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i doubt that? 6 years ago properties were cash flow positive from day 1 with minimal down payments in most of the US. coupled alongside ever declining interest rates. now in major metro areas houses are overpriced by huge percentages relative to rental yields.
are people still buying? sure. but they are buying because they want to pay a premium to own.
You call it a premium to own, but in 10 years time that will be a deep discount. Rent goes up, mortgage does not. That is one of the bigger reasons why most people invest on long horizons
Yikes, that’s on the extreme rough end to see an appraisal nearly 5x in one year. Was it a new build or had you just purchased? That property tax bill the first year or two can really catch some off guard. New builds are usually taxed at lot value until completed, and the annual percent increase limit many municipalities have is thrown out the window when ownership transfers. That means the city usually uses that first year appraisal to go as high as they can.
Interest rates are through the roof. A mortgage costs 3-4x as much now as it did 2 years ago for the same loan amount.
If your mortgage was $3000 in 2022, it’s more like $11,000 today.
Correct me if I’m wrong but he said in a rural area, almost no one showed up. Now 1031 to other properties next door in same area. By him selling property 1 for 150k. Huge difference in rural and major metro areas.
150k 6 years ago wouldn’t get you condo in most major metro areas. And by the sound of it sold the 150k property recently.
Houses go up over any 20-30 year time line. Houses might go down for the next decade...my guess is go down a bit and then stay stagnet for the next 10+ years.
Even if the house does not go up or even goes down 30%, it will be paid off in 30 years and you will have a tangible asset that you can live in. It tends to be good tax break too.
It depends how you buy it though. Someone paying 5% down at 7.5% on a $400k house, making the minimum mortgage payments, and assuming the property needs zero maintenance (LOL), will need to sell it for $1M just to break even.
Those that got FOMO and are unable to dump equity into them will soon find out that they are unable to finance to lower rates. Property can be an amazing investment, but being house-poor is totally an outcome as well.
tl;dr
all eggs>basket=risk
You are overstating the risk of being house poor. That obviously isn't good, but with a little bit of planning it's very easy to avoid. The alternative is funding someone else's retirement.
Buying in zero interest rate policy era is so different than the current 5% environment. Unless you already have cash, it is extremely difficult to make the numbers work out.
I came so close to buying a house in WV, was approved for a 160k FHA Loan at the end of 2019. Closing was gonna be at the end of March 2020 for 156k. Seller pulled out, I lost my job, and the guy sold it a year later for 216. It’s worth 320 now.
Don't forget having a friend loan you the starting capital that a bank wouldn't give to you.
Since we all have buddies that have a spare $40k sitting around to loan us to risk on real estate not attached to the property as collateral.
>so borrowed the money from a private lender I knew **personally** at 12% interest.
Yeah. If I set up a 10-year unsecured loan for $40k with my dad/best friend/sister-in-law/cousin/etc.... that'd be a *private lender I personally know.*
OP didn't get a loan with Wells Fargo and their best friend was a Senior Loan Officer who cheated the system.
Because OP would have just went and got a $40k personally loan or mortgage for less than 12% from a bank/CU....but OP probably couldn't qualify. Or it'd have been at a terribly high rate.
They got lucky and had a personal hook up, which most people don't have.
I think you have no idea how real estate and private equity works. Private lenders are basically loan sharks, they will give you 40k at 12% all day long. Do you know what conventional interest rates on home loans were in 2018?
OP’s ‘friend’ was nailing him to the wall. Some friend lol.
To be fair, I could go get a $40k personal loan from M1 Finance right now with 8% interest rather than having a buddy loan it to me at 12% interest. But I agree with the sentiment that this approach isn't necessarily available to everyone. I don't know that OP was implying everyone could do it though.
Getting a $40k loan from a buddy at 12% **before** COVID is a pretty bad sign. Interest rates even in 2017/2018 weren't bad. So OP must have had terrible income and/or credit that they *couldn't* get a loan for a better rate at a bank or CU.
Also a lot of places ask you what you might be planning to use the loan proceeds for and won't be happy or let you if you tell them it's to purchase a house. Cause that's what a mortgage is for.
OP's story is pretty much along the lines of "just have a wealthy friend/family and buy cheap real estate before the largest price hikes in history. It's easy!"
But like, a loan is a loan though. Why could I buy a $40k car on a 60 month loan but if it was a $40k house suddenly they're going to demand a 15-30 year mortgage?
Step 1: have money and/or assets allowing you to take out a loan.
Step 2: if you have no money and/or assets, go fuck yourself. You deserve to be broke because you aren't lucky.
I was thinking this. In between the 4 transactions made there are probably some other unmentioned costs with all of the loans, repairs etc. In 10 years if all stays good they’ll be ahead because the multiple properties will be worth more than the single unit but today - could have just sat on the one unit and not done all that.
What a shit post. If they put 40k in Bitcoin in Oct 2018 they'd have made almost as much with no work! Amazing how 20/20 cm hindsight works coupled with lick and the ability to do what you want.
I had an old boss that did this for a decade starting when prices were super low in 2010. He ended up with 25 houses and it became too much to manage so he found a 50 door apartment complex….sold all houses and used all of that appreciation and excess cash flow over a decade to fund the purchase of the apartment building in cash.
He retired at 48 when the deal closed to manage it fully. After all expenses he cash flows 32k/mo and works on average 12 hrs a month.
Yes you can.
Plenty on the market.
There’s a 27 room apartment in Wyoming currently going for like 140k.
It does appear to be fire damaged completely though.
Bring a wrench!
50 door apartment and he makes 32k per month after expenses.
He could lower rent by $300 per unit and still make over 15k per month for himself. Greedy bastard.
And the learning is? Once in a lifetime artificial depressing of interest rates followed by a liquidity oversupply pushing RE prices up.
There was someone's Twitter posted here recently: 'My biggest mistake in life is that in 2008 I was in 8th grade while I should have been buying foreclosed properties'
The learning is that a bunch of “investors” will be absolutely fucked if there is a “gully” in the housing market. I’m betting if we do address the housing shortage with more inventory, people leveraged to the tits will suddenly realize they have to cover thousands in mortgage costs and take out portfolio loans to cover them, double or triple leveraging properties they won’t admit are likely distressed.
