Political Roundtable Part XXIII

[gtn130]

SD, you're moving the goal posts for one, but those tax write offs are relative peanuts and do not turn a minimum wage gig into a $50k+ annual salary. Again, you don't know what you're talking about.

[gtn130]

SD20: You can make $50k+ annually by driving Uber and not reporting your taxes.

me: Uber drivers make minimum wage, and Uber reports your earning to the IRS, so you can't evade taxes

SD20: Yes, but those tax write offs!

Ok dude.

[stilldropin20]

SD, you're moving the goal posts for one, but those tax write offs are relative peanuts and do not turn a minimum wage gig into a $50k+ annual salary. Again, you don't know what you're talking about.

do you hear yourself? Let's say it nice and slow...I'm moving the goal post..... on my..... own..... wealth building strategy?

Do you hear that?

look you may think this is a political discussion or an argument. its not. its called a wealth building strategy. It works. And tremendously well. Ive done it for 27 years. There are no "holes" to punch in it. Not in theory. not in reality.

You are not even asking the right questions to understand where the risks are. But I know where those are and I can prepare you or anyone how to hedge for those risks as well.

but getting a job is not one of the risks. its called a given. You must work! I dont care if you drive for uber or wait tables or tend bar.whichever...go get a job. save your money. and pay your taxes. Avoid debt. buy income property. its that simple.

[stilldropin20]

SD20: You can make $50k+ annually by driving Uber and not reporting your taxes.

me: Uber drivers make minimum wage, and Uber reports your earning to the IRS, so you can't evade taxes

SD20: Yes, but those tax write offs!

Ok dude.

dude....you are not reading...i am NOT saying that you DO NOT report your income!!!! I am saying the exact opposite...You MUST report your income!!!!. All of it!!. you need to show your income and as much as possible to qualify for your loan.

Who cares how much uber drivers make????? Just get your ass to work!!! Do something...Uber is just a nice side hustle because you can easily double up as a real estate agent<--and that is what i would do...put a huge real estate sign marketing myself on my car....killing 2 birds with one stone....do you understand???????? A typical real estate commission is 2.5-3%. So on a $500K house or condo, the realtor makes $15,000. Get it??? Do you understand the potential synergy between uber and real estate? Instead of getting lost down the wormhole of how much the uber drivers actually earn, focus on the big picture and work more hours if you have to. The marketing for real estate will pay off!!

So im just not sure what are you missing???? You just dont believe the gross revenue is there?????????? Well...you're flat wrong!!! NYC ubers average almost 30 per hour. Chicago $20.

there are sign on bonuses. weekly quota bonuses as well on top of all of that.

But are you seriously are you justTHAT hung up on this whole aspect of "get a job???" Are you this averse to working????

What is your struggle???

look, the hardest million to make is your first million. It takes most people 15-20 years once they enter the work force (18 years old) . But once you make your first million it usually takes 1-2 years to make your second million.

If you do what I'm telling you to do you can make in equity or cash your first million in 10 years. and then double your net worth every 2-4 years.

but to qualify for a loan to purchase a home you must make money!!!! It doesn't matter how you make the money...If you only earn $10 per hour then you need to work 80 hours per week...whatever...do it!! you only need to do it for 2 years.

But i'm giving you a very easy path:

1. Redfin real estate agents make $40-60K. My fiance did it for 1 year. they will run you all over town and pay you about 40 per hour.

2. Uber drivers earn 20-30 per hour. I just looked it up BTW...but my brother drives for Uber right now...he drives mornings and evening only and does construction mid day. He makes about $40 per hour (uber black) but has a gas guzzler that requires too much maintenance.

3. but i dont care how you make your money...just go make some money for 2 years. You need to earn at least 40K to buy a cheap 2 flat. But 70-80K will get you a much better place like a 4 flat in a better neighborhood.

4. avoid debt. live at home in mommy's basement. whatever.

5. buy income property as i detailed in all of those posts.

[pancakes3]

hypothetical 18 year old applies for FHA gets denied bc he hasn't had steady employment for 2 years.

18 year old drives uber for 2 years, applies for FHA loan, guidelines ask for front end ratio of 35%, which for a gross income of $70,000 (generous, even accounting for 80 hour work weeks split between 2 jobs) sets a ceiling of ~$280,000. 20 year old has difficulty finding a multi-unit property at that price point.

