All Forum Posts by: Jeff Wallace

@Brian Garrett

Sounds like the "fuzzy math" of the old Regan era - no matter how you "write out" the numbers - it doesn't change the math of the deal - You aren't getting all your money back - 

@Matthew Sutton

There is a way in TX to get your entire investment back at refi - but not on this deal - PM me and I will connect you with a lender who can help you - especially since you are using hard money on the purchase

@Josh Mitchell @Brian Garrett

rework your numbers -- total investment as described is $130,000 - no way he is getting it all back 

@Matthew Sutton

So, as I read your question, what I'm actually hearing is "Help me explain why we should invest in real estate" and not "why should we invest in this specific property" (which doesn't really seem like a great deal in our market).  So here are my thoughts - 

-As an investment, real estate has a lot of benefits that you don't find in other investments

Leverage is the biggest benefit - you can acquire your investment with a small amount of your own money and borrow the rest at VERY attractive terms.  lets assume a 20% down payment. Leverage  allows you to acquire 5 times more investments with the same amount of investment $$ versus a cash purchase.

Your tenant will pay back your borrowed money over time.

Tax benefits -  You can put money in your pocket every year with cashflow, but generally show a loss to the tax man.

Appreciation - as time goes on, your property will generally increase in value... so the more property you acquire, you will benefit from multiplied appreciation.... 5 x the appreciation because you purchased 5 properties...

Now -- your partner would never ask "why would we leave $30,000 in Apple stock when it will take ten years to double?" which is effectively what he is saying regarding leaving the money in a piece of real estate.

Compare a real estate investment to a stock investment -

Buying a rental property is like --

-Buying $100,000 of Apple stock for $20,000 of your own money and borrowing $80,000 (and being able to repeat the leveraged purchase as often as you would like)

-Getting someone else to pay back the $80,000 loan

-Getting a $300-$400/per month dividend

-Generally not paying income tax on your dividend

-Knowing fairly certainly that the value of the stock will grow over time, leaving you with an asset that is more valuable than when you bought it

-

To answer your question regarding getting all of your money back --- in general, yes you can get purchase and rehab money back, but not likely on the deal you mentioned.

Good Luck and Happy Investing,

jeff

@Seth Hobbs

I second @Waylon Themer - I just closed three properties with City Bank a couple of months ago and the transaction was very smooth - Good communication and the only delays were on my end.

@Danny N.

I personally don't invest in condos based on the maintenance fees you mentioned -- and I'm not saying you should buy in The Woodlands - I buy here because I live here (I can ride my bike to all my properties except one).

Based on the fact that you self manage, I would look at properties that are in my general vicinity - Demand is high all around Houston right now so you should do well wherever you look, but due to the hassle of lower end stuff, I suggest transitioning up the board a bit.

@Danny N.

Hey Danny,

Since you said "just curious what you would do in my situation"  here you go!

These are the statement you have made that lead me to my opinion

- You self manage

- you like the trouble free nature of your more pricey properties

I would sell everything you own and re-invest in more middle of the road priced properties in your local area.  If you live in Spring, TX that would look like $125,000 -$175,000 3-4bd 2ba homes.  You could easily have 10 properties free and clear in an area that has easy tenants and good return on investment.

- Your return on the $650,000 property is terrible - I understand you are seeing appreciation, but that is speculating more than investing and not guaranteed year after year.

- I understand your frustration with your $50k properties - I started investing in the worst areas in Houston's worst "wards" and slowly transitioned my properties through the same 77373 zip code you are probably currently invested ---- now I have almost all of my property in The Woodlands - Easy tenants, steady rent income, and decent appreciation.

- You are on both ends of the investing world and the sweet spot is right in the middle.

Think of the Monopoly Board - the best investments are the Orange and Red properties around Free Parking --- Go to Jail cards and the Go to Jail spot jump players over the high rent properties and the low rent properties in a way that mimics the supply and demand principles of the free market --The Orange and Red properties represent the highest rental demand segment of middle class America -- In my opinion that is where you will most successfully invest and if I were in your shoes, that is what I would do.

Good luck and Happy investing -

jeff

@Daniel S.

Think of your Gold Rush analogy but with the consideration of all those gold nuggets having babies who grow up and have little gold nuggets of their own... and before long there is Gold Nugget overcrowding

In real estate investing, we aren't dealing with a finite number of houses or tenants like there is a finite amount of gold to be mined --- long term, our population growth will generally keep pressure on housing demand and inflation - and therefore create future cashflow and profit for the LONG TERM investor.  Wouldn't it have been awesome to have taken advantage of all those great deals that were available a few years ago? -- of course... I don't know how many people I hear say-- "I wish I would have bought property five years ago," (or ten years ago, or twenty years ago etc.etc) --but the guy who buys at todays prices... even retail prices, will have a property in five or ten years that is worth more than he paid today- and generating more cashflow than it does today - 

That is why my philosophy is to just go out and acquire property -- I know too many people who wait around looking for a deal - and tomorrows opportunity passes them by --- I buy tomorrow's bargain today!  When I have the money to buy... I buy.  If the returns aren't all that great today... I know they will be in a few years.  As long as my investment region has long term projected population growth and a good job outlook, I am confident that prices will continue to rise and I will be glad I paid retail today and acquired the property  ---- when looking back, today's retail will be a bargain in the future.

@Robert Cowart

 Hey Robert, I'm also located in The Woodlands -- you are definitely on the right track… In my opinion there is no better option then real estate to get you to a point where you are able to quit your day job -  originally, my intention wasn't to quit my day job but rather to  completely fund retirement through real estate  when the time came when I could retire -  what I found was that  after a few years I was able to resign from my career and that is  exactly  what I did -- good luck and happy investing.

Jeff

@Matthew Wright

Hands Down - Houston would be my preference - And specifically I would recommend checking out The Woodlands - it is an amazing place to live - 

I have spent time in both cities (and actually quite a few summers in Maine) - Dallas is the southern extension of the Great Plains and nothing more than a slightly warmer version of Nebraska, Kansas or Oklahoma - about halfway between Dallas and Houston you pass through an obvious change - more green in the winter, pine forests, etc - as others have said, Dallas is actually hotter in the summer than Houston, though less humid... As for investment opportunity, don't feel like you have missed the boat - I am finding more property than I have money to buy - property that can be purchased, rehabbed and refinanced at 80% LTV to get all your purchase/rehab money back for the next one -

Good Luck with the transition

jeff

@Reed V.

depending on the payoff on the 1st, you might be in good shape - you are the owner of the property subject to the first position lien -- if there is equity and the payoff is attractive, don't wait for the foreclosure, just send the bank a check -