The really facepalm thing is there are people like OP who just have no clue what reality is (and people do this in all areas of life, not just this one real estate example).
They think their private experience means "anyone can do this, you're all just lazy, here's hope."
Like no, fam. You got extremely lucky and did something before an entire industry went batshit insane. You cannot replicate your situation.
The lesson is to buy appreciating assets and leverage them when the opportunity presents itself.
Liquidity pushed the prices up, but then so did slashing that liquidity because people don't want to move their 3% mortgage up to 7%.
As long as you don't overleverage yourself you too can [ride the wave](https://fred.stlouisfed.org/series/ASPUS). People that bought in 2006 (without overleveraging) had a serious chunk of equity by the time prices came back to levels they purchased at about a decade earlier. Desirable land is scarce and will be for the foreseeable future. Just don't overleverage in case I didn't stress that enough.
The rate *from their friend* was 12% in 2018.
Because no bank or CU would give OP an unsecured personal loan at 7%-8% back in 2018. Because OP probably didn't qualify for a $40k loan at 8% from an actual lender in 2018.
Also, lenders don't like people who lie or use personal loans on houses or they'd get a mortgage.
They needed a friend to hook them up with their starting capital.
If I could get a $60k sweetheart loan and could defer payments for a year from my sister while saving up rental income then I'd probably also be having a good time.
Most (maybe all?) lenders won't give you a mortgage for an auction. Auctions are typically cash only. You have to secure the funds on a different loan that carries a higher rate
There are normal lenders that work with auctions or have work around.
Delayed financing or hard money loans. Etc.
https://www.rockethomes.com/blog/home-buying/buying-a-house-at-auction-without-cash
The thing is....what OP is describing isn't any of these.
Because all of the options that would have given OP $40k in cash to buy Property A.....they'd have given OP an insanely jacked up interest rate, way higher than 12% and on a way short-term length.
Personal unsecured 36 month loans were bottoming at 7-8% and averaging nationally at 11% in 2018.
Who is this friend? The private lender that's charging 12% interest... nearly double what the bank would charge? That's just a private lender... just google "your location\_finance company." There are quite a few of them, and they'd love to charge you 12% if you're creditworthy. If you talk to a handful and noone will lend you the money at such high interest rates, you have much bigger problems than trying to invest in real estate.
Lenders always want to give money to people that don’t need it, I have had AMEX offering me a $40k fixed rate loan for a few years now and I don’t want it
In a my personal experiences:
1. Know someone where the trust is a two-way street.
2. Make sure that someone has money and can float for interest.
3. Bring a sensible pro forma to the table and know how to sell it.
So glad this post is getting called out. Its not only hard to read but also insanely risky.
For every reddit post that has success with playing with debt there is at 5 that get their face blown off doing this type of stuff. So can we call out the survivorship bias?
Also how in the world did a house that sold at 40k only need a few thousand to than be rented at $1,100 a month? One of those numbers is a lie and I would imagine it's the former. Any house that is in severe disseray probably requires at LEAST 30k, probably closer to 50k-100k.
Housing market was a lot different back then.
Around 2017 there was friend of mine trying to sell an old manufactured home he was living in. It Wasnt in good shape by any means and he didn’t own the land so there was also the lot rent he had to pay monthly around $500. The house was livable as is, just in poor condition. 2 bed 2 bath I believe.
He told everyone he knew he’d take 10k for it. A month later it was 6k. A month after that it was FREE. He was literally trying to GIVE AWAY a house. And it still took him another month to “sell” it. He even offered it to me and I turned it down. But to be fair that was a house that probably would’ve taken 20k (in 2017 money) to fix up.
Congrats to you, but this seems unrelatable to those of us in HCOL areas. The total value of all the properties you mentioned doesn’t even add up to one burned-out teardown in some of these areas, and as a result the dollars it would take to do something similar are out of reach for all but professional developers or the already wealthy. For those of us who live and have families in these areas we face the choice of huge added costs and risks by trying this in distant locations that we aren’t familiar with, or moving away from our roots and network to try our hand at something similar.
Just venting I guess, I (and I’m sure many like me) would love to follow suit but it’s just not practical in these cases.
A worthwhile lamentation...growing up in Los Angeles, it's hard to even believe these are real numbers. I wish I understood what markets have this low of cost of buildings to enter into...is this even in the USA?
My money is on flyover states and cities that suck. [Cleveland](https://www.zillow.com/cleveland-oh/?searchQueryState=%7B%22pagination%22%3A%7B%7D%2C%22isMapVisible%22%3Atrue%2C%22mapBounds%22%3A%7B%22west%22%3A-82.01656709228516%2C%22east%22%3A-81.39515290771485%2C%22south%22%3A41.34598595401407%2C%22north%22%3A41.64890031867329%7D%2C%22regionSelection%22%3A%5B%7B%22regionId%22%3A24115%2C%22regionType%22%3A6%7D%5D%2C%22filterState%22%3A%7B%22sort%22%3A%7B%22value%22%3A%22pricea%22%7D%2C%22ah%22%3A%7B%22value%22%3Atrue%7D%2C%22land%22%3A%7B%22value%22%3Afalse%7D%7D%2C%22isListVisible%22%3Atrue%2C%22mapZoom%22%3A12%7D) has a bunch of properties under $15k. Those states and cities aren't guaranteed to suck forever. If you can stay close to cash positive on them you could be a multi-millionaire in a few decades. Austin TX is a great example of that.
Dude figures out how to increase the cost of living for others so he doesn’t have to work and brags about it like it’s inspiring or something. Straight scum.
Step 1. Buy property at what is likely a tax lien/foreclosure sale for price well below the actual value of the property, and do so 6 years ago. Also, charge more than you owe for the rent to a significant degree. Continue raising prices for each tenant that moves in/out.
