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Brag about your real estate investments
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2017 Dec 13, 10:49pm 4,298 views 20 comments
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1
Ceffer
2017 Dec 13, 11:10pm
Ceffer
2017 Dec 13, 11:10pm
I bought a 1200 sq foot foreclosure in 2010 for cash. Not as an investment, just to have a second place to decompress. It has gone up 250 percent in value. I had no intention of speculating, and actually spend a lot of time there.
Aside from that, primary residence homes have been break even propositions at least with maybe a bit of overall gain, but mainly just "equity savings accounts".
Aside from that, primary residence homes have been break even propositions at least with maybe a bit of overall gain, but mainly just "equity savings accounts".
2
bob2356
2017 Dec 13, 11:42pm
BorderPatrol says
I'm getting out of Vegas after a great 5 year run. Much better returns other places now. I cleaned up with the superpriority mess but now taxes are up, insurance is up, hoa's fees are up, the market is way up. It's time to move on.
How do you calculate 66% ROI? It's up 26k but closing costs are going to eat up a big chunk fast if you sell it. Plus capital gains eats another chunk. You calculate ROI on the net not the gross. You will pay 25% tax on all the depreciation when you sell. Even if you don't take the depreciation the IRS will charge you for it. Look up how depreciation recapture works.
- last year Dan was arguing with someone. and that person mentioned rentals in Vegas. i looked it up on Redfin and the numbers were not bad. but when i saw the inflation adjusted graph of Vegas i made up my mind. in Dec of the same year i bought a SFH in Vegas. class B neighborhood for $183K. at first i break even every month, meaning $0 monthly cash flow after all expenses are taken into account, and some long time landlord would get cranky hearing this. but the kicker is just one year later it is now worth 209.5K. put in total $40K including closing costs so lets see, rate of return is 66%. where else can one get 66% return in passive investments? i don't do anything as a property manager is taking care of it. depreciation also allows me to get back 1.3K year from the IRS as well.
I'm getting out of Vegas after a great 5 year run. Much better returns other places now. I cleaned up with the superpriority mess but now taxes are up, insurance is up, hoa's fees are up, the market is way up. It's time to move on.
How do you calculate 66% ROI? It's up 26k but closing costs are going to eat up a big chunk fast if you sell it. Plus capital gains eats another chunk. You calculate ROI on the net not the gross. You will pay 25% tax on all the depreciation when you sell. Even if you don't take the depreciation the IRS will charge you for it. Look up how depreciation recapture works.
3
WatermelonUniversity
2017 Dec 13, 11:48pm
WatermelonUniversity
2017 Dec 13, 11:48pm
Ceffer says
wow. and i thought mine was a big win. which city?
I bought a 1200 sq foot foreclosure in 2010 for cash. Not as an investment, just to have a second place to decompress. It has gone up 250 percent in value. I had no intention of speculating, and actually spend a lot of time there.
wow. and i thought mine was a big win. which city?
4
WatermelonUniversity
2017 Dec 14, 12:18am
WatermelonUniversity
2017 Dec 14, 12:18am
bob2356 says
OK so let second year appreciation pays for closing costs 8%. 33% each year for the first two years is still not bad.
i know depreciation recapture. the advantage is i get $1.3K/y now which is re-invested in stocks at 10% year. in 27.5 years i will have $182K. but when the IRS gets it back in 30 years when i sell the house, it's worth much less. by then i will have claimed $146K of depreciation. so at 25% tax, i'll give them $36K back but i made $182K from it.
not to mention $3K principal pay-down every year. this should be included in the ROI as well.
when you calculate ROI for cash flow you don't use after tax number so same here, ROI should use before tax income. also the cash flow gains are considered income which is taxed at a much higher rate than capital gains (for me anyways).
so ROI = depreciation tax advantage + principle paydown + appreciation == BIG BIG return $$$
How do you calculate 66% ROI? It's up 26k but closing costs are going to eat up a big chunk fast if you sell it. Plus capital gains eats another chunk. You calculate ROI on the net not the gross. You will pay 25% tax on all the depreciation when you sell. Even if you don't take the depreciation the IRS will charge you for it. Look up how depreciation recapture works.