FHA loans require the property to be the 20 year old's primary residence, eliminating one of the units available for rent, cutting into rental income.

20 year old who finds a miracle listing of a 4-unit property at $280,000 is optimistically renting out each unit at $600/unit, which works out to equal the PMIT payments of ~$1800.

20 year old is now at the exact same financial situation he was 2 years ago, except locked into a 30 year mortgage, with the investment property being cost-neutral.

20 year old is now ineligible for future FHA loans, and cannot purchase another property until he is able to front 20% down. If he wishes to find another 4-unit property at around $300,000, he must save $60,000. A rough guideline for a "good" savings rate is typically estimated at 20% of net income. Living a SD-approved spartan lifestyle, our 20-year old, who is still working 80 hours a week is able to save 50%. It would take him roughly 2 years to save up a down payment for his second unit.

Our man has now driven uber and tended bar 7 days a week for 208 straight weeks to be 600,000 in debt, owning two properties that are cost-neutral to him. If he sold his first property, he would have roughly $40,000 in equity in the property.

After 10 years, he will have worked 12-hour days for over 3600 days straight (or 18-hour days 5 days a week), taken out 1.5 million in loans, and have roughly $580,000 in equity. There may be gains in real estate at the end of the 10 years. If the property bought in year 2, 4, 6, and 8 has appreciated sufficiently in value by year 10 (partially driven via inflation), then in addition to the equity, sure, our 28 year old could be worth in excess of $1 million. Even if Uber does not employ drivers anymore in 2028, our man here has real estate experience, and may have pivoted to be a real estate agent.

However, any deviance from this to, date romantically, go to school, travel, or buying a movie ticket cuts into these gains. Netflix, Amazon Prime, and X-box live cuts into these gains. A gym membership cuts into these gains. If he is unable to find suitable properties, it would cut into these gains. Any potential downturns in the real estate market would cut into these gains.

So I mean, maybe. Maybe this is a template to build wealth. It's possible. It could also be an oversimplification of someone's financial situation to the point where it sounds like a 5 year old is scrawling out the math in crayon. I'm not here to judge. I just happen to think that life's messy and anyone who says things with too much conviction comes off as woefully underinformed.

[Induveca]

You may dislike SD’s vibe but his financial advice is pretty damn good.

I worked my ass off in my late teens to 30 years old, bought real estate in undeveloped areas and revamped them slowly. I did this while working like a maniac in software development, and bought properties in DC at their lows in the 90s.

Invest most of your earnings young and take advantage of your youth. You have so much flexibility at that age, work as much as you possibly can live in the cheapest spot you can (preferably the buildings you purchase). Invest any additional cash in hard assets. Get a solid line of credit, not difficult if you make 100k+.

I’m buying real estate in Chicago, Cleveland and Detroit as well. As rents keep going through the roof in California and NYC/DC the exodus to cities with solid infrastructures is only going to increase in the next decade.

There are some amazing properties for dirt cheap. 25k for 4 story buildings. Just hire a local property manager and keep renting them out, slowly renovate them. Pays for itself.

It’s an easy flip, and an even better hold. Easy money. Even the Uber suggestion is solid, you should always turn your free time into more cash at that age. Buy a decent *USED* black SUV and get to work in your free time. Put your properties on AirBNB, Homeaway etc as well.

[pancakes3]

i guess my non-snarky point is that while real estate is a fine enough investment vehicle, but it's not a viable substitute for active income.

takes money to make money.

[dckingsfan]

i guess my non-snarky point is that while real estate is a fine enough investment vehicle, but it's not a viable substitute for active income.

takes money to make money.

It also depends on when - those that were just starting to flip in 2008 went chapter... It is always hard to time the market but I wouldn't guess we are at the bottom right now

[dckingsfan]

You may dislike SD’s vibe but his financial advice is pretty damn good.

I worked my ass off in my late teens to 30 years old, bought real estate in undeveloped areas and revamped them slowly. I did this while working like a maniac in software development, and bought properties in DC at their lows in the 90s.

