All Forum Posts by: Chris John

@Michael Thach

I'm saying this as someone that didn't keep my rents at market and wish I had. 

First, when we did raise rents (to a point where they were still below market) my tenants still got pissed anyway.  I became annoyed that they had zero appreciation for what I had (and was still doing for them) and it caused acrimony.  I'd saved them thousands of dollars over years and they were annoyed that rents went up $50 a month.  The entitlement was crazy.  Many threatened to leave, but they looked around, and signed the new lease.

Second, this is supposed to be a business and I lost sight of that fact. It cost me money and caused hard feelings (again). 

Third (and the one I never anticipated), California just passed rent control.  Luckily I came to my senses beforehand and got rents to market, but there are tons of properties in my neck of the woods with rents that are way below market.  You can't get rid of these tenants if you buy the property and it will take years to get the rents to market prices.  To me, it greatly diminishes how much I'm willing to pay for a property (nobody else seems to care, so maybe they know something I don't though).

Good luck!

If the property is in California, you should be happy it's empty.  We keep running across properties with super low rents and now that there's rent control, it'll take a long time to get them up to market.  Also, if it's in California, I'd be really aggressive on the rents.  Many of my friends have NO idea how high rents have gotten over the past few years...

Good luck!

@Jay Pina

Are they giving you a reason you can't borrow against the house? 

I'm with @Will Fraser.  I'd look around a little more to try to borrow against the house.  I'd use those funds to put a down on my new owner occ and as many other investment properties as you can.  You might be able to go from 1 house to 3 or 4 depending on the numbers.

Good luck!

I hear you.  I'm just saying he wasn't an emperor.  It took a lot of people to be that stupid.

Interesting how those same politicians couldn't believe what happened and it all got chalked up to greed.  Don't get me wrong, greed was a major part of it too.

@Sherry Byrne  I don't blame any one person, but what was going on was out of control in terms of lending "standards". 

It was so obvious things were going to implode that even I could see it coming.  haha.

@Craig Anderson  I really hope I'm misreading parts of this.  I'll leave it at that.

@Frank Connelly

Sorry for the book...

I'll only speak for myself, but to me the idea of good debt is debt I use to buy assets (mortgages on rentals, some student loans, etc.).  I consider bad debt to be debt for liabilities (cars, credit cards, etc.)  From there, I go with high and low interest debt.  High would be like credit cards (22% or whatever) and low would be mortgages (3-4% these days).  So, for me, debt gets graded on two things.  If I borrow money at 12% to buy a rental, I consider it high, good debt.  If I borrow to buy a car at 2%, I consider it low, bad debt.

Anyway, I try to avoid bad debt completely and only take on good debt if I can help it.  Once I have debt, I don't really care if it's good or bad.  I mean, I owe it and I just want to pay it off in the best manner possible.  Everyone has their own comfort level, but I feel like it's reasonable to invest money and expect a 15-20% return (by the time you factor in appreciation, cashflow, tax benefits, loan retirement, etc.). 

If I had debt in the 15%+ range, I'd make it a priority to pay it off as quickly as I could.  It's easier than investing and helps my financial picture at roughly the same percentage.  I'd probably keep debt under 5% as long as I can.  Honestly, I'll borrow as much money as the bank will let me at 3-5% because I feel like I can invest it at 15-20% and create a cash machine.  Between 5-10%, I'm probably paying it off, but not going crazy to do so.  That's my personal comfort level.  Everyone's is different.

To be specific to what you mentioned, I would pay the minimums on the student loans if they were 5% or lower. I just think you can utilize those dollars more effectively by investing. The idea of renting your house means that you would have bought a new, better house to live in. My wife loved the idea. haha. We hated packing up and moving, but we rent out our old house and live in a better one now. I know this is a real estate website, but stocks should be able to give you an easy average of 10% or so. Some years a lot higher and some years a lot lower, but 10% is a reasonable hope to get. I'm not sure what you're invested in, but I'd personally use that as a bellweather. If I had debt above 10% or could invest at something above 10% I'd skip funding my IRA. If I had debt below 10% or could invest at something below 10% I might keep funding my IRA.

Again, these are my personal preferences.  Some are more aggressive and some are less.  You have to do what allows you to sleep at night.  Also, it goes without mentioning that these are unprecedented times (at least for anyone currently alive), so I'd consider that in my thinking as well.  If you believe that the world will fall apart financially soon, you probably just want to wait on the sidelines.  If you're comfortable with where we're at, you should be good to go.

Sorry again for the book, but please feel free to reach out with any questions or clarifications I can offer.  Best wishes.

Also, this "advice" is probably worth what you paid for it.  I definitely don't pretend to know all... or much.  haha

@Dylon May

I mean, that's the worst case scenario.  Hopefully she'd be amenable to the idea.  I'd initiate a conversation to feel her out.  She may be thrilled at the opportunity to get some assistance from you.  I don't know a ton about the foreclosure process, but at this point it sounds like you still have control of the asset.  I'd sit down with her and your wife and see if you can come up with a workable solution for her.  Personally, I'd do it asap because it sounds like time might become an issue, so I'd want every day I could to get a workable solution. 

You might be able to get her current on the mortgage, sell the house, get your money back plus some interest, ...  You might be able to get her current and buy the house from her, but let her rent it back...  There's a lot of potential solutions as long as there's a willingness and some money!  haha.

Good luck with it.  I know it's kind of personal, but I'd love an update of how it goes as I feel like I'm emotionally invested now!  Of course, no worries if not.  I completely understand.  Best wishes

@Mike Esposito  I don't disagree with your logic at all, but if it's right, we're not there yet.  I've called on a couple of properties in the Modesto area and there's hasn't been a slowdown on purchasing yet.  I still feel like it's not a bad time to be on the sidelines though.  If you're correct, you'll be able to save some money on purchases, for sure.  If not, it doesn't seem like prices will double in the meantime or anything crazy price wise.  To me, it just feels like the potential downside is lower than the potential upside is higher in the short term. 

Please note that anyone reading this should probably consider my opinion of a potential bear market an exceptionally bullish indicator, however.  haha.

We shall see...

@Charlie Anne

I probably would have passed on this deal as well, but I'm impressed that you recognized that you were "too close" to it and had the confidence to step back and ask for other sets of eyes to take a look.  Well done on that!  That's a quality that I think you will find beneficial.

Good luck on turning up the next deal!