I know I'm going to catch hell, but I think I did right?

[MikeSTI]

I want to put this here because I do care about my friends and I would never want them to go through a bad deal. Again I only want people that might be thinking about homes and mortgages to show intrest being I feel this business is a tricky one. Maybe I should add this to the topics I'm not allowed to talk about at any cost.


starts here and I guess I made him anwser too many question's in one day that he had no time to tell the board ( I guess some things just need to be a PM?)
http://www.i-club.com/forums/showthread.php?t=88819

It ends up here for whatever reason as I thought I was helping my local friends but now I'm challenged to take on the whole community (if anyone scrolls down there )
http://www.i-club.com/forums/showthread.php?t=88874

am I that out of place? If I am please tell me

[khail19]

From what I scanned over briefly, you seem to be giving good advice. I know for a fact that plenty of people rent out homes and condos for more than the mortgage payment. For example, the payment on my condo is around $550, plus $150 association fee. So figure I'm at $700 + utilities a month. A lot of the condos in my complex are rentals, and they usually go for $900 up to $1200 a month. A lot of people are too afraid/lazy/unmotivated to try and buy a place, and it costs them. A lot of people also have terrible credit and would get a high interest rate if they were buying. So there's plenty of reasons why renters pay more than they need to.

[qksubi]

Duplex are were it is in this town just that the price of them is so dam expesive my CO-workers at work are using them for tax selters I here it works real well!!

[dknv]

Hey Mike,
I think your intent was right, it's just when the words get personal that the message loses its strength.

That said, I agree with you, I don't see any good reason to be paying on an interest-only loan -- though I would be open to looking at the numbers on paper, if someone who was a proven financial advisor would show me how it could make good sense. Also -- I see no problem with charging market value for a rental, even if that is higher than the mortgage payment. I mean, if you add in property taxes, insurance, depreciation on appliances, repairs, upkeep, and the additional time it personally takes to be a landlord & take care of all the paperwork, that is justified in and of itself.

Anyway --- financial planning is something that is different for each individual. Paying off a car loan more quickly is not necessarily the best thing to do, if that loan has a 1.9% interest rate, and you are able to invest the amount you would have spent paying off the loan faster, in something that earns a even higher rate - like a 401k. Where I work, our company used to match our 401k contributions 100% on up to 6% pre-tax, so the way I looked at it, my 6% contribution netted me a 100% return on my money. Not Bad for an investment! (Company has since dropped the match to 50%.)

[MikeSTI]

I-Club Sucks!!!!!!! They locked the thread again!!!! what a bunch of sore losers. Oh well I guess. Hey wait does this mean I win

[BOO]

[quote="MikeSTI"]I-Club Sucks!!!!!!!
what a bunch of sore losers.

Hmm Does this mean that I cant buy a Hoodie any more ???

[MikeSTI]

SRIC might still be ok

I dont think I am making many new friends there thou

[BOO]

Originally Posted by MikeSTI

SRIC might still be ok

I dont think I am making many new friends there thou

Poor Mike... its ok though Atleast you can Honestly say.. YOU have better SECCS here with us ...
wait.. that didnt sound right.. lol

[doubleurx]

Originally Posted by MikeSTI

I-Club Sucks!!!!!!! They locked the thread again!!!! what a bunch of sore losers. Oh well I guess. Hey wait does this mean I win

Mike, I read that and wanted to leave a smart a$$ remark, but it was locked!

[doubleurx]

Originally Posted by dknv

Hey Mike,
I think your intent was right, it's just when the words get personal that the message loses its strength.

That said, I agree with you, I don't see any good reason to be paying on an interest-only loan -- though I would be open to looking at the numbers on paper, if someone who was a proven financial advisor would show me how it could make good sense. Also -- I see no problem with charging market value for a rental, even if that is higher than the mortgage payment. I mean, if you add in property taxes, insurance, depreciation on appliances, repairs, upkeep, and the additional time it personally takes to be a landlord & take care of all the paperwork, that is justified in and of itself.

Anyway --- financial planning is something that is different for each individual. Paying off a car loan more quickly is not necessarily the best thing to do, if that loan has a 1.9% interest rate, and you are able to invest the amount you would have spent paying off the loan faster, in something that earns a even higher rate - like a 401k. Where I work, our company used to match our 401k contributions 100% on up to 6% pre-tax, so the way I looked at it, my 6% contribution netted me a 100% return on my money. Not Bad for an investment! (Company has since dropped the match to 50%.)

Most equity lines allow an interest only payment. I have this and love it. It allows a ton of flexibilty which is necessary when modding your car!. Seriously though it allows you to pay as much or as little as you can while maintaining a low tax deductable interest rate.

