Rental Property Opinion

[ballgame]

Fake math! They both lose the same amount but one's in debt and the other is not.

The 10% was a hypothetical yearly ROI

Bob would only lose $20,000; the bank would lose $30,000.

This does not take into consideration that there are closing costs, attorney fees etc due by "Bob" at the time of the acquisition.

In the long run Bob would be losing more than just $20k because his credit is ruined and additional fees will be incurred. Also anytime he tries to borrow money in the future he will have to pay more to borrow. (higher originantion fees, above market interest rate, more down-payment)

[BuckSmasher]

Bob would only lose $20,000; the bank would lose $30,000.

This does not take into consideration that there are closing costs, attorney fees etc due by "Bob" at the time of the acquisition.

In the long run Bob would be losing more than just $20k because his credit is ruined and additional fees will be incurred. Also anytime he tries to borrow money in the future he will have to pay more to borrow. (higher originantion fees, above market interest rate, more down-payment)

This is all true. On a 30k loss it might be better for Bob to fork over the cash to keep his credit in good shape. That ability and calculus changes as the numbers get bigger. Say $10M property and a $3M haircut.

Bob's credit exposure is one reason I transitioned out of SHF investments and FreddieMac Loans to Multifamily's and privately held promissory notes and non recourse commercial loans.

[Pintail45]

What? Do you really not understand that 20 is a smaller number than 50 or are you just making a joke?

Jokes are sometimes hard to tell on text. If you are making one I don't get it.

Let me write it out in crayon:

Bob owes 80k and sells house for 50. Bob loses his 20k down payment and bank sues Bob for the remaining 30k: Net result = 50k loss

Harry sells house but doesn't owe anything: Net result = 50k loss


Their equity was different but it's same resulting net loss. And Harry didn't have to pay interest on a mortgage or worry about foreclosure.

[BuckSmasher]

Let me write it out in crayon:

Bob owes 80k and sells house for 50. Bob loses his 20k down payment and bank sues Bob for the remaining 30k: Net result = 50k loss

Harry sells house but doesn't owe anything: Net result = 50k loss


Their equity was different but it's same resulting net loss. And Harry didn't have to pay interest on a mortgage or worry about foreclosure.

Aha!

Now I see! Based upon your demonstration of your understanding of how home loans and the legal system work a crayon may be the only thing you have ever written with.

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[Codie]

I have based my (which house is right decision) on 1 rule that I was taught by a very successful Businessman that I became good friends with. If the ROI is not 10yrs or shorter, then it isn't that great of a deal. With that as my guideline, if I can put the numbers together and finance the note on a 10yr or shorter note and it pay for itself as long as there is a renter in it, then I will consider it. MOST of the time when I get the numbers crunched the note will have to be financed for longer than 10yrs in order for the rent to cover the debt service and I immediately mark that one off my list. No science to it and probably plenty more educated than me that would say it is not smart, but I trust my friend and he has made more millions than I could ever dream of making using this same investment guideline on anything he puts money into.

[Pintail45]

Aha!

Now I see! Based upon your demonstration of your understanding of how home loans and the legal system work a crayon may be the only thing you have ever written with.

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I look forward to buying your assets out of bankruptcy

P.S. If you really have a lender willing to do a 80% LTV, NRL with zero juice, please shoot me a PM.

[Pintail45]

Yeah sorry I'm not the kind of man who walks away from his contractual obligations just because they're no longer convenient for me.

His example isn't realistic but he's not walking away. Non-recourse loans are still secured by collateral (in this case a house) but the lender gives up his right to come after him for any deficiency in exchange for a higher interest rate (and will require a larger down payment).

Back to his example, a more realistic scenario would be that Bob was required to put at least 40% down and paid a higher interest rate.

After it's all said and done, they would both lose about the same amount.

[meltingfeather]

You can't justify a 4-5% spread on an investment due to servicing the debt when the reduction in spread (with additional risk) takes you below the yield of other investments with a long track record.

Call it what you want, the numbers don't lie.

Feelings do, and they're also different for different people... and that was your explanation for your position on the risk vs. return position in the example.
It's not wrong that your emotions guide your investment decisions, but it's also not that your way is the right one and anything else is "not worth it."

[Atfulldraw]

Feelings do, and they're also different for different people... and that was your explanation for your position on the risk vs. return position in the example.
It's not wrong that your emotions guide your investment decisions, but it's also not that your way is the right one and anything else is "not worth it."

Just keep on quoting half of a sentence

You can think what you want.....

I can tell you'd like to think you have the intellectual high ground here and that acknowledging risk is somehow "weak".... so I'll just let you continue to think you are giving new investors good advice.

[gigem95]

Better wear your big boy pants if you want to participate on this thread! [emoji23]


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[BuckSmasher]

Geez Louise. No kidding. Just once I would like to have a difference of opinion and argue with someone on TBH without them acting nasty.

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[Atfulldraw]

Geez Louise. No kidding. Just once I would like to have a difference of opinion and argue with someone on TBH without them acting nasty.

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aren't you the one that said you didn't like to have to "wrap anything in a layer of politeness" or something like that ?

the answer is ..... there is no right answer.

It's different for everyone

but you leverage people act like someone criticized your Amway products.....

[Captain39]

Funny reading all these comments. There is more than one way to skin a deer; just like there is more than one way to buy rental propery. Each is different; some ways work better for others. But what makes me laugh; you post buying land & every body on here will tell to buy! And there is no return on your money! Per speculation on appreciation & some tax write offs. And don’t get me ering, I own land and have flipped land. Land has never paid me like my rentals!

[BuckSmasher]

aren't you the one that said you didn't like to have to "wrap anything in a layer of politeness" or something like that ?

the answer is ..... there is no right answer.

It's different for everyone

but you leverage people act like someone criticized your Amway products.....

I did, and it was a bit tongue in cheek.

True... No doubt.

LOL, and you no-debters act like Dave Ramsey is a prophet....

[Atfulldraw]

I did, and it was a bit tongue in cheek.

True... No doubt.

LOL, and you no-debters act like Dave Ramsey is a prophet....

I've got no prophets.

and we've got some RE debt so Dave probably wouldn't approve anyway

(But I will take the bet that he has increased more folks' net worth than all of the at-the-hotel weekend seminar, no-money-down, you too can drive a Ferrari and live in a Florida mansion and swim in your pool all day, that you can pack in a gold chain store idiot shysters combined)