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Jeff

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Reply with quote  #1 

A very small fraction of you will be interested in this…mostly long-time members…

In 1993, I went from renting a nice 2 bedroom one bath from UCSD student housing to purchasing a rundown 3/2 in Claremont…coming to closing with my entire life savings--$9,600.  Nine years later I sold that house and put the gains into a new house, with an equity position of around 135k.  At that time, I only wished I had somehow bought 10 houses (which I vowed to do if I ever got the chance).

In 2005, I had about 100k in my retirement account, and was surprised to find that I also had (though no fault of my own) a bunch of equity in my personal residence.  I felt flush with money, and in a fit of optimism, or mania, I decided to take out a loan against that equity and fulfill my dream.  I bought 14 houses in various states around the country—all with 100% borrowed money.  Let me repeat that, I used NO money of my own…only borrowed money.  I joined SDCIA with the tagline “The first million is the hardest...”  Little did I know how true that tagline would become.

Looking back my choice was crazy of course, and I have suffered greatly for my insanity.  The negative consequences of my risk-taking behavior I have talked about elsewhere…but they include three short sales (when a builder refused to build for 2 years, I sued them and somehow lost), damage to my credit, huge financial problems that resulted in a brush with bankruptcy, the need to empty out one retirement account to make my mortgages, etc.  The financial struggles were significant and lasted for roughly a decade.

But that is not the end of the story.  Starting about 3-4 years ago, I was able to re-finance most of my houses using HARP (which works even if your house is under water, as some of mine were).  This changed the rates on most of my houses from around 7% to around 4%--and of course significantly reduced my monthly nut, which was now over 20k less than it was.  I was also able to refi my personal residence despite my less than perfect credit (thank you Thom MacFarlane) which saved another roughly 20k a year.  Then I found a credit union in SLC that would refinance to 90% LTV on two of my houses there, and was able to pull out 150k.  Now I don’t have to struggle each month, putting my mortgages on my credit card or worse.  And something else happened.  My houses, instead of losing value each year, began to actually gain in value (well, some of them anyway).  For the last two years running, my houses as a whole have appreciated an average of 150k a year.  My LTV, which used to be 100% or higher, is now down to 70% (thanks, largely, to the incremental, slow-but-steady power of principal paydown).  For the first time in 12 years, I sometimes wake up feeling like I am not a complete failure as an investor.  I just wanted to share that with someone…preferably someone who knew the story from the beginning.  

That meant that I had to post here.

 

Oh, and since my equity position in my houses (not including my primary residence) added to my retirement account just hit 1 million dollars, I will have to change my tagline…                

 


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Please God, make the second million easier...
rickencin

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Reply with quote  #2 

Nice updated tagline!

I remember your posts well.  It was hard not to be optimistic when everything was coming up roses!  So you had 14 houses 100% financed in 2008.  Yikes!!!  I'm glad you managed to come out of the ordeal with some nice equity.  I'm always going on about CAP and ROI but if your CAP is enough above your mortgage rate, you can cash flow with 100% financed rentals.  Not that that is likely to happen in San Diego.  You may not be able to predict the highs and lows of the real estate market, but it is hard to argue that they don't exist.  What's that old saying "Buy Low, Sell High"?

 


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Rick
brycewheeler

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Reply with quote  #3 
It gladens my heart to see that your struggles are rewarded for sticking in there, so far at least.  Congratulations!!!

Bryce
Suzanne

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Reply with quote  #4 
Nice to hear this Jeff.  I remember your posts.  We all found ways to survive and thrive from those days!
Nyou

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Reply with quote  #5 
Remember you Jeff. Very smart guy!!
You located very good spots for those houses.
Now Your struggles are rewarded. Congratulations!!!
SeanHillier

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Reply with quote  #6 
Great post Jeff! I love hearing how investors snatched victory from the jaws of defeat. At first, I too struggled to carry my first few rental houses, but now they are all cash-flowing nicely. As a broker (and out-of-state investor) who specializes in finding profitable properties for my clients in San Diego County, my hat is off to you.
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Sean Hillier
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CA BRE broker lic. #01872754
We find profitable investment properties
EastCountyHomeSolutions@cox.net
Greg

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Reply with quote  #7 
Jeff,

Your posts were famous. Some went "viral" before they even used that term. You disappeared for a long while and that was concerning. 

I'm very glad to hear you survived.

Greg
javipa

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Reply with quote  #8 
Few have the determination to plow through circumstances like that.  You're the man.

I trust your second million comes faster and easier.

One thing you've illustrated well is that taking action trumps everything. 

You could have sat back and done nothing, been safe, saved yourself a LOT of grief, and then risked being part of the six in ten Americans who can't handle a $600 emergency.

Instead you acted, faced a giant wall, remained committed and determined, and finally came out on top, with more equity than 98% of Americans (if my math is right).  There are approximately 9 million millionaires in the United states, with a population of three hundred and thirty million people, which put you in the .02% class.

Great going and congratulations your success!
[thumb]

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Jeff

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Reply with quote  #9 
Thanks for the kind words everyone...
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Please God, make the second million easier...
Homeloanwisdom

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Reply with quote  #10 
Jeff - Thanks for accolade on your home loan.

Congrats on that first "hard" million milestone. That second million will be a lot easier with loans amortized at lower rates and  continued, if only moderate,  appreciation. 

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Thom MacFarlane
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thom@sibloans.com 858-485-0462
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