All Forum Posts by: Malcolm Douglas

Just want to touch on the concept of timing.  Having invested in the stock market for a while, trying to "time" when to make an investment transaction is extremely difficult.  I would have made more money if I had just invested earlier as oppose to trying to time the best price.  I wish I had a better understanding of this when I was your age.  You can't see the future.  What if the market doesn't correct for 3-4 years?  Will the time spent waiting have paid off? I don't know, but I'm guessing your in this for the long haul.  A lot of people down the road agree on one thing, they wish they started sooner.

I know stocks are different than real estate, and I'm not saying the advice you're hearing is wrong, it could very well be right, but in the end it's about finding the right deal at the right price, no matter any stage of the market cycle.  

One thing you can "time" right now is borrowing money (mortgage rates) at maybe the cheapest levels you will see in your life.  Just food for thought.

Just want to point out that mortgage rates are correlated with 10-year treasury bond yields, not the FED funds rates (which I believe is what the hike talk above is referring to).  If Yellen increases FED funds rate by .25% in December that does not mean Mortgage rates will necessarily increase .25%.

The current ten-year treasury rate is around 2.35%. This got below 1.5% during the summer showing a difference of .85%. The FED did not increase rates during that period but mortgage rates most definitely climbed.

This was something I did not realize when I first started but I feel it is important to know from a finance perspective.

1) Seller's agent will meet you and show you around property and units.  Most time I would not see seller but it can happen.

2) I would look for quality or foundation, appliances and any sort of problems that could be large in future (i.e. cost money).  Will things need to be updated, and will it meet your budget?  Your realtor should be able to assist.  Also, and this is big, do the numbers work? Depending where you look in Chicago, it is competitive right now so make sure the numbers work the way they need  to for your situation.

3) Why are they selling? This can affect how you bid and negotiate.  I ask about utility costs - these are potentially expenses for you and your bottom line.  If they are way above average that can also be a sign that things aren't as efficient.  Ask about age of appliances, roof, remodeling etc if needed.  Again, talk with your realtor and make sure they understand your goal and what's in your best interest.  My realtor was very helpful, and for it being my first property, he was able to quickly identify the weak deals i would have otherwise considered.

IMHO, I wouldn't necessarily filter your search to newer homes.  Having researched myself and talking with people, new construction isn't always better for the long haul. Especially if it's a house that was built with the intent to minimize expenses and increase bottom line (ie cheaply built).  A lot of this occurred in 90's and 2000's from what I have heard.  Granted, I have been involved within metro area, not suburbs, so i can't speak as well to that.

Thanks Ronan.  I agree. I'm only 29, so even though I can't access the money until later, it's nice to get an extra 50% bump through matching while i let it compound earlier in life.  

Should rates rise, I have also explored the option to borrow against 401k to paydown HELOC. Better to pay myself that interest than the bank.

Also to note, there are no fees to consider.

Wanted to hear some peoples opinion on this question.

Due to maximum loan restrictions for a 30 year fixed mortgage on a 2-unit building in Chicago, a portion of my loan is being financed through a HELOC. The interest rate on my HELOC is adjustable and linked to Prime (currently 3.5%), no spread. This is currently less than my actual mortgage rate.

My employer 401k will match 50% of up to 6% of my annual contributions - im invested in basic SP index.

From your point of view - should i stop, or decrease, my 401k contributions and use those funds to pay off my HELOC sooner? Should I continue to contribute while rates remain low and switch thereafter? Other thoughts? Please provide your reasoning when answering.

Thanks

Mac

Thanks Ronan.  Wicker Park.

My name is Mac Douglas and I just recently purchased my first two-unit property in Chicago.  I will live in one unit while renting the other to subsidize a large portion of my expenses as I build equity.  I have spent the last several months visiting multi-unit properties, building cash flow models, speaking with a few experienced individuals and researching through articles and podcasts.

I have loved every step, and as my broker (who's been a big mentor) suggested, "you're going to become addicted." Well I have, and I'm already thinking about how to plot my next deal, even if I may have to get creative with financing.

I look forward to gaining, and sharing, more knowledge with BiggerPockets.  I am very new to the game but would love to talk about my experiences with first time or experienced investors.  This site has helped give me confidence and removed walls of doubt when it comes to real estate investing.