OK so let second year appreciation pays for closing costs 8%. 33% each year for the first two years is still not bad.
i know depreciation recapture. the advantage is i get $1.3K/y now which is re-invested in stocks at 10% year. in 27.5 years i will have $182K. but when the IRS gets it back in 30 years when i sell the house, it's worth much less. by then i will have claimed $146K of depreciation. so at 25% tax, i'll give them $36K back but i made $182K from it.
not to mention $3K principal pay-down every year. this should be included in the ROI as well.
when you calculate ROI for cash flow you don't use after tax number so same here, ROI should use before tax income. also the cash flow gains are considered income which is taxed at a much higher rate than capital gains (for me anyways).
so ROI = depreciation tax advantage + principle paydown + appreciation == BIG BIG return $$$
5
bob2356
2017 Dec 14, 7:22am
BorderPatrol says
Well if you believe Vegas is going up 15% year after year and you are going to get 10% on the stock market for the next 27.5 years then as my grandmother used to say bless your little heart.. Remember you have zero ROI until someone writes you a check and you put the money into the bank. A lot of people found that out in 2007.
When you calculate ROI for cash flow the cash is immediately available for re investment compounding your rate of return. You have zero reinvestment ability on appreciation.
Whatever makes you happy go for it. If you think you are going to see 60% or even 30% ROI then great, enjoy. I'm quite happy seeing 12-14% net going into the bank month after month and using it to buy more and more properties. Since I'm all cash at this point I don't give a shit if the market dropped through the floor. I'd just be able to buy even cheaper.
OK so let second year appreciation pays for closing costs 8%. 33% each year for the first two years is still not bad.
i know depreciation recapture. the advantage is i get $1.3K/y now which is re-invested in stocks at 10% year. in 27.5 years i will have $182K. but when the IRS gets it back in 30 years when i sell the house, it's worth much less. by then i will have claimed $146K of depreciation. so at 25% tax, i'll give them $36K back but i made $182K from it.
not to mention $3K principal pay-down every year. this should be included in the ROI as well.
when you calculate ROI for cash flow you don't use after tax number so same here, ROI should use before tax income. also the cash flow gains are considered income which is taxed at a much higher rate than capital gains (for me anyways).
so ROI = depreciation tax advantage + principle paydown + appreciation == BIG BIG return $$$
Well if you believe Vegas is going up 15% year after year and you are going to get 10% on the stock market for the next 27.5 years then as my grandmother used to say bless your little heart.. Remember you have zero ROI until someone writes you a check and you put the money into the bank. A lot of people found that out in 2007.
When you calculate ROI for cash flow the cash is immediately available for re investment compounding your rate of return. You have zero reinvestment ability on appreciation.
Whatever makes you happy go for it. If you think you are going to see 60% or even 30% ROI then great, enjoy. I'm quite happy seeing 12-14% net going into the bank month after month and using it to buy more and more properties. Since I'm all cash at this point I don't give a shit if the market dropped through the floor. I'd just be able to buy even cheaper.
6
WookieMan
2017 Dec 14, 8:39am
WookieMan
2017 Dec 14, 8:39am
bob2356 says
If I was teaching a real estate investment course, this would be one of the first things out of my mouth talking about real estate (investment or even primary). Especially when people talk about equity. This is an overstatement as certain techniques involve getting cash out from your investments, so you need to know your LTV. But my god, until you're at the closing table and someone gives you a check for a property you just sold (or refi) as Bob says, there is NO equity. Zero. Don't EVER count on it. Of course paid off properties have equity, but until it hits the market and you've got a contract, always assume the absolute worst case scenario with your equity.
My folks had legit (I know, this is hypocritical to my statement above) paper "equity" of around $3M in 2006 with properties in the Midwest and Florida. 2009, where do you think that $3M paper "equity" was? Gone. Across their portfolio they were technically upside down values to debt still owed. Fortunately the cash flow was solid enough and things are better now, but they're still not back to $3M in equity they were at before if you ignore principle pay down.