Invest most of your earnings young and take advantage of your youth. You have so much flexibility at that age, work as much as you possibly can live in the cheapest spot you can (preferably the buildings you purchase). Invest any additional cash in hard assets. Get a solid line of credit, not difficult if you make 100k+.

I’m buying real estate in Chicago, Cleveland and Detroit as well. As rents keep going through the roof in California and NYC/DC the exodus to cities with solid infrastructures is only going to increase in the next decade.

There are some amazing properties for dirt cheap. 25k for 4 story buildings. Just hire a local property manager and keep renting them out, slowly renovate them. Pays for itself.

It’s an easy flip, and an even better hold. Easy money. Even the Uber suggestion is solid, you should always turn your free time into more cash at that age. Buy a decent *USED* black SUV and get to work in your free time. Put your properties on AirBNB, Homeaway etc as well.

And there you have it...

[gtn130]

You may dislike SD’s vibe but his financial advice is pretty damn good.

It’s terrible advice. You’re far better off putting your money in an index fund and diversifying instead of dumping your net worth into real estate and having zero liquidity or access to cash.

You guys who bought property in the 90s are delusional and have no concept of risk aversion

[dckingsfan]

SD20: You can make $50k+ annually by driving Uber and not reporting your taxes.

me: Uber drivers make minimum wage, and Uber reports your earning to the IRS, so you can't evade taxes

SD20: Yes, but those tax write offs!

Ok dude.

Buzzfeed's analysis on uber, projected yearly driver salary of $34,164.

[Induveca]

i guess my non-snarky point is that while real estate is a fine enough investment vehicle, but it's not a viable substitute for active income.

takes money to make money.

Agreed, but it’s far better to use your credit line on a down payment for a 25-50k building with 6-8 units in the rust belt vs buying an iPhone and laptop every year.

Even at 400/month rent for a 6 unit you get your money back pretty quickly. Of course crucial to avoid any major issues. But finding a building with decent occupancy isn’t that difficult if you spend a few weeks searching in a city like Cleveland or Detroit.

[Induveca]

SD20: You can make $50k+ annually by driving Uber and not reporting your taxes.

me: Uber drivers make minimum wage, and Uber reports your earning to the IRS, so you can't evade taxes

SD20: Yes, but those tax write offs!

Ok dude.

Buzzfeed's analysis on uber, projected yearly driver salary of $34,164.

It fully depends on location, and it’s highly highly variable. The guy with a black car vs UberX who focuses on concerts/events/weekends and actually plans can make quite a bit.

In NYC top Uber earners are in the 80k area. Like anything else strategy is key. A generic sum avg isn’t very helpful. You’re mixing the clueless vs drivers with a strategy.

The “average” salary of a national survey of real estate agents isnt very helpful either.

[Induveca]

You may dislike SD’s vibe but his financial advice is pretty damn good.

It’s terrible advice. You’re far better off putting your money in an index fund and diversifying instead of dumping your net worth into real estate and having zero liquidity or access to cash.

You guys who bought property in the 90s are delusional and have no concept of risk aversion

Gtn, I’ve been on Wall Street and investing for 25 years, this is solid advice. I sell data to hedge funds, founded a major online financial service in the 90s. Actively build black box algorithmic trading. Index funds are fisher price level investment vehicles.

We’re advocating using credit lines to buy distressed properties and working 70-80 hours a week when you’re young to gain more credit. Working your ass off, with an actual plan and hording cash in side gigs and holding down a full time job is a path to rapid success in your 20s. Do it as an LLC, worst case scenario if you can’t hang? LLC folds.

You’re a web designer right? That isn’t going to build wealth alone. FYI, I made more money in real estate post 2010 in places like Midland Texas with the shale boom vs DC in the 90s.

Again strategy, just don’t be an uninformed investor and buy a house or commercial unit without a strategy. North Dakota and Montana also have some amazing commercial opportunities.

You can make a killing taking over 10 year leases of failed fast food chains and flipping them to McDonald’s/Burger King in areas projected to see even minimal growth in industries like shale.

With that attitude you’ll get nowhere, index funds are the most basic investment vehicles already built into 401ks. You’re aiming for 2-3% returns at best, we’re just saying aim higher.

