All Forum Posts by: Chris John

I think this thread is interesting in that it shows the old saying "all real estate is local".  I'm not necessarily saying that buying your home is a great investment (because I think you can probably find better ones and you can point to the opportunity cost). 

Having said that, where I live, rents are definitely more expensive than the mortgages if you put 20% down.  At 3.5% down and a higher rate, it's roughly similar numbers.  And that's only because house prices have jumped since the pandemic.  Owning was clearly cheaper on monthly payments before that.  And that's if, and this is a gigantic "if", you could even find someone to rent you a home.  It's so competitive out here it's crazy.

If you chose to rent instead of own out here in 2009, you're now paying $1800-2000/mo in rent instead of a house payment of $400.

@Jim K.  I'm definitely NOT trying to argue with you as I think you make a lot of good points about consumerism.  Heck, my daily driver is a 1990 Chevy truck that I bought in 1994 and I'm teased mercilessly about it.  But, it didn't take marketers to convince me that I didn't want to raise my family in a neighborhood where seeing passed out drug abusers sleeping in business landscaping was a normal thing.  I didn't grow up in the city, but the city grew into us...

Besides the obvious of God, family, and country, I'll throw in that I'm EXTREMELY thankful for capitalism.  It's not perfect, but (IMO) it's the best system we have for creating wealth, getting people out of poverty, innovations, freedom, etc. 

It's taken a beating lately, but that says more about the people disparaging it (again, imo).

God Bless, all.

I definitely don't consider myself an underdog story or anything, but my wife and I are teachers and I definitely had to bust my hump in high school and at a warehouse through college to try to get ahead in life.

It cracks me up when people assume I'm destitute or something.  I wish I'd written down the comments over the years, but some of my favorites:

"I wanted to be a teacher, but I knew I would never be able to live on that income."

"I tell people I have a rich son (my brother) and a poor son (obviously me)."

I always try to work finance into my classes, so students will ask me stuff like:

"If you know so much about money, why didn't you do any of this?"

"Shouldn't you be a millionaire by now?"

Haha.  Good times!

@Charles Clark

That's awesome to hear.  My daughter is currently looking into schools that have an option for a semester/year abroad in Italy so she can study marketing.  You both make me jealous as I couldn't see past the benefit of making $10/hr at a warehouse during college!  :(

If you don't mind my asking, what was the "unique strategy" you used to acquire the eight unit property?

Bom dia and coisa de mesa (that's pretty much all of the Portuguese I know and I'm not sure why my grandma said it that way...)

@Forrest Faulconer

Haha.  You're bringing me back to the good old days of stress!  The real "story" is super long, but the short version is that it was 2012, prices were cheap but obviously rebounding, and I knew I was taking a chance on my "forever" home at a price I'd most likely never see again (but I also knew I might not be able to actually afford). 

Like a moth to a flame, I couldn't resist. 20% down, accidentally overdrew my Roth IRA costing me over 20k of taxes and fees (which sucked because this house needed a TON of work and I was REALLY counting on that money! haha), had to keep my original home as a rental because I was 70k upside down on it, etc.

My wife kind of lets me run the finances, but I remember her asking me if I thought we could actually afford it.  I was like, "Look.  If it turns out we can, it's gonna be great.  If it turns out we can't, we're gonna have to work the rest of our lives anyway, so what difference does it really make?"  haha.  I love that she trusts me so much!

Anyway, one of the best decisions I've ever made.  Obviously, nobody has a crystal ball, but I definitely wouldn't be shocked if you find yourself in "once-in-a-lifetime" territory in a year or two if the government chills out from pumping trillions into the economy long enough to see where we're at. 

Either way, good luck and thanks for taking me down memory lane with your question!

@Joe Villeneuve

Yeah, you're right. We pulled the trigger on these loans a couple of months ago and I just checked. 75% LTV, not 80%. Whoops! haha. If my succeeding despite myself is not the greatest commercial for real estate investing, I don't know what is...

Anyway, APR was a bit below 4% on the refinances and around 3.75% on the 4-plex purchase. Definitely fees involved, but I was honestly surprised at how low they were...