[MikeSTI]

Originally Posted by doubleurx

Mike, I read that and wanted to leave a smart a$$ remark, but it was locked!

when they first moved it I thought it would get good or bad for me because I thought that being there more poeple would responed, all my fear was for nothing!!! The sad thing is I was giving sound advice and no one wanted to listen

I dont know what it is that inspired me to right such a long post maybe the fact that I know how debt can eat a person whole..............I do beleive it was one of my best informative posts to date, and it got closed because someone couldn't take the heat? I can still prove to anyone that wants to know that investing with you own money is far better then investing with other people's money.

[doubleurx]

Originally Posted by MikeSTI

when they first moved it I thought it would get good or bad for me because I thought that being there more poeple would responed, all my fear was for nothing!!! The sad thing is I was giving sound advice and no one wanted to listen

I dont know what it is that inspired me to right such a long post maybe the fact that I know how debt can eat a person whole..............I do beleive it was one of my best informative posts to date, and it got closed because someone couldn't take the heat? I can still prove to anyone that wants to know that investing with you own money is far better then investing with other people's money.

[doubleurx]

[quote="MikeSTI I can still prove to anyone that wants to know that investing with you own money is far better then investing with other people's money.[/quote]

That should be followed by a "duh" emoticon.

[miahmarie]

We should all have financial advisors. I agree Debbie that we should be willing to look at the numbers if they make good sense. However our advisor says that interest only loans are for people who do not plan to live in their homes for more than 5-10 years depending on their incomes. When this was so hot back in June of last year I talked to him about this. He said it wasn't for us. Illustration:

Suppose you borrow $500,000 from Wells Fargo and you have three loan options: a 30-year fixed-rate loan at 6 percent; a traditional 30-year amortizing ARM with a rate that is fixed at 4.75 percent for five years, then adjusts annually; or the same ARM that for the first five years is interest only.

With the fixed-rate loan, your payments will be $2,998 per month for the Life of the loan.

With the amortizing ARM, your payments will be $2,609 per month for the first five years.

With the interest-only ARM, your payments are only $1,980 per month for the first five years. That's $629 per month or 24 percent less than the traditional ARM.

Now let's see what happens after five years.

First, suppose interest rates have gone up a bit and the ARM rate floats up to 6 percent.

In year six, the monthly payment on the traditional amortizing ARM rises to $2,948. (That's 6 percent on your remaining balance of $457,491, amortized over 25 years.)

On the interest-only loan, your payment is now $3,222. (That's 6 percent of your remaining $500,000 balance, amortized over 25 years.)

The fixed rate is still the same. $2998

Now suppose after five years, the interest rate on the ARM has leaped to 8 percent.

On the traditional amortizing loan, your monthly payment is now $3,531.

On the interest-only loan, the payment has leaped to $3,859 - double your initial payment. And $869 more than the fixed rate life of the loan mortgage.

That means your income would also have to double if you want to keep your monthly payment at the same percentage of your monthly income as it was.

Now I also agree with charging market value on rental property. We own land in California which we lease to several companies. This investment has already paid for itself and we net $40,000 a year after paying all our expenses on the land and we only own 10% of it.

Personal belief-I am all for rental property, but choose to own them rather than borrow from someone else who I have to pay my profits to. I think investing in general is an excellent idea (however most people don't save, and don't have an emergency account should they lose their job). My kids have 529 plans, family has life insurance, we have retirement. We are 28 years old and by 35 Michael can retire without ever having to work again and put his kids through college 4 years later. An we have an emergency fund!

Talking about money is bound to offend people. We hardly ever talk about it. The thread of discussion wasn't talking about trying to pay off debt but instead how someone could maximize their taxes. Then someone else assumed this meant the person was in $$$$ trouble. That is just sad.

For me DEBT is a Dumb Excuse for Buying Things. I NEVER use a credit card. Personal choice. I live well below our means. Mike is a little spend thrifty but still we are living well below our means. Paying off our mortgage in 7 years, along with monthly bills and Mike's car habit we still have $13,000 in the bank at the end of the year. Some is invested, some we use to take vacations and my indulgence: STARBUCKS!!!!

I have no problems with auto loans. and I am for 401k's with matching. I mean if we can get someone else to contribute to our financial future jump on it--FREE MONEY!!!! I agree with Debbie, I agree with Mike too (for obvious reasons). I don't care how anyone spends their money. I would like to see the people we care about have their dreams paid for so that there will be peace in their later days. But at the same time we could all die tomorrow and none of this would have mattered!

[doubleurx]

[quote="miahmarie"]
amortized over 25 years.)



We are 28 years old and by 35 Michael can retire without ever having to work again and put his kids through college 4 years later. An we have an emergency fund!