And this is why I say ignore equity. Say my folks were wanting to retire in 2009-2010 with that equity. They would have been fucked. Cashflow is your best friend or a good wife and equity is the random model you hit it off with and have a one night stand. The model will most certainly screw you over in the long run if you expected to have a relationship with her. Don't count on models or equity is my motto ;)
Remember you have zero ROI until someone writes you a check and you put the money into the bank. A lot of people found that out in 2007.
If I was teaching a real estate investment course, this would be one of the first things out of my mouth talking about real estate (investment or even primary). Especially when people talk about equity. This is an overstatement as certain techniques involve getting cash out from your investments, so you need to know your LTV. But my god, until you're at the closing table and someone gives you a check for a property you just sold (or refi) as Bob says, there is NO equity. Zero. Don't EVER count on it. Of course paid off properties have equity, but until it hits the market and you've got a contract, always assume the absolute worst case scenario with your equity.
My folks had legit (I know, this is hypocritical to my statement above) paper "equity" of around $3M in 2006 with properties in the Midwest and Florida. 2009, where do you think that $3M paper "equity" was? Gone. Across their portfolio they were technically upside down values to debt still owed. Fortunately the cash flow was solid enough and things are better now, but they're still not back to $3M in equity they were at before if you ignore principle pay down.
And this is why I say ignore equity. Say my folks were wanting to retire in 2009-2010 with that equity. They would have been fucked. Cashflow is your best friend or a good wife and equity is the random model you hit it off with and have a one night stand. The model will most certainly screw you over in the long run if you expected to have a relationship with her. Don't count on models or equity is my motto ;)
7
anonymous
2017 Dec 14, 9:16am
anonymous says
You have ZERO return until you sell it and cash out:
bob2356 says
It's just numbers on a spreadsheet until the check clears.
anonymous says
Scary..
WookieMan says
It looks like the OP han'ts figured that part out yet.
but the kicker is just one year later it is now worth 209.5K. put in total $40K including closing costs so lets see, rate of return is 66%. where else can one get 66% return in passive investments?
You have ZERO return until you sell it and cash out:
bob2356 says
Remember you have zero ROI until someone writes you a check and you put the money into the bank.
It's just numbers on a spreadsheet until the check clears.
anonymous says
meaning $0 monthly cash flow after all expenses are taken into account,
Scary..
WookieMan says
Cashflow is your best friend
It looks like the OP han'ts figured that part out yet.
8
Tenpoundbass
2017 Dec 14, 10:43am
Tenpoundbass
2017 Dec 14, 10:43am
I paid $160K in 2010, the guy wanted $170K. When I realized that was as close to the bottom we were going to get under Obama.
For him Real Estate Correction was all about regaining 2007's losses, and having Rent Monopolies buy up the Ghost inventory that should have been wholesaled to the public.
But his FHA rules wouldn't lend money on a house that had as much as a sink or Refrigerator missing. Those houses were deemed "Distressed" under TARP and were fair game to get Federal money for their losses and to auction to investor shell companies for pennies on the dollar.
It is now up to $280K to $300K, I would be ecstatic if it was down to $95K to $120K
For him Real Estate Correction was all about regaining 2007's losses, and having Rent Monopolies buy up the Ghost inventory that should have been wholesaled to the public.
But his FHA rules wouldn't lend money on a house that had as much as a sink or Refrigerator missing. Those houses were deemed "Distressed" under TARP and were fair game to get Federal money for their losses and to auction to investor shell companies for pennies on the dollar.
It is now up to $280K to $300K, I would be ecstatic if it was down to $95K to $120K
9
anonymous
2017 Dec 14, 11:12am
I bought the Brooklyn Bridge for a mere $200,000. I'll be charging tolls on it in January.
10
socal2
2017 Dec 14, 1:16pm
BorderPatrol says
I was in the same boat. We started seriously looking in 2007 but stumbled upon Patrick's website and it sobered me up quick. We started looking again in 2010 and drove my realtor nuts by visiting about 70 homes. We ended up buying our house in Carlsbad, CA in December 2011 and caught the very bottom of the dead cat bounce when prices tanked. I got our 2,500 square foot house with peak ocean view and big yard for $580K and the identical model in the neighborhood just sold for $950K last month. We got a 30 year fixed with a great interest rate.
