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      06-23-2020, 08:41 PM   #23
BimmerDimmer6
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Originally Posted by dsad1 View Post
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Originally Posted by corn18 View Post
I thought leverage was what made RE investing profitable? If I have $100k to invest, I could buy one property for $100k cash and get what, $500/mo rent? Not a great ROIC. But if I buy 4 properties w/ $25k downpayment, I can get a much better ROIC and reduce my risk.
Not sure how that reduced risk. What happens when a pandemic comes, you lose a quarter of your tenants and now lose all four properties to the bank?

I agree that leveraging assets in a smart way can very much boost returns, but it doesn't reduce risk.
Highly unlikely you'd lose every tenant at the same time, but even if you did you should have enough cash to cover the mortgages for YEARS as you didn't pay for them in cash. You're "leveraging" your risk in that regard.

I'm surprised you guys are so against leveraging, I get most of you guys have typical jobs and view your house as a place you live, but I just see them as boxes that pay me every month and appreciate over time.

I should also add I bought most of these units during the downturn from 08 - 2013 when the numbers made a lot more sense. I wouldn't touch anything with a ten foot pole right now as far as rentals go.

To give you guys an idea I'm positive cash flowing about $9k/ MO from my 16 doors.

This doesn't include appreciation.
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      06-24-2020, 09:45 AM   #24
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Quote:
Originally Posted by BimmerDimmer6 View Post
Highly unlikely you'd lose every tenant at the same time, but even if you did you should have enough cash to cover the mortgages for YEARS as you didn't pay for them in cash. You're "leveraging" your risk in that regard.
"Years" sounds extreme but agree that emergency cash is a requirement and that uninvested cash drag is part of the "cost" of rentals.

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Originally Posted by BimmerDimmer6 View Post
I'm surprised you guys are so against leveraging, I get most of you guys have typical jobs and view your house as a place you live, but I just see them as boxes that pay me every month and appreciate over time.

I should also add I bought most of these units during the downturn from 08 - 2013 when the numbers made a lot more sense. I wouldn't touch anything with a ten foot pole right now as far as rentals go.
Yes, it doesn't really make sense without the benefit of leverage. Although it seems like buying at normal prices (not 08-13 discounts) and getting "normal" 3%-5% appreciation is still enough to earn a pretty good premium over normal stock investments, no? Different story if you're thinking everything is so expensive right now they will depreciate.

So, BimmerDimmer, if you literally had that $500k, would you buy one ~$2M multifamily unit ($400k down at 20%, $100k leftover for reserves) or would you "diversify" and buy, say, 5 different units for a total of ~$2M?
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      06-24-2020, 10:14 AM   #25
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Not sure how that reduced risk. What happens when a pandemic comes, you lose a quarter of your tenants and now lose all four properties to the bank?

I agree that leveraging assets in a smart way can very much boost returns, but it doesn't reduce risk.
It doesn't... leverage works both ways! Not against using leverage but folks need to understand how it can work for you on the upside AND against you on the downside.
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      06-24-2020, 01:58 PM   #26
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Regarding RE investing - how do you guys feel about buying properties out of state and having them managed remotely and such?

My problem is that while I make a nice 6 figure salary, real estate in my area is still 10x what I make and essentially untouchable for beginner investors. I'd need $75k minimum for a 5% down payment in most cases (median price is $1,300,000) and the mortgage would be more than you can rent it for unless you put closer to 20% down - at which point you're talking $200,000 down payments.

If I could snag 4 properties for $25k each that would net me an extra $500 per month over the mortgage payments, that'd be a sweet deal right now.
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      06-24-2020, 02:39 PM   #27
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My B-I-L has it all sorted, lol. I asked him one day what his ultimate goal is - and he said he wanted to be a billionaire. He is well on his way.

In addition to his full time job as a partner with a Big-4 accounting firm in transactions and deals - he has his own side hustle.

What is it? He buys diamond mines. I believe he has a large stake in about 4 of them right now. He lives in Africa and said he is thinking of moving. I assumed here - nope, he wants to move to Russia. Says it's like the wild west over there and so easy to make lots of money.

Not my cup of tea, but more power to him, lol.
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      06-24-2020, 02:40 PM   #28
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Quote:
Originally Posted by NorCalAthlete View Post
Regarding RE investing - how do you guys feel about buying properties out of state and having them managed remotely and such?