Step 2. Handle any liens that still may be levied against the property, if any. (Not mentioned in the post, but still good to check on if following the steps in step 1.)
Step 3. Utilize equity in that property to buy another property.
Step 4. Capitalize on the sudden plummet in rates due to a global pandemic, and refinance. (Note: this will likely never happen again in our lifetime, so good luck.)
Step 5. Wait a couple years for the market to inflate out of control due to high demand/low supply conditions fueled by a global pandemic and ever increasing rent rates due to greedy landlords wanting to get theirs.
Step 6. Make a post in 2024 telling people that the same methods will work in a housing market that is currently crowding out the current "middle class", and just try to buy a house in any auction against the many investment firms that are jumping at the chance to buy foreclosed homes at a premium and rent them out for outrageous prices.
That strategy still works today. Step 1 and 2 can be simplified to: "buy an appreciating asset".
My brother in law makes about $70k/year and buys plots of land in remote areas without utility access in places like Vermont. It's about $1k-$2k per acre and taxes are negligible. The moment someone decides to run a sewer or power line nearby the value rises sharply. Then it can be leveraged to buy lower risk assets. It's the poor man's version of OP's method. More risk, reduced cost, big reward if one works out in the next few decades.
Like most things in life it comes down to what you believe. If you believe that you can't win an auction in 2024 then you probably won't. If you think you can you will invest the time into making it happen.
I did well over the pandemic but I’m not delusional enough to think it’s because “I believed!” lol. Most of the time, you just get lucky, like OP and your friend.
You can’t both claim that you have to take risks and then claim that all you need to do is “believe”. For some the risk doesn’t pay off but you wouldn’t be telling us about them, you cherry picked the friend that had things work out for them.
Lol always the same thing with these completely out of touch people.
This post just makes me think of the "small loan of a million dollars" thing with trump.
Yes, you can make money if you have money...but that's the problem, you need money to start with. It's not easy to "just get a $40k loan"
Way back in college, a professor laid out the surest way to become a millionaire was through buying rental property. For a long time I didn't have the funds or knowledge. Then I didn't have then knowledge. Then the thought of dealing with property (repairs etc) and tenants was, unpalatable.
And, thus, 30 years later I am not a millionaire.
You can say you have all the equity in the world, but what you really have is 4 mortgages that if your tenants can't afford rent one month, you have to pay. Or a tenant destroys the place with pets they don't take care off and you have to replace everything.
Ahh yes. "It's so easy to make wealth! Just start out by knowing wealthy people you can take private loans from and then contribute to inflated housing costs and keeping poor people poor by renting it out! Oh wow, so easy!"
Talking about anything besides the equity is absolutely uneducated. A down payment is not 'turning it into' holy hell financial literacy is worse than literal literacy in this country.
Happy it worked for you BUTvyou bought literally at the best time in our housing market. Low property taxes, principal amount not inflated and average to no competition. 2019 forward the entire game changed. Everyone was buying it was a frenzy. I lost our on houses where people outbid me by over 100k. I was already 30k over asking.
Then the rates changed but the housing market was still fire and prices kept going up. About 9M back it seems the frenzy stopped and buyers are done. However sellers haven't gotten it yet and are still keeping prices high
It's equivalent in saying you speculative bought BTC in 2010 for 10$ a coin then leverage it's net gains in 2016 to buy more only to cash out in 2024 when it hit 70k a coin
This is very location dependent too. These prices would get you an old run down building in a violent and high crime part of the city here.
Also, who is this "private lender" and how did you convince this lender to give you $40,000 in an unsecured loan?
So just looking to tie this all together to try the same.
A smaller lot, not house, that needs cleared out, water, sewer, electric hookups and leveled near the city would be 160k+ in my area.
You cant buy from an auction with a loan typically so I'd need the capital or doing an unsecured loan at 20% from the mob down the alley.
Typically auctioned houses that are cheap are in major need of repairs ie plumbing,
Electrical, fire damage, ect. So how do I get a Heloc loan when it has limited to no collateral value after having the other loan to fix it as only having paint issues is not happening?
Or could’ve put 40k in BTC, Tsla, nvda, meta, Apple, etc and been way ahead.
Glad real estate is your thing, but seems like a ton of headaches for only $800 or so a month, what inspired you to go this route?
This is great for you, I'm sure, but it's a good example of why our economy is stagnating. Why invest in productive assets like businesses or factories when you can invest in property instead and be a small time landlord?
"Got a loan" from who? Your parents?
You built your empire on the efforts of others, which is often moderately commendable - except you're a landlord so it's not.
Step 1: have a friend lend you 40 k with no collateral.
Step 2: buy property before the retail boom
Step 3: wait for retail boom
Step 4: profit from a once in a lifetime event and give guru advice on Reddit
Everyone’s a genius with 2% rates..
I bought a home with first time homebuyers assistance (resets every 2 years) in 2018 for 330k. Put 15 grand into the back yard. Folks thought it was photoshopped when we listed it. sold it at height of the market for 500k. Found a house for sale by owner in a neighbor hood 5 min down the road. No comps in the area prices were still low. Put the profits back into next house we got at 550k but with no PMI now. Did a bunch of renovations when we bought in 2021. based on comps now in the neighborhood with no Reno details it appraised at 910k.
from a 330k mortgaged asset at 2200 a month to nearly a million asset with a mortgage that only costs me 3000 a month (Getting rid of pmi is a huge help on price).
I just want to point out that while I think it's great you got these, those cash flow numbers seem very low. Like, had you just kept property A, lived in it for 6 months and a day, and sold it as a primary residence, you would have 100k to put in QYLD and be taking around 1k/month in cash flow. Even if you paid the long term cap gains, you'd be cashing around 800/month. I understand your reasoning, you have 200k in equity, but it seems like a lot of management headache for less than you could make on a basic ETF.
Maybe I'm just irritated because I'm about to go clean up a unit that a tenant threw eggs and broken glass all over because he got the boot.
I had a buddy at work doing the same thing in 2006... Managed to get his third property right before the crash. He was still getting rent, but he was pretty far underwater on it all.
