No. of Recommendations: 55
Keep it simple stupid.

I've noticed that people in all walks of life tend to overly complicate things that do not need to be complicated. I've been guilty of doing the same myself.

If a person has a strong desire to FIRE, then KISS.

According to the studies that are so frequently mentioned on these boards, you must save 25 times your annual expenses in order to be able to FIRE. That means if you spend $40,000 a year you will need to save a total of $1,000,000.

Now, if you have other sources of income, you may be able to save less. Let's say you own rental property and have an annual income of $10,000. Let's say you also have a pension from your old job that pays you $10,000 a year. That means that you already have $20,000 a year. You only need $20,000 more coming from your investments. That means, instead of having to save $1,000,000 you will only need a pot of money worth $500,000.

While you are on your way towards obtaining this goal, KISS.

Keep yourself healthy. No matter what some folks may say about the fact that we are all going to die, and no matter how you slice the pie, we are all going to die. Let's say health is a triangle. One side will be exercise, one side will be nutrition and one side will be genetics. We can not change what was given to us by our ancestors. We can change both exercise and diet.

It's frugally cheaper to buy apples than it is to buy twinkies. If I were to eat a twinkie or some chips, I get the urge to eat more. That's not good for the wallet or for the waistline.

Exercise is not hard to do. Find something that works for you. It may be as simple (remember KISS) as parking at the far edge of the parking lot versus parking as close as possible to the doors. Take the stairs instead of taking the elevator.

Forgoe that bottle of coke from the vending machine and walk the extra steps to the water fountain where you fill up your bottle.

If you want to get married, that's fine. Just KISS.

Same goes for if you want to have kids, KISS.

I have kids and I try to put them first. That by no means, means that they get everything that they ask for. We provide them with shelter, food (no twinkies) and activities. We expect a return from our investments which is that the kids will grow up to be productive citizens of the world. If that means they are productive because they figure out how to legally FIRE by age 25, more power to them.

If you want to invest in the stock market, KISS. Index funds are an easy way to go. Sure, you can do better by picking the right individual stocks, but you can also do a lot worse. Do you want to hear about my small investments with JDSU or INSP? I thought not.

I still have stocks and will always have some. However, I also have index funds. Just remember to KISS. If you will need the money in the next 5 years or so, don't buy stocks.

If you want to invest in real estate, would you be better off buying an investment $500,000 house to rent out or buying a $40,000 house to rent out? I'd be willing to bet that you would be better off buying the $40K house as there are probably more folks out there that can afford to rent this place then could afford to rent the $500,000 house. Plus, if the world goes into another great depression I'd rather be holding a $40,000 house and not a half a million dollar place.

Books from the library are free, books from the bookstore are not. Videos from the library are free, videos from Blockbusters are not.

You have to remember to Live Below Your Means. This means that you must spend less than you bring in. But, KISS. Do NOT forget about living!!

There is beauty wherever you go. Almost. Flowers are nice. So are tomatoe plants. Pets can be fun. Watching a 14 month old kid learn how to walk is a trip.

Take a look around you and see what you have. If you have a couple of thousand dollars laying around, take a trip to some 3rd world country. It may help give you a different perspective on life which may help in your quest to KISS which ultimately may help in your quest to FIRE.

MLB players are guilty of not KISS. Ballplayers are making millions of dollars a year to PLAY baseball. Oh, if only my job was so tough. And, believe it or not, they are talking about striking. What's wrong with this picture?

If you want to FIRE, then by all means go for it. Just don't forget about living while you are working towards your goal. And if you don't want to FIRE, why waste your time reading this board? Keep working until you are 75. I really don't care and neither do most of the others on this board.

What it all boils down to is trying to live healthy, be happy and amass at least 25 times your expenses. That's it. KISS.

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No. of Recommendations: 4
Great post about KISS and FIRE. Very well said. Is there anything more KISS than being FIRE with a 4% SWR from a portfolio of 15 to 25% in FI and 75 to 85% in a broad based index fund (and NO real estate whatsoever)? I don't think so.
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No. of Recommendations: 6
Is there anything more KISS than being FIRE with a 4% SWR from a portfolio of 15 to 25% in FI and 75 to 85% in a broad based index fund (and NO real estate whatsoever)?

I would like to discuss what to do if one is behind schedule. All the points in the KISS post are dead-on, but what if you are 40 or 45 and you haven't saved 25 times your income? This is where alternative investments MAY become viable. Are there any strategies (not get rich quick schemes) that MAY allow someone to (1) accelerate their LBYM and (2) take some risk to reach the point where their anticipated retirement needs can reasonably be met?

There was a poll a while back as to whether one is FIRE. A disheartening number indicated they were far from it. Is there room for them on this board?
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No. of Recommendations: 6
I would like to discuss what to do if one is behind schedule. All the points in the KISS post are dead-on, but what if you are 40 or 45 and you haven't saved 25 times your income?

In this day and age, it is not unreasonable for the average american to expect to be able to live to the age of 90 or so. If you pay attention to your dietary habits and exercise, it shouldn't be a problem and you may make it to 100.

So, if you are 40 and have zero savings, start saving. If it takes 20 years to amass the 25X total, then you will only be 60. You still have at least 30 years of living.

I think you, CC, have some savings. If nothing else you own rental properties which should be bringing some income in. Don't forget about this.

Do you really want to know how to LBYM? Oh, boy. A few years back I bought a 90K house on a 23K income while supporting a non-working spouse, 2 kids, a 105 pound German Shepherd, a cat and two birds. I have always known how to LBMM, but in this situation I really learned to cut corners and still save some money. If you need the tips, just let me know.

There was a poll a while back as to whether one is FIRE. A disheartening number indicated they were far from it. Is there room for them on this board?

Unless I get some lucky break which I don't forsee happening, I am still 15 years or so away from FIRE. That's ok. I'll just keep plugging away. I may get hit by a car tomorrow and it'll all be for naught. But the way time passes by so quick, 15 years will be here before I know it. There is a light at the end of the tunnel and I plan on reaching it.
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No. of Recommendations: 5
CC writes:
All the points in the KISS post are dead-on, but what if you are 40 or 45 and you haven't saved 25 times your income? This is where alternative investments MAY become viable. Are there any strategies (not get rich quick schemes) that MAY allow someone to (1) accelerate their LBYM and (2) take some risk to reach the point where their anticipated retirement needs can reasonably be met?

Good point, and I think you know at least one of the answers to your question. One of the major drawbacks of the safe withdrawal rate study is that it speaks not at all to the real problem; assembling that starting nut. Because of its volatility, the stock market is an absolutely horrid place to be during the accumulation stage. For someone desiring very early retirement, you either get lucky or you fail. I prefer to eliminate luck as a consideration to the greatest extent possible. Since the volatility of the equities markets can create extended period of low returns, an equity heavy approach in the short accumulation period allowed to early retirees, is a pure crapshoot. LBYM, diversification and the use of investment approaches that involve real estate are advised.

Regards,
FMO
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No. of Recommendations: 5
galeno writes:
Is there anything more KISS than being FIRE with a 4% SWR from a portfolio of 15 to 25% in FI and 75 to 85% in a broad based index fund (and NO real estate whatsoever)? I don't think so.

Your approach is as easy as falling off a log. I don't want to fall off a log.

Regards,
FMO
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No. of Recommendations: 12
CatherineCoy asks,

<<<Is there anything more KISS than being FIRE with a 4% SWR from a portfolio of 15 to 25% in FI and 75 to 85% in a broad based index fund (and NO real estate whatsoever)? >>>>

I would like to discuss what to do if one is behind schedule. All the points in the KISS post are dead-on, but what if you are 40 or 45 and you haven't saved 25 times your income? This is where alternative investments MAY become viable. Are there any strategies (not get rich quick schemes) that MAY allow someone to (1) accelerate their LBYM and (2) take some risk to reach the point where their anticipated retirement needs can reasonably be met?

There was a poll a while back as to whether one is FIRE. A disheartening number indicated they were far from it. Is there room for them on this board?


Maybe we need a "Far from FIRE" board for those that see no merit in reducing expenses, avoiding debt, and saving prodigiously in pursuit of early retirement. I made an attempt at starting such a board a while back:

http://www.retireearlyhomepage.com/laterhp.html

For those that have come late to the party, there's really no secret strategy, just spend less and save more.

intercst
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No. of Recommendations: 3
FMO wrote:
Because of its volatility, the stock market is an absolutely horrid place to be during the accumulation stage. For someone desiring very early retirement, you either get lucky or you fail. I prefer to eliminate luck as a consideration to the greatest extent possible. Since the volatility of the equities markets can create extended period of low returns, an equity heavy approach in the short accumulation period allowed to early retirees, is a pure crapshoot. LBYM, diversification and the use of investment approaches that involve real estate are advised.

