All Forum Posts by: Jim Macedon

Any suggestions for a land development loan in Austin TX?

I'm confused. Who do I call to create a subdivision, a surveyor or an engineer?

Just because something is more possible doesn't make it a good idea.  For me, jumping off a bridge is infinitely more possible than marrying Jennifer Lawrence.  It's not like you HAVE to own ten properties; therefore, you have to put yourself in serious financial jeopardy to do so.

To answer your question about how do you get to 10 properties free and clear.  Well, I never said you had to have 10 properties.  Maybe for your situation you should have 1 property free and clear.  Or 5.  I don't know.  There are many variables here.  I can tell you my own thinking on it, but it would be just that, my thoughts.  If I got to the point where I could live the same lifestyle I do now and not have to work, then it would be time to start paying down all my debt.  But my lifestyle might not be enough for everyone.  Or on the other side of the coin, another person may love their job and not want to quit it.

As I said in the original post, I think somewhere between the two extremes is the place to be for most people.  Someone made the following analogy somewhere.  I don't want to take credit for it, but I think it is very illustrative.  Debt is like a gun.  It's neither inherently good nor bad.  It's a tool, but like a gun it is potentially a dangerous tool.  A gun can do good things for you.  You can hunt for food.  You can protect yourself.  But the gun can just as easily hurt you if you are careless with it.  You need to always respect the gun.  Use it according to a certain procedure and set of rules at all times.

My point wasn't that all debt is bad.  My reaction is to this new school that seems to worship debt.  Hey, it's free money!  Or hey, it's other people's money!  It's good debt!  Arbitrage!  Getting rich in real estate is easy, just go millions of dollars in debt on an income of $50k.  How can you lose?  I did the math and it says this is a good idea.  What, risk?  What's that?  It's not a number I can plug into my formula so it doesn't exist.

It's like a kid waving a loaded .45 around saying guns are awesome!

I believe the apartment loan only goes to 87%.

I know FHA offers apartment loans at 87% LTV. That's great, but what if the apartment building I want is still slightly out of reach? Is there anything else I can add to the stack other than friends and family's money? Will a bank add a second mortgage? (Or does FHA even allow a second mortgage?)

Is anyone on here in the laundromat business or know anything about it?  Or even just has an opinion about it?  In my research I'm getting a lot of conflicting information/opinion from "laudromats are a dying business" to "laudromats have high profit margins, and with more people renting the future is bright."

We're talking past each other.  We both know the bank caps each property at 75%-80% debt.  But guess what, if you have 10 properties with 75% debt, that's more debt than 1 property at 75% debt.  There's a balance between potential vs risk.  Back to John McNellis' quote, but here is a more real example with 25% equity as the requirement:

Just assume every house is worth $100k for easy math.  You can either be worth $1 million in this example by having:

A. 10 houses owned free and clear.

B. 40 houses with 25% equity and $3 million in debt.

C. Somewhere in between.

C is probably the best spot to be in, but for the sake of argument, let's just look at the extremes because I see a lot of people on here that are convinced that B. is the obvious choice. In order for them to come to such a hasty conclusion, they have to completely disregard risk. Yes, B has advantages. Namely, potential... if everything goes right. ROI is most likely higher as well. However, income is much lower to go along with all that debt. Low income and high debt is not a great combination. Just ask the bank when you're applying for a loan.

B. could work out and after 30 years you may end up way ahead of A.  Or you could have an unfortunate set of events crush you.  As others have said, with B. you better have a ton of cash reserves.  Who has the "dead money" now?

Well sure, BRRRR isn't strictly equivalent to the idea of going a mile wide and an inch deep, but they are very closely related. The purpose of the former is to do the latter. Keep getting bigger and bigger. How? With high debt and low income. That's the entire goal of BRRRR.

No responses... Let me add a TL/DR then:  Are you usually able to prelease units in construction?

I'm more referring to the encouragement of going a million miles wide and an inch deep.  John McNellis, talking about risk in his book, asks a simple question:  Would you rather be worth $1 million by having $1 million in property and zero debt, or would you rather be worth the same $1 million by having $1 billion in property and having $999 million in debt?  It's a rhetorical question because the answer is obvious to him (and to me).  But many people on BP advocate for the latter example.  The guy with $1M free and clear is a fool for having so much "dead money"!