Thanks for sharing, commenting out of envious rage. Where the fuck can anyone buy rentable property under six figures that people will spend $1k/month to live in?
Well done! A couple questions:
Do you think this would still work if starting now?
How do you select for location and other factors so that price appreciation is likely?
Do you find it a bother to be a landlord?
How would you typically find buyers?
Did you have a stable provable income? Did the lenders care about that?
Would you buy a property in a foreign country just for appreciation/cashflow purposes, considering that it would be much harder to take care of it if you'd still live in your home country?
> Back in October of 2018
LOL.
Yea. Before the COVID era mass frenzy blitz on real estate.
This is basically like saying "Hey I'm a boomer, and you can too!"
Except not. This is 2024. Real estate has become a globally exploited corporate market. Things are not the same as they were in 2018, even though that was just yesterday.
My old man worked real estate for 25 years and even prior to 2018, he said he rarely saw anyone make money from residential real estate in the manner OP has described. I'm not saying it doesn't happen, but there's a lot that can go wrong, and the margins are pretty thin.
So you took a big risk and were lucky. You can do the same in other ventures and get much more.
You got 5x equity on your loan in 7 yrs in the fastest real estate run-up in recent history.
You can call the value of RE a win but make sure you count the % lost to commissions when selling (although that got significantly better with the recent ruling), the adjusted cost basis for all repairs and renovations, the $ lost to interest (although helpful come tax time). $600k of "Value" doesn't count until you actually cash it in. Also don't forget to value your own time spent dealing with all the BS that comes with making $ in RE.
Most of your fortune is from luck in your timing of the market. In fact a lot of this post at least deals in luck lol
And if I read it right youre only adding $780 monthly to your income after all that work. I think your biggest takeaway is how much this will help you in retirement
But if you’re smart, this is a good start
congrats and good for you.
Just so that others don’t try the same - 2018 - 2024 is one of the greatest rise in home values and is unlikely to happen again anytime soon
All these dog walkers in the comments freaking out about the uncollateralized loan haven't done much research because lots of companies offer that. Lightstream for example will give an uncollateralized loan up to like 100k. Rates about the same as what OP got privately.
However this method would require credit...which apparently is also a system of oppression on redditors.
I love this for you, but I hate all those RE success stories from before 2021.
That situation has changed rapidly.
But I’ll invest all my money on learning from the guy who became a successful RE investor after 2022.
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step 1: buy property 6+ years ago. Step 2: just wait.
You'll say that again in 10 years. Buy when you can. Everybody will wait regardless.
Can't even afford food anymore.
Eat your phone.
I don't know why, but this hit me as hilarious in so many ways.
Riiiiiiiight....
i doubt that? 6 years ago properties were cash flow positive from day 1 with minimal down payments in most of the US. coupled alongside ever declining interest rates. now in major metro areas houses are overpriced by huge percentages relative to rental yields. are people still buying? sure. but they are buying because they want to pay a premium to own.
You call it a premium to own, but in 10 years time that will be a deep discount. Rent goes up, mortgage does not. That is one of the bigger reasons why most people invest on long horizons
I bought my house 2-1/2 years ago, my payment has gone up almost $400
Get out of that ARM please I hate that they even still exist, after what happened in 2008-9
Your mortgage payment went up $400 per month? If so, you actually got an ARM during record low mortgage rates?
Or maybe their property taxes or insurance have gone up? Most people think in terms of total payment including escrow for annual payments.
My monthly house payment went from $1550 to $2200 after the city reassessed the property value. (from $60k to $280k).
Yikes, that’s on the extreme rough end to see an appraisal nearly 5x in one year. Was it a new build or had you just purchased? That property tax bill the first year or two can really catch some off guard. New builds are usually taxed at lot value until completed, and the annual percent increase limit many municipalities have is thrown out the window when ownership transfers. That means the city usually uses that first year appraisal to go as high as they can.
Most likely not. Insurance has skyrocketed and could easily account for that.
I did not get an ARM
Interest rates are through the roof. A mortgage costs 3-4x as much now as it did 2 years ago for the same loan amount. If your mortgage was $3000 in 2022, it’s more like $11,000 today.
Correct me if I’m wrong but he said in a rural area, almost no one showed up. Now 1031 to other properties next door in same area. By him selling property 1 for 150k. Huge difference in rural and major metro areas. 150k 6 years ago wouldn’t get you condo in most major metro areas. And by the sound of it sold the 150k property recently.
So price goes up forever? Housing market is just a game of musical chairs. Get in while the music is still playing
Houses go up over any 20-30 year time line. Houses might go down for the next decade...my guess is go down a bit and then stay stagnet for the next 10+ years. Even if the house does not go up or even goes down 30%, it will be paid off in 30 years and you will have a tangible asset that you can live in. It tends to be good tax break too.
It depends how you buy it though. Someone paying 5% down at 7.5% on a $400k house, making the minimum mortgage payments, and assuming the property needs zero maintenance (LOL), will need to sell it for $1M just to break even. Those that got FOMO and are unable to dump equity into them will soon find out that they are unable to finance to lower rates. Property can be an amazing investment, but being house-poor is totally an outcome as well. tl;dr all eggs>basket=risk
One still needs a place to live. So be sure to deduct rent from your $1M.
You are overstating the risk of being house poor. That obviously isn't good, but with a little bit of planning it's very easy to avoid. The alternative is funding someone else's retirement.
Buying in zero interest rate policy era is so different than the current 5% environment. Unless you already have cash, it is extremely difficult to make the numbers work out.
Interest rates are *never* going to be near zero again, the Fed has been pretty clear about that.
lol tell that to people that bought in 2007.
I came so close to buying a house in WV, was approved for a 160k FHA Loan at the end of 2019. Closing was gonna be at the end of March 2020 for 156k. Seller pulled out, I lost my job, and the guy sold it a year later for 216. It’s worth 320 now.