1. Because of the volatility of the stock market, that makes it the absolute BEST place to be during the accumulation phase and after too.

2. There is NO luck involved IF the FIRE wannabe is thinking long term. If you think short-term (like most on this board) then I guess you can talk about luck. And...you won't get to FIRE...at least not at a young age.

3. Serious FIRE wannabees would do best to AVOID real estate like the plague. RE is best treated as an EXPENSE by smart FIRE wannabes. RE can be used to diversify a large FIRE portfolio for those who need to have a "job" during FIRE.
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No. of Recommendations: 10
FMO writes:
Your approach is as easy as falling off a log. I don't want to fall off a log.

Hmmmm, I retired over seven and a half years ago at age 38. I spent 13 years saving and investing 20% of my gross monthly income into the US equity markets.

I'm married. I have four children. And I achieved FIRE before age 40 in a third world country whose standard of living is 20% of that of the USA. That said, many of you could FIRE just on the value of my personal residence <grin>.

Your approach is far too tedious and +complicated. Your ROI is far too low for my needs.

Finally, when I'm in the mountains, at the beach, or out of the country enjoying the scenery and a comely young woman, the last thing I want to get is a call on my cell phone about a clogged toilet in some freaking house, apartment, or office I that own.
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No. of Recommendations: 7
galeno writes:
2. There is NO luck involved IF the FIRE wannabe is thinking long term. If you think short-term (like most on this board) then I guess you can talk about luck. And...you won't get to FIRE...at least not at a young age.

If you want to retire very early then you must think short term. To retire at the age achieved by you and intercst, you have but twenty years or so to accumulate your starting nut. The markets over periods as short as 15 to 20 years are fully capable of dealing relatively poor returns. As the safe withdrawal study purports to prove, this need not be an intractable problem once you are retired, if you have the constitution to stick with the program in the face of having a substantial portion of your assets wiped out. Such poor performance during the accumulation phase however is another issue. You cannot apply the lessons of history to the distribution phase and ignore those very same lessons as they apply to the more difficult problem of accumulating assets in the first place.

The papers are full of stories right now about people who are delaying their retirements due to the effect of short term market performance on their strategies calling for heavy investment in equities. Were they stupid for following the course you recommend, or merely unlucky?

Regards,
FMO

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No. of Recommendations: 15
...but what if you are 40 or 45 and you haven't saved 25 times your income?

How 'bout an old-fashioned idea like semi-retirement? As mazske said in the original KISS post, you only need 25X if you're going to rely solely on these savings for your income.

Any amount of other, steady income reduces the requirement. Each person must ask themselves what "retirement" means to them. If it means not having to work AT ALL, then that's the "base case" that's discussed most often on this board.

However, if "retirement" can mean more a "custom-crafted" lifestyle that includes leisure/passion pursuits and, yes, a little work, you've got more options. For myself, I have no objection to having part-time work obligations for the rest of my life -- say, 15 hr/wk. So the key for me is to find something I can do according to my own schedule that will provide some challenge and some supplemental income. Then, I can transition to this "semi-retirement" a heckuva lot sooner.

Plus, this way, I've still got "my hand in the game". If something happens either on the savings side or the expense side, I've got another degree of freedom to exploit to keep things moving. If things get rough, I kick it up a notch to 25 hr/wk (or whatever) until the situation is resolved.

Lots of people do it. Lots of posters here are doing it. It's an option for you, as well.
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No. of Recommendations: 1
FMO wrote:
You cannot apply the lessons of history to the distribution phase and ignore those very same lessons as they apply to the more difficult problem of accumulating assets in the first place.

The papers are full of stories right now about people who are delaying their retirements due to the effect of short term market performance on their strategies calling for heavy investment in equities. Were they stupid for following the course you recommend, or merely unlucky?


1. The asset accumulation phase is EASIER than the distribution phase. The lessons of history are unchanged for either phase.

2. The papers are full of stories about people who started investing at the top of the market bubble into single stocks with NO earnings and who thought the market would go up 20% a year indefinately. I call them UNREALISTIC. These people knew just enough to be dangerous to themselves and others <grin>.

3. If we want to talk about crap-shoots, then let's talk real estate. Real estate is a totally LOCAL phenomenon. In MOST places in the USA with JOBS, owning real estate is FAR MORE expensive than renting it is. Like intercst and I have said before, smart FIREs treat RE as an EXPENSE, NOT as an ASSET.
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No. of Recommendations: 7
galeno writes:
1. The asset accumulation phase is EASIER than the distribution phase. The lessons of history are unchanged for either phase.

And why is the distribution phase more difficult? Could it be the constant worrying during the distribution phase about whether or not you will be able to stay retired?

2. The papers are full of stories about people who started investing at the top of the market bubble into single stocks with NO earnings and who thought the market would go up 20% a year indefinately. I call them UNREALISTIC. These people knew just enough to be dangerous to themselves and others <grin>.

If I remember correctly, the lesson of history from the Safe Withdrawal Study is that for fully half of all 20-year start dates, the returns for portfolios invested exclusively in equities fell somewhere between 2.75 and 7.7 %. This is hardly the range of returns necessary for most investors to retire in 20 years.

And I achieved FIRE before age 40 in a third world country whose standard of living is 20% of that of the USA.

. . . . by investing in the US and then residing in a third world country. Congratulations.

Your ROI is far too low for my needs.

You know nothing about my return on investment. I judge the success of my plans by how low a return on investment will make them work. It is not good that your needs are so great.

Finally, when I'm in the mountains, at the beach, or out of the country enjoying the scenery and a comely young woman, the last thing I want to get is a call on my cell phone about a clogged toilet in some freaking house, apartment, or office I that own.

Have you been reduced to using sex to sell your ideas? Tell you what. If I ever get one of those ubiquitous clogged toilet calls. I will let you know. I will include all details about how it ruined my life.

Regards,
FMO
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No. of Recommendations: 4
Galeno:
2. There is NO luck involved IF the FIRE wannabe is thinking long term. If you think short-term (like most on this board) then I guess you can talk about luck. And...you won't get to FIRE...at least not at a young age.

FMO:
The papers are full of stories right now about people who are delaying their retirements due to the effect of short term market performance on their strategies calling for heavy investment in equities. Were they stupid for following the course you recommend, or merely unlucky?

I think galeno's point is that you cannot think short term and rely on equities. You must think long term. In another post galeno said that he expects to see many bear markets. Not expecting a bear market and failing to plan for one is an example of not only short term thinking, but wishful thinking as well.


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No. of Recommendations: 4
FMO Writes: For someone desiring very early retirement, you either get lucky or you fail. I prefer to eliminate luck as a consideration to the greatest extent possible.

FMO was referring to the stock market. I agree that luck DOES play a large part. But there really is no way to avoid this. OK, so you do the heavy real estate thing...and what happens if real estate crashes and burns as has happened in the past? Or what if Congress changes tax laws drastically, like they did in 1986, and killed a whole generation of real estate investors over night, who had properties based on the old tax system that became worth MUCH less under the new tax system?
Of what if it's 1941 and we enter a war where you have to get drafted or work? Or what if The United States has peaked, like England did just up to WW1?

I am not predicting ANY of the above. Only pointing out that reducing exposure to stocks increases exposure to other "luck" based items. In the end, much of life is based on luck. There's not much we can do about it except crawl under a rock. And a lizard might bite you there!

Daryll40
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No. of Recommendations: 6
The papers are full of stories right now about people who are delaying their retirements due to the effect of short term market performance on their strategies calling for heavy investment in equities. Were they stupid for following the course you recommend, or merely unlucky? Regards,FMO

Stupid. Stupid for thinking that the bull would never end and that they could retire IN THE FIRST PLACE on amounts less than required by the 4% rule of thumb. Or, rather, by not even thinking about a worst case scenario and even thinking about the maximum SWR to get thru tough times. Stupid.

Did I say they are STUPID?

Daryll40
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No. of Recommendations: 3
Daryl40 writes:
But there really is no way to avoid this. OK, so you do the heavy real estate thing...and what happens if real estate crashes and burns as has happened in the past?

The role that luck plays can be minimized however by avoiding the use of undiversified and highly volatile strategies such as are espoused on this board, during the accumulation stage. Real estate is capable of delivering comparable returns as equities with much less volatility and with a strong income component. Real estate debacles are few and highly localized. Stock market bears are common, expected and affect all investors. There have been very long (>10 year) periods when stocks have returned zilch. I am not aware of even two consecutive years when the average U.S home resale price has declined. The risk is obviously less and the role that luck plays is minimized.