We hope this will be our forever house at least until our kids are grown and out of the house and we can downsize to a condo near the beach in Encinitas, Del Mar or La Jolla.
- 2006. i wanted to buy a house. but 15 minutes after reading Patrick's list, i forgot the idea instantly. what he said confirmed my suspicion that housing was overpriced. this saved me so much money and a bankruptcy. i bought a BMW instead.
- 2011. i came back checking to see if it's time to buy.
I was in the same boat. We started seriously looking in 2007 but stumbled upon Patrick's website and it sobered me up quick. We started looking again in 2010 and drove my realtor nuts by visiting about 70 homes. We ended up buying our house in Carlsbad, CA in December 2011 and caught the very bottom of the dead cat bounce when prices tanked. I got our 2,500 square foot house with peak ocean view and big yard for $580K and the identical model in the neighborhood just sold for $950K last month. We got a 30 year fixed with a great interest rate.
We hope this will be our forever house at least until our kids are grown and out of the house and we can downsize to a condo near the beach in Encinitas, Del Mar or La Jolla.
11
RC2006
2017 Dec 14, 1:31pm
RC2006
2017 Dec 14, 1:31pm
Almost bought a house for 550k in 2005 came across Patrick's site and after doing more research decided to wait. 2010 bought a house for 340k its now close to 600k and the mortgage for my 4br house is the same for 2br apartments in my area now. After crash that house I almost bought for 550k foreclosed and was sold by bank for 170k after market crashed.
12
Shaman
2017 Dec 14, 1:34pm
Shaman
2017 Dec 14, 1:34pm
Nice job you guys! I started my home search in 2006, but felt pretty sick at the prices at the time. Payments would have killed. Decided to wait and save and was glad that I did. Didn’t find Patnet until 2010? Probably did me no favors, as that was the best time to buy.
I didn’t wind up buying until 2013, bought a 4 bed townhome for $420k, kept for three years and sold it last year for $500. She got a nice job around then so we upgraded. Put the equity and savings down on a big five bed house in a great hood with a pool and are pretty happy with it. We didn’t get uber rich or anything, but finally made it to the American dream. Mostly through savings and hard work. The equity didn’t hurt!
I didn’t wind up buying until 2013, bought a 4 bed townhome for $420k, kept for three years and sold it last year for $500. She got a nice job around then so we upgraded. Put the equity and savings down on a big five bed house in a great hood with a pool and are pretty happy with it. We didn’t get uber rich or anything, but finally made it to the American dream. Mostly through savings and hard work. The equity didn’t hurt!
13
lostand confused
2017 Dec 14, 1:49pm
lostand confused
2017 Dec 14, 1:49pm
bob2356 says
Where are other areas. I am a bit risk averse as in I don't want to put in and buy 400-600k for a property.
Me currently bought a house, then bought two rental units -duplex. Run down but great structure and moderate neighborhood-no crime, but blue collar. Fixed it up and rented. Right now a moderate surplus after property manager and because of low carrying costs have a big margin in case of no tenants etc. Not expecting much appreciation here.
But I want to diversify and get into one or more units outside the midwest. I moved out of stocks a bit ago and don't want to get back at these levels. But real estate is also elevated.I would defnitely use property management and just build up equity slowly .
I am currently looking in Las vegas, Phoenix, Florida, Richmond, N Carolina. Will take some time to decide. Kinda like my original duplex, ok neighborhood, low cost, low crime, decent job base to support renters. It is a bit difficult if you don't live there though.
I'm getting out of Vegas after a great 5 year run. Much better returns other places now. I cleaned up with the superpriority mess but now taxes are up, insurance is up, hoa's fees are up, the market is way up. It's time to move on.
Where are other areas. I am a bit risk averse as in I don't want to put in and buy 400-600k for a property.
