The Real Estate Investing Thread

[bucket]

I wonder if there is any large investment entities impacting housing pricing and supply.   Maybe certain entities, like one that just bought 17,000 houses.   

I'll leave out Pit level commentary.

As a home owner it doesn't necessarily bother me because I'm seeing my home valuation increase. However, it's really troubling when you consider what it means for home ownership among millennials, lower class and middle class families.

It basically amounts to a tax increase, unless you are looking to move somewhere where housing is significantly cheaper.

True.

[sonofdaxjones]

I wonder if there is any large investment entities impacting housing pricing and supply.   Maybe certain entities, like one that just bought 17,000 houses.   

I'll leave out Pit level commentary.

That’s not moving the needle much at all


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That's just one example

[steve dave]

I wonder if there is any large investment entities impacting housing pricing and supply.   Maybe certain entities, like one that just bought 17,000 houses.   

I'll leave out Pit level commentary.

That’s not moving the needle much at all


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That's just one example

I know, I was talking about the macro trend. It’s not moving the needle much.


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[KITNfury]

I wonder if there is any large investment entities impacting housing pricing and supply.   Maybe certain entities, like one that just bought 17,000 houses.   

I'll leave out Pit level commentary.

That’s not moving the needle much at all


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That's just one example

I know, I was talking about the macro trend. It’s not moving the needle much.


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Correct, there is no boogie man here. Just short supply and low interest rates. Interest rates can rise, prices will fall, and monthly mortgage payments will be similar so affordability will be similar.

Want lower property values? Create more housing. But that will take time and the current climate isn't conducive for it.

[passranch]

But isn't that just because we have Chip and Joanna ship-lappin' up the whole place so we don't need fancy new houses anymore?

[mocat]

no it's because there were empty foreclosed houses sitting around everywhere in the 2010s

[KITNfury]

Today I'm closing on my 2 kids "college funds".

They aren't home runs, probably getting a slight discount from retail, but not a lot. But they fit my criteria. They are 2 full duplexes, identical and side by side, in a good KC suburb. After year 1, they should cashflow around 5-8% of my down payment. That number will climb over the years as rent creeps up. But, I expect appreciation will be pretty good since the area is nice.

What I plan to do is give each kid one when they turn 18, or 21, or 25.....whenever I feel they are mature enough lol. But they should be able to take out a HELOC to pay for college, which the rental income will pay off. So they will essentially get free college. If college isn't the right fit for them, they could move out of my house, live in one side and the rent from the other should be high enough at that time to let them live mortgage/rent free. And if they are smart, they'll start saving like crazy.


Just a thought for anyone with young kids. Although the best way IMO, is if you can find a fixer and refinance all your personal cash out (or most of it), get a basically fully financed house that pays you each month, then do the HELOC thing to pay for their college. Then college becomes truly free. I wanted that, but I also wanted identical appreciation as to not potentially rip off one kid if one area went up a lot and the other did not haha. Anyway, this post is already longer than I intended, so......

[meow meow]

sounds like everything is free, no expenses or consequences 

[Justwin]

Today I'm closing on my 2 kids "college funds".

They aren't home runs, probably getting a slight discount from retail, but not a lot. But they fit my criteria. They are 2 full duplexes, identical and side by side, in a good KC suburb. After year 1, they should cashflow around 5-8% of my down payment. That number will climb over the years as rent creeps up. But, I expect appreciation will be pretty good since the area is nice.

What I plan to do is give each kid one when they turn 18, or 21, or 25.....whenever I feel they are mature enough lol. But they should be able to take out a HELOC to pay for college, which the rental income will pay off. So they will essentially get free college. If college isn't the right fit for them, they could move out of my house, live in one side and the rent from the other should be high enough at that time to let them live mortgage/rent free. And if they are smart, they'll start saving like crazy.


Just a thought for anyone with young kids. Although the best way IMO, is if you can find a fixer and refinance all your personal cash out (or most of it), get a basically fully financed house that pays you each month, then do the HELOC thing to pay for their college. Then college becomes truly free. I wanted that, but I also wanted identical appreciation as to not potentially rip off one kid if one area went up a lot and the other did not haha. Anyway, this post is already longer than I intended, so......

In no way is college truly free in your example.

[KITNfury]

Today I'm closing on my 2 kids "college funds".

They aren't home runs, probably getting a slight discount from retail, but not a lot. But they fit my criteria. They are 2 full duplexes, identical and side by side, in a good KC suburb. After year 1, they should cashflow around 5-8% of my down payment. That number will climb over the years as rent creeps up. But, I expect appreciation will be pretty good since the area is nice.