Or what if Congress changes tax laws drastically, like they did in 1986, and killed a whole generation of real estate investors over night, who had properties based on the old tax system that became worth MUCH less under the new tax system?

The 1986 tax law changes had little effect on the small residential properties that I recommend since these can can be marketed to owner occupants. In my market, some of the largest gains due to appreciation I have ever seen, occurred from 1986 to 1990.

Only pointing out that reducing exposure to stocks increases exposure to other "luck" based items. In the end, much of life is based on luck. There's not much we can do about it except crawl under a rock. And a lizard might bite you there!

Agreed. There will always be some element of luck and risk involved. So why go looking for trouble by relying exclusively on the most risky, volatile asset available?

Regards,
FMO

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No. of Recommendations: 1
Daryl40 writes:

Stupid for thinking that the bull would never end and that they could retire IN THE FIRST PLACE on amounts less than required by the 4% rule of thumb.

LOL. My local newspaper had an article recently about a guy whose retirement plans were dashed by the recent market ugliness. He was blaming everyone in sight; the CEO's, the Government, etc. It seemed that his retirement stash of $40K had been reduced to $10K.

Regards,
FMO
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No. of Recommendations: 4
FMO wrote:
There will always be some element of luck and risk involved. So why go looking for trouble by relying exclusively on the most risky, volatile asset available?

Why? To get to FIRE quickly. That's why! Now, if you want to wait until you're 55, 60, or 65 to retire (not FIRE BTW) then put your gold and silver coins in cans under your bed <grin>.

For those not interested in FIRE, there is another retirement board called "Retirement Investing". Lot's of talk there about social security, medicare, medigap policies, defined benefit pensions, and CDs.

Low ROI real estate investing probably belongs over there too.

But if you are really interested in real EARLY retirement, there's no way you can get there via investing if you don't make stocks your main investment vehicle.
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Blaming things on luck, good or bad, is often just a way of rationalizing one's actions, and providing an excuse for not learning from one's mistakes.

Of course there is an element of luck in everything we do. Nevertheless, except in rare cases, it is not likely to be the deciding factor. Nothing you can do about being hit by a meteor, but it does not happen very often.

When somebody loses money big time in the stock market, for example, it is appropriate to ask how it might have been avoided, rather than just blame bad luck.

Just to give a few examples, simple reading charts and technical indicators would have gotten you our of Worldcom, Imclone, and Enron before the final disasters. You may have taken a loss, depending on when you bought, but there was absolutely no reason for anybody who was paying attention to have ridden those stocks down to their current levels. The charts did not predict bankruptcy on Worldcom and Enron, of course, but they did predict a decline in price, and a prudent investor gets out to avoid that. Of course, there may not have been any reason to buy those stocks either - I don't know about that. I never owned those stocks.

The same may be said about this current market decline. It was fairly obvious around the beginning of April that the rally was running out of steam. No telling how long the decline would be, but no point in riding it out either. If you stayed in and lost money, then you should be asking yourself how you could have prevented that, and not talking about luck.

William O'Neil, the inventor of the CANSLIM method of trading stocks, was interviewed on Bloomberg not too long ago. When the interviewer asked him what somebody who had lost big time in this market should do, O'Neil said that they should realize that they had made mistakes, analyze what they did wrong, and take corrective action. He did not say that they should realize that it was all luck.

I cannot speak to the real estate market, about which I know very little except that high leverage in that area is risky. Unlike the stock market, where you can quickly sell in anticipation of a margin call, real estate is much less liquid.

The ancient world worshiped the goddess Fortune. Many people believed that the future was not in their control, and that the only course was to pray that Fortune would smile on them. Such a belief is comforting in a strange way. If you are not responsible for what happens to you, then you might as well quit trying to make something of yourself and just go with the flow.

One of my professors said belief in luck was the same thing as belief in fortune. I won't argue about that one. It does provide the same sort of comfort. If luck is the decisive factor, then improving your technique, learning from the past, etc., is relatively unimportant.

The point is that if things are confusing, and you see nothing in particular that you can do to improve your situation, then you have at least two choices: (1) Say it is primarily a matter of luck, relax and hope for the best, or (2) Make a real effort to figure things out, improve your technique and knowledge, and change what is wrong.
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No. of Recommendations: 4
I am not aware of even two consecutive years when the average U.S home resale price has declined. The risk is obviously less and the role that luck plays is minimized.

I don't have any numerical "proof", but anticdotially I know LOTS of people who lost money on residential real estate. Either they bot in the midwest where prices move slowly or they bot on either coast at the peak of a cycle. And I know MANY people who have lived in their houses FOR YEARS and finally sold them for the same or less than the inflation adjusted values of what they paid for them.

As to income properties, that's a problem too. I don't want taxable income now. I want unrealized and currently untaxed capital gains.

I am NOT anti-real estate by any means. In fact, about 10% of my portfolio is in the Vanguard REIT Index Fund. But I don't real estate is the "anti-stock-market" panacea that you are touting.
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No. of Recommendations: 10
FoolMeOnce writes,

The role that luck plays can be minimized however by avoiding the use of undiversified and highly volatile strategies such as are espoused on this board, during the accumulation stage. Real estate is capable of delivering comparable returns as equities with much less volatility and with a strong income component. Real estate debacles are few and highly localized. Stock market bears are common, expected and affect all investors. There have been very long (>10 year) periods when stocks have returned zilch. I am not aware of even two consecutive years when the average U.S home resale price has declined. The risk is obviously less and the role that luck plays is minimized.

Thank you for that post. It has greatly increased my understanding of real estate as an investment. Let's see if I have it right?

1) Successful real estate investors buy "well-selected properties", but we don't how many real estate investors are successful in identifying these "well-selected" gems.

2) I believe most real estate investors buy properties close to home? Am I way off base there? So in addition to buying "well-selected properties", I also need to insure that my current place of residence and its surroundings is not the site of the next "highly localized" debacle.

3) Leverage seems to be a common theme among all real estate investors save golfwaymore. This increases the downside for those caught in one of those "highly localized" debacles. Budding early retirees with assets beyond their real estate investments may seen the banks go after their stocks and bonds in an effort to collect on their outstanding real estate loans.

Have I left anything out?

Oh, and comparing the purchase of a few rent houses in a single city with the fact that "I am not aware of even two consecutive years when the average U.S home resale price has declined", is kind of like comparing the S&P500 to a concentrated portfolio of three stocks bought on margin.

intercst



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There have been very long (>10 year) periods when stocks have returned zilch. I am not aware of even two consecutive years when the average U.S home resale price has declined. The risk is obviously less and the role that luck plays is minimized.

No one invests in the "average US home resale" price. You invest in real estate in a specific location. Ask people in Houston how long it took for housing prices to recover after the oil bust. It took a decade or more just to reach break even point, at a CAGR of about 1% over the last 20 years.

Note: Not anti-real estate. I'm actively shopping myself at the moment. But there are risks involved. It may be a long, long time from now until the break even point if I'm forced to sell. So I want to arrange my affairs such that that doesn't happen.
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No. of Recommendations: 4
intercst wrote:
1) Successful real estate investors buy "well-selected properties", but we don't how many real estate investors are successful in identifying these "well-selected" gems.

2) I believe most real estate investors buy properties close to home? Am I way off base there? So in addition to buying "well-selected properties", I also need to insure that my current place of residence and its surroundings is not the site of the next "highly localized"
debacle.

3) Leverage seems to be a common theme among all real estate investors save golfwaymore. This increases the downside for those caught in one of those "highly localized" debacles. Budding early retirees with assets beyond their real estate investments may seen the banks go after their stocks and bonds in an effort to collect on their outstanding real estate loans.

Have I left anything out?

Oh, and comparing the purchase of a few rent houses in a single city with the fact that "I am not aware of even two consecutive years when the average U.S home resale price has declined", is kind of like comparing the S&P500 to a concentrated portfolio of three stocks bought on margin.


Yes! Yes! Yes! Why do so many people on this board have such a difficult time understanding the above?

I will repeat AGAIN, if you seriously want to retire early, you must invest in stocks. If you want a masochistic and UGLY second job and PRETEND to retire early, then invest in residential real estate. I understand that wishful thinking and waving your hands around at the same time MAY improve your investment returns and SWR significantly <grin>.
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No. of Recommendations: 6
Because of its volatility, the stock market is an absolutely horrid place to be during the accumulation stage.