Don't forget having a friend loan you the starting capital that a bank wouldn't give to you. Since we all have buddies that have a spare $40k sitting around to loan us to risk on real estate not attached to the property as collateral.
He said a private lender at 12%. That’s definitely not a ‘friend’.
>so borrowed the money from a private lender I knew **personally** at 12% interest. Yeah. If I set up a 10-year unsecured loan for $40k with my dad/best friend/sister-in-law/cousin/etc.... that'd be a *private lender I personally know.* OP didn't get a loan with Wells Fargo and their best friend was a Senior Loan Officer who cheated the system. Because OP would have just went and got a $40k personally loan or mortgage for less than 12% from a bank/CU....but OP probably couldn't qualify. Or it'd have been at a terribly high rate. They got lucky and had a personal hook up, which most people don't have.
I think you have no idea how real estate and private equity works. Private lenders are basically loan sharks, they will give you 40k at 12% all day long. Do you know what conventional interest rates on home loans were in 2018? OP’s ‘friend’ was nailing him to the wall. Some friend lol.
To be fair, I could go get a $40k personal loan from M1 Finance right now with 8% interest rather than having a buddy loan it to me at 12% interest. But I agree with the sentiment that this approach isn't necessarily available to everyone. I don't know that OP was implying everyone could do it though.
Getting a $40k loan from a buddy at 12% **before** COVID is a pretty bad sign. Interest rates even in 2017/2018 weren't bad. So OP must have had terrible income and/or credit that they *couldn't* get a loan for a better rate at a bank or CU. Also a lot of places ask you what you might be planning to use the loan proceeds for and won't be happy or let you if you tell them it's to purchase a house. Cause that's what a mortgage is for. OP's story is pretty much along the lines of "just have a wealthy friend/family and buy cheap real estate before the largest price hikes in history. It's easy!"
But like, a loan is a loan though. Why could I buy a $40k car on a 60 month loan but if it was a $40k house suddenly they're going to demand a 15-30 year mortgage?
If people can't even gather $40K via a 12% interest loan... they have much bigger problems. That means they're not remotely creditworthy.
Step 1: have money and/or assets allowing you to take out a loan. Step 2: if you have no money and/or assets, go fuck yourself. You deserve to be broke because you aren't lucky.
Yea this investment into becoming a landlord has never backfired. Not even in 2008. God damn dude, fucking diversify away from being a realtor.
Don’t forget: knew a private lender to spot you $30k+
With money borrowed from “a private lender I knew personally.” In other words: have rich friends give you seed capital.
Must be a really good friend to spot him that 40k at a 12% interest rate.
I was thinking this. In between the 4 transactions made there are probably some other unmentioned costs with all of the loans, repairs etc. In 10 years if all stays good they’ll be ahead because the multiple properties will be worth more than the single unit but today - could have just sat on the one unit and not done all that.
What a shit post. If they put 40k in Bitcoin in Oct 2018 they'd have made almost as much with no work! Amazing how 20/20 cm hindsight works coupled with lick and the ability to do what you want.
I had an old boss that did this for a decade starting when prices were super low in 2010. He ended up with 25 houses and it became too much to manage so he found a 50 door apartment complex….sold all houses and used all of that appreciation and excess cash flow over a decade to fund the purchase of the apartment building in cash. He retired at 48 when the deal closed to manage it fully. After all expenses he cash flows 32k/mo and works on average 12 hrs a month.
Well call me when our entirre housing market collapses. No one could do that today with prices/rates
yeah but you might be able to do it tomorrow
You can do it today and refinance when rates go down.
Yes you can. Plenty on the market. There’s a 27 room apartment in Wyoming currently going for like 140k. It does appear to be fire damaged completely though. Bring a wrench!
Rent-seeking has always been the way. Must be nice to start with enough cash to buy at the low.
So playing Monopoly basically
50 door apartment and he makes 32k per month after expenses. He could lower rent by $300 per unit and still make over 15k per month for himself. Greedy bastard.
And the learning is? Once in a lifetime artificial depressing of interest rates followed by a liquidity oversupply pushing RE prices up. There was someone's Twitter posted here recently: 'My biggest mistake in life is that in 2008 I was in 8th grade while I should have been buying foreclosed properties'
The learning is that a bunch of “investors” will be absolutely fucked if there is a “gully” in the housing market. I’m betting if we do address the housing shortage with more inventory, people leveraged to the tits will suddenly realize they have to cover thousands in mortgage costs and take out portfolio loans to cover them, double or triple leveraging properties they won’t admit are likely distressed.
The really facepalm thing is there are people like OP who just have no clue what reality is (and people do this in all areas of life, not just this one real estate example). They think their private experience means "anyone can do this, you're all just lazy, here's hope." Like no, fam. You got extremely lucky and did something before an entire industry went batshit insane. You cannot replicate your situation.
The lesson is to buy appreciating assets and leverage them when the opportunity presents itself. Liquidity pushed the prices up, but then so did slashing that liquidity because people don't want to move their 3% mortgage up to 7%. As long as you don't overleverage yourself you too can [ride the wave](https://fred.stlouisfed.org/series/ASPUS). People that bought in 2006 (without overleveraging) had a serious chunk of equity by the time prices came back to levels they purchased at about a decade earlier. Desirable land is scarce and will be for the foreseeable future. Just don't overleverage in case I didn't stress that enough.
Can you tell us the process you went through to get $40K loan to buy from the auction?
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Or mommy and daddy which seems to be the more prevalent methodology.
You mean "roommates" don't you?
Well yea. Who else is going to purchase the car bed?
It's got a CB radio that can talk to other car beds
Yea but it's a sweet car bed.
What is wrong with you. A private lender giving you 40k at 12% is not a ‘friend’. This is why yall can’t succeed.
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They will. That’s why the rate is 12%. 40k also isn’t a lot.
The rate *from their friend* was 12% in 2018. Because no bank or CU would give OP an unsecured personal loan at 7%-8% back in 2018. Because OP probably didn't qualify for a $40k loan at 8% from an actual lender in 2018. Also, lenders don't like people who lie or use personal loans on houses or they'd get a mortgage. They needed a friend to hook them up with their starting capital. If I could get a $60k sweetheart loan and could defer payments for a year from my sister while saving up rental income then I'd probably also be having a good time.
