I'm 3 years into a 30 year. I read some of these comments and they make me wonder. I recently got my PMI knocked off as I'm sitting on 30% or so of equity which is nice. While I could consider selling out my collection of pinballs or cars for a nearly paid off house it's just too tough. These are the hobbies that make the house and the life worth having or atleast fun. Tomorrow is never promised and honestly it may not be the smartest route to live but having a paid off house that I won't be able to take with me isn't worth it. She will get paid off when we gets paid off and I will continue to enjoy everyday the best I can. Good luck on decision and I hope you find a resolution that is best for you!

If you manage it yourself, then it comes with the territory. Most of the horror stories come from improper screening, like not checking credit scores, background checks, etc. I think most of the people with more positive experiences are hiring that part out. It's not really any different than hiring an accountant or financial planner, some of them are good and some of them are not.

Good point. When you’re younger you have 20-30 years of working ahead of you. It’s hard to obtain much stuff without a mortgage payment during the early years especially when you are buying a new house needs furniture, kids need clothes.

Investing in Real estate Can be very rewarding but it really varies from location to location. Colorado Front Range has been a great place to invest in Real estate. My house doubled in value since I bought it in 05. I picked a very stable neighborhood and the houses sell like hotcakes here in todays market. I chose real estate over stock market portfolios and it paid off for me. I have also vacation rentaled my properties from time to time. Renting does carry risk. What it takes to evict a tenant is horrifying and an experience that no one ever wants to go through. One of the reasons why I chose to vacation rental. The other thing is you just don't know how people treat your stuff. In Colorado with Marijuana Laws, all it takes in one person to smoke that stuff in your house and you have a big problem. At this stage of the game for me, I would rather just sell the place, make the money, and put it in that portfolio after all.

We move a lot. And we save a lot. Often we’ve been mortgage free, but I’ve learned that doesn’t do it for me. We focus on net worth, and we get it by putting almost everything into assets. We don’t buy $3 sodas in restaurants (or bottled water, or movie theater tix...or anything that is economically upside-down or not otherwise guaranteed to thrill) and if anybody makes toast they (somewhat infamously) use both slots.

I consider pinballs to be a form of savings. If our safety stash was ever depleted, pinballs would probably be next to liquidate. But as long as our worth increases...or is more than ‘x’...I don’t see denying ourselves the pleasure. They also play a major role in our home furnishings, replacing a useless and expensive (if done right) dining room.

I haven’t read the whole thread, but I’m sure somebody expounded on why/how cheap debt can increase your worth.

Good luck w whatever you decide.

This has to be a euphemism ...

Yup. Enjoying life is a delicate balance of not undervaluing or overvaluing the present or the future.

later...

This is what is so fun about the forums

Thank you

Paid my home off two years ago, best decision I've ever made.

I agree. Sell the house and buy more pins!

Not going to thumb you down, it’s your decision. My only advice is, do you want to work till you are 65 or longer? I want to be able to retire at 55. (Be able, meaning go to work each day and when I don’t enjoy it, quit). Life is short and even shorter when you work till you are 65.

Amen to that! If work I when I am 65, I will do it because I want to, not because I have to. And life can be shorter than we realize.

Bought my home at 24 so on track for 54 if I stay here. I have alot of time ahead of me.

Serious question for those of you that have paid off. Are you still holding the property title personally or did you transfer to a trust or holding company? Seems like a huge leak to leave one of your largest assets unprotected to personal liability.

should have an umbrella liability insurance witch is hella cheap for the amount of coverage (talking millions of insurance for hundreds of dollars per year)
https://www.geico.com/information/aboutinsurance/umbrella/

Quote : According to the Insurance Information Institute, an umbrella policy with $1 million in coverage costs about $150 to $300 per year. With its high coverage limit, umbrella insurance gives you good value for the cost. In our litigious society, the extra cost may be well worth the peace of mind you get knowing your assets are insulated from lawsuits.

also your primary residence sometimes is protected from claims.

Homestead exemptions protect the equity in your principal residence (not investment properties) from seizure by creditors. Homestead exemptions differ from state to state. In a small number of states, homeowners enjoy an unlimited homestead exemption. Check the law in your state to determine whether you are one of those lucky few!

Yes, and you've been an incredible contribution to this thread with your insightfulness.

