All Forum Posts by: John Carbone

 That’s a nice spreadsheet. Did you create all of the formulas yourself?

And if you asked Warren buffet what you were, he would say 2 and 3. 

Your such a feckless Troll!     Spending the day spewing lies, distortions, rants and baseless attacks. 

yes, as the founder of a tech start-up, without doubt 0 innovation. Founder of more then a dozen companies, absolutely, imitator without doubt. Yes, one Absolutely achieves "Top Producer" via idiocy.    

What have you achieved? Of course you must be "the" innovator supreme, please, bestow upon us your accolades of achievement kind sir. With out doubt they are so numerous that it would be a grand list of so many.    Please, delight us all with accounts of your conquests.......

 James, If you go through the back and forth discussions we have had over the past few weeks, you are the "troll" always instigating attacks. Just because I call you out on your BS doesn't make me a troll. I hate using this term because it is so overly used nowadays, but you are the classic "bully", about 1 in 100.  I have a zero tolerance policy for people like yourself. I've seen people like you over the years thinking they can shout the loudest and claim to know all. For example, years ago in High School, there was this GOON who would go around and take food off peoples plates. There was a friend of mine who he did this to daily, he finally listened to me, when one day the GOON took a Bosco stick, and what followed was "hey Jim (it actually was his name)…you forgot the sauce" and when he turned around, my friend threw the cup of sauce directly in his face. Suffice to say, the bully James was in shock, and he never took another piece of food from him again. Nowadays though, if that happened, my friend probably would be suspended from school. I'm not going to spout my accolades on here, because it doesn't matter. Nobody cares what you claim to be just like nobody cares what my accolades are. 

Quote from @James Hamling:

Quote from @John Carbone:

Quote from @Joe Villeneuve:

Quote from @John Carbone:

Quote from @Joe Villeneuve:

Quote from @Michael Wooldridge:

@John Carbone from the sounds of things you are a long term investor that is working to replacing his income with CF. My w2 also funds pretty quick purchases for properties. 

I get @Joe Villeneuve point about rolling the equity forward into more properties faster. I’ll have to play with the numbers I think perhaps cashing out a bunch of equity about 41-53 would allow me to retire almost instantly instead of 55-56 as planned but there’s  a lot of variables. Still it’s an interesting dynamic to play with. 

I’ve never been a big fan of flipping and given that I have the income to invest 25% down consistently and quickly, my major goals has always been to replace the invoice to retire early. but it’s absolutely faster the way Joe is discussing. I’m just not sure how much faster. 

As you said, "play with the numbers", do the math.  You'll be very surprised.  Einstein was once asked what he thought the greatest invention of the 20th Century was.  His answer was "compound Interest".  What he said after that was more important.  "Those that understand it, will live off those that don't".

Isn't doing a cashout refi up to 80 percent the same thing though? Why sell the performing asset? I understand the math of doing 20 percent down payments for higher COC, but you are also using more leverage. Not saying leverage isn't a good thing, but it goes both ways. Granted, historically using leverage in real estate works out great as you describe, but until interest rates moderate and prices level off, I see no reason to jack up the real estate leverage. A 20 percent reversion in prices can knock you back multiple years.

 I think the leverage aspect is misguided. I’m glad that investors in general follow this advice. When they are underwater and foreclose like has happened before in my area, I’ll purchase from their banks with leverage then. 

How are you increasing leverage?  You have the same number of loans.
Pulling out more equity with a sale than a refi.  Also, when you cash out, the mortgage payment goes up, and the cash flow goes down as a result.
Keep in mind that all appreciation is based on the PV, so increasing your total PV is exponentially increasing future gains from appreciation.
REFI is a linear return, with a step backwards.  Selling and moving forward gets you an exponential return.
It's the power of the penny...and that has nothing to do with "every penny adds up".  I don't want them adding,...I want them multiplying...like Gold(fish).
If you took a penny, and every day you doubled the previous day's total, (so day 1 would be 2c, day 2 would be 4c, etc...), how much money would you have if you did this for 30 straight days?  Simple math formula.

Your assumption though is that by selling and buying bigger and better is that the returns will be equal to the previous deal in a linear manner. As expansion goes up, risk of performance also goes up. Selling and buying bigger doesn’t mean a linear compounding increase in return. In theory, yes, multiplying the Pennies, but what happens when that 8th penny is only “worth” 4-5 pennies. I’d rather have a 20 percent return with minimal leverage than a 3-4 percent return on 5x leverage relying on overpriced underlying assets continuing to return at the same levels they did over the past decade.  

 And what-if that 8th penny get's unexpectedly INCREASED to being worth 12. What if, what if, what if.......

The fact that housing is severely over valued right now is not being “negative”, it’s just math. Math has no emotions or feelings. The fact that you accuse me of being negative and using “psychological” analogies in describing investing , just shows you are an emotional investor. I love people like you, and fortunately you are in the majority of the sheep population, I’ll be buying when your clients get hit with the leverage “brick wall” and for the aforementioned discounts. Please continue doing as you have been for the past decade. 

I think you are between the anxiety and denial spectrum right now. Give it 18 months and I’ll see you at the bottom. 

Your assumption though is that by selling and buying bigger and better is that the returns will be equal to the previous deal in a linear manner. As expansion goes up, risk of performance also goes up. Selling and buying bigger doesn’t mean a linear compounding increase in return. In theory, yes, multiplying the Pennies, but what happens when that 8th penny is only “worth” 4-5 pennies. I’d rather have a 20 percent return with minimal leverage than a 3-4 percent return on 5x leverage relying on overpriced underlying assets continuing to return at the same levels they did over the past decade.  

Isn't doing a cashout refi up to 80 percent the same thing though? Why sell the performing asset? I understand the math of doing 20 percent down payments for higher COC, but you are also using more leverage. Not saying leverage isn't a good thing, but it goes both ways. Granted, historically using leverage in real estate works out great as you describe, but until interest rates moderate and prices level off, I see no reason to jack up the real estate leverage. A 20 percent reversion in prices can knock you back multiple years.

 I think the leverage aspect is misguided. I’m glad that investors in general follow this advice. When they are underwater and foreclose like has happened before in my area, I’ll purchase from their banks with leverage then. 

I agree that the time to recover the cost is the most important component to the formula. I don’t follow on selling though. Maybe the way I look at it is a little different than you. So I’m into a rehabbed property for 350k (200k cash down) and it returns me a net profit of 70k a year. Break even is sub 3 years, and 5 years free and clear, with an annual dividend thereafter of 70k once paid off. If I get an appraisal at 400k why would I sell when I’m getting 70k a year. This is a 20 percent return on a 350k investment. The “equity” component is meaningless to me since most of my formula comes from cash flow, not equity. Maybe the smart thing is to cash out refi up to 80 percent at that point, if there is a need/to create interest expense for tax deductions, but I don’t understand why I would sell. My whole philosophy is to buy and never sell. What am I missing?

Obviously adding value to a property can increase the “value”, but speaking from a turn key pov, once you max out the usefulness of the property you are letting interest rates dictate the value. I don’t calculate my property value based off of what an appraiser will give it, I base it off of what my asset returns to me. This is a wildly different number than what a bank will say it is worth. CASH FLOW allows me to not care about interest rates and the negative impact on the “home equity”.