Me currently bought a house, then bought two rental units -duplex. Run down but great structure and moderate neighborhood-no crime, but blue collar. Fixed it up and rented. Right now a moderate surplus after property manager and because of low carrying costs have a big margin in case of no tenants etc. Not expecting much appreciation here.
But I want to diversify and get into one or more units outside the midwest. I moved out of stocks a bit ago and don't want to get back at these levels. But real estate is also elevated.I would defnitely use property management and just build up equity slowly .
I am currently looking in Las vegas, Phoenix, Florida, Richmond, N Carolina. Will take some time to decide. Kinda like my original duplex, ok neighborhood, low cost, low crime, decent job base to support renters. It is a bit difficult if you don't live there though.
14
anonymous
2017 Dec 14, 2:52pm
Cash flow is the average investors’ game. Appreciation is how you get rich, not a few bucks in your pocket a month.
Many novice haven’t realized that for every loser in the 2009 crash there was also a winner.
Many novice haven’t realized that for every loser in the 2009 crash there was also a winner.
15
Strategist
2017 Dec 14, 3:13pm
Strategist
2017 Dec 14, 3:13pm
I sold the Brooklyn Bridge for $200,000. Don't know who bought it.
16
lostand confused
2017 Dec 14, 5:48pm
lostand confused
2017 Dec 14, 5:48pm
anon_b8d7d says
In today's market are there many deals left that will appreciate? I know plenty of investors before 2006 that bought proeprties in Phoenix, Fl etc that went belly up and just walked away.
Cash flow is the average investors’ game. Appreciation is how you get rich, not a few bucks in your pocket a month.
In today's market are there many deals left that will appreciate? I know plenty of investors before 2006 that bought proeprties in Phoenix, Fl etc that went belly up and just walked away.
17
Strategist
2017 Dec 14, 6:14pm
Strategist
2017 Dec 14, 6:14pm
anon_b8d7d says
Cash flow is what a lot of people like our friend Bob go for. You just end up paying more tax at your bracket every year. With appreciation, your investment is tax deferred, and taxed at a much lower capital gains tax.
Cash flow is the average investors’ game. Appreciation is how you get rich, not a few bucks in your pocket a month.
Many novice haven’t realized that for every loser in the 2009 crash there was also a winner.
Cash flow is what a lot of people like our friend Bob go for. You just end up paying more tax at your bracket every year. With appreciation, your investment is tax deferred, and taxed at a much lower capital gains tax.
18
Strategist
2017 Dec 14, 6:20pm
Strategist
2017 Dec 14, 6:20pm
lostand confused says
And it will happen again. Every now and then you will have a severe real estate crash. The 2008 crash happened after 80 years. If you are in the real estate game for the long run, and don't get carried away, you will never lose in the long run. Real Estate may not always go up, but it always recovers and goes higher in regions where populations continue to rise.
In today's market are there many deals left that will appreciate? I know plenty of investors before 2006 that bought proeprties in Phoenix, Fl etc that went belly up and just walked away.
And it will happen again. Every now and then you will have a severe real estate crash. The 2008 crash happened after 80 years. If you are in the real estate game for the long run, and don't get carried away, you will never lose in the long run. Real Estate may not always go up, but it always recovers and goes higher in regions where populations continue to rise.
19
bob2356
2017 Dec 14, 8:04pm
lostand confused says
Ask map. https://www.realtytrac.com/news/real-estate-investing/realtytrac-q1-2016-single-family-rental-market-report/ Go directly to the site for the latest.
Where are other areas. I am a bit risk averse as in I don't want to put in and buy 400-600k for a property.
Ask map. https://www.realtytrac.com/news/real-estate-investing/realtytrac-q1-2016-single-family-rental-market-report/ Go directly to the site for the latest.
20
WatermelonUniversity
2017 Dec 16, 9:34pm
WatermelonUniversity
2017 Dec 16, 9:34pm
I never said Vegas goes up 15% every year. But every 3% appreciation is 15% of what I put in and that will consistently beat the stock market.
Stocks go up 10% on average annually since 1900.
If you think the $165K equity in my primary home doesn’t mean anything then lol. What do you say to stock investors whose portfolios have gone up several times since 2009? It’s meaningless? they will laugh. RE is no difference.
