All Forum Posts by: Nnabuenyi Anigbogu

WOW!!!!!!  That is one messed up landlord tenant situation. 

@Perry Ivy

I did not think you were being argumentative. I love a lively debate with people who think differently or more conservatively than me. I tend to lean towards the more risky side (probably a product of being young and comfortable) and love hearing from the other side. It has helped me tame down some of my REI actions actually a . It also helps for newbies who are trying to figure out which route to go. Hence why i love REI forums.

Thanks

@Perry Ivy I agree with you and don't believe rent never goes down. I do think in the long run it always goes up due to inflation similar to house prices in decent areas. You just have to be able to ride out times when it stagnates or goes down temporarily over a few months or couple of years.

@Perry Ivy

Hence why i mentioned responsibly leveraged. There are plenty of people that were leveraged that did not lose anything in the crash. Some of them actually used that time to acquire more properties. If you did not sell, by now at least in my market you are at or ahead of where you were in 2008.. As someone on the forum said real estate is risky when you are over leveraged or undercapitalized. Most people who lost their shirt in the crash were both. Most of the people who suffered in the crash were more on the retail side and newer investors who were just jumping in or older investors who were highly over-leveraged. For everyone i know who lost their shirt i know someone who used it to strengthen their investing position.

I.E for me i always keep enough reserves to pay PITI for at least a year. In the area i buy (5 miles from downtown chicago) you will always have renters even if things are crashing. If i have no renters i can go a year paying from my reserves without paying anything from my personal pocket (which can also cover the debt if needed). Usually though you dont have all the units empty because you lower rents to attract renters. If you have a good cashflowing rental and reduce rents then you can still pay your mortgage and ride out the downturns.

I do not begrudge people who shun leverage. If that is your style and it helps you sleep at night then do it. Especially if you have acquired a significant portfolio or at the later part of life where preservation is more key. 

@Jordan B.

In my opinion the biggest thing that going at it debt free has over using leverage is the peace of mind. Your risk is actually not too much less than those who use leverage responsibly (note i said responsibly). The biggest risks in real estate affect everyone equally no matter if you have leverage or not. 

I.E. If the market crashes the value of your house goes down no matter how it is financed. Now responsible leverage users can ride this out just as easily as those who bought we cash. Take me for example. I bought a 4 unit building with leverage for 500K that cash flows almost 1K after all is considered (capex, maintenance, etc). If the market crashes and my building is worth less well that does not affect me because i can still make my payments no matter what. The only way i get affected is if i lost renters (which by the way affects cash buyers too). However because i leveraged responsibly, I can pay for the entire building from my personal salary if needed and would not lose any sleep. Assuming two people started from the same position to buy this building, i would have an extra 400K to use to make more money while the other person would not. They would have more cash flow though.

Your story with the 36K property makes sense but anyone who uses leverage responsibly will come out ahead at the end of those 7 years using the same assumptions. Also im sure that a 36k property is not going to appreciate much given the area that it is in. I highly doubt it is a B or A area given those extremely low prices. Therefore your COC return will be closer to 10% over the 7 years. If you consider that then you can see why @Joe Villeneuve is stating that you stick to the stock market. Investing that 70K in the market over the 7 years at a 8-10% return gives you close to the same amount. In order to invest in a place where appreciation is a big factor, you would need to accumulate several years of savings because property in those areas are much more expensive that 36K.

I admire your conviction though and if that is your path then by all means stick to it. There are plenty of positives to being debt free. However know that it lengthens the time it takes to get to the same point as someone who uses leverage.

I am thankful for quite a few things with BP.

1) Deal analysis and advice here helped me buy my first fully rental property (4 unit in Albany park that is cash flowing very well even as i live in one unit)

2) Listing Agent for my condo was met through BP

3) Flip i am working on now is with a partner that was introduced to me through a BP memeber

4) 2 Flips i have under contract are both with a partner i met through BP (same one working with @Wendell De Guzman so i have to thank him and BP for that.

So from Feb to Nov i have bought over 1 mil in property, both flips and rentals, through BP associations. (now to get to 1 mil in equity)

You took a big risk and it paid off. Congratulations. That was some hard work and good due diligence.

@James Wise I agree with you on the fact that the owners could have fixed it up or even listed it without fixing it up and got a higher price. However the fact that they could not even pay the 5K to stop the tax sale tells me that they could not afford to list and wait for a buyer. If they didnt do anything they would have lost the house immediately. The OP was contacted by them and paid 5K of his own funds to stop the sale and in the process risked his money (no guarantee that the sellers would go through the deal). He then spent attorney fees on getting the entire probate aspect done. After that he placed it under contract for what the sellers wanted.

I personally do not see how he took advantage of the sellers. With an 800K arv, 50K is nothing. that is similar to a realtors commission.

Congratulations on your success. Definitely an inspiration.

I follow the 3X income rule also. Those who meet that rule in whatever area you are in tend to be more financially stable than those who dont.

It might not be the best deal but it is not a horrible deal. Some people here aim for 100 a door with rentals which is right where you are. You might not make a lot each month but the tax savings from depreciation and the mortgage pay down should not be overlooked. Over the long term this could be a good deal. Hopefully it is in a A or B area so that it also appreciates.

Best of all it was a good learning experience.

Congrats on your first deal!!!