Paying off our mortgage in 7 years, along with monthly bills and Mike's car

Finally the brains behind the Harris operation speaks!

Great post miahmarie! You've got it right on!

[BOO]

lol Hey!! Give Mike some credit.. WAIT.. What are you good at Mike???.. lol just kidding man ...

[doubleurx]

Originally Posted by BOO

lol Hey!! Give Mike some credit.. WAIT.. What are you good at Mike???.. lol just kidding man ...

Ok Ok...........Mike did marry her.

[dknv]

Originally Posted by miahmarie

For me DEBT is a Dumb Excuse for Buying Things. I NEVER use a credit card. Personal choice.

SMART! Great job on the financial position you guys are in!

I hate credit card debt -- plus, I'm paranoid of the electronic paper trail ala 'Enemy of the State'.

[AtomicLabMonkey]

Originally Posted by miahmarie

With the fixed-rate loan, your payments will be $2,998 per month for the Life of the loan.
...
On the interest-only loan, the payment has leaped to $3,859 - double your initial payment. And $869 more than the fixed rate life of the loan mortgage.

:shock: :shock: Who the hell can afford to make monthly payments like that?

[Nick Koan]

Bleh, I didn't start using Credit Cards until recently, and I wish I didn't start. Before, I just would use them, then pay off in full each month. Since I was unemployed for a little bit, I reluctantly used them, and crawled into a little bit of debt.

Hopefully I can fix that debt in the near future.

[MikeSTI]

Originally Posted by doubleurx

Ok Ok...........Mike did marry her.

hey now I didn't want anything to do with an Interst Only Loan and thats why my wife went to the finace planner in the first place. I already knew it wasnt for us

[dknv]

Originally Posted by AtomicLabMonkey

:shock: :shock: Who the hell can afford to make monthly payments like that?

The person who can afford a $500,000 home. :? That might be me, if I could only find someone else to put down $450,000

[BOO]

Originally Posted by dknv

The person who can afford a $500,000 home. :? That might be me, if I could only find someone else to put down $450,000

Cute!! :wink:

[MikeK]

Interest only loans have their place. An interest only loan allows you to either use less deposit or buy more property for the same repayment. If you have found a property where the rent will not quite cover the repayments, switching to an interest only loan might allow you to hold the property without costing you a cent each month.

Assuming the property value goes up over time, which is usually does in a built up area if you hold the property for a long enough time period, you can sell the property at the end of the loan term, pay off the loan and pocket the rest.

The only downside to an interest only loan is that the property might go down in value, which is why you have to plan on holding the property for the longer term. Most interest only loans also allow you to make extra payments to reduce the principle, so you can have all the benefits of a normal principle and interest loan with the option of lower repayments.

I wouldn't use an interest only loan for a house I was living in, but I wouldn't hesitate to use one for a rental property if it meant the property wasn't going to cost me money every month. This could mean that you could hold 2 rental properties instead of 1, and after 5 or 10 years, the increase in equity from holding 2 properties will always be more than the increase in equity from only holding one property and trying to pay down the loan. Say the properties are each worth $200k, and property prices double every 8-10 years on average. By holding 2 properties your equity goes up by $400k and it didn't cost you a cent after the initial purchase price. By holding 1 property your equity goes up by $200k plus any extra payments you make, and it cost you those extra payments.

Of course, if you can find a rental property where the rent covers the repayments for a normal principle and interest loan then you get the best of both worlds, but I know a LOT of people who have made serious money using interest only real estate loans.

I'm not saying they work in every circumstance, but I don't think all the facts are being considered here.

Summary: Comparing an interest only loan to a normal loan to buy a property, the normal loan will be the better choice most of the time. But if the reduced repayments of the interest only loan allows you to hold more properties than the normal loan, then the increase in equity as the properties go up in value can make the interest only loan(s) the better choice.

Disclaimer: I haven't read the original i-club thread so this post may have nothing to do with this conversation

[dknv]

I think the whole property investment concept has so many dependencies, and add on top of that, how much risk you are willing to take and how much stress you are willing to put up with.

Interest rates can go up, but have also gone down historically. Depending on where your property is, property values can also go down instead of up. (I think there are still places in CA where the property values are still declining, compared to 5 years ago.) Then, you have the possibility that there is no one to rent your property - therefore, you have to be able to absorb the loss for some period of time. Figuring it all out, for my statistically-challenged brain, would require too much time and too high a level of uncertainty.

For me personally I just hate the idea of being beholden (in debt) to someone else. But I think there are some people who have enough knowledge, energy, and the right timing, to be very successful with this. 5 years ago, my real estate agent in Carson City had 2 properties, his home & a condo. Now he has 4 properties.