As opposed to any other, comparably passive investment - which, if not even more volatile, will reliably and smoothly not get you there in this lifetime.

There are other more-active investments that might get you there... but they are more active.

Anyone who can afford sufficient real estate that it becomes as passive as stock-market investing - with a hired manager doing or overseeing all the work - doesn't need to invest in order to reach early retirement. He's already there (if he so chooses).

Anyone of lesser means is going to find that owning real estate consumes signifigant amounts of TIME, and occasionally will require that you add a bucket or two of MONEY.

Stocks, it's entirely my choice how much time to put into it. I can spend a few minutes opening a mutual-fund account and setting up a periodic automatic deposit, and then never look at again except for spending an extra ten minutes a year on my income tax. I can construct a stock filter at any of a number of free online sites, and then spend ten minutes a month bringing my portfolio in line with what the filter currently says. I can spend an hour every day on fundamental analysis. Or anything in between - STRICTLY my choice.

There is NOTHING WRONG with real estate investing, and for some people it's a wonderful choice.

But I am not one of those people.
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That would be the Living Beyond Your Means board:
http://boards.fool.com/Messages.asp?bid=113627

For the other side, there is also Living Below Your Means:
http://boards.fool.com/Messages.asp?bid=100158

And for a less intelligent retirement, Living Below Your Mensa:
http://boards.fool.com/Messages.asp?bid=115079
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No. of Recommendations: 3
Real estate debacles are few and highly localized.

Small-scale real estate investors are ALSO highly localized.

Tell me: how, with $20,000, do I get a geographically diversified portfolio of real-estate investments?

That is, OTHER than by investing in REIT sharess that trade on the stock exchanges and in every other way are treated and tracked exactly like stocks?
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No. of Recommendations: 8
Several valid comments have been made about the local nature of real estate. I agree. It is difficult to diversify individual real estate holdings. If you are not comfortable investing in your own area, then by all means don't.

For me it comes down to this: If you buy individual properties, there is a small chance that you will experience any kind of dramatic loss of valuation. If you are truly investing in properties whose income characteristics make sense and not merely speculating, the chance is even smaller. If you invest in the S&P 500, a dramatic loss of valuation from time to time is a near certainty. This is a real problem in the shortened accumulation phase available to prospective early retirees.

If the risk of dramatic loss was anything near as high as one might be led to believe by the various horror stories, I would doubt that roughly 7 out of 10 families would own their own homes.

Regards,
FMO
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I would like to discuss what to do if one is behind schedule. All the points in the KISS post are dead-on, but what if you are 40 or 45 and you haven't saved 25 times your income? This is where alternative investments MAY become viable. Are there any strategies (not get rich quick schemes) that MAY allow someone to (1) accelerate their LBYM and (2) take some risk to reach the point where their anticipated retirement needs can reasonably be met?

Your point is well taken Catherine. Amassing a portfolio of stocks large enough to retire on [comfortably] is much easier if someone plods along at it over 20 years or so.

Real estate can offer extrordinary returns, but I do feel the asset class is setting itself up for a fall in certain parts of the country. Everyone and their brother is "hopped up" on the promises of real estate right now, a sure sign of tough days ahead for some. Even in my area, which typically lags the rest of the country, I'm seeing less value in real estate than before. The spread between the cost of building a home, and the sell price of said home is widening greatly. Not good.

When I say potentially tough days ahead "for some", I mean to point out that if a real estate bubble pops, it wont be the seasoned real estate investors who get burned, it'll be the novice who was looking to get on the wagon. A real estate novice may be wise to make some modest investments right now. But to overweight one's self in the "latest craze" to try to "make up time" or "expedite retirement" late in life is foolish, IMHO. As Art says, "it's never different this time".

I dont know of a speedier way to create personal wealth than to own/operate a succesful business, successful being the operative word here. <grin>

I've known millionares who worked for "the man" and there are alot of them here. But I've never known anyone with enormous wealth who wasnt self enterprising. That's not to say that one has to be "enormously wealthy" to RE. However, I think reasonable people would agree that such a person will accumulate the greatest amount of wealth in the shortest period of time.

Following such a path has it's high risks, however. My father waited until age 50 to start his business which is now failing, and has pretty much sucked his retirement dry.

Golfwaymore


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Galeno: But if you are really interested in real EARLY retirement, there's no way you can get there via investing if you don't make stocks your main investment vehicle.

Galeno,

I got to ER at a younger age than you, and stocks werent what delivered the prize.

Since [as you've said] you're so smart, I must be a frickin' genius. <do you really believe the things you say?>

And if I followed your logic, and since I outperformed you, then my way must be the only way, and you're just a FIRE wannabe. <grin>

Golfwaymore

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golfwaymore writes,

I dont know of a speedier way to create personal wealth than to own/operate a succesful business, successful being the operative word here. <grin>

I've known millionares who worked for "the man" and there are alot of them here. But I've never known anyone with enormous wealth who wasnt self enterprising. That's not to say that one has to be "enormously wealthy" to RE. However, I think reasonable people would agree that such a person will accumulate the greatest amount of wealth in the shortest period of time.

Following such a path has it's high risks, however. My father waited until age 50 to start his business which is now failing, and has pretty much sucked his retirement dry.


Great insights as usual, golfwaymore.

What percentage of the population is "self-enterprising"? (FWIW, I know I'm not.) And of this group of hardy "self-enterprisers", how many achieve a level of success in business that allows retirement by age 40 or 50? Surely we're down to 1% to 2% of the population at large if we apply this criteria.

I imagine your own extraordinary success of starting a business, and retiring from it, all before your 31st birthday makes you one in a million, or maybe ten million.

intercst
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I cannot speak to the real estate market, about which I know very little except that high leverage in that area is risky.

High leverage in real estate is profitable! I bought two 3-unit apartment buildings for $112,500 each building. I spent $15,000 to fix them up. They cash flowed practically from the git-go. A year later when I refinanced to take out the hard money loans, they appraised at $178,000 each. Three years after I bought them, they're valued at $278,000 each. Geez, do I even have to get out my calculator to determine that my purchase--when I hardly even knew what I was doing--was profitable?

It seems to me that when you buy at a significant discount to ARV (after rehab value), leverage can do nothing but make you wealthy.
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>>>>>
High leverage in real estate is profitable! I bought two 3-unit apartment buildings for $112,500 each building. I spent $15,000 to fix them up. They cash flowed practically from the git-go. A year later when I refinanced to take out the hard money loans, they appraised at $178,000 each. Three years after I bought them, they're valued at $278,000 each. Geez, do I even have to get out my calculator to determine that my purchase--when I hardly even knew what I was doing--was profitable?

It seems to me that when you buy at a significant discount to ARV (after rehab value), leverage can do nothing but make you wealthy.
<<<<<<

Good for you! But how about a bit of logic here: the fact that you made a lot of money in a fairly short time does not mean that you did not take a lot of risk. It certainly seems that you got a good value, and that it was an intelligent investment.

However, if the units had been hard to rent, you would have had very little room to save your investment.

Risk is the hardest thing to evaluate because it is so hard to predict what may happen. Other people have done the same thing - or what they thought was the same thing - and lost big time.

The reason I said that real estate leverage was risky has to do with the fact that sometimes when things get bad there just are no buyers, or renters, and you end up with a piece of property you cannot pay for.

One way to evaluate risk is to ask yourself, "If everything goes wrong, how easy will it be for me to save myself?" Or, "OK, this is my plan, but what is my backup plan?"

I am not opposed to investing in real estate but there are some things that you need to consider.
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the fact that you made a lot of money in a fairly short time does not mean that you did not take a lot of risk.

Well, just like a stock portfolio, I haven't really made the money yet since I haven't sold them, but wasn't my selection and purchase a lot less risky because I have practically no money in the deal? How do you perceive the risk?

One thing I did know enough to do was make sure the rental market in the area was robust (working class neighborhood). I rented them somewhat below market rates so the phone was ringing off the wall with prospective tenants.
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but wasn't my selection and purchase a lot less risky because I have practically no money in the deal? How do you perceive the risk?

IMHO, risk is directly related to reward. Low risk low reward. Vice versa. I assert that highly leveraged deals are more risky because of the perceived greater return.

The greatest risk anyone can take is to assume they have found the Holy Grail of investing-low risk great reward.

I parapharase John Templeton,"The most dangerous words are that it's different this time".

When everybody is talking about how great a particular strategy is it may be a time to, if not head for the door, at least know where the doors are.

buzman
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"wasn't my selection and purchase a lot less risky because I have practically no money in the deal?"

