All Forum Posts by: Jacob Sampson

I would be hesitant to buy during a hot market if I am, likely, to need to sell in 4 years.  Generally, 4 years isn't even enough to clear the realtor fees you will have to pay when you sell.  I would add a slightly different take on @Zack Karp statement that mortgage debt is good debt.  It might be good debt but you won't know until you sell and it is pretty rare for your personal residence to end up being profitable (good debt).  Especially if you are holding for a short period and purchase into a hot market.

People who think they turned a profit on their personal residence usually think this because they do only the most cursory math.  Meaning they say, as an example, hmm I purchased for $100k and sold for $120k I must have made $20k profit.  The reality is you need to remove all the interest, insurance, maintenance, property taxes, realtor fees, etc you paid during your time spent in the home.  After those are removed it is unlikely you will have turned a profit.  Thus I would consider it bad debt.

I am actively investing in Topeka.  But have not expanded out into any other areas.

@Dave Clauson is correct.  You buy in Topeka for cash flow.  If you don't have that you don't have anything because there is no real long term appreciation.  We purchased a 3 bed 1 bath home in a reasonable part of town for 40k.  The last time it sold was 20 years previous for the same 40k price.

IMO, which I don't think you will like, if you aren't ready/able to acquire standard investment financing you are not, yet, ready to invest.  

The value of your home doesn't come into your debt to income.  The only thing that comes into play is your debt (the amount owed to the bank which doesn't change based on the value of the home) and income (the money you earn which doesn't change based on the value of your home).

If I like the area/subdivision I would have no problem buying up everything, assuming a good price.  The only thing that would worry me is if there is some risk that could impact the whole area.  For example, I try to limit my exposure to areas in a flood zone.  I don't mind 10-20% of my portfolio in it but I don't want much more.  Another example, we have an employer here in town whose employees all live in the same area/subdivision.  In that case, I would also limit my exposure simply because that employer could leave or go bankrupt and then I'm in trouble.

Outside of systemic risks like the above, I prefer to purchase in areas I am comfortable with and in close proximity of other properties I own.  Makes maintenance and support easier.

I always recommend insuring for what you purchased not for replacement cost.  Replacement cost is why it is insured for more than it is worth.  If the rental burns up you file the claim, pay off the mortgage and sell the lot.  You aren't going to rebuild a new building, most of the time.

I also set my deductible for 5k.  My goal with insurance is to cover a catastrophe anything else I will cover myself.  This keeps my insurance premium low.

This does of course require you to be disciplined with retaining strong cash reserves.

It certainly can take the government longer than it should to do just about anything.  I would think she would get the check soon.

I start getting very worried once my tenants are more than 1 month behind.  I would give a 3 day pay or quit notice to get the process started.  You can delay movng forward with it but at least she will be more motivated to get this resolved.

That being said, this is what cash reserves are for.

I think they have 2 offices here in town.  I only use their main one.

I'm pretty basic.  I use a local bank, 20% down, 15 year note that adjusts every 5.  I have a long enough relationship with my bank that I can get 100% if I needed it but usually put 20%.