[Induveca]

“Before you can become a millionaire, you must learn to think like one. You must learn how to motivate yourself to counter fear with courage. Making critical decisions about your career, business, investments and other resources conjures up fear, fear that is part of the process of becoming a financial success”

Always loved that quote in my 20s, if you’re not scared to death and taking big investment risks in your 20s you’re doing something horribly wrong.

[pancakes3]

it's still a matter of risk management though, and real estate investment is not a one-size-fits-all strategy, much less a guarantee path to millionairedom.

yeah, index funds are "fisher-price level investment vehicles" but fisher price is a successful company because they're safe, not because they're sexy. the "conventional" hierarchies of investment, not to mention diversification, advises that cash is king, and everyone needs 3-6 months emergency cash, on hand, on demand. i know i don't have to tell you, Indu that as ROI increases, risk increases. plus, factors such as employer matching on 401k, growth v. value based strategies, risk aversion, passive income v. ROI, all affect people's portfolios differently.

and at the risk of drawing boomer ire, the concept of socially responsible investing is a notion that we damned millennials are really taking to heart.

edit: yes, fortune may favor the bold, and when people are young, they're more free to indulge in riskier business and investing propositions. that's a measured, articulate thought and it's a far cry from "you lazy idiots, just drive uber and buy duplexes."

[Induveca]

it's still a matter of risk management though, and real estate investment is not a one-size-fits-all strategy, much less a guarantee path to millionairedom.

yeah, index funds are "fisher-price level investment vehicles" but fisher price is a successful company because they're safe, not because they're sexy. the "conventional" hierarchies of investment, not to mention diversification, advises that cash is king, and everyone needs 3-6 months emergency cash, on hand, on demand. i know i don't have to tell you, Indu that as ROI increases, risk increases. plus, factors such as employer matching on 401k, growth v. value based strategies, risk aversion, passive income v. ROI, all affect people's portfolios differently.

and at the risk of drawing boomer ire, the concept of socially responsible investing is a notion that we damned millennials are really taking to heart.

edit: yes, fortune may favor the bold, and when people are young, they're more free to indulge in riskier business and investing propositions. that's a measured, articulate thought and it's a far cry from "you lazy idiots, just drive uber and buy duplexes."

Not saying that at all or calling people lazy idiots. But I received wonderful advice very young, 18-30 are your prime years of risk. Once you have a kid, it’s a variable which pushes you towards herd-level investments.

If everyone is doing it? You’re not going to succeed, you’re going to tread water. I’m all about grand ambitions, risk, and the thrill of success. Even if you fail, it’s worth taking big risks in your 20s via credit lines and LLCs. You have nothing to lose and everything to gain.

Don’t like real estate? Anticipate where tech supply chain companies are bound to expand and get there first with an eye on exit, and merely building the framework the larger company will need. Look at data trends, in GTN’s case he’s likely very knowledgable in new design trends/competitors etc. Do some backtesting on new version releases of Adobe products and how it impacted a group of equities. Find alpha. I license those kinda of datasets at 5-20k a month to funds. Anyone can do that who dedicates themselves to backtesting theories. So many things move the market, and right now alt data is being hordes by all major funds.

I started an alt data firm in a week, and had paying customers a few weeks later. The only risk? Time and a small layout for a new virtual server.

Become obsessed where Wall Street vets are putting their high-risk money *themselves*. The China domain boom, crypto, alt currencies, alt data were all taken full advantage of by obsessively reading underground finance boards.

If you’re too late to those parties for the big profits? Create a service assisting others in that area. Billionaires/millionaires have been made creating brokerages in crypto (and Chinese domains) long after they peaked.

Want serious risk/high reward? Back the crypto farms popping up in poor countries in South America with extreme cheap access to energy.

And if the answer is “I don’t have the money?”, you’re not working hard enough. 70/80 hours a week really should be the goal in your 20s. Half of those aimed at hitting a home run, and realizing you’ll never find extreme wealth working in a cubicle in an established company (outside of Wall Street).

[stilldropin20]

You may dislike SD’s vibe but his financial advice is pretty damn good.

I worked my ass off in my late teens to 30 years old, bought real estate in undeveloped areas and revamped them slowly. I did this while working like a maniac in software development, and bought properties in DC at their lows in the 90s.

