All Forum Posts by: Cheryl C.

BryanA,

I think CF vs appreciation is often the same as the 50% rule. And you are right, I've never lived on any of our RE profits. Most have always been redeployed via 1031. We will take the tax free personal residence sale though! We also had some loss-carry forwards from the time period before RE Professional tax treatment.

My point is that many people that come here don't plan on living off the CF. For instance, for DC couple I've been talking to wants 2 or 3 places to get paid off in time for their children's college tuition. They are new to investing and I don't get the impression that can/want to deal with the places you would have to buy around here to get the 50%. I don't mean to say one way is better than another.

I'd go along with Charles except 25-30yrs and about double the RE NW.

Sharad, I could give you particular developments if you want. Around the Northern Virginia area certain locations got really creamed (over-corrected) and we have had quite a bounce, I neglected to mention two properties that I bought as intended rentals and ended up flipping. I can look up the addresses, but I don't want my personal info out on the web. One I bought from Deutche Bank for 115K. It was 2-3 yrs old 3/2.5 SFD. After about 4k fix-up, I sold it immediately for 196K. Net was about 60K. Another was 104K and sold for 135K. Net 20K. There are plenty of examples of prices even doing a double since 2008. I'm not questioning whether certain areas of the country have good properties that meet the 50% rule (and I should have said that). I doubt you'll find that in DC.

So, if the 150K place is 220K in a few years (due to the factors I already cited) is this worse than one would get with the 50% rule? I bought something nearby last year for 115K, with rent at $1,300. I bought something a few months ago for 155K with current (also reo/short) comps at 175-200K. Rents are $1,500. All are within a mile of the new subway and the hottest location outside the beltway.

The 50% rule is being interpreted by new visitor's as applying to every investor and every situation. There are some people (like me) that are mom and pop and don't live off the CF, but want some good long term appreciation with good areas and quality tenants. It's a trade-off, I know.

Just as an example and not saying there are any guarantee's, we bought a house in 1985 for 95K a year before the subway opened. We sold it in 1987 for 189K (FSBO). Then we flipped a new TH (that we had actually owned only 2wks) and cleared 60K. Then we sold another new construction that we only lived in 6 months - purchase 234K and sale 360K (FSBO). There were a couple other smaller ones, but all this was in a 5yr time period and before we were 30. My point is that CF is not the only way to make money. Different avenues for different people.

BryanA, granted I haven't been on BP long but I've never seen the 50% rule "qualified" as applying only to full-time investors who make a living off their rentals. In fact it is being put out as a rigid rule for new investors as well as experienced. I think that buying in low-end areas is the worst thing a brand new LL could do. Dealing with those type of properties and tenants takes alot of experience imo. I am talking with a new prospective LL where husband and wife have good FT jobs and an infant. I suggested a very good deal and they came back and said it doesn't meet the 50% rule. The property (150K) would produce a positive CF with their intended 30K down. Rents are about $1,400. The thing is that the area is exploding with growth and jobs, is exremely popular with tenants and....a new subway station is opening within walking distance in 2yrs.

I'm long term buy and hold and look for underpriced places in good areas with above average appreciation potential. For example; over the past 2.5 yrs I have purchased a number of properties that have already gone up 20-50%. Rents are up regionally 8% YOY. How many $100 doors would I need to deal with "in the hood" to get the couple 100K I've seen on recent purchases?

John,

But the question is: pay your mortgages for how long? I am pretty conservative on values because I'd only be deluding myself otherwise. Total assets to debt is a good number to look at. Are you asking whether one's other income (outside of rent) is sufficient to carry your properties?

Thanks Bryan. I'll have to check it out. There are so many paths up the mountain, but the view from the top is still the same! (Little River Band).

I was thinking about a similar post: CF vs appreciation. I agree with almost all the posts so far. Buy low in good areas with good tenants, where appreciation will out-perform. Sit back, relax and let the tenants buy houses for you. End game: staggered sell-off of free and clear property and taking back the paper.

Thanks for all the great advice. I've alreadt talked to Farmer's and State Farm and plan to drop off packages of my declaration pages for all policies tomorrow. I'm also going to follow up with Jason T. (thanks Jason). I told my Allstate agent about the Allstatesucks site - she knew about it.

Do they really mean 57% turnover per year????

Thanks Bryan. I'll have to take a deeper look at these numbers. At first blush, many of these expenses do not apply to my situation. I'm signing off to fix my computer - triple posts!!