Investing for ssnlers: my 3 year anniversary gift to ssnl

[tannenj]

so do you have a roth ira, snow? neither poker nor re investing counts as "earned," right?

[snowbank]

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This is the most useful post I've read in a while. Pure gold.

Thanks Snowbank.

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really glad. was hoping it would be beneficial for people.

your welcome.

[snowbank]

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Nice post, I sort of skimmed it.

Some things you have to include when renting multiple properties is vacancy and maintenance. These are costs to the property owner and can be significant.

I'd say maintenance is $100-$200/month per house and a fair vacancy rate is generally 5%-10%.

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masterlj,

ya, i think i included in the post that those types of expenses weren't included in my examples, but could give a breakdown on all that if people wanted.(hopefully i included that, pretty sure i did) post was getting so long i had to skip all the details on some stuff. took hours to write up.

[snowbank]

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With Claytons example - can a pro poker player easily get a mortgage like that? Also, I take it he is just paying the interest on these loans, so he gets the downpayment and the appreciation back for himself? Sorry if my questions are obvious.

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yes, he can get a mortgage like that.(Though don't tell the bank you play poker for a living) If a poker player has 2 years in his profession, he can show by his tax records what his income is, and can get the loan easily. If someone doesn't have 2 years tax statements, let's say someone's been playing poker as a profession for a year, than he will have to go with a no doc loan, where basically you don't provide any documentation that you make any money, and you often have to put a little higher % down, and your rates will be a little higher. You can always try to avoid this by using a co-signer if you have someone that will co-sign for you, but if not, you'll just be paying a little more.

No, he wouldn't just be paying interest on the loans.(although that is an option- to get a loan like that)

[snowbank]

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A question for you guys: At what bankroll level do you believe investing in a mutual fund or some other passive investment is more +EV than keeping it in your poker BR to move up with?

I guess this depends on how good a player you are and which level you are capable of beating. Do you all plan to continue raising your stakes until you reach a level that you decide "Ok, this is just not profitable enough for me to not just drop back to the previous level with my much higher BB/100"? I suppose if one feels 200NL is the highest level they can effectively beat they ought to cash out all money over say an 8k bankroll and invest it yes? How long do you plan to takes shots at the level immediately above the one you know you can beat before you decide you have reached your plateau and begin cashing out regularly? Anyone who has gone through this decision?

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Investing is one of the main reasons I've played a lot lower than I could be playing. I've talked about this a little bit before. Basically playing low variance stakes for the purpose of getting ahead financially away from the poker table. Long term I will make a LOT more from investing than I will at poker, so I spend time/money learning and working on my investment skills.

[AndyP]

Good post, I was starting to pay attention to investing etc and this is a great start for me.

You need to keep a great FICO score to get great deals with banks though, right? Kinda obv question, but I've been working my ass off to bring up my scores.

[snowbank]

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Good read

From my limited knowledge if the property market goes down then your losses are leveraged as well. You should really point that out.

So if Clayton's 10 houses depreciate by $50,000 ea over the same period then he suffers a large loss.

With the property Boom over the last decade or so people forget that property prices can go down. I don't know if they will over the next 10 years but its not all beer and skittles.

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necromancer,

yes, like i mentioned, prices can definitely go down as well(as happened in my first example with a property I bought). However, long term real estate prices increase. You could lose with a set of Aces on the flop against a flush draw, but long term you will come out way ahead. You can also play it safe with real estate, and just play for positive cashflow on properties. Let me explain:

Let's say you buy a $100,000 house with 20% down with a mortgage at 7% interest rate. So you will put $20,000 down, and will have a mortgage payment of $532/month. You rent the house out for $900/month. You hold the property for cashflow. Your expenses(taxes, maintenance, vacancy allowances, etc...) are an estimated $250/month. So you can expect to cashflow around $118/month. Let's pretend for some reason the market you were in declined in prices for a couple years. That doesn't effect your cashflow. You are still making $118/month. So if buy and hold is your strategy, you really don't have to worry about your house decreasing in value, since the variance of a couple years of a market declining won't effect you. Also, you want to buy where prices should go up.(aka, where people are moving to, and will have demand for housing) For example if you buy in Buffalo, NY, you can get a house for $20k, but that house isn't going to increase in value.

Also, one thing that should be mentioned as another benefit for real estate investors is some of the other tax benefits. For example, in this example you would be able to write off almost $4,000 per year as a loss, even though you didn't lose money. Real estate is depreciated on a 27 year scale, meaning that "on the books", you depreciate your real estate by X amount of money depending on what you bought for. So you can actually write off your entire property as having depreciated if you held for 27 years, even though real estate is an appreciating asset, unlike a car. One of the other great benefits of real estate as an investment.

[snowbank]

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so do you have a roth ira, snow? neither poker nor re investing counts as "earned," right?

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Yes, I do have a Roth IRA. I was only able to contribute one year, because I haven't had "earned" income since then. There are always creative ways around everything though, but as of right now I've only invested one year into a Roth. There are other IRAs I'm investing in for the last tax year, to help avoid paying some taxes.

[snowbank]

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Good post, I was starting to pay attention to investing etc and this is a great start for me.

You need to keep a great FICO score to get great deals with banks though, right? Kinda obv question, but I've been working my ass off to bring up my scores.

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Yes, it's good to have a good FICO score. Luckily I had good scores when I started buying properties, so I didn't have to do a lot to bring up my scores.

For people who want to get into investing, and may not have much credit, it's important that you have 3 lines of credit. Whether it's school loans, credit cards, etc... Having 3 lines of credit and paying them on time will help give you a good score. It's often harder for banks to give you funding if you don't have much credit history. So it's a good idea to get them now, so you have some history when you want to buy something in the future.

[AndyP]

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Having 3 lines of credit and paying them on time will help give you a good score. It's often harder for banks to give you funding if you don't have much credit history. So it's a good idea to get them now, so you have some history when you want to buy something in the future.

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Definitely. I was at high 500, now at 670.. trying to get to 700+. Anyways, thanks for this again and gl with your future RE investments.