Invest most of your earnings young and take advantage of your youth. You have so much flexibility at that age, work as much as you possibly can live in the cheapest spot you can (preferably the buildings you purchase). Invest any additional cash in hard assets. Get a solid line of credit, not difficult if you make 100k+.

I’m buying real estate in Chicago, Cleveland and Detroit as well. As rents keep going through the roof in California and NYC/DC the exodus to cities with solid infrastructures is only going to increase in the next decade.

There are some amazing properties for dirt cheap. 25k for 4 story buildings. Just hire a local property manager and keep renting them out, slowly renovate them. Pays for itself.

It’s an easy flip, and an even better hold. Easy money. Even the Uber suggestion is solid, you should always turn your free time into more cash at that age. Buy a decent *USED* black SUV and get to work in your free time. Put your properties on AirBNB, Homeaway etc as well.

exactly! and great points...you just have to have a strategy.

I agree on NYC and Ca.<-- I expect a massive exodus as GOP continues to go after SALT deductions as they continue to tweak the tax plan to work better for their base in fly over country who pay low SALT. Something they tried to do this past time around. Trump and GOP know this is the key to re-election and keeping either houses. tax breaks for middle america and mom and pop small businesses...but...to not lose tax revenue they will need to kill SALT deducitons.which hurts the big expensive cites. tax breaks are his key to reelection and keeping the house and senate...perhaps even picking up seats. That's why he is floating the additional 10% middle income break right now.

--a few inside secrets on chicago market:

1. (for starters: great market, smart pick) but rahm is basically doubling our taxes on his way out. Started 3 years ago and has been relentless about it. You can appeal your chicago properties and get at least 20-30% of the increase back. So make sure you keep appealling.

2. --massive rental high rises have been built over downtown chicago for the past 3 years and many more are already fully planned and funded. (high end) Renters are getting better choices and moving out of the walk ups...But they are charging nearly double for high rise sapce compared to walk ups...so eventually rent will rise over the next 4-5 years. rents have somewhat stagnant for 15 years. The rental market will be saturated by 2021. <--but again there should be not too much to worry about though because millenials just dont want to buy...they are waiting until their mid-late 30's to buy. many reasons...but mostly just dont want to deal with ownership and new high rises are amazing. I actually rent out all of my property and have lived in a high rise rental for the past 3 years. My girl gets about 10 new real estate clients per year just by socializing at the pool and throwing parties.

3. not really a secret anymore but buy everything you can in and around the westloop of chicago. Your box is 94/290/ashland/chicago. But be as close as you can to halsted and randolph. on halsted in westloop we are seeing 10-20 times initial investment or 1000% appreciation over the past 4 years. If you got the money to get in there? do it.

I live a block away from halsted and randolph and own a couple businesses in here...if you need any help buying here let me know. I have strong relationships with all the guys holding pocket listings and personally know most of the biggest realtors in chicago. but westloop proper is a 2-3 million dollar starting price market right now. dont waste money on condos here...they dont see much appreciation anywhere in the city compared to income property and SFH.

4. The next best neighborhood to make money is North Center. other downtown areas are decent. every building brings a unique opportunity. but i am up so speed on this entire market.

5. if you just want to grow your portfolio of cheaper walk ups, i can help there too. i have an associate that generally handles those and is well versed. I know which neighborhoods to buy in and which to avoid altogether. I help put the deals together and negotiate if necessary.

6. and i have a guy at guaranteed rate(best rates in chicago) that can close almost any deal in 30 days. or refi to cash out of a cash purchase.

7. if your chicago portfolio is big enough we can manage it for likely a tremendous savings because i already have a complete team managing mine.

8. i didn't mention this to GTN cuz he's lost on the beginner basics...but if the portfolio is big enough we are rolling them up in massive LLC's and local investment banking houses are buying the shares. Their clients are happy with 2.5-3% returns. The investment house are happy with 1.5-2% margins on top of that. Investment house sits 2nd place on title (instead of the bank). So in essence its a real 5% interest rate. If you borrow 1,000,000...you pay them $50,000 in annual interest and pay no mortgage. You retain ownership. so obviously you retain the appreciation on your real estate. Your Rental income margins will likely be even larger because loan is no longer amortized like a typical mortgage where all the interest is paid up front BUT you are not paying down the debt. Its amazing actually. But the portfolios sizes start $200 million. The only difficulty in the roll ups like this is the properties must be nearly perfect. All maintenance and repairs must be 100% up to date. Mgmt flawless. Record keeping impeccable. etc. But this is where the big bucks are at because after a few years the investment house will essentially become your bank. So long as your portfolio is diverse and doing at least 15-20% against your own cash you cant miss unless you grossly mismanage. Essentially you give up 5% of your 15-20% margins on cash and you keep all of your cash to go buy more real estate. Like i said above...i dont even think about buying a place unless the cap rate based on a conventional loan is 20%. So giving up 5% of my 20% and 100% cashing out is a no brainer.

