All Forum Posts by: Clayton Sneider

Jack B:

"Family asks if I can move the like new washer and dryer to the shed so they can put their in from storage. Ummm. no."

That seems like a fairly reasonable request really, if they are otherwise good applicants.

Welcome. There are monthly real estate meet ups in Loveland, Fort Collins, and Erie. You should go to some of them.

Russell: I totally agree that returns on real estate can far outpace inflation, and beat the stock market, even though appreciation might just match inflation.

I am not sure what you mean Bob. I do realize that in certain places and in certain times real estate will appreciate faster than inflation. Just not over the long term.

I am going to contradict myself though. I do think that Michael Bluejay's argument is flawed because he did not distinguish between houses and real estate. A house is not real estate. The ground a house sits on is real estate. Houses depreciate over time, real estate appreciates. He did not take into account the fact that lot sizes have generally become smaller over time, even though houses are getting bigger. People may be spending about the same percent of their salary on housing over the years but they are living on smaller pieces of land. There are little old houses sitting on huge pieces of land that have appreciated a bunch, because the value is in the land, not the house. This is one of the reasons I am not interested in buying condos. 

Michael Bluejay on his website http://michaelbluejay.com/house/appreciation.html

says that real estate does not appreciate faster than inflation. I think I mostly agree with his logic:

"When you think about it, it seems that long-term appreciation rates would have to be pretty close to the general rate of inflation. Because if appreciation were much higher than inflation, then it wouldn't be too long before no one could afford to buy a house! If workers make 3% more per year on average, but the price of homes goes up by 6% per year, then pretty soon homes become widely unaffordable."

This doesn't mean that you don't make money on the appreciation of real estate, especially if you borrow money to buy it. But, on average, don't expect appreciation to be more than inflation.

What do you think?

Is the meetup still happening for Sept 2nd?

Chad: I hope I didn't come across as a naysayer, that wasn't my point. But I think it makes sense to get your finances in order before you take a risk on an investment.

Cade: You should share some of the details of how you made it in real estate starting with no money and in debt, and with kids to take care of. What did you do specifically? Wholesaling? Flipping? Seller Financing? It seems like 90% of people started with some sort of advantage like having parents help, or having a six figure income already, or having parents who already had a real estate business, or a friend or relative that loaned them money. Most of the people I know who are successful in RE started out with one of these advantages. I know there are people out there who start from nothing and make it though. So I am very interested to hear stories from people who are truly self made.

It doesn't sound like you are in a financial position to invest in real estate at this point. I could be wrong because I don't know the details of your financial situation. But if you have no money, don't make much money and had a car recently re-possessed it sounds like you really are broke.

The first thing I would do is work on getting a higher paying job. I can't imagine you make much as a barber. There has to be something that you can do that pays better.

Then work on drastically cutting your expenses. Cut up your credit cards if you carry a balance on them, and start paying them off. Your rate of return on paying down credit cards will probably beat anything that you could do in real estate. Sell anything that has value that you don't need. Cancel your cable subscription if you have one. Cut out any un necessary expenses. Ride a bike to work if you can. Don't eat out as often. Never buy drinks at a bar if that is something you do.

In other words: Make more money and save more money.

This phase will probably take you a year or more...

Then, build up an emergency fund, maybe six months of expenses.

After you are out of debt, and have saved a bit of money, then start thinking about investing it.

It is possible that you could take a short cut around all of this if you were to secure zero down financing and start flipping houses or something. If you have significant construction experience that is a huge plus. However, it would be very difficult and risky for somebody with no money. What if something ends up costing a few thousand more than you anticipated and you can't make the loan payments? You would be completely screwed because you have zero working capital.

If you could find a partner that is willing to be the "money guy" and let you do all of the leg work, that would probably be the safest bet for you. However, if you have zero real estate experience, good luck finding somebody who will give you $.

I didn't invest in real estate until I had literally so much money saved up that I had to invest in something, and it still stresses me out thinking about all the "what ifs". I can't imagine trying to do it being completely broke.

My suggestion is to keep real estate in mind, keep learning, get your financial situation in order and then in a couple of years pull the trigger.

While I would prefer that tenants don't smoke anything inside, I think marijuana is not that big of an issue compared to cigarettes. Marijuana simply does not cause the same level of permanent odor that cigarettes do. I am sure if a huge amount of pot was smoked in a house, there could be exceptions.

Personally, I have a no smoking clause in my lease. I know some of my current tenants smoke pot, not sure how much of that is inside, and I don't care enough to evict them over it.

If I knew that my tenants were constantly smoking cigarettes inside, I would evict them, because that could cause me to have to replace all the carpeting and repaint the entire inside.

If you have otherwise good tenants, that smoke pot, I don't think it is worth it to evict them personally.

I have been approved for a loan on a rental property through Quicken loans, and they counted the income from a rental I have only had for a couple of months.

They required at least a year lease on the rental and bank statements as proof that I was getting the rent payments.

Of course, I still need to put 20 percent down.