Posted by Brent_IL on October 30, 2001 at 23:59:12:
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Questions From Rodrigo Rodrigues - Posted by Ronald * Starr
Posted by Ronald * Starr on October 30, 2001 at 20:15:08:
I received the following in an e-mail. Seeing no problem with personal privacy, I post here to share.
--–THE E-MAIL--–-----
-------Original Message-------
From: Rodrigo Rodrigues
Date: Sunday, October 28, 2001 08:59:15 AM
To: lott@invest-faq.com
Subject: questions…
FIRST I WOULD LIKE TO SAY THAT YOUR SITE IS VERY INTERESTING I VE’READ THE ARTICLE ABOUT MAKING EXTRA PAYMENTS ON THE HOUSE VERSUS INVESTING, WELL I HAVE A FEW QUESTIONS …
I PURCHASED A DUPLEX LAST APRIL AND INTEND TO PURCHASE ANOTHER ONE NEXT YEAR ,IN ORDER TO BUILD A EVEN STRONGER CREDIT HISTORY , MY IDEA IS TO MOVE TO THE OTHER ONE AND PAY OFF THIS ONE HERE AS FAST I CAN AND THEN BUY A SMALL AN APT COMPLEX ,
USING THE MONEY FROM THE FIRST ONE FOR DOWN PAYMENT ,
HOW MUCH DOWN PAYMENT IS NEEDED FOR LET’S SAY A 500 GRAND OU 600 GRAND APT COMPLEX?
HOW DO I PROTECT MYSELF FROM LAWSUITS HAVING SUCH EXPENSIVE ASSET?
IS IT LESS RISKY TO USE PART OF THE MONEY AND BUY A APT COMPLEX WITH PARTNERS AND THEN INVEST THE REST IN MUTUAL FUNDS,STOCKS ETC?
MY GOAL IS TO HAVE A $3000 MONTHLY CASH FLOW IF TURNS OUT TO BE MORE FINE IF NOT FINE ,WHAT WOULD YOU RECOMMEND?
THANKS FOR YOUR TIME AND ATTENTION
RODRIGO RODRIGUES
------RONALD STARR RESPONSE--------
Rodrigo Rodrigues-----------
I would not recommend paying off a loan early. You would probably get a better return for the money by investing it in other properties with loans on them. Save enough for a down-payment on a small property. Use it to buy another property. Continue doing this. Then, if you want to buy a larger property, you can sell several of the smaller properties and invest the resulting money into a large property with a tax-deferred section 1031 exchange.
If you are concerned with the high profile from a larger building, I suggest you simply buy one- and two-unit properties. If you buy in the name of partnership or a trust, you will be less conspicuous. I am not an expert on asset protection. From what I can figure out, there is no very good way to protect assets until you have lots of money and can hire very high-priced attorneys. Umbrella liability insurance policies may be the best way to go. Along with allways being honest and businesslike.
If you can avoid having partners, I suggest you do so. Some partnerships are great-- a few. Many are horrible. Better is own your own properties alone. If you want to work some with other property owners, share work on each other’s properties. Meet together and talk about real estate. But don’t get into partnerships.
I can’t comment on stock investing except to say I don’t like it. But there are some people who have both real estate and stocks. Most people if they can manage real estate seem to avoid stocks, it seems to me.
Three thousand dollars of spendable cash is certainly possible. But it may take you a few years to build up to that level. If you can buy properties with $200/month cashflow after all expenses and vacanties, you would need fifteen units. Depending upon where you are located, this might take you a couple of years or it might take you up to say 10 years. Some areas are better for long-term rental holding than are others.
You are well started. I encourage you continue studying and, as you suggest, buy more properties. Build up at a pace that seems comfortable to you. As you go, develop your record-keeping system, your application process, your rental application, your repair skills and knowledge. When you get more properties you will be able to handle the problems that come up.
Good Investing*Ron Starr