Had lunch today with a very experienced, savvy real estate professional today. He’s from Northern California, so knows much about cartoonishly high real estate prices. As we talked, he mentioned a client who’d bought a property, ‘a real mess’ for ‘just’ $750,000. I guess a starter home up his way is well north of seven figures. But the real eyeopener was his description of the fourplex he’d recently sold. About $1.3 Mil, or, to put it into cartoon prospective, 16 X the scheduled gross annual rents. And no, that’s not a misprint.
I’m workin’ on a post about that ‘investment’. Seriously, calling that an investment almost made me lose my lunch. If I was a standup comic, real estate investors going to NoCal with serious intent would provide me with endless material. They put almost 45% down so they could bathe in the monthly glory of a whole $500 in cash flow. They must feel proud. Sorry for the snarkiness, as I usually stop myself, but at some point sensible folk must draw the line in the sand.
I guess in NoCal, gettin’ a cash on cash return of .96% earns the investor braggin’ rights at the next neighborhood BBQ. Go figure. Don’t think it’s just those from the northern half of the state though. San Diegans are infamous for thinkin’ their real estate is blessed by the mythical real estate gods.
Max Whitmore’s advice last week
He called it, big time. A New York client told me following Max’s advice saved his 401k mucho dinero. Let’s hope Max gets the itch to write every now and again. We sure miss him here.
Chad Emerson comes through again — he’s so boringly predictable.
Had a couple clients receive a welcome email today from my favorite Texas lender, Chad Emerson. He let ‘em know their loan rate had floated down to below 5%! Never in all my two lifetimes in this business have I ever even dared to hope for an investment loan under 5% on a 30 year fixed term. The clients are jazzed, as am I. One of ‘em commented to me today that they’d never known a ‘banker’ to do business as Chad does. Said Chad was ‘The Man’. Preachin’ to the choir.
EIULs VS 401Ks and your retirement
Though I’ve easily written over 20,000 words on the topic, here and elsewhere, there are folks who might benefit from seeing here — and now.
Here’s the Reader’s Digest version. Just about everything that’s wrong or illusory about your 401k/IRA is what it should be, or real, with an EIUL. Here’s the best piece of empirical evidence I can offer while being exceedingly brief.
Those who had their money in 401Ks circa 2008, lost 35-50% of their hard earned retirement funds. Those who had EIULs in place? They suffered through a year in which they made 2% on their money. In other words, if you had $1 Mil in your ‘retirement’ plan in ’08 in the stock market, you lost $350-500,000. If you had it in an EIUL, you made $20,000. ‘Nuff said.
OK people, tomorrow’s almost here and I need a fix. Gimme a call at 619 889-7100 and we’ll put our heads together. Rather send me a note? Click on Contact BawldGuy up top. Have a good one.
Related posts:
About BawldGuy
Are you saying that these sub-5% thirty-year investment loans are the lowest rates you’ve EVER seen? I would also like to second that Chad is, in fact, “The Man.”
Hey Kyle — Let me put it into prospective, based on my career.
Starting at 18 years old in October of ’69 interest rates were roughly 8-9%. They remained at those levels, occasionally dropping down to the mid-high 7′s for short periods. They blew up to double digits at the end of ’79 and remained at that level through ’84. In fact, I believe it was ’80 or ’81 when FHA interest hit 16.5%.
The last transaction I closed in ’83 was a small apartment complex, seven units, with an adjustable rate loan beginning at 11.75%. My client was elated.
Sometime around the early 2000′s I saw my first rate in the high 6′s. Remember now, these rates, except the apartment loan mentioned above, were all owner occupied, conforming 80% home purchase loans — NOT investment loans, which are always .5-.8% higher.
Around ’02 or ’03 or so, my first ever sighting of an interest rate beginning with a 5 blew my mind. Didn’t think it was possible. Remember, it took well over three decades before I saw a rate starting with a number below 7! A certain Texas builder’s son, bought his primary residence with a 3.9% 30 year fixed rate loan. Even as I typed that sentence it felt fictional.
So, yeah, seeing a 30 year investment loan, fixed rate under 5% is beyond astounding to me. It’s almost analogous to learning unicorns really exist.
What would be your rationale for putting additional principal payments against a long term, low interest loan?
Wouldn’t it be smarter to keep that cash on hand and leverage into an additional property?
Jeff,
One of the many reasons I admire you is that you have figured out how to take part in the Texas boom without actually having to live here!
Well played.
Regards,
Shaun
Hey Shaun! You nailed it, big guy.
Good to hear from ya, Shaun.