Question For Matt Flynn

[AZK]

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I could elaborate about what it's like being a doctor, but nobody cares nor will they until half of us are out of business, which will be 6 years from now if the planned Medicare cuts aren't eliminated. Even if they are smart people are stupid to go into medicine nowadays so you lose either way.

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This is very troubling as I'm hoping to start attending medical school next fall, meh.

[Lucky]

Wow,

Great reply as always Matt. I'll search for your old post on REI, most of which I've read, but would like to read again.

It was just so no nice to hear you in the past, as you were one of the few people taking a line that i like in investments.

I don't think I'll ever get into stocks past solid mutual funds, ie my 401k to hedge against real estate disaster (although in the turtle like mid-south i dont think that will be a problem).

Thanks especially for enumerating the basics:
1. do deals with 5% or less.
2. buy sfh, duplexes, and apts, not condos, etc.
3. roll closing costs into loan.
4. dont pay points.

All of these are great points, especially as everyone will be hammering us to put more than 5 percent down. It's nice to know that there is a cut off to make a deal feasible, "No Mr. Mister Mortgage Broker, There's a big internet poker player/doctor/investor, and he says 5 percent is the ceiling, take it or leave it!"

But seriously, that is a huge point, because it's not about what you own, but what you control. If you were goint to get 100k of real estate for 100k of investment, you're better off with S &P. The miracle of real estate, like hedge funds for the super rich, is leverage.

Anyway, i'd always figured id need 10 percent, ie 100k could control 1 mil, etc.

Im rambling, but once again, thanks matt

[Loci]

One of my father's clients has amassed a fortune by utilizing seemingly odd, but imo clever, means of obtaining land. I don't know if he has bothered to buy anything that he sees with a for-sale sign on it, because to the best of my knowledge he simply goes to auction and purchases every piece available for 20 cents on the dollar, paying the back taxes for fields scattered across the county. He sits on this land for 5, 10, 15 years until a developer wants it for housing or it gets rezoned for commercial use and sells those formerly useless fields for insane mark ups.
-I wondered for a while if Dad was exagerating when he related one statistic, but the more I've thought about it over the years, I don't think he was... Mr. H. resold a land he bought at a 1000X mark up 7 years after he purchased it, when they decided to put a new mall after commercial rezoning. If he bought this parcel at back-tax value, say 5-15K, and the area grew exponentially during the duration, the land was rezoned to commercial, it's value would be outragious. The statistic boggles my mind to this day, but if it is an exageration, I doubt it was by much. (this example is the definition of rare, don't expect returns this!)
Take care
Loci

[Loci]

Thanks! The old man deserves the credit, though. I was just fortunate to have a little rub off over the years. Social work is rewarding, just not financially.

[GFunk911]

Matt,

I appreciate your taking the time to respond here, and I was hoping you could answer a question. I would spell out a scenario, but that would take too long, so I'll just ask this question.

Do you feel that real estate is a better investment than a hypothetical investment (let's call it the Mock Market) that return 10%, each year, every year?

Also, in addition, if anyone who finds them could post links to the referenced posts/threads here, I'd appreciate it. It can be tough to find thing in the archives.

[Matt Flynn]

pretty clear 10% is a bad return in real estate.

e.g., assume in 24 years you have paid off a 30-year loan by spending some of the excess cash flow. you bought the 100K house for 5K down with 5K in additional costs put in before positive cash flow overwhelmed expenses. 10K down. it rents for $750 in Raleigh. rents and property values go up 3% per year. by rule of 72 your house is now worth 200K and you are getting 1500/month in rent of which about 1100 is gross income after all expenses including insurance, roofs, etc.. you may take 100K out at will and still get 600/month in cash.

suppose instead you took that 10K (which remember in the house example you really put 5K up front and then 5 K over 3-4 years) and invested it in a 10% fund. by the rule of 72 you get around 3.3 doublings, which puts you right at 100K.

stocks give you 100K. house gives you 100K plus 600/month in perpetuity that will rise with inflation and once the house has been paid off again rise to 1100/month AND you get another 6K/year in capital gains, which also continues to index with inflation. assuming inflation is 3% (it may drop, but who knows), that's 7,200/year rent plus 3% (because your rents keep pace with inflation), plus 6% on the 100K or 16% beyond the 100K you already took out. so even doing it the worst way you not only get the same amount in cash but you earn an additional 16% in perpetuity. actually it works out to be more. plus your downside risk is lower. realistically you will pay it off in 22 years, which only enhances your earn. if you instead take positive cash flow out and buy other properties, then on that one house you are cleanly beating the 10%, plus you get the added income, plsu you have other houses that are over water and climbing to being free and clear and generating cash.

so, assuming rents and housing prices rise 3%/year (very fair compared to a 10% stock market), real estate crushes stock indices due to the leveraged purchase. if you buy with 1-2% down you really crush the market. even at 10% you win. keep in mind that you cannot convert stocks to an annuity that pays decently, whereas real estate gives you an annuity that pays well and is more reliable. plus annuities only work if the company selling them stays in business! if they go broke, you just lose it all. whereas if your house caves in or gets hit by a meteorite, you have insurance to replace it for you, and that insurance would only be with currently good companies.

the stock/bond/bank industry exists to separate you from you money. nothing I do, except for the hedge money we put in stocks and whole life, yields under 20% long term.

matt

[JoeC]

Matt, where are the good properties in NC? Outer Banks? Holden Beach/Wilmington area? Or just everywhere?

[Matt Flynn]

Don't ask me. I know the Triangle reasonably. That's about it.

However, NC oceanfront is grossly underpriced relative to NY/NJ and Florida. Wilmington and Wrightsville Beach will do well. Carolina and Kure Beaches too: they have more room to improve. Morehead City and Atlantic Beach good. Heck it's all good. I do not know what they will rent for though. Still it's just all so cheap.

Matt

[JoeC]

Thanks Matt... I'm currently just a poor college student but if I can get some capital together through poker I'll definitely jump on this. Appreciate the help.

[LuvDemNutz]

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assuming he uses good game selection, I would think that playing high stakes NL with his ability is a higher +EV option than real estate. and I dont think its very close.

not saying he should not do both, but if he had to choose, I would think poker would be a better choice.

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i dont really understand what you guys are talking about, you only need 100K to play the highest stake online game.

if he could beat this game for even $50/hr this would obviously surpass a 100K investment in real estate.

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isnt that what i just said? [img]/images/graemlins/confused.gif[/img]

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looking back, yeah it is, and why did everyone crawl up my ass and not yours?

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Because you're a penis.