My problem is that while I make a nice 6 figure salary, real estate in my area is still 10x what I make and essentially untouchable for beginner investors. I'd need $75k minimum for a 5% down payment in most cases (median price is $1,300,000) and the mortgage would be more than you can rent it for unless you put closer to 20% down - at which point you're talking $200,000 down payments.

If I could snag 4 properties for $25k each that would net me an extra $500 per month over the mortgage payments, that'd be a sweet deal right now.

I own several properties overseas that are managed by a mgmt company. This has worked well for me because I rent them out as vacation rentals, not primary residences.

In addition - none of them have any debt or mortgages. That is also a key, I believe. Having a loan on an investment property out of area is just asking for trouble.
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      06-24-2020, 04:34 PM   #29
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Originally Posted by Run Silent View Post
I own several properties overseas that are managed by a mgmt company. This has worked well for me because I rent them out as vacation rentals, not primary residences.

In addition - none of them have any debt or mortgages. That is also a key, I believe. Having a loan on an investment property out of area is just asking for trouble.
Have you ever actually seen them in person? How'd you pick them out / pick out the management company / etc? What was your initial investment cost?
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      06-24-2020, 05:09 PM   #30
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Quote:
Originally Posted by BimmerDimmer6 View Post
Highly unlikely you'd lose every tenant at the same time, but even if you did you should have enough cash to cover the mortgages for YEARS as you didn't pay for them in cash. You're "leveraging" your risk in that regard.

I'm surprised you guys are so against leveraging, I get most of you guys have typical jobs and view your house as a place you live, but I just see them as boxes that pay me every month and appreciate over time.

I should also add I bought most of these units during the downturn from 08 - 2013 when the numbers made a lot more sense. I wouldn't touch anything with a ten foot pole right now as far as rentals go.

To give you guys an idea I'm positive cash flowing about $9k/ MO from my 16 doors.

This doesn't include appreciation.
In the hypothetical scenario proposed you would be putting 75% leverage on each of the four buildings. You wouldn't need to lose all your tenants to not be able to make the loan payments, 20%-30% vacancy would put you in a lot of trouble. You wouldn't have any cash available since you spent all your $100k on the 4 properties.

I am not against leveraging, but putting 75% leverage on 4 buildings isn't a "low risk" proposition.

Last edited by dsad1; 06-24-2020 at 05:40 PM..
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      06-24-2020, 05:50 PM   #31
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Quote:
Originally Posted by BimmerDimmer6 View Post
Highly unlikely you'd lose every tenant at the same time, but even if you did you should have enough cash to cover the mortgages for YEARS as you didn't pay for them in cash. You're "leveraging" your risk in that regard.

I'm surprised you guys are so against leveraging, I get most of you guys have typical jobs and view your house as a place you live, but I just see them as boxes that pay me every month and appreciate over time.

I should also add I bought most of these units during the downturn from 08 - 2013 when the numbers made a lot more sense. I wouldn't touch anything with a ten foot pole right now as far as rentals go.

To give you guys an idea I'm positive cash flowing about $9k/ MO from my 16 doors.

This doesn't include appreciation.


how is it positive cash flow if you have a mortgage? I'm assuming you do carry one, from your previous posts. Please forgive if i'm incorrect.
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      06-24-2020, 07:28 PM   #32
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Quote:
Originally Posted by Run Silent View Post
My B-I-L has it all sorted, lol. I asked him one day what his ultimate goal is - and he said he wanted to be a billionaire. He is well on his way.

In addition to his full time job as a partner with a Big-4 accounting firm in transactions and deals - he has his own side hustle.

What is it? He buys diamond mines. I believe he has a large stake in about 4 of them right now. He lives in Africa and said he is thinking of moving. I assumed here - nope, he wants to move to Russia. Says it's like the wild west over there and so easy to make lots of money.

Not my cup of tea, but more power to him, lol.
Dude...that's some James Bond-villain level machination. I'm impressed.
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      06-24-2020, 11:59 PM   #33
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      06-25-2020, 10:17 AM   #34
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Quote:
Originally Posted by NorCalAthlete View Post
Have you ever actually seen them in person? How'd you pick them out / pick out the management company / etc? What was your initial investment cost?
Yes - I travel overseas regularly and check on them, was in country when I purchased them.

They are all oceanfront condos and I purchased them for around $80K each or so. They would be comparable to $500K condos in Florida if you are trying to get a gauge. They vary in rental charges, but are roughly $1000/wk. About 1500sqft each or so.

Property management company is a well established and well known company in the local country.
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