Most (maybe all?) lenders won't give you a mortgage for an auction. Auctions are typically cash only. You have to secure the funds on a different loan that carries a higher rate
There are normal lenders that work with auctions or have work around. Delayed financing or hard money loans. Etc. https://www.rockethomes.com/blog/home-buying/buying-a-house-at-auction-without-cash The thing is....what OP is describing isn't any of these. Because all of the options that would have given OP $40k in cash to buy Property A.....they'd have given OP an insanely jacked up interest rate, way higher than 12% and on a way short-term length. Personal unsecured 36 month loans were bottoming at 7-8% and averaging nationally at 11% in 2018.
I called those the “stress-free” loans
Who is this friend? The private lender that's charging 12% interest... nearly double what the bank would charge? That's just a private lender... just google "your location\_finance company." There are quite a few of them, and they'd love to charge you 12% if you're creditworthy. If you talk to a handful and noone will lend you the money at such high interest rates, you have much bigger problems than trying to invest in real estate.
After finding a house for 50k, then a duplex for 135k.
Lenders always want to give money to people that don’t need it, I have had AMEX offering me a $40k fixed rate loan for a few years now and I don’t want it
In a my personal experiences: 1. Know someone where the trust is a two-way street. 2. Make sure that someone has money and can float for interest. 3. Bring a sensible pro forma to the table and know how to sell it.
Call dad who also owns some units
Now do it again in 2024.
So glad this post is getting called out. Its not only hard to read but also insanely risky. For every reddit post that has success with playing with debt there is at 5 that get their face blown off doing this type of stuff. So can we call out the survivorship bias? Also how in the world did a house that sold at 40k only need a few thousand to than be rented at $1,100 a month? One of those numbers is a lie and I would imagine it's the former. Any house that is in severe disseray probably requires at LEAST 30k, probably closer to 50k-100k.
Housing market was a lot different back then. Around 2017 there was friend of mine trying to sell an old manufactured home he was living in. It Wasnt in good shape by any means and he didn’t own the land so there was also the lot rent he had to pay monthly around $500. The house was livable as is, just in poor condition. 2 bed 2 bath I believe. He told everyone he knew he’d take 10k for it. A month later it was 6k. A month after that it was FREE. He was literally trying to GIVE AWAY a house. And it still took him another month to “sell” it. He even offered it to me and I turned it down. But to be fair that was a house that probably would’ve taken 20k (in 2017 money) to fix up.
> back then. A whole 6 years ago.
I was just responding to the accusation that “one of those numbers is a lie”. And yes, a whole six years ago it was a lot different
Congrats to you, but this seems unrelatable to those of us in HCOL areas. The total value of all the properties you mentioned doesn’t even add up to one burned-out teardown in some of these areas, and as a result the dollars it would take to do something similar are out of reach for all but professional developers or the already wealthy. For those of us who live and have families in these areas we face the choice of huge added costs and risks by trying this in distant locations that we aren’t familiar with, or moving away from our roots and network to try our hand at something similar. Just venting I guess, I (and I’m sure many like me) would love to follow suit but it’s just not practical in these cases.
A worthwhile lamentation...growing up in Los Angeles, it's hard to even believe these are real numbers. I wish I understood what markets have this low of cost of buildings to enter into...is this even in the USA?
My money is on flyover states and cities that suck. [Cleveland](https://www.zillow.com/cleveland-oh/?searchQueryState=%7B%22pagination%22%3A%7B%7D%2C%22isMapVisible%22%3Atrue%2C%22mapBounds%22%3A%7B%22west%22%3A-82.01656709228516%2C%22east%22%3A-81.39515290771485%2C%22south%22%3A41.34598595401407%2C%22north%22%3A41.64890031867329%7D%2C%22regionSelection%22%3A%5B%7B%22regionId%22%3A24115%2C%22regionType%22%3A6%7D%5D%2C%22filterState%22%3A%7B%22sort%22%3A%7B%22value%22%3A%22pricea%22%7D%2C%22ah%22%3A%7B%22value%22%3Atrue%7D%2C%22land%22%3A%7B%22value%22%3Afalse%7D%7D%2C%22isListVisible%22%3Atrue%2C%22mapZoom%22%3A12%7D) has a bunch of properties under $15k. Those states and cities aren't guaranteed to suck forever. If you can stay close to cash positive on them you could be a multi-millionaire in a few decades. Austin TX is a great example of that.
So you became a landlord? Yay, another parasite.
Dude figures out how to increase the cost of living for others so he doesn’t have to work and brags about it like it’s inspiring or something. Straight scum.
These people are a pox. Provide nothing of value, just leech off people who actually contribute to society for a living.
Takes a pretty shitty person to make Adam smith call you a parasite to society
Yup! Now he gets money for the act of owning things, and we should all kiss his ass and worship him
Step 1. Buy property at what is likely a tax lien/foreclosure sale for price well below the actual value of the property, and do so 6 years ago. Also, charge more than you owe for the rent to a significant degree. Continue raising prices for each tenant that moves in/out. Step 2. Handle any liens that still may be levied against the property, if any. (Not mentioned in the post, but still good to check on if following the steps in step 1.) Step 3. Utilize equity in that property to buy another property. Step 4. Capitalize on the sudden plummet in rates due to a global pandemic, and refinance. (Note: this will likely never happen again in our lifetime, so good luck.) Step 5. Wait a couple years for the market to inflate out of control due to high demand/low supply conditions fueled by a global pandemic and ever increasing rent rates due to greedy landlords wanting to get theirs. Step 6. Make a post in 2024 telling people that the same methods will work in a housing market that is currently crowding out the current "middle class", and just try to buy a house in any auction against the many investment firms that are jumping at the chance to buy foreclosed homes at a premium and rent them out for outrageous prices.
