Investing for ssnlers: my 3 year anniversary gift to ssnl

[cbloom]

If you're a poker pro you can have a SEP-IRA which lets you invest a lot more than a Roth.

HSA's are also a good deal to reduce your tax load assuming you have a HDHP.

[snowbank]

[ QUOTE ]
If you're a poker pro you can have a SEP-IRA which lets you invest a lot more than a Roth.

HSA's are also a good deal to reduce your tax load assuming you have a HDHP.

[/ QUOTE ]

Ya, I'm getting into a SEP-IRA. I'm going to try to learn a ton about the tax system, and find some crazy loopholes that will save me a ton on taxes for next year.

[illph]

[ QUOTE ]

Clayton also decides to invest some of his poker earnings. He has $200k to invest as well. He decides he wants to buy multiple properties though. Clayton decides to invest in the same neighborhood as his friend Carrot. He works out a deal with an investor who is getting out of residential real estate, and sells Clayton 10 houses. Clayton puts 10% down on each of his properties. They are worth $200k each. So roughly $20k on each property he has invested. Each of the houses are rented out for $1,500. Clayton has a mortgage on all of his properties, and pays $1,300/month. He also has taxes of $100/month, so he only cashflows around $100 per month. He has 10 properties though, so total he cashflows $1,000 per month. After 5 years, Clayton decides it’s time to sell his houses and buy an apartment complex. Clayton can sell his houses for $250k each, just like Carrot.

Clayton’s investment:

$200k invested
$100/month cashflow per property
X 10 properties= $1000/month cashflow
$12,000 per year cashflow on his houses
X 5 years= $60,000
appreciation per property: $50,000
total appreciation: $500,000


Average profit per year: $112,000
Return: 280% over 5 years
Clayton made 56% per year on his investment

Total profit: $560,000


[/ QUOTE ]

Hey, first of all thank you for that very insightful post.

But there is a part I don't understand in your calculations:

In your example Clayton pays 10% of each of the 10 houses. That means he practically ownes 10% of each house. So after 5 years when he sells his parts of the houses, why does he get the full 50k appreciation for each house(like the guy in your previous example) and not 10% of it(= 5k)?

<font color="white">edith [censored] this thread is 2 weaks old </font>

[jongreenway]

Thought I would add my two cents. May seem like a free lunch, but real estate isn't that easy. Just remember; EMH (Efficient Market Hypothesis) - If investing in Real Estate was a free lunch, everyone would be doing it and the opportunity for arbitrage profits wouldn't exist.

Assumptions may not hold:
- Appreciation - Isn't the US housing market in a slump? What if the price plummets. Condos in Florida are going for half what they went for 5 years ago. Although this is the same with any investment (stock market index, recession, etc), just remember, housing market doesn't always appreciate. Also, 200 to 250k in 5 years is a big price jump if you are not improving the house. Sensitivity of that number can throw off all the totals.
- Rent: Assuming you have someone renting all the time. Trick is to get leasing contracts planned and signed before you buy the property.


Also Consider:
- IRR (Internal Rate of Return) &amp; NPV (Net Present Value):
Take into account what you could earn risk free as opposed to the return on these real estate investments. It's not only the net profit, it's the % return above the risk free rate.
- Capital Gains Tax: Since it is not your primary residence, you pay money on the profits. This is unless you are living/flipping a house and use it as your primary residence.
- Stress: This isn't a passive investment. Real estate can be a pain maintaining and always playing an active role.
- Managing 10 properties: Either have to pay a company to manage them for you, or hire someone to do it because it would take a lot of time!

[holyfield5]

snowbank, i read the whole post, Ive been trying to find out about this sort of thing lately. Can you recommend some books because most of my friends are young and dont know much about this stuff. Also do you mind dropping me an AIM name in PM, i wont be bothering you about this just yet but for future reference.

you graduated from tech carrotsnake? you still in ATL? wow i never knew, i should be nicer to you then.

