All Forum Posts by: Frank Jiang

You amass wealth by working hard, solving difficult problems better than anyone else, and living significantly below your means.  What degree you pick is basically inconsequential.

I think you'll get laughed off the table if you make an offer like this. Your friend has to have some incentive to loan you money.  How would you respond if I asked you to borrow $10,000 and I offered to pay you $1,000 a year for the next 10 years in repayment?

This is a pretty straightforward deal. You have a house with 72k ARV, 37k purchase price and 20k necessary repairs (do you have comps to justify 72k? quotes on necessary work to justify 20k repair expense? You're at 80% of ARV for costs btw, over the much quoted 70% rule) so you have a 15k pie.

You can either take out a private loan from your friend (which you'd have to pay at least ~12% interest on if you got it on the open market) or offer your friend an equity share of the profit in addition to their initial investment back.  You'll find that if you approach people in a way that let's them make money and you appear to have solid research and planning, finding funding will be incredibly easy.

I'm not exactly suggesting house hacking.  I'm suggesting to increase your balance sheet and acquire more houses through owner occupancy.  You would trade your current house for a similar house and move into that one instead, converting your current into a rental.  Then rinse and repeat either once a year or every other year if you want the tax benefit on capital gains.  You buy each house with the intent of turning it into a rental later and you do your analysis as if it were an investment property.  This is a good way to build a portfolio with limited funds since financing on owner occupied loans don't require as much money down.

That said, $50 a month after expenses is pretty tight (I hope it's $50 after accrual for repair and capex and not before).  You're risking running into a liquidity problem if a few things go wrong together.  This strategy in general is risky for liquidity since you're taking out a bunch of 95-96.5% loans on your portfolio, but on the flip side it's a game you can play with a relatively small amount of capital.

It's awesome that you've actually thought these scenarios through.  I would say your assessment of the risks that come with each method are pretty accurate.  Which strategy you choose should be dependent on your personal goals.

Would you be able to cash flow if you rented out your current primary? I personally believe now is a good time to lever up and inflate your balance sheet. From my perspective, the best way to do this in your situation would be to rent out your current home and buy a new home using either a 3.5% FHA or 5% conventional using your available cash.

A house I'm looking at has some stress in its internal support and I'm unsure of what's causing the problem.  I know basically nothing about this sort of issue.  Possible culprits are the house had an addition built on the front side of the second floor, it has a free hanging patio, and there looks like there might have been some water damage in the garage at some point.

Load bearing beam in garage (basement) of a house I'm looking at has cracks along the entire width and some slight bowing towards the front of the house.  Cracks are maybe half a centimenter wide at worst points.

There also appears to be some integrity issues outside.  This photo is of the area right above the garage on the side of the house.

Here's a photo of the front of the house with the addition at the top and the free hanging patio shown.  Window shown in the third picture is the window on the right side of the house above the garage.

Any suggestions on what I should be looking for to remedy and how much it might cost me?

David,

FHA and conventional loans under 20% are subject to PMI. If you believe you will use the savings from an FHA loan (20 - 3.5% = 16.5% of property price) to make more than the cost of borrowing and the cost of PMI, by all means do that.

Keep in mind that non-primary housing loans will require 20-25% down.

Bottom line is, it's actually quite expensive to take out a loan less than 20%. Can you beat that IRR through investment? Is it worth the additional risk you take on from that extra investment?

Absolutely.

You'll see a lot of activity on BP looking for deals with: No money down, No Income, and Creative Financing.

But would you rather approach a business venture trying to hustle with the above or would you rather have: sustainable fallback income in case of failure, money in your pocket to quickly close deals, and non-creative financing that'll net you the cheapest possible rate and thus boost your bottom line?

Getting a cat to live there for a week is a great idea.  Rats will vacate to a new location quickly when they smell cat urine.

My favorites are:

http://www.mrmoneymustache.com/2012/01/13/the-shoc...

- Describes required working time as a function of how much of your income you save.

http://www.mrmoneymustache.com/2012/12/18/your-mon...

- Describes how to calculate all purchases you make in units of hours of your life instead of dollars.  Since your life is infinitely valuable to yourself, it puts your purchases in unique perspective.

http://www.mrmoneymustache.com/2014/11/11/are-you-...

- Describes how to overcome 'temporal discounting' (stealing from your future self for present day happiness).

Much appreciated.  I wish you the best of luck in all of your future endeavors as well.

Nowhere did I make a blanket statement that no one should use a buyer's agent.  The comment I took offense to was the comment by Tony stating that working with a buyer's agent is free since the commission is paid for by the seller.

This is simply not true and I feel I've demonstrated how a savvy buyer can reduce purchase price by cutting out the middle man.  It's perfectly fine to use a buyer's agent as long as the buyer understands the cost of this service.  Most buyers do not since many realtors spread the misinformation that "it's free" because it's a simple and convenient answer.  The buyer's agent realtor likely even believes this misinformation themselves, but that doesn't make it any more true.