4th Is over and everyone is selling their toys??

[HTMike]

Can you imagine the opportunity cost of doing that by paying off each house before you bought another? The impact to your retirement income and net worth would be staggering. You’d end up with 3 homes instead of 15.

Right, but at that point you're running a business and using leverage to scale a business. I don't think that's what's really being discussed here.

 

[Cdog]

Wells Fargo Plans to Stop Offering Personal Lines of Credit

Wells Fargo to Shut Personal Credit Lines in Shift to Cards

Wells Fargo & Co. said it’s shutting down all existing personal lines of credit and will no longer offer the product to its customers.

www.bloomberg.com

Hmmmm........

 

[HALLETT BOY]

When I had my shop , I would receive numerous auto related publications every month . The common narrative between all articles were that 75% of the driving public did not have $1000 cash for an emergency repair . That’s a very small reserve . Tighten your belts , boys .

 

[LargeOrangeFont]

Right, but at that point you're running a business and using leverage to scale a business. I don't think that's what's really being discussed here.

I'd argue you are the CEO of the business of yore entire life.

 

[Cdog]

I don't disagree

I don't wan't"All" my money those two spots either. My point was that when the consumer debt is gone. You can be free to invest and pay the primary off ahead of schedule. Once that is done weather it is age 30 or 50 you can really move the ball and pound money into whatever investments you love and understand. For me it's real estate and low cost index funds for Dave Ramsey it's real estate and managed mutual funds for others it's Gold and single stocks or all the above.

We got derailed on the Dave Ramsey thing and his plan and lack of work life balance etc. He teaches to never put extra on your house unless you are investing 15% of you annual income into retirement. People always miss this but he also teaches that you should be enjoying life and taking vacations and " living like no one else " as he calls it.

He only teaches to be super intense and focused when paying off your Non mortage debt. Then you move from intense to intentional.

He has 7 steps to his plan but 90% of the people quit listening after step 2 which is the "get your act together and have a plan" part of the steps. Then they run around talking about what his plan is and they have missed the majority of the teaching.

It's not a horrible plan. But I'm all for maximizing your deductible expenses while your in your high earning years. The more you make, the more they take.

These cycles we all live through make millionaires out of paupers. Then reset a lot of them back to pauperdom. The money is made on the buy like a wave, it's all about timing. You'll miss a lot of Opportunity if you're waiting to pay off your primary residence.

 

[LargeOrangeFont]

I don't disagree

I don't wan't"All" my money those two spots either. My point was that when the consumer debt is gone. You can be free to invest and pay the primary off ahead of schedule. Once that is done weather it is age 30 or 50 you can really move the ball and pound money into whatever investments you love and understand. For me it's real estate and low cost index funds for Dave Ramsey it's real estate and managed mutual funds for others it's Gold and single stocks or all the above.

We got derailed on the Dave Ramsey thing and his plan and lack of work life balance etc. He teaches to never put extra on your house unless you are investing 15% of you annual income into retirement. People always miss this but he also teaches that you should be enjoying life and taking vacations and " living like no one else " as he calls it.

He only teaches to be super intense and focused when paying off your Non mortage debt. Then you move from intense to intentional.

He has 7 steps to his plan but 90% of the people quit listening after step 2 which is the "get your act together and have a plan" part of the steps. Then they run around talking about what his plan is and they have missed the majority of the teaching.

Agreed, people do get all wrapped around the axle on Dave Ramsey. At the end of the day they are solid principles especially if you don't know how to manage your finances.

As Cdog mentioned, I am also about investments that minimize my tax burden at the same time, which is how I even got into RE as an investment vehicle in first place.

 

[Cdog]

Yet here you are...

Your hypocrisy knows no bounds.

That’s why it’s funny dude. Are u offended somehow?

 

[badgas]

Agreed, people do get all wrapped around the axle on Dave Ramsey. At the end of the day they are solid principles especially if you don't know how to manage your finances.

As Cdog mentioned, I am also about investments that minimize my tax burden at the same time, which is how I even got into RE as an investment vehicle in first place.