Like stocks, 2009 crash doesn’t mean anything if you don’t selll your house or rentals. And I never have to. After 5 years, rent has caught up to housing expenses. Moreover, unlike a stock, the rental doesn’t have a business to go bankrupt. Most markets have gone back to 2006 levels.
Saying one shouldn’t bank on appreciation because of 2009 like advising stock investors not to depend on equity because of crash in 2000 and 2009. Markets always go back up Just don’t panic sell and don’t buy at the top.
I think cash flow is good but appreciation is just as good and as if done right, just as profitable.
bob2356 says
Stocks go up 10% on average annually since 1900.
If you think the $165K equity in my primary home doesn’t mean anything then lol. What do you say to stock investors whose portfolios have gone up several times since 2009? It’s meaningless? they will laugh. RE is no difference.
Like stocks, 2009 crash doesn’t mean anything if you don’t selll your house or rentals. And I never have to. After 5 years, rent has caught up to housing expenses. Moreover, unlike a stock, the rental doesn’t have a business to go bankrupt. Most markets have gone back to 2006 levels.
Saying one shouldn’t bank on appreciation because of 2009 like advising stock investors not to depend on equity because of crash in 2000 and 2009. Markets always go back up Just don’t panic sell and don’t buy at the top.
I think cash flow is good but appreciation is just as good and as if done right, just as profitable.
bob2356 says
BorderPatrol says
OK so let second year appreciation pays for closing costs 8%. 33% each year for the first two years is still not bad.
i know depreciation recapture. the advantage is i get $1.3K/y now which is re-invested in stocks at 10% year. in 27.5 years i will have $182K. but when the IRS gets it back in 30 years when i sell the house, it's worth much less. by then i will have claimed $146K of depreciation. so at 25% tax, i'll give them $36K back but i made $182K from it.
not to mention $3K principal pay-down every year. this should be included in the ROI as well.
when you calculate ROI for cash flow you don't use after tax number so same here, ROI should use before tax income. also the cash flow gains are considered income which is taxed at a much higher rate than capital gains (for me anyways).
so ROI = depreciation tax advantage + principle paydown + appreciation ==...
stocks so far i think i'm even but thanks to patnet i saved and made some money learning real estate from people here. so here's a quick summary of my mini-success RE story.
- 2006. i wanted to buy a house. but 15 minutes after reading Patrick's list, i forgot the idea instantly. what he said confirmed my suspicion that housing was overpriced. this saved me so much money and a bankruptcy. i bought a BMW instead.
- 2011. i came back checking to see if it's time to buy. i was a bear at first but turned bull when inventory went from 2 year to 3 months. i bought my first home in Los Angeles on Dec 2012 for $345K. It is now $460K. i only put down $10K and refinanced 3 years later to get rid of PMI. and today the equity is $165. to see how is this better than putting money in stocks, here are some numbers. total housing related expenses are $2445/m so even if i stayed in my Simi Valley apartment paying $1445/m rent for all these 5 years (doubtful considering greedy, rent raising landlord), i would have saved about $12K x 5 = 60K. if i invested this amount in the Nasdaq index over the last 5 years (which grows at 18% annually since), i would have gotten $101K today only. so as you can see the house is a bigger win. if i sell it now, the money saved from not paying state income tax and capital gain more than pay for the 6% realtor commissions and 3 years of PMI.
- last year Dan was arguing with someone. and that person mentioned rentals in Vegas. i looked it up on Redfin and the numbers were not bad. but when i saw the inflation adjusted graph of Vegas i made up my mind. in Dec of the same year i bought a SFH in Vegas. class B neighborhood for $183K. at first i break even every month, meaning $0 monthly cash flow after all expenses are taken into account, and some long time landlord would get cranky hearing this. but the kicker is just one year later it is now worth 209.5K. put in total $40K including closing costs so lets see, rate of return is 66%. where else can one get 66% return in passive investments? i don't do anything as a property manager is taking care of it. depreciation also allows me to get back 1.3K year from the IRS as well.
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