Well, that all depends. On the one hand, you had only a little money in the deal. On the other hand, you could have lost it all.

In the stock market, it is very unusual, at least for those who pay attention, to lose everything. In this deal, you could have lost everything you put into it, and most likely damaged your credit if there had been a foreclosure.

Again, you did your homework, and made a good choice.
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GWM wrote:
I dont know of a speedier way to create personal wealth than to own/operate a succesful business, successful being the operative word here. <grin>

I've known millionares who worked for "the man" and there are alot of them here. But I've never known anyone with enormous wealth who wasnt self enterprising. That's not to say that one has to be "enormously wealthy" to RE. However, I think reasonable people would agree that such a person will accumulate the greatest amount of wealth in the shortest period of time.

Following such a path has it's high risks, however. My father waited until age 50 to start his business which is now failing, and has pretty much sucked his retirement dry.


I agree wholeheartedly. I was able to retire after 13 years of accumulation because I owned and operated my own medical practice. This allowed me to make 5 times as much as opposed to have had worked as an employee in Costa Rica's socialized medical system.

Owning and operating one's own business is risky but can be very economically rewarding as GWM so aptly point out.
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One of my professors said belief in luck was the same thing as belief in fortune. I won't argue about that one. It does provide the same sort of comfort. If luck is the decisive factor, then improving your
technique, learning from the past, etc., is relatively unimportant.


I've always thought luck primarily consisted of the wisdom to recognize an opportunity and the guts to take advantage of it. Random "luck" is extremely rare, IMO, and one of the most common excuses for not living up to your abilities.

InParadise
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GWM wrote:
I got to ER at a younger age than you, and stocks werent what delivered the prize.

Since [as you've said] you're so smart, I must be a frickin' genius. <do you really believe the things you say?>

And if I followed your logic, and since I outperformed you, then my way must be the only way, and you're just a FIRE wannabe. <grin>


GWM, unless you have between 50 and 100 times (or more) your annual expenses in income producing assets to support you thru FIRE, I'll guarantee you one thing, your FIRE will not last unless you are exposed to stocks.

With $30 million cash in cardboard boxes in the cellar and $60K per year in expenses, ANY IDIOT can FIRE. Just ask any successfully retired drug dealer <grin>.

BTW, I'm STILL smarter than you because I FIRED in a much more difficult environment than you did. Almost anybody with 1/4th a brain can retire early int the USA. If I "did my thing" in the USA, I'd be a member the Forbes 500 <grin>.
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CatherineCoy asks us to identify the risk:

Well, just like a stock portfolio, I haven't really made the money yet since I haven't sold them, but wasn't my selection and purchase a lot less risky because I have practically no money in the deal? How do you perceive the risk?

If you had sold for a loss, you would still be liable for the deficiency. Your losses are not limited to your down payment.

Have fun,

John R.

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Intercst: 2) I believe most real estate investors buy properties close to home? Am I way off base there? So in addition to buying "well-selected properties", I also need to insure that my current place of residence and its surroundings is not the site of the next "highly localized" debacle.

I know this one person who buys mid range price SFH in resort areas all over the world to rent to the tourist market. The return on these properties are astronomical. Though it means having a management company do the day to day work, the extra rent one gets on the short term market is well worth it. We looked at a house here on St. Croix that would have gotten a long term monthly rent of $1500-$1750, (and of course the tenants would have been responsible for all utilities and yard work,) but would rent in season for $2500 to $3500 per week based on number of occupants, (including all utilities, maintenence and maid service). Based on a conservative 90% occupancy in the high season and 25% occupancy in low, (numbers we got from multiple management cos on island based on their similar properties,) hiring out all but the pool work and acting as my own renting agent, we were projecting a 15% return in year 2, going up to 25% return per year in year 10. This was with assuming the first year would be a total write off, doubling anticipated expenses for variable things like water and electricity, and having a 0% appreciation on the house.

He recruits all his rentals over the internet, saving the 20%-35% a realtor would charge him. While it would be insane to project your profits on renting 52 weeks out of the year, he had his rented out 50 weeks pre 9/11. I have noticed a slight decrease in occupancy since then, but not during season.

Nothing is guaranteed, and if you leverage yourself beyond your comfort level you are a fool, both with real estate and with stocks. Given our circumstances, we could have afforded to swallow all the costs if the place didn't rent. We wound up backing out due to local issues, but I am actively researching this area of real estate investing. Wouldn't mind investing in a REIT that does short term rentals.

InParadise,
who thinks we should set up the REHP REIT based on this premise. <grin>
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Galeno: I will repeat AGAIN, if you seriously want to retire early, you must invest in stocks. If you want a masochistic and UGLY second job and PRETEND to retire early, then invest in residential real estate. I understand that wishfull thinking and waving your hands around at the same time MAY improve your investment returns and SWR significantly <grin>.

What experience do you base these comments on? I realize we may have just been "lucky", though I really don't believe in that term, but for the 9 years that we have had our batchelor pad turned rental property we have not spent more than a handfull of hours per year on it, and for the last 6+ years have managed the property from over 1500 miles away. We've also done owner financing that while originally painful while the market was surging, wound up being a great investment as our stocks plunged. This again took minimal time. I realize I have a narrow based experience, but am curious as to what experience you are basing your comments on?

InParadise,
Who used to have similar feelings about rentals as Galeno until she actually experienced it.
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We have 2 camps here. People who want to take the time to handle real estate as an investment because they are more out going and don't mind taking calls when the phone is ringing off the hook because you rent something out below market value.And people who are more introverted and see renting out property as not retiring early because dealing with renters is like having a job. My cousin is a real estate agent and has 8 houses in which he rents out and does very well for himself. He dreams of owning apartment buildings and such. I see this as a huge pain in the a**,but if i liked dealing with people i see nothing wrong with it whatsoever. I on the other hand used to own my own business coldcalling businesses looking for used metalworking equipment.Being very introverted it was a chore,but strangely i made quite a bit of money doing it.I personally wouldn't like the phone ringing off the hook trying to rent property out but i definitely see it as a great way to retire.

2828
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GWM, unless you have between 50 and 100 times (or more) your annual expenses in income producing assets to support you thru FIRE, I'll guarantee you one thing, your FIRE will not last unless you are exposed to stocks.

As you know, I'm heavily exposed to a wide range of asset classes, including stocks. I read your statement to implicitly declare that reaching ER by any means other than stocks was an impossibility.

BTW, I'm STILL smarter than you because I FIRED in a much more difficult environment than you did. Almost anybody with 1/4th a brain can retire early int the USA. If I "did my thing" in the USA, I'd be a member the Forbes 500 <grin>.

I've always understood you to say that retiring in Costa Rica was a breeze compared to the US, with 20% the cost living requirement. I'm also not sure what you know about "my environment".

Only an idiot would get pumped about a "smart contest", so I officially declare you smarter than all of us. <grin> I take pride in "dumbing down" this board on a regular basis.

I guess my position is that it seems academic as to how one gets to ER, or how they stay in ER. Taking a "chest beater" posture and declaring right and wrong methods seems like a dumb thing to do, for a "smart guy". <grin>

Golfwaymore



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GWM wrote:
I guess my position is that it seems academic as to how one gets to ER, or how they stay in ER. Taking a "chest beater" posture and declaring right and wrong methods seems like a dumb thing to do, for a "smart guy". <grin>

You may now address me as "your majesty", "holy father and heavenly king", or any other array of royal or presidential titles. Personally, I prefer "the highest of the high" or "oh great, wise, and just one".
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We have 2 camps here. People who want to take the time to handle real estate as an investment because they are more out going and don't mind taking calls when the phone is ringing off the hook because you rent something out below market value

Why is this the only place on the face of the earth where Real Estate Investment and Rental Real Estate are exactly the same thing?

Golfwaymore
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What percentage of the population is "self-enterprising"? (FWIW, I know I'm not.) And of this group of hardy "self-enterprisers", how many achieve a level of success in business that allows retirement by age 40 or 50? Surely we're down to 1% to 2% of the population at large if we apply this criteria.

If, as you claim, the Safe Withdrawal Rate approach works for 10 percent of the population, adding regular discussion of an approach that works for another 2 percent of the population increases the number of people served by this board by 20 percent.

Did I get the math on that one right, intercst?

Who knows how much farther we could expand the reach of the board if we encouraged discussion of some of the other approaches that a few daring posters have ventured to post on in recent months? Could we ultimately get to a point where early retirement is possible for 15 percent of the population, 20 percent, 30 percent?