I appreciate your thoughts and in 5-15 years when we do our next round of refinances to go buy more, I'll strongly consider selling instead.  Having said that, they're so dialed in with the pm at the moment that the upside of selling will have to win out by quite a bit to get me to get over the inertia of just refinancing.  It's just so easy, I don't have to get a house sellable, deal with agents, etc.

@Joe Villeneuve and @Jay Hinrichs

Thank you both for the replies.  I definitely plan on leveling up with the money I've refinanced, but I'm a little leery of the market right now.  We (my brother and I) bought a few houses in Jacksonville with cash and a local 4-plex in an effort to offset our higher mortgage payments in the short term, but we're just sitting on the rest right now and waiting.  I expect to use the last of our 10 "good" loans on duplexes and 4-plexes, finance the Jax houses to pull cash out, and then try to buy a small apartment or two just to see what that game is like.

I definitely agree with leverage and all, but my thoughts for financing to an 80% LTV instead of selling were that it would essentially be the "5th" house anyway and I'd avoid selling costs. Let's pretend these houses had no loans on them (they did, but that gets in the way of the thought exercise). My logic is that I could:

A - Sell the property and use the money to buy 5 similar properties (20% down each).  However, I'd have to pay selling costs, extra buying costs on the 5th house in terms of title fees, etc., and it would create a 1031 situation (I believe it would anyway and I could absolutely be wrong on this) where I'd be rushed into buying the extra properties.

Or

B - I could refinance to 80% LTV and use that money to buy 4 similar houses, keeping this current house as the "5th" and avoiding all of the negatives, such as the fees, from Scenario A.

Jay, if you don't mind answering, what do you invest in?  The "B class Multi in a larger metro area" that you mention?

Again, I really appreciate both of your times and opinions.  I know that iron sharpens iron, but in this case it's sharpening a wood stick!  haha.

@Chris Svendsen

Sorry for hijacking your post!  It sounds like you've hit a "perfect storm" of unfortunate situations, but it sounds like you'll see your way through it.  You are definitely in an enviable position overall!

@Joe Villeneuve and @Jay Hinrichs

Hey guys.  I've definitely come across several of your posts in the past and respect your opinions.  I'm curious to know why you advocate for selling properties and moving on?  I've recently refinanced several properties and pulled cash out to buy more figuring that I'm getting to utilize the current equity, but can still keep and cash flow the current properties.  These were purchased in the Central Valley of California from around 2009 to 2012 and appreciation and rents have been bonkers since then...  In your opinion, should I have sold instead?  I'd appreciate your thoughts.

Thanks

I think most people that over-analyze do it because either:

A) They're afraid that they're jinxed and that somehow real estate will suddenly stop working because they got involved.

or

B) They're afraid of not hitting a home run like they've read about in a book or heard on a podcast.  Like there's something wrong with singles or something.

I figured, screw it.  I'm not special enough to break real estate and I think Wade Boggs and Tony Gwynn were great baseball players...

@Devin Monroe

I don't know man.  I'm sure I'll get crushed for saying this, but here's how I see it.  Based on your numbers of $1500-1800/mo rent - 10% management fees and a $735 mortgage, you're going to be making $7500-10,000 a year on that thing.  That's a lot of things to go wrong EVERY year in terms of maintenance, vacancies, etc. for you to not make money.

Admittedly, I have no idea what Baltimore's like so I may be way off base here, but where I'm at in California, we've definitely taken our lumps on occasion.  However, if we were taking a 10k beating EVERY year on every house, I would've quit a long time ago.  We've built a decent network of handymen, electricians and hvac guys that do side work, etc. that have saved us a bundle.  There's other shortcuts too.  Never replace carpet with carpet.  Instead, find a "meh" tile guy and buy an extra box or two to leave in the garage.  Pick a nice neutral paint and buy it in 5 gallon buckets for all of the rentals to share, etc.

Plus, your tenants are going to be buying your house for you, you'll have the tax advantages of depreciation and interest, etc.  Inflation will make rents and the value of the property increase while your mortgage will stay the same.  

Despite all of this, I'm waiting for resolution on the coronavirus economy before I buy more, so...  haha.

Good luck!