All Forum Posts by: David C.

Off-Topic Joke Alert:

I think @Rick Clatfelter just needs to write a book 'Gross Dad/Net Dad' about his fake Dad and make up his own definition for 'cash flow'. Nobody around here seems to mind that RK has his own definition for 'asset' and 'liability'.

@Duncan Taylor

Why not leverage inside a REIT?, isn't the access to leverage a major benefit of Real Estate investing?

If you had taken the 10 million in investor capital, couldn't you have purchased 50 million in real estate with 20% down mortgages? or 40 million in property with 25% down? If REIT's don't use leverage, isn't that a serious drag on the returns?

Real Estate allows cheap leverage because of the assets available to secure the loans, rates are lower to get a loan on a house, than on a machine that stamps out ipod cases for instance, because next year the ipod will be bigger/smaller/thinner/fatter whatever, and your machine is obsolete, since real-estate has such a long life, its cheaper to borrow against, right?

I'm not trying to challenge, just trying to learn.

Thanks in advance.

Sorry if I have taken this 'off the rails' - but it seems like one answer to 'turn key' is perhaps a 'REIT'. If I were in a REIT and I knew the operators had significant capital of their own invested, I'd feel better about that REIT.

@Duncan Taylor

REIT's intrigue me. Are REIT's able to leverage as much as individual investors? more? less?

And depreciation is taken as a business expense and then the net profits must be distributed to get the tax-treatment of a REIT, right?

So... if Real Estate is a superior asset class due to: inflation, low interest rates and favorable tax treatment. Shouldn't REIT's have performed spectacularly for the past 5 years or so? Have they significantly outpaced the broader market? If they haven't, why not? I'm not trying to start a 'stocks vs. RE' thread, but I'm afraid I just did. I'm really curious about it though. I want to diversify out of my purely stock investment allocation - but I don't want the hassles of buying a business. This keeps driving me toward 'turn key' but I keep getting educated away from that :)

Many REIT's are commercial, is there a good reason why? Is the building up of residential REIT's the 'institutional buying' that people mention on here, right? that is sucking up the supply of houses? Are those all private and hidden in hedge funds?

Are there residential REIT's that you know about that are available to a regular guy?

@Rick Clatfelter

If you do @ then ? right after it, a list of those people who have commented in the thread so far comes up below the comment box.

Thanks for your respectful response to my outrage.

As a potential turn-key investor, I've been educated a lot on this site, and return claims are regularly challenged here, and while your site did not previously show any expenses, just gross rents as the return, at least you could argue that by leaving out all expenses, it was clear you were not counting any?

Many turn-key providers seem to think that significantly underestimating the expenses is a better tactic for selling. This can lead an inexperienced investor to trust the pro-forma numbers as it will have many things listed that they did not think of.

The folks here at BP are priceless when it comes to evaluating those pro-forma numbers and pointing out where the estimates are low, or where things like 'owner-paid-utilities' have been left out.

The more I read here, the happier I am with my analysis-paralysis and inaction thus far.

This is the most presposterous advice or recommendation I have ever heard. If you are trying to find out about someone, only ask them?

I wonder what Madoff would have said if you asked Madoff?

How can you say this with a straight face?

And how have so many people replied with 'fair enough'? No - not at all fair enough. Clearly not fair, as you have now taken down the exact irresponsible claims that were called out here. Apparently these 'ignorant people' have called you out, taught you a thing or two, and educated some of your potential victims.

I love this site.

Ask that Campbell clown if the 1% rule is a good idea and he'll happily sell you 1,300/month rent for 130,000. Go to the 'source'? Absolutely ridiculous.

@Will Spruill

--- removed --- its none of my business what value you expect. Good Luck Will!

@Marco Santarelli it must be a bit stressful to go through this problem out in the open like this, but its also a huge opportunity to show that you can turn an bad turnkey investment around. I bet that phone rings like mad if you end up with @Will Spruill happy in the end.

@Bryan L.

I don't see flippers that way at all. I didn't even know there was a negative perception out there. I see them as doing a great service rehabbing properties and improving the housing stock.

I'm afraid for them more often than I think poorly of them. I'm afraid they are overpaying in the first place, underestimating their repair costs and overestimating the ARV.

I'm afraid they have been sold a dream by a guru or a TV show and are not running the numbers, and not leaving contingencies in their plans.

I think what you've done is awesome.

Thank you.

@David Campbell says:

If you sell this property in 30 years and net $131,000 which is exactly what you paid for it (ultra conservative even for Texas) and you made no cashflow along the way, but your tenant paid off the mortgage for you here's the math: $131k proceeds of sale - $11k invested (assumes 5% down + closing costs) = $120k profit divided by $11k invested = 1090% total return divided by 30 years equals 36% annualized ROI.

Does divided by 30 really give an 'annualized return' ? that assumes no compounding? I don't think anyone uses that kind of math for any investment?

I get that 8.3% for 30 years gets you 1093% of your original investment.

@Jon Holdman don't forget the step-up in basis on death, the killer app for depreciation is that your heirs get to avoid recapture with the stepped up basis at the time of your death! We all die, so this is a sure thing! I'm going to pull all my money into these zero cash-flow deals and then off myself in year 29, I'll get the last laugh!

Lets see some pictures man!