Sorry it took me awhile to respond, thanks for all the comments Chelone I have lots of relatives who have a great retirement doing what you are doing. MIL struggled to put the kids through college on a teachers salary and now in retirement is rolling in it. Keep it up I have no problem mortgaging or not mortgaging my own house. Our real estate taxes are high, probably more than many mortgages, so even if you got rid of a mortgage you are still paying 1k a month in taxes. In the above example, I probably would do option 4, if I really had a 5% mortgage I would not pay it off and probably stick part of the money in a CD paying 5.5 or whatever rate I could get above 5! To pay it off really would be leaving money on the table if you could SAFELY get more than that. I agree that Universal life is seldom a good deal and I would only do that if I thought from an insurance point of view it was a better deal than term for some reason. Otherwise I think its just a scam. The problem I had with the post that started this, if you have a mortgage at 5% and now have some extra cash, great, do not park it in your house because you really can get more at the bank. However the advisor was suggesting pulling money out (does not matter REF or HELO) just so you have it in your hands instead of it sitting dead in your house. Thats a great idea but if I am borrowing at 6% and can only SAFELY invest at 5% who is going to pay the spread? Also what about the 10k in closing costs I paid to pull the equity out? Worse what if I do follow a hot stock tip that ends up not so hot?! People are tempted when they have acess to so much cash (I think I could manage but who knows). Dave claims its an issue of safety to have too much equity without owning it outright. The HELO that was suggested would actually be one way to safeguard the eequity. Do not tap it unless you really need it, the perfect storm scenrio that Dave mentioned where people cannot tap the equity and lost their house even though they have lots of equity Thanks for the compliment Celtic, I just could not figure out how to adress the shortfall in an owner occupied property. Ia lso agree with you about the rental increase issue, 6% annally is impossible, office leases around here have a 3% increase, sometimes less. CMarlin I love your examples and you have given me things to think about. My DH thinks I am the most risk averse person on the planet so I doubt we will be competing for property (especially from NY!). In running your numbers why even invest the 500k? If your debt service at 6.7% is about 116k and your income is 144k, even assuming taxes are 20k why tie up so much? Do the lenders require this? Is it to give yourself a perfect storm cushion? Why not put aside 100k in an interest bearing acount instead and maybe put down 100k so you can cover incidentals with the rental income? I have no idea how this works. What is an SFR? Also do you buy rentals locally? You mentioned you research the areas which assumes you go outisde of your local area, do you go out of state? Just curious. What about I have Two real estate stories I think about that stop me from following your lead, I guess if prices really do drop in a mini crash maybe I will rethink it. Although there are still lots of people like me who know a bunch of people who recently got rich on real estate so we wonder if we could do the same and I always wonder about things everybody is doing, someone has to lose money doing it. Not saying you CMarlin I actually think your plan is sound except for the 6% but I assume even at 1 or 3% you will still make money (although how does that play into local tax increase, here they have been increasing taxes up to 6% PER YEAR based on the rapid increas in value of these properties). How many apartments do you feel you need to own when starting out to truly spread the risk so to speak? Also of the 144k, what percentage is overhead unrelated to taxes and mortgage. What are those expenses? Here are the stories that stop me. In 1986 a wealthy physician I know (not well) decided to invest in real estate out of state in Boston. With the 1987 crasg the condo market went belly up and they could not sell these in the late 80s. He and several others were general partners. One of his relatives who got him into this ended up losing her law licsence over this! They tried to sue him and he almost lost everything outside of this (had a large home etc) fortunately most of his assets were in his wifes name anyway for liability reasons relating to his medical speciality, so they dropped the suit when they realized this. This same guy started trading stock on margin out of his retirement account in the late 90s, his account at one point was up to 42 million! Needless to say he is still working after that market crash and he is now near retirement age My father was approached by his accountant in 1975 who was running a tax shelter. He and his partners were buying a building near Lincoln Center in NYC. At the time the neighborhood was a bad and they paid 1m for a 40 story building plus garage (400 per car per month) and retail stores in the lobby (now a Chase Bank, a drugstore and a McDonalds). Dads share would have been 100k but back then he did not have it and even if he did, well I get my risk averse thing from him! For some reason I remember telling him to invest but who listens to a 12 year old and again they really did not have that kind of money to throw out with 3 kids. In 1987 (yes at the absolute height of the market) I bought a last remaining sponser apartment in, you guessed it, that building for more than double what 10% of a 200 unit building would have cost 12 years earlier! This was a fluke dad did not realize it until he saw the purchase contract. They ended up selling the apartments back to the tenants for 10m in 1985! They kept the master leases on the garage and the McDonalds so I am sure that funded someone's retirement. The irony is this was sold as a tax shelter, it was not supposed to even make money! Dad has no regrets (well other than that 4th child they never had!LOL) he says that for every successful deal he was offered, there were 20 that failed and he would have lost his investment I know this is way too much information but its what makes me leary about real estate as an investment. I actually just want a bigger house for me and my household, I do not care if its paid off or not as long as I am not awake nights worrying about how I can pay the mortgage. Still trying to figure out how to get there Its funny I flip flop on the do it yourself investing. I hate being told what to do and need to understand it before I can commit. I also hate mutual funds as a general rule excpet for the ones that are based on indexes. I sort of get frustrated with magazines like money that seem to try to make everyone feel like they need to be in mutual funds and not just one, but a portfolio of them,. Are they secretly owned by a constortium of mutual fund. Also I wonder what an investment advisor can tell me? Its like my theory on stock brokers, if they were so great at picking stocks why would they need me to make money. No offense intended to any investment advisors. I do think an individual investor can beat the market average (or not!) even if they do not have access tp all the inside information because they have flexibility that a mutual fund running 1B does not. Then there are days when I look at my house which is basically decorated but the reality is that it lacks the fine tuning a decorator could give it but I hate the idea of living with something someone else has chosen for me(I tend to return gifts too). Its sort of like that with investing, I am not comfortable with the loss of control but I do not have the time and energy to follow this all the time

