If you had $20,000 cash lying around...
- Thread starter Jinxus
- Start date
On FHA loans you have to owner occupy. The law states you must occupy the property in the first 60 days and remain and occupant for atleast the first year. So unless you're sleeping in your fix-er-upper shanty home for a year this won't work.
Renting homes is risky as shit, especially one's you're financing. You move a tenant in and they can easily do $5k in damages or more in the year they're living there. Meanwhile you've collected like $2400 in rental profit all year long. Sure they lose their $500 deposit but whoopty-doo. You're still out thousands. Renters don't give a shit about the house or anything else. When its run down they'll just move. A lot of renters won't even tell you about problems with the house because they're afraid if you fix it you'll raise their rent to cover the repairs. So sinks leak onto floor boards for years causing it to rot and mold. So you don't just have to repair the sink, you have to repair the floor boards, and possibly mold remediation (easily $x,xxx to $xx,xxx)
My point was DONT finance rental properties, unless you're financing a very small percentage (25% or less is my rule). Who cares if the bank will loan it to you. When you have a mortgage + insurance + taxes to pay your "cashflow" on the property is going to be like $200 or less a month. All it takes is for the HVAC unit to break and you've lost 2-3 years of "Cash flow" on the property. The meager 3-5% increase in property values isn't going to cover your losses let alone provide you with some sort of return on your investment.
I see this so many times, this is a terrible place to put your money unless you're paying cash in full. You're better off putting it in a CD, or Bonds, or even a Mutual Fund or Money Market account. Or like Cuban said, just pay off debt. Or reinvest in your business. All of these seem better than using it as a down payment on a rental.
DISCLAIMER: I now own 10 rental homes free and clear. Financed most of them with 80% down.
I'll second that. Back when I was pulling in big ecommerce numbers I was wise enough to pay off a home that I own. I have since used it as a rental. I recently discovered that the main bathroom shower somehow or another had a small tile fall off several years ago. The tenant said nothing, but he and his family kept using the shower. For those with remodeling experience - you can guess the results.
By the time I discovered the issue there was a hole in the shower wall that was larger than a basketball. They used plastic garbage bags and duct tape in an attempt to cover it up, but of course that failed. The end result was the wall *and* bathroom floor had to be ripped out and replaced along with the ceiling of the lower level and a bunch of other stupid things.
The total damage was thousands of dollars when a $1 tile and a bit of grout would have saved the day - if they had only notified us.
That is great if you have that much cash on hand. If you have a solid income and money in the bank, building your real estate assets with little money down can be a good way to get started especailly if you live in the house and have roommate's. I won't argue that what you said is wrong, but I have several friends that are in the same position as you and got started with much less cash.
Congrats on 10 properties though, that is impressive.
$2 a whole? You gotta be kidding me.
If I had 20K I'll invest that money in real estate & associated services.
Why fucking waste it on whores? All of it? You must have a monthly budget set up for whores and muffins. :ak:
It's easy for a billionaire like Cuban to be in cash, but this isn't a prudent strategy for most people - unless they want their savings to get decimated by inflation over the years.
He is actually using his cash to buy things. Like arbitrage bond fund purchasing software. Just because someone like him has 50% in cash today, doesn't mean he doesn't go and buy a sports team tomorrow.
Oh wait..
He's one smart dude.
I will find some stock with good dividend rate and potential growth. Though it takes time, it still better than leaving it lying around.