We may soon find outselves venturing down a road where you will have to redo that study on your site where you claim that INTJs are represented more frequently in the population of early retirees than they are in the general population. Someday INTJs may even be the RE board minority.

Don't worry. INFJs aren't into this ridicule of alternate approaches stuff. We take our knowledge of how to retire early whereever we can find it, and are appreciative of any help that those suffering from other personality -type designations can share with us.


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The greatest risk anyone can take is to assume they have found the Holy Grail of investing-low risk great reward.


I appreciate the platitudes, but please quantify the risk when I buy an asset deeply discounted and I have hardly any money in the deal.

If you found an undervalued stock and could buy it on margin, wouldn't you do so--the proverbial 100-bagger? I sure would.

I wouldn't pay full sticker price for real estate in a highly leveraged way. That would be dumb.

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If you had sold for a loss, you would still be liable for the deficiency.

But I bought at a significant discount which greatly limits my downside.

I'm still trying to figure out why real estate is considered such a pariah by FIREs.

By the way, for those who consider my purchase a "lucky" one, I know two investors who consistently purchase this way. It's called "value investing" in real estate, just as it's called in equities.

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"You may now address me as "your majesty", "holy father and heavenly king", or any other array of royal or presidential titles. Personally, I prefer "the highest of the high" or "oh great, wise, and just one".
- galeno


How about "Ceasar?" As in "greasy salad dressing?" - Art
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We have 2 camps here.

This is what puzzles me--why there are two camps. Why wouldn't one want to diversify for protection? My rentals take zero of my time because now they're professionally managed. Now that I've been hanging out here for a while, I'm wondering what I should do with my discretionary income...buy more real estate or get more heavily into the stock market now that prices appear to be "undervalued."

I'll keep reading ...
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I take pride in "dumbing down" this board on a regular basis.

Hey, that's my job. I may have gotten a 3.96 GPA in college, but I must be pretty "dumb" if I only make 30K a year. Writing is not my strong skill, so I'm sure if any English majors read my post they really feel I'm "dumbing down" this board.

I'm glad a 31 yoa millionaire early retiree with kids is just as dumb as a blue collar, father of two, FIRE wannabe who is a couple of years older.
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"But I bought at a significant discount which greatly limits my downside."

Now Catherine, you are sounding like somebody that bought Sun Microsystems at 15 because it was 75% off its high. It is now $4.17, and if you had bought that on margin, you would have had big problems.

You bought at a significant discount to what? There is no inherent value - just what people are willing to pay. There are, to be sure, ways to figure out just what they might be willing to pay, but that just gives an educated guess at best.

Of course, it sounds like a great deal, and it worked out. You have been able to service the payments from the rent, and the estimated price of the property has gone up. What could be better?

Nevertheless, do not ever say to yourself "there is no way I can lost money on this deal." Nothing is certain.
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Why is this the only place on the face of the earth where Real Estate Investment and Rental Real Estate are exactly the same thing?

Ain't it the truth?! When I bought my units, I borrowed the money from a private party--an early retiree. He received 4 points up front and 15% interest for a year, after which I cashed him out. If I had big gobs of money, this seems like quite a viable way to go. What a no-brainer!
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CatherineCoy responded to my comment that:

If you had sold for a loss, you would still be liable for the deficiency.

with this:

But I bought at a significant discount which greatly limits my downside.

She is right that she limited her risk substantially by buying at a good price. She was wrong, however, to identify a low down payment as limiting her risk.

But she does have a good post. It is worth reading and I have recommended it.

BTW, CatherineCoy, the reason that intercst is so hostile to real estate investments is that it has cost him several hundreds of thousands of dollars (mainly in opportunity costs). He has also lived through the real estate disaster in the oil patch area. He has seen first hand how horrible it can be when things go wrong. telegraph also comes from the same area and has lived through that real estate bust. But I don't think that he has suffered as much financially as intercst. That is why I think that telegraph's comments and observations are so valuable to a real estate investor. You yourself have commented at how penetrating his questions can be.

Have fun.

John R.
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JWR1945 writes,

BTW, CatherineCoy, the reason that intercst is so hostile to real estate investments is that it has cost him several hundreds of thousands of dollars (mainly in opportunity costs). He has also lived through the real estate disaster in the oil patch area. He has seen first hand how horrible it can be when things go wrong. telegraph also comes from the same area and has lived through that real estate bust. But I don't think that he has suffered as much financially as intercst. That is why I think that telegraph's comments and observations are so valuable to a real estate investor. You yourself have commented at how penetrating his questions can be.

I'm intrigued. How did avoiding the Houston real estate market in favor of investing in the stock market over the past 20 years "cost me several hundreds of thousands of dollars (mainly in opportunity costs)"? It seems to me that the "opportunity costs" would have been born by someone doing the reverse.

intercst
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intercst. A clarification.

It was not the Houston real estate market that cost you hundreds of thousands of dollars. It was your sale of some Dell stock to purchase REITs (IIRC) that cost you hundreds of thousands of dollars. Your observations of what happened in the Houston real estate market tended to reinforce your negative opinion.

(I was really hoping that CatherineCoy and others would have started looking at your old posts to figure out the details. I thought that doing so would benefit many. Obviously, I was much too subtle and I caused confusion.)

Have fun.

John R.
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You yourself have commented at how penetrating his [Telegraph] questions can be.

And I wasn't kidding, either. I'm runnin' all my prospective purchases by Telegraph first. He'll keep me out of trouble. He may keep me from buying, too, but that's another issue.
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I was really hoping that CatherineCoy and others would have started looking at your old posts to figure out the details.

Pursuant to GWM's suggestion, I've begun a systematic reading of old posts, but there are so many ...
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JWR1945 clarifies,

It was not the Houston real estate market that cost you hundreds of thousands of dollars. It was your sale of some Dell stock to purchase REITs (IIRC) that cost you hundreds of thousands of dollars. Your observations of what happened in the Houston real estate market tended to reinforce your negative opinion.


Yes. Absolutely! I hope my single biggest investment mistake to date will be a lesson for all.

As Warren Buffett himself said during an appearance at the University of Washington in 1998, "Most people will only see 2 or 3 truly great investment opportunities in their lifetime. When a good opportunity arises, it's not the time to be reading a textbook on diversification."

I wish Warren had said that two years earlier when I "diversified" my portfolio by selling some DELL and buying REITS. <grin>

intercst
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I've always thought luck primarily consisted of the wisdom to recognize an opportunity and the guts to take advantage of it.

There's that kind of luck and then there's blind luck. My wife went to work for a company about whose prospects she had no idea and received stock options that were worth a lot for a while. She might just as easily have ended up at one of hundreds of other companies, worked just as hard, been just as appreciated, and still gotten no more than her salary. Many equally talented folks did just that. Some folks got parents who left them with inheritances to RE on and some didn't. I tend to regard luck as mostly random, although it would be nice to believe otherwise.

--fleg
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CatherineCoy quoted me on this thread:

I was really hoping that CatherineCoy and others would have started looking at your old posts to figure out the details.

With a really good comment:

Pursuant to GWM's suggestion, I've begun a systematic reading of old posts, but there are so many ...

CatherineCoy, remember your very first few posts on this board. You asked a couple of innocent questions. You were wondering why someone who is capable of working and enjoys working might want to retire early. You have just answered your own question. It is so that you can read those old posts.

You have also expressed concern over the amount of time it would take to retire. But consider this:

Recently, you have indicated that you already have about $400K in real estate equity. That is about half way to a high quality retirement in most states (i.e., outside of California and other high cost of living areas).

Start dreaming, CatherineCoy. You are almost there.

Have lots of fun. Dream on.

John R.
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JWR1945 states:
CatherineCoy, remember your very first few posts on this board. You asked a couple of innocent questions.


Innocent???

Ms. Coy stated “Why retire?” followed with “I love my job.”

Never before has the Bourgeoisie uttered such filth to the no-longer (and aspiring to be no-longer) exploited, oppressed, and subjected working masses!!!!

Innocent my a**.

Leolo
26 months and the explotation ENDS!!!
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Never before has the Bourgeoisie uttered such filth to the no-longer (and aspiring to be no-longer) exploited, oppressed, and subjected working masses!!!!

Oh great. Now I gotta study up on the bourgeois. The work of being an active lurker/participant on this board never ends.
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Pursuant to GWM's suggestion, I've begun a systematic reading of old posts, but there are so many ...

That actually JWR's suggestion. GWM hates it when you get him confused with someone else <g>.

Note: Just so no one is confused by the recent "gloves off" spirt of the board, this post was meant in the spirit of good-natured ribbing. I like GWM and try to read all his posts. Doesn't mean I don't like to get in some ribbing now and again though!