You and me both, That is why I also love rental real estate that gets depreciated.

The primary home mortgage write off is sort of mirage. In 2019 less that 14% of Americans even itemized thier taxes so for 86% of the population it does not even come into play.

For the the 13.7% that did write off the mortage interset i'm sure there are a few who hit the spread on the invested difference and that is all good. This is a really small number, yet 86% of amercians sit around talk about what a great write off the home mortgage interest is and they don't even take it.

Good fun love the discussion.

 

[pronstar]

I know many that where on this plan ( some family and a very close friend) last time around and lost 100% of their real estate both rental and personal. This is why I am much less risk tolerant than others because I have watched people close to me crash and burn. I know there are others out there maybe you are one of them that can put 50%+ down on a 15 year note so it is almost bullet proof providing your tennant keeps paying. That is great for them, just not for me.

There is just a peace anout not being leveraged.

You mentioned being worried about a lawsuit target becasue of equity ? If you are planning on a six figure annual income off rentals then plan on having a lot of equity. Rentals don't cashflow without equity.

20%-ish equity position by forcing equity.

Rentals bought in the MLS don’t really work in my area.

Buy distressed, rehab, refinance out to recover your initial investment. This how we force equity.

We flow a few hundred a month in cash.
We have 20%-ish equity.
We have zero of our own dollars in the deal (or very little).

The plan I presented doesn’t pay me with cash flow.
It pays me with debt. Debt that the renter is paying for me.

Edit:
Cash is a tool to make more cash.
Unused equity is a tool that’s just sitting and depreciating due to inflation. Far better to put it to work IMHO

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[badgas]

20%-ish equity position by forcing equity.

Rentals bought in the MLS don’t really work in my area.

Buy distressed, rehab, refinance out to recover your initial investment. This how we force equity.

We flow a few hundred a month in cash.
We have 20%-ish equity.
We have zero of our own dollars in the deal (or very little).

The plan I presented doesn’t pay me with cash flow.
It pays me with debt. Debt that the renter is paying for me.


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I'm familiar with the BRRR method.

I was pointing to your quote about equity putting a target on your back.

My take was as some point if you are going to have money to spend ( the $100,000 income you mentioned ) after you pay your mortgage and taxes you will need equity.

That equity might be $100,000 on one house or $2,000,000 across several homes.

That few hundred per month will need to be several thousand. You will get there but at that point you will have a lot of equity and that will be a good proeblem to have.

 

[pronstar]

I'm familiar with the BRRR method.

I was pointing to your quote about equity putting a target on your back.

My take was as some point if you are going to have money to spend ( the $100,000 income you mentioned ) after you pay your mortgage and taxes you will need equity.

That equity might be $100,000 on one house or $2,000,000 across several homes.

That few hundred per month will need to be several thousand. You will get there but at that point you will have a lot of equity and that will be a good proeblem to have.

We’re speaking the same language.

One way to minimize risk is by putting each house in its own encapsulated legal entity. So the issue of having a lot of equity spread over multiple assets is minimized.


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[Mrs. Riley1]

20%-ish equity position by forcing equity.

Rentals bought in the MLS don’t really work in my area.

Buy distressed, rehab, refinance out to recover your initial investment. This how we force equity.

We flow a few hundred a month in cash.
We have 20%-ish equity.
We have zero of our own dollars in the deal (or very little).

The plan I presented doesn’t pay me with cash flow.
It pays me with debt. Debt that the renter is paying for me.

Edit:
Cash is a tool to make more cash.
Unused equity is a tool that’s just sitting and depreciating due to inflation. Far better to put it to work IMHO

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I have a question. I’m new to this game so bear with me lol
I just purchased my first rental property in May and I put 20% down. So I should refinance and take that money back out to put on a down payment for another property?

 

[pronstar]

I have a question. I’m new to this game so bear with me lol
I just purchased my first rental property in May and I put 20% down. So I should refinance and take that money back out to put on a down payment for another property?

If you bought it off the MLS at market pricing (not distressed), I doubt you’ll flow cash with zero dollars in the deal.

