack to a stock market discussion, sure if you go back 80 years the number is correct. But my investment horizon is much less. In any 10 year period the return can be negative as well. Also I think there are fundamental shifts in the market dynamics, demographics as well as the overall economy that long term average growth in the stock market will be lower in the future than the past. Thats why I am diversifying into Real Estate. I still have a sizable sum in the stock market but it makes me queasy.

I agree. Too thin. I look for minimum 1.5% rent ratios as well. Not sure I agree with Scott W. about the stock market comment. Getting a consistent 10% return from the stock market is highly risky and also highly unlikely. Lucky if the broad market returns 5% with lots of volatility.

On the face of it it does not look like a good deal at all. Even if it was not a townhome the rent ratio is less than 1%. Secondly, you get hit by HOA fees. The HOA fees can be considered a kind of insurance against major structural repairs but on a new home, thats unlikely anyways. So its just another cost. I dont see how you could get to any reasonable cash flow. Plus the HOA fees can go up, speciall assessments can happen and townhomes dont generally appreciate as much as SFRs. Then you may have neighbors complain about your tenants etc. I wouldnt do it. Charlotte seems to be a good market for SFR with far better returns. Why not look at those?