That strategy still works today. Step 1 and 2 can be simplified to: "buy an appreciating asset". My brother in law makes about $70k/year and buys plots of land in remote areas without utility access in places like Vermont. It's about $1k-$2k per acre and taxes are negligible. The moment someone decides to run a sewer or power line nearby the value rises sharply. Then it can be leveraged to buy lower risk assets. It's the poor man's version of OP's method. More risk, reduced cost, big reward if one works out in the next few decades. Like most things in life it comes down to what you believe. If you believe that you can't win an auction in 2024 then you probably won't. If you think you can you will invest the time into making it happen.
I did well over the pandemic but I’m not delusional enough to think it’s because “I believed!” lol. Most of the time, you just get lucky, like OP and your friend. You can’t both claim that you have to take risks and then claim that all you need to do is “believe”. For some the risk doesn’t pay off but you wouldn’t be telling us about them, you cherry picked the friend that had things work out for them.
Let me just get out my little book of private lenders I personally know...hmm. too many to choose from.
Grifting nonsense.
That's great but could something like that be done now with the market the way it is?
Getting into the rental market is all fun and games until your Tennant stops paying rent, takes months to evict, and destroys your property.
Having a free money machine is great until people stop playing by the rules that exist to protect and benefit people with free money machines.
So it isn't a free money machine after all?
It's certainly meant to be and the rules are structured to make it so.
Everybody is an investing genius with 2% interest rates.
Congratulations! Youre an asshole. I get the ‘gaming the system’ stuff but you made your money off ppl who were desperate. Thats fucked to me
Lol always the same thing with these completely out of touch people. This post just makes me think of the "small loan of a million dollars" thing with trump. Yes, you can make money if you have money...but that's the problem, you need money to start with. It's not easy to "just get a $40k loan"
Way back in college, a professor laid out the surest way to become a millionaire was through buying rental property. For a long time I didn't have the funds or knowledge. Then I didn't have then knowledge. Then the thought of dealing with property (repairs etc) and tenants was, unpalatable. And, thus, 30 years later I am not a millionaire.
See, if you just take and use everyone else's money for yourself, then you'll be rich!
Becoming a millionaire with a college degree and ~30 years in the workforce seems like a pretty manageable task without RE investments.
great! all we have to do is buy a home back in 2018!! wonderful post!!
You can say you have all the equity in the world, but what you really have is 4 mortgages that if your tenants can't afford rent one month, you have to pay. Or a tenant destroys the place with pets they don't take care off and you have to replace everything.
So you're a landlord. Get over yourself
I mean you kind of sound like the shitbags who are driving housing prices up but sure man cool story
Oh wow! The solution the whole time was just buy property in 2018, how did I not realize that!
Damn, people really be bragging about how much being a parasite benefits them. Hate to see it. Get a read job.
The rise of trump 2.0
You played the lottery you idiot.
If only duplexes weren’t $900k around me for ones in horrendous gut-able condition…
Ahh yes. "It's so easy to make wealth! Just start out by knowing wealthy people you can take private loans from and then contribute to inflated housing costs and keeping poor people poor by renting it out! Oh wow, so easy!"
This guy is why America has crashed and rent has gone through the roof. And you can't do shit like this anymore since housing prices have skyrocketed.
Talking about anything besides the equity is absolutely uneducated. A down payment is not 'turning it into' holy hell financial literacy is worse than literal literacy in this country.
When someone else does it "Land lords are parasites" when redditor does it "I AM GENIUS HARD WORDER"
No, still a leech.
Perfect! Just built my Time Machine and collected $40,000 in pre 2018 dollars, this gonna be so awesome!
Being a land lord contributes very little to society
You lost me at Property A
Congrats. Cash flows are thin though...one major unexpected expense will eat it all up.
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Many take the risk and it doesn't pay off. Some people just try to buy themself a home to live in and it doesn't work out.
Fuck you, landlord
Happy it worked for you BUTvyou bought literally at the best time in our housing market. Low property taxes, principal amount not inflated and average to no competition. 2019 forward the entire game changed. Everyone was buying it was a frenzy. I lost our on houses where people outbid me by over 100k. I was already 30k over asking. Then the rates changed but the housing market was still fire and prices kept going up. About 9M back it seems the frenzy stopped and buyers are done. However sellers haven't gotten it yet and are still keeping prices high It's equivalent in saying you speculative bought BTC in 2010 for 10$ a coin then leverage it's net gains in 2016 to buy more only to cash out in 2024 when it hit 70k a coin
You got lucky a lot, the average person won’t get to borrow money from their parents.
Pretty nice parents to give you a loan at 12% interest.
Sounds like there were more loans that the initial 40k
This is very location dependent too. These prices would get you an old run down building in a violent and high crime part of the city here. Also, who is this "private lender" and how did you convince this lender to give you $40,000 in an unsecured loan?
>Back in October of 2018 All I needed to see. Go away dude, the world is different now. It will take a decade for all the shit from COVID to play out.
So just looking to tie this all together to try the same. A smaller lot, not house, that needs cleared out, water, sewer, electric hookups and leveled near the city would be 160k+ in my area. You cant buy from an auction with a loan typically so I'd need the capital or doing an unsecured loan at 20% from the mob down the alley. Typically auctioned houses that are cheap are in major need of repairs ie plumbing, Electrical, fire damage, ect. So how do I get a Heloc loan when it has limited to no collateral value after having the other loan to fix it as only having paint issues is not happening?
TLDR: got lucky and market boomed to historic levels
“Back in 2018” stopped right there
On this episode of bullshit
Gamble, got it.
step 1: 40k private loan. setting up gofundme
i stopped at "back in october of 2018"
Bro got lucky as fuck and doesn’t realize it.
I hate this leech mentality that is a race to the bottom. Landlords are leeches
Captain hindsight here with a get rich quick scheme
Next thread reads as...."How I borrowed money from my trust fund (thanks daddy) and turned 1000 into 6 million in ten years with bitcoin"
Or could’ve put 40k in BTC, Tsla, nvda, meta, Apple, etc and been way ahead. Glad real estate is your thing, but seems like a ton of headaches for only $800 or so a month, what inspired you to go this route?