Refinancing to pull your initial investment really only works when you buy distressed, and renovate to force equity.


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[traquer]

If you bought it off the MLS at market pricing (not distressed), I doubt you’ll flow cash with zero dollars in the deal.

Refinancing to pull your initial investment really only works when you buy distressed, and renovate to force equity.


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So let's say you buy something for 400 with 10% down =40k, then invest 60k cash in it, then have it appraised for 550k. How much will they let you take out?

 

[86403]

239 posts later and were no closer to answering the OP’s original question,
“4th Is over and everyone is selling their toys??”

 

[pronstar]

So let's say you buy something for 400 with 10% down =40k, then invest 60k cash in it, then have it appraised for 550k. How much will they let you take out?

Depends on the lender.
70-80% cash out seems sorta typical for investment properties.


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[HTMike]

That’s why it’s funny dude. Are u offended somehow?

You don't think what I said was funny ? Its words on a screen... I'd click the Red X in the top right corner LONG before I got mad at looking at words on a screen.

 

[HTMike]

I'd argue you are the CEO of the business of yore entire life.

True.. but you may be more conservative with your personal finances than you would be with your business finances...

That's just me though. I have been in business for over 23 years and we haven't used leverage of any kind for 20 of them. Tortoise and the Hare is the kind of race I like to run.

 

[badgas]

I have a question. I’m new to this game so bear with me lol
I just purchased my first rental property in May and I put 20% down. So I should refinance and take that money back out to put on a down payment for another property?

Since this is your fisrt property, I would take it slow. @pronstar is right unless you picked up a distressed property the equity from May to July is probably not a big jump but who knows in this crazy market.

This high leverage plan is a recipe for bankruptcy. Go slow and take a year to learn how to be landlord. Talk with your CPA after a year and see what you are really making after taxes and depreciation etc.

Make sure can master one before you move on to another.

The Tortoise always wins

 

[pronstar]

Real estate is NOT “get rich quick”.

Real estate is “get rich slowly” and even then, you need to play your cards right.


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[K-DOG]

239 posts later and were no closer to answering the OP’s original question,
“4th Is over and everyone is selling their toys??”

Everyone that I know that is selling are only doing it to take advantage of the high prices, not because they have to. Many are setting high prices and will sell if someone pays it but will keep if they can’t get that amount. It’s getting to the point where people are asking so much that stuff isn’t selling. Some people will pay a premium during these times but not outrageous prices.

 

[dezrtracer]

Since this is your fisrt property, I would take it slow. @pronstar is right unless you picked up a distressed property the equity from May to July is probably not a big jump but who knows in this crazy market.

This high leverage plan is a recipe for bankruptcy. Go slow and take a year to learn how to be landlord. Talk with your CPA after a year and see what you are really making after taxes and depreciation etc.

Make sure can master one before you move on to another.

The Tortoise always wins

Well said

 

[CarolynandBob]

Sorry

Late night blurry eyed math $600 per month

0 Mortage and zero debt + $600 in property taxes = $600

$2,500 mortgage + $600 in property taxes + $1,000 truck and car payments + $400 SXS payment + $700 boat payment = $5,200.00

$5,200 - $600 = $4,600.00

That $4,600.00 per month is $55,200.00 after taxes

My point was the more we have have going out that is in our control the less enslaved we are.

I assumed something like that. You had the right number in the end.

I have owned 4 rentals in the past. Just wasn't for me. Had to evict families out of 2 of them. Yes it was their fault. but I just didn't like it.

 

[COCA COLA COWBOY]

Everyone that I know that is selling are only doing it to take advantage of the high prices, not because they have to. Many are setting high prices and will sell if someone pays it but will keep if they can’t get that amount. It’s getting to the point where people are asking so much that stuff isn’t selling. Some people will pay a premium during these times but not outrageous prices.