Is "owning" a pin "work"? No.
Does owning a pin sometimes require "work"? Yes.

It's easy to poke fun at things you don't understand. Not so easy to explain it to people like you. So enjoy that social security check, I'm sure the government pays really well. I won't have those days circled on my calendar like you.

It's funny reading some of these comments. Paying off my mortgage early is the only reason I 'am'/would consider paying these astronomical pin prices. Being debt free is nice.

I think some of the pinsiders might want to open their minds a bit and realize not everyone lives in easily lucrative areas, and that the income ratio is quite varied among its contributors. The same lifestyle doesn't fit all.

Wow! Those taxes sure would be nice. Losing the property tax deduction was a huge deal to me. I pay over $11,000 a year just on my primary residence which is nice but not a castle. Our city has some of the highest property taxes in the country and that is partially responsible for my home not appreciating in value over the past 25 years that we have owned it. We own three houses and a business building and and pay over $30K a year in property taxes. Owning property here is really just renting with a huge upfront payment. Why I own so much real estate and live here is another story.

That said, our mortgages are all paid off. I did sell a number of my pins a few years ago in order to pay off a final mortgage.

Pins have been a much better investment where I live than real estate. Though I don't see them growing in value that much any more.

Tom

Your situation is an interesting perspective.

Not sure what your saying here. Vulnerable to law suit for.... or Identity theft? Sounds like your saying owning your own property is a liability. I do have an umbrella policy and a really good real estate Attorney so I am not too worried.

I have 5 mortgages on 5 different properties. I would never pay them off.

Mortgage is just about the cheapest access to money you can get. Interest rates are stupid low for mortgages.

You need to learn how to make your money work for you. Sell your collection, and invest that money. Buy new machines with the money you make of your investment. Leave your mortgage alone.

For example, I bought the house next door to mine with a down payment of $50,000. My mortgage is $2,100 a month (includes all taxes insurance etc in escrow). I rent it for $2,600/month. So in terms of cashflow I make $6,000/year or 12% return on investment (minus some repairs). However about $700/month of the mortgage payment goes to equity. and tax benefits equal another $1k/year. So on my $50,000 investment, my net worth goes up over $15,000 a year or a 30% ROI on my initial investment (Oh and housing market is still going up, so there's that too).

If you can do something similar to what I do - your $100k, can get you $12k a year in cash flow that would buy you 1-2 machines per year, while still building equity in the property you own.

How old are you, if you don't mind me asking & when did you start? I don't have $50,000 in scratch yet but I also don't have enough pinball machines to payoff my house.

Trying to give blanket personal financial advice is like a doctor prescribing penicillin to everyone that walks into the door. It's all about personal goals, appetite for risk and a wide variety of other factors. And pinball machines are complicated because it's an incredibly expensive hobby, but it's also a pretty stable hobby so you're not likely to take a significant loss unless you buy 100% restored machines and sell them after 50,000 plays in a smoke filled house without ever cleaning them.

Location is huge too. Like if you live in an area with expensive property you most likely get paid a lot more than someone who doesn't. But pinball values are still the same. So someone in NJ might not be able to afford a house, but they could easily afford a few pins and a nice car. Whereas someone in Montana or something might own a house outright but buying pins or a nice car is a big stretch.

After reading all the great financial advice, think I am going to sell my house so I can buy more pins. No debt and a mountain of pins. Win win!

I'm 44 now. My situation is somewhat different than most because I was able to graduate with no debt, and my wife also graduated with no debt. I also worked my butt off straight out of college, so built savings early in my life.

By the time I was 35 or so is when I started moving away from having all my money in the stock markets because I was scared about market crashes etc. First thing I did was divest all my investments out of oil and gas (since I worked in the oil and gas industry.... didn't want my job and investments tied to the same industry in case it crashed). I purchased a couple places in Toronto, which I sold after a few years and made well over $100k. About 6-7 years ago I purchased a home in Florida (this is when Florida real estate prices hit rock bottom). It was a personal place, so I only put 5% down payment on a place that cost $227,000. After a bit, we decided to airbnb the place since it was right next to Disney, and now that place is grossing $6k/month and netting after everything about $1500/month (after the mortgage and all fees are paid). Now I own 3 places in Florida as well as the house next door to me (which I got at a good price since the neighbor had passed away, and I purchased it before it went on the market).