What I plan to do is give each kid one when they turn 18, or 21, or 25.....whenever I feel they are mature enough lol. But they should be able to take out a HELOC to pay for college, which the rental income will pay off. So they will essentially get free college. If college isn't the right fit for them, they could move out of my house, live in one side and the rent from the other should be high enough at that time to let them live mortgage/rent free. And if they are smart, they'll start saving like crazy.


Just a thought for anyone with young kids. Although the best way IMO, is if you can find a fixer and refinance all your personal cash out (or most of it), get a basically fully financed house that pays you each month, then do the HELOC thing to pay for their college. Then college becomes truly free. I wanted that, but I also wanted identical appreciation as to not potentially rip off one kid if one area went up a lot and the other did not haha. Anyway, this post is already longer than I intended, so......

In no way is college truly free in your example.

It is as long as the property doesn't lose value. The down payment may not be easily accessed, but it's still there.

Example:
Buy something worth $200,000. And let's make some assumptions that are not guaranteed to happen, but are likely.

Assumptions:

• 7% ROI based on down payment on average over 15 years
• Home value increase of 2% per year

Ok, so you buy this $200k property and have to put $40k as a down payment. In 15 years, assuming you get a 30 year mortgage at 4.125%, you will owe about $104k. It will also be worth around $270k. You would have about $165k in equity. So, you could simply sell the house, pay yourself back the $40k, and have $125k leftover to pay for college. Less actually due to capital gains, but you get the picture.

And oh by the way, you've been getting 7% on your down payment, totaling $42k over the 15 years. So you doubled your investment and paid for college.

Or, you could sell the property to your kid to get your $40k back. Since you would owe $104k, you would sell it for $144k to pay off the loan and get your $40k. They would then have a property with around $136k in equity. Plenty to take out a HELOC for college that the renters would pay back down.

Lots of scenarios that work fantastically as long as the property does not drop in value. Granted, the money is tied up (assuming you don't do a cash-out refinance at some point), but it's still there.

[yoga-like_abana]

I feel like that works really well with multiple properties but when you just have 1 you then have possibilities/probability of new roof, siding, updates, furnance, a/c, heater goes out. Still worthwhile in long run?

[wetwillie]

Wouldn’t it be easier to just put your 40k into a tax sheltered 529 and then have the exact same amount to give your child

[catastrophe]

Right, doubling your investment over 15 years is the floor (really the basement) when you have available market tracking ETFs that grow completely tax free.

I take it you believe there is more upside with the investment property but there is obviously more risk and work between debt management and property maintenance.

All that said, seems like a good intro to real estate for the kids if you ask me. I do wish I had more exposure to that investment vehicle growing up because at this point I’ve entirely lost interest in it.

[KITNfury]

Guys, that's way more than doubling your money. You got $56k in mortgage pay down, done by the renters. You got $42k in cash. And you got $70k in appreciation. My numbers are different, but I'll be gifting the appreciation and mortgage pay down to my kids.

[KITNfury]

I feel like that works really well with multiple properties but when you just have 1 you then have possibilities/probability of new roof, siding, updates, furnance, a/c, heater goes out. Still worthwhile in long run?

I factor in all capital expenditures, like a new roof, into my projected ROI.

[sys]

In no way is college truly free in your example.

 

[yoga-like_abana]

was listening to a podcast the other day that mentioned using a self directed IRA to purchase real estate. Seemed like an interesting concept

[Kat Kid]

was listening to a podcast the other day that mentioned using a self directed IRA to purchase real estate. Seemed like an interesting concept

I think self-directed IRAs are difficult to get approved.

[yoga-like_abana]

was listening to a podcast the other day that mentioned using a self directed IRA to purchase real estate. Seemed like an interesting concept

I think self-directed IRAs are difficult to get approved.

Yeah, didn't sound like it was for the average joe.

[KITNfury]

Very specific rules to using a self directed IRA with REI. One that I don't like is that positive cashflow goes back into the IRA.

I'd look at a syndication if I were using an IRA. Keep it completely passive.

[yoga-like_abana]

Alright nerds.. chatted with the bank can lock in 2.5% and cash out refi close to $70k. Is there any reason why I shouldn't do this? I'm almost 5 years into my current 15 year mortgage.

[steve dave]

No good reason not to imo.

[wetwillie]

Sign that deal immediately

[steve dave]

I cashed out a massive amount at 2.125% and it’s one of the better decisions I’ve ever made.

[yoga-like_abana]

This is what I needed to hear. Thanks gE!


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