Being in the industry, this is absolutely correct for the market at this moment. However, #SanDiego MLS had 540 price changes last week. This week it went up to 663. I follow some other MLS's here in SoCal as well as other markets on the other coast and have seen very similar price changes. Some seller's will hold, but in every market some have to sell due to divorce, death, job, etc. Those new comparable sales set the values for the new market. Our recent issue with properties not appraising has changed and now we are seeing appraisals higher that contract prices. I actually think the market will stabilize with the buyers will coming back in September. I heard the amount of people going on vacations have skyrocketed so that will also play into this as those are buyers too. One thing that is not being talked about much is interest rates. They are low! They will go up at some time. The fed has teased with this fairly recently and the market tumbled 500points. I'm still fact finding, but it's getting more and more interesting especially with Wells Fargo yesterday.

 

[motormonkey]

I don't know if I'd sell anything I would want in the future. Cash is depreciating faster than assets and you will lose holding cash and lose again rebuying in the future Interest rates need to go up or we will soon be setup for negative rates.
Wells did prewarn last year they would be pulling personal lines of credit and are testing negative rates. The bummer is if your line is pulled, it goes on your credit score.
Jobs, the real ones will be the economic tattle tail. Not the sit at home collecting gov checks ones. The government is paying those entry level jobs stay at home checks, hoping to raise the min wage when employers have to beat the government check tout hire. With all the border crossers, they will fill those.

 

[HB2Havasu]

I don't know if I'd sell anything I would want in the future. Cash is depreciating faster than assets and you will lose holding cash and lose again rebuying in the future Interest rates need to go up or we will soon be setup for negative rates.
Wells did prewarn last year they would be pulling personal lines of credit and are testing negative rates. The bummer is if your line is pulled, it goes on your credit score.
Jobs, the real ones will be the economic tattle tail. Not the sit at home collecting gov checks ones. The government is paying those entry level jobs stay at home checks, hoping to raise the min wage when employers have to beat the government check tout hire. With all the border crossers, they will fill those.

I agree with you on holding onto cash with all the inflation now. I’m keeping most of my investments in real estate, heavy metals, and 2x4’s, lol

 

[COCA COLA COWBOY]

I agree with you on holding onto cash with all the inflation now. I’m keeping most of my investments in real estate, heavy metals, and 2x4’s, lol

Lumber prices have decreased dramatically. Not to what they were, but about 50%.

 

[Looking Glass]

Lumber prices have decreased dramatically. Not to what they were, but about 50%.

Really? Where? I was in Vegas Yesterday and up there NOT $1.00 change. The guys in the Lumber Dept. said this will Never return to pre 2021.

 

[NicPaus]

Really? Where? I was in Vegas Yesterday and up there NOT $1.00 change. The guys in the Lumber Dept. said this will Never return to pre 2021.

On the exchange but it won't drop in stores until the sales slow down. My BIL is on the wholesale side of sales. No drop to customers yet.

 

[copterzach]

So, where are all the cheap toys at!??


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[DWC]

Really? Where? I was in Vegas Yesterday and up there NOT $1.00 change. The guys in the Lumber Dept. said this will Never return to pre 2021.

Framing lumber is roughly 30% more than last year. Plywood is about double but coming down quick.

 

[COCA COLA COWBOY]

Really? Where? I was in Vegas Yesterday and up there NOT $1.00 change. The guys in the Lumber Dept. said this will Never return to pre 2021.

I don’t know. A land developer told me that yesterday.

 

[snowhammer]

Really? Where? I was in Vegas Yesterday and up there NOT $1.00 change. The guys in the Lumber Dept. said this will Never return to pre 2021.

I don't think that the guys wearing orange aprons are known for their economic forecasting.

 

[sintax]

So, where are all the cheap toys at!??


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That’s what I’m wondering, not a single schiada owner has reached out to me about my offer to buy!

I’m willing to extend my offer to DCB 22’ owners now as well, I would consider single and twins...

 

[copterzach]

That’s what I’m wondering, not a single schiada owner has reached out to me about my offer to buy!

I’m willing to extend my offer to DCB 22’ owners now as well, I would consider single and twins...

Schiada’s are recession proof. They only appreciate in value.