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If you found an undervalued stock and could buy it on margin, wouldn't you do so--the proverbial 100-bagger? I sure would. CC

Nope, not me. There are no sure things.

I wouldn't pay full sticker price for real estate in a highly leveraged way. That would be dumb.CC

As a mortgage broker you don't mind if another dummy does, huh? <grin>

please quantify the risk CC

I like William Bernstein's definition of risk-enterprises with potential great reward carry greater risk.

My brother has been marketing a piece of land for over two years, it's still on the market. The townhouse adjacent to ours, on the market for almost one year.

I'll say this, again, "The most dangerous words to an investor-it's different this time."

buzman-real estate owner



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Catherine,

I don't understand why you frequent this board if you love your job and never want to retire? I don't understand? I truly appreciate your point of view but why are you spending so much time here?Do you want to try to understand the mindset of someone that doesn't find it necessary to work if they have the cash not to? Or is it something else? It seems you are doing the equivelant of intercst hanging out at the "work because it's fun board". I am seriously curious and not trying to be combative. And by the way for everyone else what is KISS (besides a kickass 70's group)it wasn't in the frequently asked questions and i don't have the fortitude to go thru a million posts even though i have time.


2828
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And by the way for everyone else what is KISS (besides a kickass 70's group)it wasn't in the frequently asked questions and i don't have the fortitude to go thru a million posts even though i have time.

KISS = Keep it Simple Stupid.

Just click on threaded to get back to the original post which explains this.

KISS was a pretty good group as well. About 2 years ago I won tickets to there farewell concert and I actually got to go to this one. That reminds me to get some earplugs for my upcoming Aerosmith Concert.

I was waiting for someone to mention the rock group when they saw this subject line.
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2828 asks,

Catherine,

I don't understand why you frequent this board if you love your job and never want to retire? I don't understand? I truly appreciate your point of view but why are you spending so much time here?Do you want to try to understand the mindset of someone that doesn't find it necessary to work if they have the cash not to? Or is it something else? It seems you are doing the equivelant of intercst hanging out at the "work because it's fun board".


Hmmmm... That might be a lot of fun. I wonder how much commotion the "3 for 1 Rule" would cause over there? <grin>

I am seriously curious and not trying to be combative. And by the way for everyone else what is KISS (besides a kickass 70's group)it wasn't in the frequently asked questions and i don't have the fortitude to go thru a million posts even though i have time.

KISS equals "Keep It Simple Stupid"

If you can spend 15 minutes per year managing a 4% withdrawal from a 75% S&P500/ 25% fixed income portfolio, why complicate your life with real estate and a part-time job?

intercst
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Mazske,

Thanks alot, not knowing what KISS was killling me. I hate those abbreviations you have to think about.Like it's not bad enough having to tell people you're retired and explain it to your parents when you're 35. Thats almost as much work as taking phone calls to rent out your rental property.


2828
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intercst,

for the longest time i thought your moniker was pronounced "intersist" until i looked at the frequently asked questions. I will probably always think of it as "intersist" but still think you have great posts.

2828
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I hate those abbreviations you have to think about.Like it's not bad enough having to tell people you're retired and explain it to your parents when you're 35. Thats almost as much work as taking phone calls to rent out your rental property.

Guess you were never in the military, eh? One of the first things I learned in Navy bootcamp was that NAVY stood for Never Again Volunteer Yourself. Acronyms only went downhill from there. Try being an ET in the CAL Field and then switching to the VLF field. UYK-20's were fun to work on. I'm now an ETC in the NR IRR.

You FIRE'd at age 35? Who cares about explaining it to anyone. Let them wonder how you did it. Feel free to fill us in though. FIRE tips are always welcome.
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If you can spend 15 minutes per year managing a 4% withdrawal from a 75% S&P500/ 25% fixed income portfolio, why complicate your life with real estate and a part-time job?

We must factor in the possibility that maybe some of "the people" don't have a life to begin with. This thought occured to me on my third bong hit <grin>.
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Oh great. Now I gotta study up on the bourgeois. The work of being an active lurker/participant on this board never ends.

I'll make it easy on ya. In Marxist theory, the Bourgeoisie are the class who own things like factories etc., basically those who control wealth and the means of production. They are the ones trying to stomp us proles into the ground. That's why intercst is so gleeful everytime one of them gets hauled off to the clink. <g>.

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2828 writes,

Thanks alot, not knowing what KISS was killling me. I hate those abbreviations you have to think about. Like it's not bad enough having to tell people you're retired and explain it to your parents when you're 35. Thats almost as much work as taking phone calls to rent out your rental property.

You're retired at 35? Congratulations!

I'm sure everyone would like to hear the story of how you did it and what you think you need to do to stay retired.

intercst
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I am seriously curious and not trying to be combative.

Please ... if I answer this, I'm likely to find my name in lights again. Review past post if you're seriously curious.
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Galeno,

I ran out and unfortunately am drinking the cheapest white wine ever. I had a party for people who helped me build my patio and someone brought a bottle of white wine with a cork which is not cork (it looks like some sort of space age polymer which won't go back in the bottle,so i guess i gotta finish it).

2828
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Sheesh, wine and bong hits. Even though I've basically quit drinking, a good quality dark beer beats all.
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O.K. i'm just curious,not seriously curious. I'm not the type to look thru a bunch of posts to find tidbits. But i'll tell you this. You are very intriged by this board for someone who is very content with talking to people about real estate. My cousin is a top seller at Remax in my neck of the woods and he now pawns off his appointments and such to others (it can't be fun going on listing appointments). i always ask him how he gets so motivated.I guess it has to do personality because i know he is being sincere,it just doesn't register for me.


2828
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O.K. i'm just curious,not seriously curious.

Then here's a better answer. I'm not ready to drink the Kool-Aid yet. (Kidding!) I just come here for the love. You're already converted, so the true FIREs will add you to their wills.



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Catherine,

If there was a job that entailed watching Blackhawk games and drinking beer trust me i'd be right there with the most dedicated. Trying to sell people on a home is not my cup of meat( would you like to meet with me at 2:30 or 3:00pm,never take no for an answer). I personally think you will come around. If i had the rental props my cuz had i'd sell half to pay off the rest and live off the rental income,but he doesn't think like me.Thats the difference between intercst and you (i think). I see the rental property as a nuisance that makes money and you see it as a great way to meet people and be sociable. O.K. i'm putting words in your mouth but am i close?


2828
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O.K. i'm putting words in your mouth but am i close?

Yes, indeed you are--putting words in my mouth, that is. I like my J-O-B because it's rewarding and lucrative (see infamous thread of same title). ALL my business comes from referral, so I don't do that sell-y thing.

I like real estate because (a) I've always been interested in it and (b) it produces money if you do it right. I like anything that I can buy low and sell high (go figger). Buying real estate for investment purposes isn't a social event, although I kinda like the folks at the various investment clubs I frequent. They're an extremely sharing bunch (ala Golfwaymore, FoolMeOnce, etc.) as are the stock types here. I've learned a GREAT DEAL from everyone (even Galeno--yikes!) in the short time I've been visiting here. With FMO's excellent posts, I feel back on track again.

I hang out here a lot (I imagine that will diminish after I read all the threads) because I realize that I'm not as diversified as I could be. I have just a smattering in the stock market via my 401(k) (back when I worked for The Man instead of for myself). I'm convinced that I should do the Index thing-y although a couple of funds have been recommended that I'm looking into.

If I'm successful in converting the wisdom here into action, I may very well retire early but I'm only half way to what I need, so I don't know. I really don't know how I would fill my days, being accustomed as I am to producing results for pay. Alas, I don't live in paradise, either, although Southern CA comes pretty close.

Hey, thanks for asking the questions. I'm CERTAIN I'm not the only one here not fully convinced that retiring early is either possible or preferable, but exploring that is what this board is all about, eh? Congrats to you if you feel that RE has met your needs and dreams.


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CC said,

I'm not ready to drink the Kool-Aid yet. (Kidding!) I just come here for the love. You're already converted, so the true FIREs will add you to their wills.

I'll skip the Kool-Aid as well. Too much sugar. I like a cup of coffee in the AM, then water, juice and green tea.

There's lots of love here. Have a hug. <<<<<<<CC>>>>>>>>>

Hey, I'm already converted. Who's added mazske to their will?
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I just want to be in intercsts will. I promise i'll only take four percent a year. Catherine i think what you are doing is great. I'm glad you stumbled upon the board. OK let me ask you straight out, if you had unlimited funds would you still look for bargains in the real estate market? Deal with people thinking you are low balling them on their properties. Talk to people who are asking way to much for their properties (when you are trying to list them)?

