Tuesday, August 18, 2009

Someone Has Questions - Part III

FC said - I just read your entire blog backwards ... in sequence from newest to oldest. I would love to hear more about your background as far as being able to attain such a high net worth ... it seems like you both earn a relatively high income from your jobs/careers but also what else goes into it. I'm hoping that you can provide advice on landlording ... including how long you've owned the properties, how far apart you bought them, how did financing investment properties differ from financing primary home, what were some positive things that you've done versus some things that you would have done differently now that you are wiser, is it ever overwhelming having so much mortgage debt as a liability, how is the actual cash flow now versus a year or two ago versus what you initially planned/expected?

Wrapping this up -

The negatives of investing in real estate. Yes our cash flow is down a bit from last year but the real problem is that the value of our properties is down significantly. We hope to sell these properties to fund the construction of our vacation/retirement home. While we had planned to hold these properties for a longer period of time than the typical "flipper," we had plans, which are now on hold, to sell at a certain point.

What would I have done differently - I would have sold Rental #1 in 2007 and we would have made a super profit. I would not have bought Rental #3 in 2005. Basically, I would have been scared when others were greedy and as such, during the run up of real estate values in South Florida, I would have sold when everyone was buying (Rental #1) and I certainly would not have bought when everyone was buying (Rental #3). Of course hind-sight is 20/20 and if we had sold Rental #1 in 2007 we would have likely plowed that profit into another real estate investment.

Is it overwhelming having so much mortgage debt - sometimes. The real estate debt was more overwhelming when we were also carrying $50,000+ in other non-secured debt. But, on the other hand, when our property values were higher the real estate debt felt better on a psychological level.

Most of the time, I believe the positive of investing in real estate outweigh the negatives. As far as I know, real estate is the only investment in which someone else pays the monthly costs. The other positive for us relate to taxes and the tax benefits we receive from our real estate investments (although I am not one to invest in something to get a tax benefit, but I do appreciate the perk).

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