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[LargeOrangeFont]

So, where are all the cheap toys at!??


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Wait 18 months. It will be financial armageddon by then. Or the toys will just be higher than they are now

 

[Havasu blue label]

you sure talk a lot about financial issues orange man you worried clean up the credit cards remember home equity is fake money till you sell the house

 

[Magic Mike]

I don’t know about cheap toys, but I see a lot of nice stuff listed recently. Seems like pricing on some of them a bit less ridiculous also.

 

[Magic Mike]

Tried to buy a new Suburban about a week ago, no bro deal whatsoever and I walked.
Acted like they were doing me a huge favor letting me drive/ check it out because 100 people were on the way there to buy it.
Still sitting there today…

Don’t believe the hype.

Don’t drink the Kool aid.

 

[HB2Havasu]

So, where are all the cheap toys at!??


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They will be everywhere when gas hits $5.00 per gallon by the end of the year!

 

[LargeOrangeFont]

you sure talk a lot about financial issues orange man you worried clean up the credit cards remember home equity is fake money till you sell the house

Do you start drinking early or just never stop?

I have 0 worry, I don’t have any consumer debt.

News flash - stock gains, precious metal gains, and lumber gains are also worth nothing until you sell.

Payments from renters - I can fold those up every month.

 

[Looking Glass]

I don't think that the guys wearing orange aprons are known for their economic forecasting.

Well, speaking of "Orange" I'll take The Orange Apron Guys Over L ORANGE F in any Forcasting about Anything.

 

[Looking Glass]

On the exchange but it won't drop in stores until the sales slow down. My BIL is on the wholesale side of sales. No drop to customers yet.

The "Market" is bearing it so far, But the Question is when things settle down and the True Employment picture or Lack Of It shakes out?

 

[530RL]

Tried to buy a new Suburban about a week ago, no bro deal whatsoever and I walked.
Acted like they were doing me a huge favor letting me drive/ check it out because 100 people were on the way there to buy it.
Still sitting there today…

Don’t believe the hype.

Don’t drink the Kool aid.

Toyota manufactured and sold more cars in Q2 than GM for the first time.

Now why is that? Could it be that Toyota doesn’t pay a 25% tariff on semiconductors in most of their their vehicles whereas GM does and as a result can manufacture more?

Let’s hope you are correct and domestic inventory and production comes up to settle pricing.

 

[LargeOrangeFont]

Well, speaking of "Orange" I'll take The Orange Apron Guys Over L ORANGE F in any Forcasting about Anything.

If the 2 guys here that can’t even type a coherent sentence both don’t like reading my opinions, well I’m obviously doing something right with my life.

 

[530RL]

If the 2 guys here that can’t even type a coherent sentence both don’t like reading my opinions, well I’m obviously doing something right with my life.

You seem to frown upon opinions in the section you moderate so I am surprised by your criticism?

 

[LargeOrangeFont]

You seem to frown upon opinions in the section you moderate so I am surprised by your criticism?

I always wondered when you’d bring your circular logic out of the dungeon and upstairs to the inmates in gen pop.

If this is that time, I can do what I always do to scare you away down there, and bring up your unwavering support for Jeff Flake and all his Big Government policies you in turn support while claiming to be an unwavering small government conservative.

But this is not the time or place.

 

[motormonkey]

I agree with you on holding onto cash with all the inflation now. I’m keeping most of my investments in real estate, heavy metals, and 2x4’s, lol

I'm going to start buying houses just for the lumber HAHA

 

[sintax]

I'm going to start buying houses just for the lumber HAHA

You joke, but I recently demo’d my parents bathroom, this is a early 60’s build in Corona. You should see the lumber I pulled out! This was real 2x4’s, not a single knot anywhere, looking at the end grain it was some old ass shit, reddish hue, but I don’t think it was redwood? Beautiful lumber

Either way, I can almost say that’s not all that far off

 

[WhatExit?]

You seem to frown upon opinions in the section you moderate so I am surprised by your criticism?

How'd you get out of the dungeon?