2828
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intercst,
"for the longest time i thought your moniker was pronounced "intersist" until i looked at the frequently asked questions. I will probably always think of it as "intersist" but still think you have great posts."

2828


When I first saw it I thought it was pronounced "inter-cyst." But I guess that comes from 17 years of working at the Vet School. - Art
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"If you can spend 15 minutes per year managing a 4% withdrawal from a 75% S&P500/ 25% fixed income portfolio, why complicate your life with real estate and a part-time job?" - intercst

"We must factor in the possibility that maybe some of "the people" don't have a life to begin with. This thought occured to me on my third bong hit <grin>." - galeno

I don't have a life and I still don't want to do any more than I have to. - Art
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catherinecoy:
I really don't know how I would fill my days, being accustomed as I am to producing results for pay. Alas, I don't live in paradise, either, although Southern CA comes pretty close.



Paradise is where YOU will be happy. Paradise is where YOU will be able to do the things that YOU want to do. Dory36's paradise is on a boat (I really miss Dory). Seattle Pioneer found his paradise. Mine is Hawaii because I love being outside, I love the ocean, and I despise the cold. But paradise for you does not have to mean beaches and sun.
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OK let me ask you straight out, if you had unlimited funds would you still look for bargains in the real estate market? Deal with people thinking you are low balling them on their properties. Talk to people who are asking way to much for their properties (when you are trying to list them)?

You didnt ask me but...

No one has unlimited funds, but under any circumstance, I would [and do] continue to look for bargains in real estate, and everything else for that matter.

Regarding the negotiation, I buy almost all of my properties from banks as foreclosures. There's really not alot of negotiation in that world. There's a payoff needing satisfied to get the property, it's either worth it to ya or it's not...

Golfwaymore
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OK let me ask you straight out, if you had unlimited funds would you still look for bargains in the real estate market?

Yes! I think it's fun. I also like to find a screaming sale on shoes. Hey, what can I say--I'm a woman.

Deal with people thinking you are low balling them on their properties.

Yes! But I don't consider that I'm "low balling" anyone. I would pay only what the properties are worth. Big difference. If the seller is inclined to feel low-balled, they're not motivated enough to sell to me. I made several offers before I purchased my first investment properties. In not one of them did the seller feel offended (I don't think) by my offer. My goodness, there's a right way and a wrong way to negotiate!

Also, does anyone here have unlimited funds? Bill Gates isn't a lurker, is he? Aren't most FIREs judicious in their withdrawal of those funds? Isn't that what "Safe Withdrawal Rates" and the raging debate thereon is all about?
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Paradise is where YOU will be happy. Paradise is where YOU will be able to do the things that YOU want to do. Dory36's paradise is on a boat (I really miss Dory). Seattle Pioneer found his paradise. Mine is Hawaii because I love being outside, I love the ocean, and I despise the cold. But paradise for you does not have to mean beaches and sun.

Paradise for me means not having a boss whose backside I have to kiss.
And I don't mean either "keep it simple stupid" or the band. - Art
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Paradise for me means not having a boss whose backside I have to kiss. And I don't mean either "keep it simple stupid" or the band.

Maybe you're an entrepreneur at heart. Instead of wondering and stressing about how you (editorially speaking) are going to live on $15,000 a year, maybe explore your Inner Entrepreneur.
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Bill Gates isn't a lurker, is he?

Who do you think I was referring to when I said there were some folks here who wouldn't want to hang out at my house because it's not a mansion?

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Catherine,

Be very careful. I mean this constructively and not to criticize but you are just too smug about how much you like your job. That could change OVERNIGHT. Or your health could go bad. Lots of things could have you thinking much differently about early retirement. Continue to enjoy your job, but never forget that change happens rapidly and your industry could have you on the street IN A SNAP.

Daryll40
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Why complicate your life with real estate and a part-time job?

One possible answer that I can imagine is that you love real estate and that you love your part-time job.

Why is it, intercst that the thought that there might be people in the world somewhere enjoying a early retirement put together according to principles other than those that apply to your own enrages you so?

Are you desperately unhappy with what you have done? If not, what is the downside for you in allowing others to find their own way to satisfaction with life?

I've joined you from time to time in your criticisms of wage slavery, but I have never in my life had a boss who was as fanatical in demanding that things be done exactly his or her way as the founder of this board is.



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Regarding the negotiation, I buy almost all of my properties from banks as foreclosures. There's really not alot of negotiation in that world. There's a payoff needing satisfied to get the property, it's
either worth it to ya or it's not...


Golfwaymore,

Do you have a relationship with a banker or two, or do you just look in the papers? How do you go about finding your properties?

InParadise
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Golfwaymore,

Do you have a relationship with a banker or two, or do you just look in the papers? How do you go about finding your properties?


I do, but I wouldnt call those relationships overly cozy, I'm allergic to bankers <grin>. I dont even have to call the banks, the two or three I deal with most call me.

The quickest sure-fire way I know to get the bank to call you with their foreclosures first is to put a sizeable amount [max FDIC] of your cash ladder in their bank and let it be known you're interested in such.

Golfwaymore


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Oh great. Now I gotta study up on the bourgeois. The work of being an active lurker/participant on this board never ends.

This might help -

http://www.amazon.com/exec/obidos/ASIN/0684853787/qid=1029172174/sr=1-1/ref=sr_1_1/102-6896580-8360933

-Steph
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You may now address me as "your majesty", "holy father and heavenly king", or any other array of royal or presidential titles. Personally, I prefer "the highest of the high" or "oh great, wise, and just one".


I prefer "Doctor", which MDs think mean all these things, but which everyone else knows really means "*ssh*le"
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Why is this the only place on the face of the earth where Real Estate Investment and Rental Real Estate are exactly the same thing?

Actually, it's not the only place, but it irritates me to no end no matter where I run into it. For example, I am in the initial phases of my real estate investment career. I currently am involved in 4 different joint ventures (as a mostly passive investor) involving SFR rehabs. None of these involve long-term rentals. I am estimating a return of approximately 160% in a six-month time frame. I began the first of these four ventures approximately one month ago and anticipate continuing to participate at a similar rate (minimum 2 deals per month).

I consider this to qualify as 'Real Estate Investment' and yet at no point will I or my joint venture partners be taking on the role of landlord.
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Can you get hardmoney loans for the properties that are sold by banks at the courthouse, or do you just have to use your own money and then can you get a regular loan to refinance it?
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Can you get hardmoney loans for the properties that are sold by banks at the courthouse, or do you just have to use your own money and then can you get a regular loan to refinance it?

Congrats on your first TMF post. Sorry you're 10,000 posts behind, but then again this means that you may soon be experiencing The Great Debate for the first time. I am faint with envy.

sydsydsyd
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Can you get hard-money loans for the properties that are sold by banks at the courthouse, or do you just have to use your own money and then can you get a regular loan to refinance it?

Here's how that works: you can find a source for auction money for the brief time it takes to go to the courthouse and try to win the property at auction--since you have to pay cash on the barrelhead at the sale. If someone outbids you--which usually happens--you just give the money back to the auction money guy and pay a bit for having brief use of it. The 40 Thieves who typically show up at the courthouse use their own money, I'm sure.

If you win the bid, you pay the auction money guy with a hard money loan or, if the property is in decent condition, an institutional loan--which takes longer to close.
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<<Can you get hardmoney loans for the properties that are sold by banks at the courthouse, or do you just have to use your own money and then can you get a regular loan to refinance it?
>>


In Seattle, there are some organized aids to buying properties being sold at deed of trust sales. One is a website that lists information on all such sales, and the second is a real estate broker who makes these sales his business.

The real estate guy has a weekly meeting for his clients, reviewing pending sales for the week. This gives those interested an opportunity to investigate properties up for sale. Additional meetings later in the week update the rapidly changing situation, which often sees properties withdrawn from sale at the last minute.

The date of the sale is interesting. You have to have cash or cashiers checks to cover your bids on your person. If you are the winning bidder, you hand the seller your cash and get the deed in return, and the property sale is closed.

You may be bidding on a house in which you've never been inside and have seen only from the outside. Unknown liens or other problems can trap buyers. It's pretty hairy business, but you can make really good deals, too.

When I was checking out this market, real estate was liquid enough so that there were few really good deals ---people could usually sell their property without going through a sheriff's sale. That's probably still true today. But if/when we get a real estate credit crunch, I might investigate this again ---that's when the real deals may be there in abundance.




Seattle Pioneer
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