[stilldropin20]

hypothetical 18 year old applies for FHA gets denied bc he hasn't had steady employment for 2 years.

i am going yo try to address each of these faux "concerns." for starter...i understand you are just trying to punch holes in this strategy but for educational purposes i will address each.

1. consistent employment might matter a bit...but not really...ive never seen it come up so long as employment is consistent with no breaks in employment. its really about tax returns and demonstrating the ability to afford the building. being at your current job for at least 6 months might matter. but again...in 20 years of repping clients ive never seen this come up. I feel stupid asking my mortgage broker the answer to this so not going to bother him but accorind to 2 websites I dont see this listed as a qualification. But again... That's why i recommend Uber and being a real estate agent. Both are virtually impossible to get fired from. And really...if you cant keep gainful employment you jut may not be ready to buy.

18 year old drives uber for 2 years, applies for FHA loan, guidelines ask for front end ratio of 35%, which for a gross income of $70,000 (generous, even accounting for 80 hour work weeks split between 2 jobs) sets a ceiling of ~$280,000. 20 year old has difficulty finding a multi-unit property at that price point.

FHA loans require the property to be the 20 year old's primary residence, eliminating one of the units available for rent, cutting into rental income.

20 year old who finds a miracle listing of a 4-unit property at $280,000 is optimistically renting out each unit at $600/unit, which works out to equal the PMIT payments of ~$1800.

20 year old is now at the exact same financial situation he was 2 years ago, except locked into a 30 year mortgage, with the investment property being cost-neutral.

your numbers here are way off. let's do my market because i know it.

1. approx Section 8 rental rates in cook county: 2br-$1100. 3br-1500. 4bd-$1900
2. cash rates in dense section 8 neighborhoods are about 80% of those^ rates. so a crumby 2br in the worst neighborhood in chicago still rents for 700-800 cash minimally.
3. "nice" neighborhoods: 2br-1500. 3br-2000. 4br-2500
4. best neighborhoods elite unit: 2br-2300. 3br-3200. 4br-4000
5. new high rise: 2br-3800. 3br-5500. add $25 per floor.

typical 2 unit in bad neighborhood (bad-good shape)costs 25,00-180,000.
solid neighborhood-$200,00-600,000.
great neighborhood- 750,000-950,000
elite- 1.5M-2M

obviously building size, basement height, lot size, zoning, number of Br's/ba play a role.

Income plays a role as well but tends to be built into the factors above.

So typically, for a 20 year old making 50K...on the low end: they are looking at either distressed properties in distressed neighborhoods or low end solid neighborhoods $50ishK. On the high end they are looking at a solid building in a solid neighbohood $350,000.

If you paid attention to yesterdays' posts, I recommended buying a 2 unit(cheaper costs than a 3 or 4) with finished walk out basement and high pitched (A-frame) roof. Enclosed back porches help as well to either squeeze a br out of that space or a walkin closet.

so the building that the 20 year old would buy costs 100,000-300,000. for arguements sake lets use $225,000 purchase. taxes would only be about $4500 annually on a building like this. 2 unit. 2br per unit. with a non-conforming 3rd unit in walkout basement. The owner can live there but not legally rent it out.

down payment: $11,500
monthly mortgage with taxes rolled in: $1573.00 (at 4.6% apr and .5 pmi)

Since 3rd unit is non-conforming bank wont use it as income to qualify for loan. but will use one of the 2 other units. buyer will move into 1 of the units. 80% of that rental income of 2nd is used to qualify for loan. rental rate used to calculate is based on comps or existing lease. comps would be $1200 for a building like this.

income unit 1: $1200. 80% = $960.00

to qualify for this loan the buyer would need to earn about 20K annually and have no debt and the $11,500 to put down. if buyer were a realtor the real estate commission alone would be $5000.00-$6000.00.