So my point is.... I could easily pay off my mortgage, and could have any time. But rather than do that, I kept the "cheap" money I got from the mortgage, and use my cash to buy more properties and more mortgages. Yes I'm more in debt now than ever, but I'm generating way more cash flow and building far more equity.

As someone else stated, you shouldn't focus on cash flow only... track your net worth, and track it monthly (at least). We started doing that when we were younger, and could clearly see if our net worth went down month over month, we were spending too much, and would cut back... if we saw our net worth was increasing quickly, we felt comfortable spending more money on ourselves.

I'm going to disagree with this.

I think that there is potential that the higher prices we're seeing now may be a bubble.

If high quality newer machines flood the market, no one is going to be willing to spend $8k for a 30 year old machine when they can get a kick ass new machine for $6k.

not saying that will happen, but I would never buy an $8k pin with the expectation that there is no risk that it will depreciate.

I wouldnt sell any machines you have an emotional attachment to or games that would be incredibly difficult to find again.

My older half brother is a landlord, owns about 17-18 properties that divide into roughly 30 units or so. I know he has some paid off, but pays a mortgage on most of them and turns a decent living after expenses and has for 20 years doing it. That being said, having seen the hassle being a rental property owner is and the nightmare it is to actually have someone evicted if you have to, I never care to own any rental properties, regardless of cash flow possibilities. The least amount of headache my life can be at this point, the better.

I bought a rental a couple years back. I'm building equity on it but it's just one more thing to deal with, and always has potential to be a real pain in the ass. My wife can't wait to sell it one day.

Medeival Madness original machines still sell for $8k even though you can buy a remake for the same amount.

I have a question for you. In this top post, you are using, as an example, you talk of leveraging up and making $100K look like $1million. I understand the concept. And I am not knocking it. But it is not a risk free venture. You can run into some bumps along the way.

But my question is related to an earlier post you made.

In this post you talk about having 2 rentals and one is paid for. So, my question is why don't you take the paid off unit and borrow against it and go buy more properties and make use of the leverage of which you speak? You know, "Go for the gusto". Or is this something you are planning to do?

That's exactly what we're doing. In fact that's the formula my brother and the other guys in here with more properties probably used, in virtually every real estate book you read or seminar you attend. After we started renting V2, as we affectionately call it (Vacation House 2), we bought a new house of our own and have been working on that, creating the game room we'd always wanted. That sidetracked us a bit. But we are actively looking for V3 right now and at creating an LCL company to put everything under.

I'm doing the same as you.... though forgoing creating an LLC. Problem with an LLC is that it becomes much more difficult if you want to take money out of it. For example, if you want to use your proceeds from the rental to buy a pin, you need to account for all of that. I understand getting an LLC to protect yourself such as if someone sues you, they can only go after the LLC assets, and not your personal, but that's where a good insurance policy is needed. We have a 5 million dollar umbrella policy that protects us.

One of my former co-workers has used the following formula to acquire about 50 rental houses (it's a ground of 4-5 guys with rentals being run by property managers)....
- They purchase a house that needs to be fixed up with 20% down. ($20k down on a $100k house)
- They fix up the house which significantly increases the value of the asset (Spend $10k to make the house worth $140k)
- They then re-finance the house after it's fixed up at the higher value, which allows them to take out the original downpayment, and often the cost of the reno. (Mortgage for 80% of $140k = $112k.)
- They now own that house with no cash invested of their own.... they could walk away from the house and let the mortgage company foreclose and not be out a single penny.

This can go on forever... but it takes time. It is relatively low risk if done correctly. Biggest risk is if there are any unforseen problems with the property which need to be addressed. Or if you can't rent it out for whatever reason. All things that can be avoided if you do your research ahead of time.

ummm, when you refinance a house, they don't hand you the money you have invested. This doesn't make any sense. You still have the initial 20% you put down spent, as well as the money you spent on renovations. How does the bank hand you all that money back again?

Don;t know how this became a landlord thread

See this example:

You buy a house for $90k. You put in $18k as a 20% downpayment. You then put $30k in reno into it, so you've spent $48k. If you go to the bank and refi, they will go do an appraisal. Different banks have different rules, but a lot of them will allow you to take up to 80% of the appraised value in a loan. So if the house now appraises at $160k, you can take up to $128k out as a loan, paying off the original loan + your $18k down + your reno budget.

