All Forum Posts by: Chris John

I'm with @Bjorn Ahlblad in that I'd like to see more explanation. 

Having said that, if there's no other money to dump into the property in terms of deferred maintenance or rehab and the monthly cash flow number considers a fixed rate PITI loan, I'd probably like it. Yearly income of 19,320 divided by a down payment of 120,000 is 16.1% and I like to see this percentage be over 15% to cover all the BS and unexpected surprises that come along with owning real estate. Having said that, I like to see this number be over 15% with all of the money that I know I'm going to have to dump into it, so there's not a lot of margin for rehab.

@Enoch Li

I'm definitely anything but an expert, but I think it's a specific loan type.  Sorry, I've only heard of them, but have no experience with them.

@Enoch Li

I believe that you're referring to a callable loan, but I could definitely be wrong.  I definitely don't know much about it, but in theory, a bank can call your loan and say that they'd like to be paid back in full.  If you have equity, you can sell or refinance to pay them back.  If the property is "upside down" because of declines in the market, you would need to refinance or sell for what you can get and then make the difference up in cash.

Having said this, I don't know much about callable loans in terms of which loans are callable, under what circumstances loans can be called, why a lender would call a loan that's "upside down", why a lender would call a loan that is current on payments, etc.

Sorry if this isn't what you were getting at!

"If you think it's OK to pay a higher DP in order to go from negative to
positive CF... That "positive" cash flow is an illusion. All you'd be doing is
paying all that negative CF upfront."

This is a really interesting point that I'd never really considered.

@Mike Dymski

That post was gold!  Thank you for that.  Makes a ton of sense.  The way you laid out inflation was revelatory for me.  Sometimes you just need to hear something phrased a certain way, I guess (and that absolutely did it for me, so thank you again!)

"I am building a hybrid apartment/hotel for under $200k all-in cost per unit in a submarket where apartments sell for close to $500k per unit. We'll see if I can execute."  That sounds amazing.  It's funny because I've told my wife that I feel like a vulture in the sense that the properties I own have existed and housed people before me and will continue after me, I've just written my name on them for a while.  Obviously, we clean them up, but...  However, there must be a great deal of satisfaction with being on the creation/building side of things.  I'm sure you'll execute, but even if you miss by 50%, that's still some profit!  haha.

@Mike Dymski

Good stuff.  I couldn't agree more with "current rates being "normal" but property values are not", but where does that leave us?  Lower prices at current rates, current prices at lower rates, current prices with current rates (with nothing actually selling)?

I'm also curious about "Globalization kept inflation low for over a decade...nationalism/isolationism does the opposite."  I"ll address this as delicately as I can for obvious reasons, but I feel like Trump is typically characterized as a nationalist while Biden is typically characterized as a globalist, but we've had inflation under Biden's administration (I do want to point out that Bush 2, Obama, Trump, and Biden pumped trillions into the economy, so hopefully we can ignore politics in general).  Can I ask you what you think specifically caused inflation?  It seems like nobody knows (and I sure don't)!  haha.

I feel like I'm hearing a lot of people say stuff like "don't worry about buying when rates are high because when they drop you can always refi to a lower rate".  However, historically, rates aren't high.  I don't think I'm alone in feeling like the past several years, rates were pushed artificially low. 

So, what's the consensus on rates dropping back below 3-4%?  Is it a foregone conclusion to happen?  I don't necessarily think so, personally, but I'm really curious to hear some opinions if you're willing.

@Ruben A Ventocilla

Honestly, I'd be lying if I said I was familiar with any particulars.  I just know that I'd want a premium and/or an option fee.  I'm sure you can find more information, but I came across this while googling:

https://homeguides.sfgate.com/...

and

https://www.investopedia.com/u...

Good luck!

@Ruben A Ventocilla

Where is $2500/mo rent in comparison to market rents on that house?  If it's not above market rents, I'd definitely pass.  Even if the execution price of the house is above what the house is worth, it won't help you because they most likely won't/can't execute the house at a higher price than it's worth when the time comes. 

Essentially, they're trying to get a free option if the $2500 isn't above market rent, imo.

@Jacob Krafka and @Jeff White

Thanks for the responses. Honestly, I'm the definition of milquetoast. I use conventional financing and MLS to find deals when they're easy to find. When they're not, I sock cash away into mutual funds/stocks and wait for the next buying opportunity. I definitely believe that returns are higher and deals more plentiful for people willing to put in a shift, but I'm not that guy. I like low hanging fruit too much. haha.

Thanks again.