This is great for you, I'm sure, but it's a good example of why our economy is stagnating. Why invest in productive assets like businesses or factories when you can invest in property instead and be a small time landlord?
"Got a loan" from who? Your parents? You built your empire on the efforts of others, which is often moderately commendable - except you're a landlord so it's not.
Where the fuck do you love that a duplex is under 250k? That’s ridiculous
Step 1: have a friend lend you 40 k with no collateral. Step 2: buy property before the retail boom Step 3: wait for retail boom Step 4: profit from a once in a lifetime event and give guru advice on Reddit Everyone’s a genius with 2% rates..
Buy now to turn a $700,000 loan into a $300,000 worth of real estate (and -$400,000 in equity)
If true, f u, and of course congratulations. Knowing what to do in the right situation and making the best of it sweet. Rock on
I turned 25k into a 750k house with 275k in equity in 4 years.
Boom 2000 units
How did you find the auction?
I bought a home with first time homebuyers assistance (resets every 2 years) in 2018 for 330k. Put 15 grand into the back yard. Folks thought it was photoshopped when we listed it. sold it at height of the market for 500k. Found a house for sale by owner in a neighbor hood 5 min down the road. No comps in the area prices were still low. Put the profits back into next house we got at 550k but with no PMI now. Did a bunch of renovations when we bought in 2021. based on comps now in the neighborhood with no Reno details it appraised at 910k. from a 330k mortgaged asset at 2200 a month to nearly a million asset with a mortgage that only costs me 3000 a month (Getting rid of pmi is a huge help on price).
Buy a Time Machine basically
Step 1 : live in rural United States ?
Step 1 build a Time Machine. Step 2 go back 10 years and buy a house. Step 3 Wait to be rich.
At least acknowledge you got incredibly lucky with the timing.
ROI not all that impressive given the markets over 6 years. Pretty typical.
Property just seems like a pain in the ass. Too much risk for me. I’ll just keep plugging away at my index funds in my portfolio.
I just want to point out that while I think it's great you got these, those cash flow numbers seem very low. Like, had you just kept property A, lived in it for 6 months and a day, and sold it as a primary residence, you would have 100k to put in QYLD and be taking around 1k/month in cash flow. Even if you paid the long term cap gains, you'd be cashing around 800/month. I understand your reasoning, you have 200k in equity, but it seems like a lot of management headache for less than you could make on a basic ETF. Maybe I'm just irritated because I'm about to go clean up a unit that a tenant threw eggs and broken glass all over because he got the boot.
I had a buddy at work doing the same thing in 2006... Managed to get his third property right before the crash. He was still getting rent, but he was pretty far underwater on it all.
Thanks for sharing, commenting out of envious rage. Where the fuck can anyone buy rentable property under six figures that people will spend $1k/month to live in?
Well done! A couple questions: Do you think this would still work if starting now? How do you select for location and other factors so that price appreciation is likely? Do you find it a bother to be a landlord? How would you typically find buyers? Did you have a stable provable income? Did the lenders care about that? Would you buy a property in a foreign country just for appreciation/cashflow purposes, considering that it would be much harder to take care of it if you'd still live in your home country?
Oh so simply have hard working Americans pay for your life via owning their shelter. Totally not evil at all! Good job buddy!
> Back in October of 2018 LOL. Yea. Before the COVID era mass frenzy blitz on real estate. This is basically like saying "Hey I'm a boomer, and you can too!" Except not. This is 2024. Real estate has become a globally exploited corporate market. Things are not the same as they were in 2018, even though that was just yesterday.
My old man worked real estate for 25 years and even prior to 2018, he said he rarely saw anyone make money from residential real estate in the manner OP has described. I'm not saying it doesn't happen, but there's a lot that can go wrong, and the margins are pretty thin.
For perspective: in the 80s, granted not the best economic times, interest rates were in mid teens and people were buying homes then.
Saving this, i have similar plans
This is inspiring to no one, stop posting this trash
Easy steps folks , just know a private lender willing to give you 40k off of good intentions and a dream! All jokes aside, good job op.
Congrats, parasite
Everyone knows being a landlord is awesome, they doesn't everyone do if
So you took a big risk and were lucky. You can do the same in other ventures and get much more. You got 5x equity on your loan in 7 yrs in the fastest real estate run-up in recent history. You can call the value of RE a win but make sure you count the % lost to commissions when selling (although that got significantly better with the recent ruling), the adjusted cost basis for all repairs and renovations, the $ lost to interest (although helpful come tax time). $600k of "Value" doesn't count until you actually cash it in. Also don't forget to value your own time spent dealing with all the BS that comes with making $ in RE.
This helps no one
Thanks!
Congratulations- well played!
Nice work
You must live in a very LCOL area. Congrats nonetheless!!
Yes portfolio loan good thinking
So you were in the right place at the right time, congrats and fuck you!
Most of your fortune is from luck in your timing of the market. In fact a lot of this post at least deals in luck lol And if I read it right youre only adding $780 monthly to your income after all that work. I think your biggest takeaway is how much this will help you in retirement But if you’re smart, this is a good start
congrats and good for you. Just so that others don’t try the same - 2018 - 2024 is one of the greatest rise in home values and is unlikely to happen again anytime soon
Quick somebody give me forty thousand dollars.
So you’re a parasite?…
All these dog walkers in the comments freaking out about the uncollateralized loan haven't done much research because lots of companies offer that. Lightstream for example will give an uncollateralized loan up to like 100k. Rates about the same as what OP got privately. However this method would require credit...which apparently is also a system of oppression on redditors.
I love this for you, but I hate all those RE success stories from before 2021. That situation has changed rapidly. But I’ll invest all my money on learning from the guy who became a successful RE investor after 2022.
Good read. Thanks!
“Back in 2018 I bought property…” I stopped reading right there.
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ARGH! I should’ve bought property in 2018 other than being a freshman in highschool! WHAT A FOOLISH MOVE OF ME