All Forum Posts by: Chad Reidlinger

I wanted to pose this question to a BP forum to get your take on this. Private school or more expensive home? So Rich Dad Poor Dad has left quite an impression on me. I'm being very mindful to adding to my asset column and not my liabilities column. I don't live in a bad area at all, but I would like to improve my children's schooling location whether thru a better school district or private school. Private school will cost me about $11K per year for both my kids and they are now only 4 & 6. So potentially that will cost me $132,000 until both my kids graduate from High School. That doesn't jump out as a great investment when you look at just the numbers and it's 100% a liability unless you say I'm investing in my children :) If we move into the area we are looking at my house payment will most likely jump from about $1,000 per month now (crazy low and it's a 4/2 with a pool and completely remodeled) to a payment of around $4,500 per month if I buy the house my wife wants. I can afford the payment, but do I want to afford the payment. I won't need to incur the cost of private school and I can rent my current primary residence for about $2,900 per month. I will have to take out a HELOC on my primary now to come up with the 20% down on the other home so that will add another $450 per month to my current primary residence payment. So I'll net about $1,450 from my rental to go towards the $4,500 monthly payment. My other concern is I had planned on using my HELOC to accumulating investment property via the BRRR strategy. I feel this will surely set me back on my investments plans although my current primary will become a rental. Thoughts? Maybe you can see why I'm driving myself crazy. I can find a cheaper home in the new school district but that will still yield about a $3700 payment and will be a similar house to what I already own...thanks in advance for your advise.

Tyler...great point!  My goal was to have as many free and clear properties, but after reading about a lot of these posts in BP I'm re-thinking that strategy.

From being in the mortgage business for 15 years I'd always recommend a 15 year if you're in a buy and hold strategy. Yes you can pay extra but most borrowers never do. The 15 year requires discipline and you're building equity so much faster. This builds your net worth and also allows you to trade up in properties and you can use a 1031 exchange if your goal is to increase cash flow.

Darrell D. I've been in the mortgage business for 15 years now. A few things to keep in mind. If you're looking to qualify for more properties make sure when you're filing your tax returns you're not taking losses on each property otherwise you're income will have to carry those losses. Also know a lender can add depreciation amounts back to net income/losses on each property to help the numbers. In addition when buying a new property a lender can use 75% of the proposed rents to help you qualify. I also have access to loans for investors where a lender doesn't look at the borrower's income. They simply base the ratios on the proposed rent versus the Piti of the subject property. This way the overall dti isn't an issue.

I'm looking to get back into Real Estate investing.  I bought and sold a lot of homes in the past but not the "right way" and got killed in the Real Estate crash in 2008.  Now I'm looking to get back into investing.  I have about 125K liquid to work with and I'm also contemplating liquidating my 401K which would give me net of another 140K.  I'm not sure where to start though.  Time is my biggest issue as I run a mortgage banking branch so essentially have a full time job.  Here are the options I'm entertaining:

1. Become the bank- I have a mentor that got into investing as a hard money lender. He lends money at 50% LTV or lower and normally charges 1-3 points and 12% interest. He will take me under his wing and teach me this side of the business. He also said you will happen into fix and flips via foreclosure in this route and that is how he also began flipping homes. Pro's of this route that I've found are decent rate of return, mentor in place, and can back into fix and flips. Also I'm thinking this will take less of my time than flips. Con's of this route are I'll run out of money quickly as I lend it out and may not be able to compound my money as fast as I could in a fix and flip.

2. Fix and Flip- I have few potential mentors in this arena.  This would require more of my time and I'd take on a partner who is a firefighter and has more time than I do to manage the rehabs.  I could leverage my money better here than in option #1 and potentially have much larger gains.  The con here is time, connections, and perhaps getting into a bad deal that sets me back. 

3.  Buy and hold rentals- these will be easier for me to find and I'd hire a property manager so I'm assuming this would be less taxing on my time.  The cons are renters not paying and destroying my property :)

4. Wholesaling- This is option 4.  That's all I have to say here :)

I'm wondering if I should really just focus on finding the leads and then decide if I should wholesale, fix and flip, or fix and rent.  Am I worrying too much about which option and entertain all 3 or should I focus on just one option and stick with it.  

Also what are your thoughts on liquidating my retirement.  Most everything I read says a 401K is among the worst possible investments and offers no shelter from taxes.  

Thanks in advance for your feedback.