Once the buyer closes on the loan he/she can move into basement and rent both units:

income $2400 per month on both units. put them on a lease.

If buyer is smart he/she would buildout 2 br's in the basement and rent a 2nd br to a friend for $400-500.

total income would not be $2900.00
against a $1573.00 mortgage showing an annual profit of $15,900. lets assume $900 annual maintenance. or a profit of $15,000.

The buyer now has $15,000 in annual passive income. And a fully occupied building grossing $34,800 in annual revenue and netting $15,000. His cap rate on his initial cash ($11,500) is about 140% which is about 137% higher than any index fund he can find. And his building has appreciated greatly over the course of 12 months due to good management and occupancy. A building like this...fully occupied at these rental rates is now valued at 310,000 on a 100% cash-basis cape rate of 10%. Simply put, a cash buyer buys this building for 320,000 and collects 34,800 annually.

this valuation allows the buy to buy another building using another FHA loan because this building now meet the 75% loan to value on appraisal.

the buyer can simply rinse and repeat. And if the buyer pays his taxes on his passive income he will qualify for a much larger purchase.

^^^it really is that simple. I aint saying its easy. There will be lots of pains in the butt...leaky faucets, clogged toilets, etc. But if you are willing to do the work these are the numbers.

20 year old is now ineligible for future FHA loans, and cannot purchase another property until he is able to front 20% down. If he wishes to find another 4-unit property at around $300,000, he must save $60,000. A rough guideline for a "good" savings rate is typically estimated at 20% of net income. Living a SD-approved spartan lifestyle, our 20-year old, who is still working 80 hours a week is able to save 50%. It would take him roughly 2 years to save up a down payment for his second unit.

Our man has now driven uber and tended bar 7 days a week for 208 straight weeks to be 600,000 in debt, owning two properties that are cost-neutral to him. If he sold his first property, he would have roughly $40,000 in equity in the property.

After 10 years, he will have worked 12-hour days for over 3600 days straight (or 18-hour days 5 days a week), taken out 1.5 million in loans, and have roughly $580,000 in equity. There may be gains in real estate at the end of the 10 years. If the property bought in year 2, 4, 6, and 8 has appreciated sufficiently in value by year 10 (partially driven via inflation), then in addition to the equity, sure, our 28 year old could be worth in excess of $1 million. Even if Uber does not employ drivers anymore in 2028, our man here has real estate experience, and may have pivoted to be a real estate agent.

However, any deviance from this to, date romantically, go to school, travel, or buying a movie ticket cuts into these gains. Netflix, Amazon Prime, and X-box live cuts into these gains. A gym membership cuts into these gains. If he is unable to find suitable properties, it would cut into these gains. Any potential downturns in the real estate market would cut into these gains.

So I mean, maybe. Maybe this is a template to build wealth. It's possible. It could also be an oversimplification of someone's financial situation to the point where it sounds like a 5 year old is scrawling out the math in crayon. I'm not here to judge. I just happen to think that life's messy and anyone who says things with too much conviction comes off as woefully underinformed.

^^^^ that is mostly nonesense.

Just follow my outline above.

Here's what building 2 would look like.

See above...rinse and repeat. Thats the sweet spot. You just need to run all of your tenants credit. check into their work history. etc etc. Be ready to do maintenance. Plan for end of lease. give special like 1/2 month free if necessary. charge for laundry. rent garages. use your extra cash to spruce up units when you can. Add br's in enclosed porches. Build rear decks with elbow grease, etc.

after 4-5 building like this...then you step up... which would be about year 4-5. so when the 20 year old turns 24-25 he/she should have 4-5 buildings. And this is when the synergy starts. Your passive income should now be about $15,000 x's 5 = $75,000. if you listened to me You should be a realtor earning at least $25,000 in commissions on these 5 buildings...hopefully more.

Combining the passive income with "work income"(uber, realtor, redfin) and this former **** 20 year old is now a big dick swinging 24-25 that should be earning 125,000-150,000 annually. and holds at least 300-500K in equity in these buildings.