It's no different than refinancing your personal residence...if you have a $300k house and you owe $150k on it, they'll let you take out a loan up to $240k on it if it appraises that high.

His post on the strategy is correct. The downsides are that if the housing market ever goes down more than 20% you'll be in the red, and it takes a lot of work to renovate a house (and find deals). It's kind of like pinball buying...if you buy on pinside (like the MLS) you'll rarely find a deal. But if you find the right home owner of a pinball machine (or house) you can get it much cheaper than normal.

Seems a little fishy; I suppose you could pay to have the property re-appraised after renovations, then take out an equity loan, IF a bank was willing to do that...

Yes... you have to pay to have the property re-appraised. I did this on my main house before I started investing in real-estate. I did a number of renovations on the property, then had it re-appraised so that I no-longer had to pay PMI, since after the renovations the mortgage was less than 80% of the value of the house.

There is nothing fishy about this, and nothing illegal at all. It's the same thing as renovating and flipping a house, but rather than selling it to another buyer, think of it as re-selling it to yourself and using the profits from the sale to pay for the downpayment.

Sell sell sell

I do. Someone told the OP he needed to get his money to working for him.

And that it would be bad financial practice to pay off a low interest rate mortgage.

The OP said "fuck it". He was keeping his pins. And the mortgage, too.

So there is nothing else left to talk about

Maybe we can move on to crappy tenants. I used to have a tote-the-note car lot. And your crappy tenants were my crappy customers.

I didn't mean it like that at all; All I meant was that most banks around my ao are hesitant to give an equity line of credit or loan in the first year unless you have put down substantial cash, or the home is in a very desirable area. It may be different in your area. I play in the rental game as well.

Slumlord checking in, haha.

It is a bit of an eye opener. I always just assumed everyone here was a dirtbag lawyer, now I find out their all slumlords!

Always
Be
Closing

Slumlord reporting for duty

I agree with another poster that said this strat has some downsides. Most importantly is the long-term aspect of this investment and the associated costs (both up front and in maintenance). As you say, you can walk away because you have nothing actually invested. But, you actually aren't making anything either. You're renting the house out at mortgage value or a few hundred bucks over, because that re-fi being done after 30 or 60 days from the initial loan isn't going to be at 3%. This type of payoff comes when the house sells after someone has paid off a substantial chunk of the debt. And we all know how long it takes to payoff any sizable amount of principal.

I would say take this formula, tweak it a bit, and sell the house right away (it's called flipping!!). There's a bigger up-front investment, but there's a faster return. Rather than borrow twice on the same house, racking up closing costs that are added to both notes (about $5000 total for nothing), pay cash. Using your own scenario and numbers...

- Buy a house for $90k....pay cash! (Or borrow if you have to, but your profit is cut by the appraisal, closing costs for the note, and any interest on payments you might make.)
- Put $10K into it (at this amount, whatever you're doing to it should be done in less than a month).
- Don't waste money on a new appraisal...put a for sale sign in the yard, and let the new buyer do that.
- House sells for your estimated $140k.
- You just made $40k...no rent...no renters...no maintenance hassle.
- Or if the house doesn't sell, drop the price by $10k, and you only make $30k...aw shucks!!
- How long does it take to make $30k profit in the rental scenario?!?

The renovation isn't that tough actually. This isn't HGTV. This is real life. You're not knocking down walls. You're not adding pond sculptures and sunrooms. You're re-facing cabinets, adding solid surface counters, replacing worn out floors and trim, adding new appliances and painting. The key as @taylor34 says is finding the "bargain". You have to find the house that is in good shape but dated. All you're doing is bringing it up to current trends. You'd be amazed at how much a simple update can add to the sales price of a house. Most home buyers don't look at that "bargain" house and see it that way. They see a pain in the ass. When they walk in and nothing is left to do, they just say "wow".

Sorry about the essay-long post, and de-railing this thread even further, but I just don't like the rental investment model...too many variables.

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The OP has already made his decision. So, no sense in beating that dead horse!!

seems risky. After the renovations you are hoping that your numbers work out. Otherwise you are stuck and now have to pay another mortgage and taxes on multiple properties. Shit can go south real fast. Plus the housing market can drop like a rock. hell, my housing market shot up to almost double within 6 months around here. Same could happen the other way.

What was his decision? Not sure I saw it with all the rest lol