If you had a $1 million USD

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John Schaub is one of my favorite real estate authors. The attached image is a page from his book "Building wealth one house at a time" The SFR business plan requires purchasing a $250,000 SFR every year into an emerging real estate market. I personally do not like investing in apartments, duplexes, and commerical in C & D neighborhoods.

For B) Real Estate : Income producing property I like to invest in B grade SFRs in "A" neighborhoods. 
 
Panda, I notice Schaub's book was published in 2006. I have not read the book, however... I can't help but sense his approach is overly ambitious when it comes to appreciation. How do you feel his advice is relevant in 2012?
 
SoCal78 said:
Panda, I notice Schaub's book was published in 2006. I have not read the book, however... I can't help but sense his approach is overly ambitious when it comes to appreciation. How do you feel his advice is relevant in 2012?
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Exactly plus I think Fannie/Freddie will only allow you to have a maximum of 5-6 loans.  Nowadays lenders want you to put down at least 25% for a rental property and you'll also end up paying an interest rate that is 3/8% to 1/2% higher than for a primary residence.
 
Is it me, but does that chart make zero sense mathematically?  How do you buy 1 $225,000 house in year 1 and it's worth $500k at the same time but 1 $450,000 priced home is worth $500,000 also? Perhaps it's late and my glasses need cleaning.

You can have up to 10 financed properties. After the 5th financed home, you pretty much have to have the credit profile of a Saint, the cash reserves equal to The Bernank, and income of a mega-millions lottery winner.  Banks don't like risk, even if Fannie/Freddie buy the loan, someones got to foreclose and pay the MBS investors when Wannabe made overnight Trumps stop making the house payment.
 
Soylent Green Is People said:
Is it me, but does that chart make zero sense mathematically?  How do you buy 1 $225,000 house in year 1 and it's worth $500k at the same time but 1 $450,000 priced home is worth $500,000 also? Perhaps it's late and my glasses need cleaning.

You can have up to 10 financed properties. After the 5th financed home, you pretty much have to have the credit profile of a Saint, the cash reserves equal to The Bernank, and income of a mega-millions lottery winner.  Banks don't like risk, even if Fannie/Freddie buy the loan, someones got to foreclose and pay the MBS investors when Wannabe made overnight Trumps stop making the house payment.
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That's why my next real estate investment will be a 5+ unit residential property or a commercial property where I can use commercial financing. 
 
Soylent Green Is People said:
Is it me, but does that chart make zero sense mathematically?  How do you buy 1 $225,000 house in year 1 and it's worth $500k at the same time but 1 $450,000 priced home is worth $500,000 also? Perhaps it's late and my glasses need cleaning.

You can have up to 10 financed properties. After the 5th financed home, you pretty much have to have the credit profile of a Saint, the cash reserves equal to The Bernank, and income of a mega-millions lottery winner.  Banks don't like risk, even if Fannie/Freddie buy the loan, someones got to foreclose and pay the MBS investors when Wannabe made overnight Trumps stop making the house payment.
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I guess he is assuming that the same investment home you are purchasing today for $225k in year will cost you $450k in year 10. This is just a guideline, as I would never purchase an investment property where I couldn't cash flow with 20 - 25% down and just speculate on appreciation. I think in order to take on the risk, one should atleast get 10% cash on cash return with 20% - 25% down.

SGIP, is it true that you can put down 20% up to four investment homes not including your primary, then you are required to put down 25% starting from your 5th investment home? How much will the banks require you to put down on investment home 6,7,8,9, & 10?

i assume you will need to start buying investment properties with cash once the banks stop loaning to you.
 
I've been told as of April this year, you no longer can waive escrows for investment properties.

USCTrojanCPA said:
SoCal78 said:
Panda, I notice Schaub's book was published in 2006. I have not read the book, however... I can't help but sense his approach is overly ambitious when it comes to appreciation. How do you feel his advice is relevant in 2012?
Click to expand...
Exactly plus I think Fannie/Freddie will only allow you to have a maximum of 5-6 loans.  Nowadays lenders want you to put down at least 25% for a rental property and you'll also end up paying an interest rate that is 3/8% to 1/2% higher than for a primary residence.
Click to expand...
 
So Cal, the rates are much lower today than 2006, but lending was very loose back then. He suggests to put down only 10% which is impossible today. I think his plan, assuming that the banks will finance your investments is more attractive in 2012 then 2006. When i reach the point where banks will no longer finance my investment properties I will have to start buying the rental properties with cash. One flaw i see with Schaub's 10 year investment plan is that mortgages rates will eventually rise and investment homes purchased in 2017 & 2018 will not be nearly as desirable or profitable to the investment homes purchased in 2011 - 2013. If I had my choice, I would prefer to purchase all my investment properties by 2015 and not buy any more from 2016 and onwards, but this also adds a lot of risk if you are not experienced investor.

SoCal, as far as speculating on appreciation, I think it all depends where you are investing. If you were to ask for my opinion, I am pretty certain that overvalued real estate like Irvine will not double in value in the next 10 years, but other submarkets across the country will.  You remember back in 2008, when no one thought that Gold would double in value in IHB expect maybe Awgee, but it more than doubled today. I think the sub real estate markets that will double in value in the next 10 years will be markets that no one would have imagined. These markets are below the radar.

SoCal78 said:
Panda, I notice Schaub's book was published in 2006. I have not read the book, however... I can't help but sense his approach is overly ambitious when it comes to appreciation. How do you feel his advice is relevant in 2012?
Click to expand...
 
A million dollars?  I would invest half of it in low-risk mutual funds, and then take the other half over to my friend Asadullah, who works in securities.
 
daedalus said:
A million dollars?  I would invest half of it in low-risk mutual funds, and then take the other half over to my friend Asadullah, who works in securities.
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Move your $1 million USD into Chinese renminbi and earn 4% interest per year in a Term Deposit(s) with principal assured for the term of the deposit. This is better than what is offered in the US. But the problem is how to convert this sum of US dollars into RMB which the banks in China will NOT allow you to do unless you buy a property or do some type of business transaction. Am I wrong on this? 
 
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