Wanna know my worst story

investing real estate?

In late 1987.  It was time to have my own place after sharing an apartment with roommates for four years.  I had been  used to splitting cheap rent of $660 with other two roommates. The market rent $550 for one bedroom sounded quite jump.  But I was working a lots of over time and I could afford it.  Talking about overtime, I was shocked when I received first pay check after worked almost double hours.  I didn't know much about income tax, but I knew I got to do something about it.  One day, I noticed a mortgage company's full page ad in the LA times showing comparison of renting and owing.  Mortgage payment of $825 a month would would get you around $275 a month extra tax return.   It means the same as renting for $550 a month.   So, I went ahead pursue buying a condo instead of renting.   I bought one of two cheapest condos for $75,000 that I could qualified for a loan with 20% down.   It wasn't in nice area plus  a real fixer, I head that a half blind elderly woman lived there alone passed away.   The carpet around the toilet was soaked with urine and never been dried up even after escrow close.   After moved in, I started to painting, get flooring installed.  Luckily I caught up the last part of 80's real estate boom.  The condo appreciated 180% in two and half years.   By then, I really got the benefit of owing real estate and become obsessed to find a way to own a house.   I was crunching  numbers, read books every night to figure a way to buy a house.   I concentrated improve my work skills and got new job with 80% salary increase.   I finally got to the level I could be qualified for low $200K's house.  I refinanced to squeeze out down payment, borrowed shortage from my parents.  By then I was educated enough.   I bought 2BR house in nicer area instead of 3BR house because Real Estate is LOCATION, LOCATION, LOCATION.    By experiencing the quick appreciation of the condo value, my greed kept me away from selling it.   Plus learning income tax advantages, there was absolutely no reason to the the condo.   So, I rent it out.   My condo kept appreciated.   End of that year, I found out that I would have around $10,000 in tax return due to new mortgage payment and the condo rental.   I was excited, I started to seek for opportunity reinvesting the money.   At this point, I know bank is not the place to keep that money.   Out of state real estate deal didn't go through as I expected, but fortunately I saw "$10K move you in" ad by local Real Estate Broker 

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Sacrifice Now,

and Happily there after...

Let's say you are first time buyer just got married no kids yet and not planned to have one at least next few years till your wife finish advance education to get better job.   So, you don't have a lot of money for mortgage payment.

See below comparison if you bought a small condo for $300,000 or a fourplex for $500,000.   Both deals are 100% financing and seller pays closing cost, so no out pocket deal for you.

Of course, you will choose the condo, right?  But wait..  In 4-plex, you you live in one and you rent out other three for $500 each.  So your actual monthly out of pocket will be $1,723!  

Well, living in the fourplex may not be good experience as living in condo.  You have to deal with tenants, repairs and etc.  But see figure below shows 3year later. Both property appreciated 10% year.

Now, you wife finished her master degree, you can afford higher mortgage payments. Bought a house getting ready for babies.    You decided to keep the condo or 4-plex since rent income went up to $700 a unit.   There will be $425 shortage after mortgage and expenses are paid.