That's conventional down payment money. or gut rehab money. I personally flip at least 1 property (the one i "live in") every 2 years. As my profits are tax free. My flip is generally in the best neighborhood because it will yield the highest returns.

Or package the 5 properties and sell as a small portfolio...which would be smart and attractive if appreciation is low but the cap rates are high (which they are)...but if appreciation is high you just keep and hold forever. and refi and borrow against these properties as you continue to buy more and more. At this level and by this time...you should have quit claimed all of these properties over from your personal name to an LLC. one by one as you buy the next one. You should then incorporate as an s-corp llc holding corp and show all of your passive income in the S-corp. (AKA self employed)...paying taxes as a small business. AFTER 2 years, your credit should be pretty close to 800. and as such you only need to show 1 year of income tax returns in order to qualify for future loans.

But really, Once you get this deep in the game you no longer need banks. to be honest. You will learn to get cheaper and faster money else where borrowing against your existing assets and you will become virtually a cash buyer on future purchases...and then borrow against those assets after closing. rinse and repeat. if your portfolio gets big enough (200 million and up), investment banking houses will fund you at 5-6% with almost unlimited funds.

it really is this easy from a financial perspective...the hard part is the 80-120 hour work weeks it requires at the beginning to get there...especially when the money is so low during the first 1-2 buildings and frustration level is high because you dont understand construction yet. I had to learn all of this with no Youtube videos showing me how to change a toilet or a faucet. and no internet breaking any of it down like i just did above.

No one told me the secrets i just laid out above...and it really is that easy in terms of the numbers. The secret is avoiding any and all debt not tied to income. And not buying the sexy property unless sexy is defined as producing income. And the hard part is the hours...by the time you are 5 buildings in...you will know just about everything about construction.

The thing that stops young people is themselves...

1. they buy a car or a bunch of crap at 18 on credit.
2. or go to college and waste time, energy, and money while racking up debt.
3. they are too impatient...must get laid now!!...must impress girls now!!!....must have fun now!!...must have cool car now!!
4. or just too stupid and/or lazy.
5. or get satisfied with 1-2 buildings...had their fill...buy a big Mcmansion in the burbs and the debt burden on the Mcmansion prevents them from buying more income property and their wife and kids want no part of living in a basement unit in the city and renting out the extra BR.

But if you have the guts and are willing to do the work its all laid out for you in all of my posts above^^^

[pancakes3]

- consistent employment's not a guideline, it's a requirement. an 18 year old isn't filing taxes.
- nobody is going to take a $1200 voucher to go live in a sh*tbox apartment. they'll go live in an apt that's worth $1200, especially if you're going to nickel and dime people for laundry or parking.
- you can't get a second FHA loan by just claiming that you've moved to the second rental property and that's your new residence.
- you're being very cavalier about "income at 125k-150k annually." yes the money is coming in, but most of that money is going straight to the bank in making those loan payments.

but bickering aside, the larger point is that yeah, maybe your plan could work but chances are it won't. for your investment plan to work, it requires a very specific confluence of circumstances to align, and the margin for failure is immense. in the context of decision trees, your blueprint is severely path dependent, and even a "successful" result still plays out in a fairly lousy scenario.

and really, my biggest beef with you is mostly that you put out bad advice/takes and treat it as if it's immutable gospel. it's just a sh*tty way to communicate. differing minds can have rational discussions. i felt like indu and i had a decent discussion upthread whereas this is pulling teeth (pun intended). not only are your ideas are poorly thought out, you take way too many words to convey your poorly thought out ideas, and you cannot see the value in the words of others.

so why are you here? what do you hope to accomplish? this can be a fun forum (pun intended) to shoot the sh*t but you make it a horrifically torturous exercise.

and to be clear, i'm responding out of a feeling of social responsibility that in the event that some kid out there actually drinks your kool aid has an opportunity to hear from the other side and make an informed decision with his life.

like, if we push your logic to the absurdist extreme, everyone would follow your advice and become uber-driving slumlords. there would be no doctors, lawyers, engineers, teachers, artists, economists, etc. because any endeavor or training towards those ends are a sucker's game. it just cannot be the answer. like, i'm sorry you're harboring some sort of resentment to people (which includes your brother) who are living their lives differently than how you live it, but the manner in which you carry it is just sad.