[Womble]

[ QUOTE ]
[ QUOTE ]

Clayton also decides to invest some of his poker earnings. He has $200k to invest as well. He decides he wants to buy multiple properties though. Clayton decides to invest in the same neighborhood as his friend Carrot. He works out a deal with an investor who is getting out of residential real estate, and sells Clayton 10 houses. Clayton puts 10% down on each of his properties. They are worth $200k each. So roughly $20k on each property he has invested. Each of the houses are rented out for $1,500. Clayton has a mortgage on all of his properties, and pays $1,300/month. He also has taxes of $100/month, so he only cashflows around $100 per month. He has 10 properties though, so total he cashflows $1,000 per month. After 5 years, Clayton decides it’s time to sell his houses and buy an apartment complex. Clayton can sell his houses for $250k each, just like Carrot.

Clayton’s investment:

$200k invested
$100/month cashflow per property
X 10 properties= $1000/month cashflow
$12,000 per year cashflow on his houses
X 5 years= $60,000
appreciation per property: $50,000
total appreciation: $500,000


Average profit per year: $112,000
Return: 280% over 5 years
Clayton made 56% per year on his investment

Total profit: $560,000


[/ QUOTE ]

Hey, first of all thank you for that very insightful post.

But there is a part I don't understand in your calculations:

In your example Clayton pays 10% of each of the 10 houses. That means he practically ownes 10% of each house. So after 5 years when he sells his parts of the houses, why does he get the full 50k appreciation for each house(like the guy in your previous example) and not 10% of it(= 5k)?

<font color="white">edith [censored] this thread is 2 weaks old </font>

[/ QUOTE ]

He puts a 10% downpayemtn and is paying a mortgage. So he 'owns' the house (not fully paid for though) so when he sells it he gets everything

[carrotsnake]

holyfield, I'm actually graduating in December, and I live in Dunwoody

[loosbastard]

Thought I'd give this a bump...as I'm currently considering getting into real estate.

A couple questions for anybody that can answer them:

1)What type of mortgage is ideal for flipping? Would a higher rate/higher rebate mortgage such as a fixed rate w/ negative points be optimal considering we won't be holding the property long?
2)What about rentals?

[snowbank]

holyfield,

pm sent

[snowbank]

[ QUOTE ]
[ QUOTE ]

Clayton also decides to invest some of his poker earnings. He has $200k to invest as well. He decides he wants to buy multiple properties though. Clayton decides to invest in the same neighborhood as his friend Carrot. He works out a deal with an investor who is getting out of residential real estate, and sells Clayton 10 houses. Clayton puts 10% down on each of his properties. They are worth $200k each. So roughly $20k on each property he has invested. Each of the houses are rented out for $1,500. Clayton has a mortgage on all of his properties, and pays $1,300/month. He also has taxes of $100/month, so he only cashflows around $100 per month. He has 10 properties though, so total he cashflows $1,000 per month. After 5 years, Clayton decides it’s time to sell his houses and buy an apartment complex. Clayton can sell his houses for $250k each, just like Carrot.

Clayton’s investment:

$200k invested
$100/month cashflow per property
X 10 properties= $1000/month cashflow
$12,000 per year cashflow on his houses
X 5 years= $60,000
appreciation per property: $50,000
total appreciation: $500,000


Average profit per year: $112,000
Return: 280% over 5 years
Clayton made 56% per year on his investment

Total profit: $560,000


[/ QUOTE ]

Hey, first of all thank you for that very insightful post.

But there is a part I don't understand in your calculations:

In your example Clayton pays 10% of each of the 10 houses. That means he practically ownes 10% of each house. So after 5 years when he sells his parts of the houses, why does he get the full 50k appreciation for each house(like the guy in your previous example) and not 10% of it(= 5k)?

<font color="white">edith [censored] this thread is 2 weaks old </font>

[/ QUOTE ]

illph,

If the house appreciates, you don't give the bank extra for the amount you borrowed from them. You get everything. So if you put 10% down or 100% down, if the house appreciates you get the whole appreciation. That's why leverage in real estate is so huge.