$171K would reimburse their purchase price and pay the commission. BUT -- maybe they overpaid; maybe yours is a buyers market; maybe their company will pick up some part of their costs. (Never mind that they paid real estate taxes, etc.; they were LIVING there! It's like "rent".) Fair market price may be $175K, but maybe it will sell for less. If you are in a buyers market, and YOU have to sell in another year, what might YOU get for it? I'd offer $165K and start negotiating. You can always go up, but you can't easily go down. You will want a time constraint in the contract offer and a building inspection clause. The house will need to appraise for the price for mortgage approval. I'd bet they would be happy to get their original price back, and that their company will pay the RE commission. If they don't like your offer, they can counter. Don't tell anyone what your top offer would be but know it yourself. ($175K? Less?)

This is one of those deals where the seller (investor) is obviously so far out of his depth that he is tragically exposed and you are probably somewhat insulated from problems. The appraisal clause alone will somewhat insulate you from problems while exposing him to massive losses or price reductions. A real estate attorney will enjoy making this deal work in your favor. However, I would walk away from the deal, the whole things seems a house of cards to me, and until he has actually completed projects and closed on houses, this whole thing could come crashing down around him. It is entirely possible that these houses are not going to appraise, and he simply may not be able to absorb those losses. Then you have mechanic's liens and all that jazz to deal with if you go through with the purchase.

To be honest, I hadn't realized you said the word employee when you wrote "Can a builder finish an employee's home before yours when your home purchase agreement was put in before said employee?" I even quoted it and hadn't realized you said employee. I was just thinking about a builder finishing another buyer's home first. But now, realizing that you were talking about an employee, my answer is an even more emphatic "yes." Especially if that employee works in a sales capacity for the builder - even at a different development - the builder is going to want a happy employee, because then the employee will be more likely to say wonderful things about the builder to prospective buyers. Different jobs/occupations have different "perks." If you work for a dermatologist, you get skin care products and lip fillers at a greatly reduced price. If you work for a CPA you may get your tax returns done for free (although you may have to request an extension to file because the paying customers might get theirs done first). If you work for a car dealership, you can buy a new car at a good discount, etc. And I totally agree with you that it is better, easier, and less expensive for the builder to take care of the missing gas line now, during construction, rather than waiting until after the build is finished. We went through a somewhat similar-but-different hassle with the builder of our home. I would stop by the site every Friday on my way home from work, and I would take photos of the progress. And, when I would find things that had been done incorrectly, I would bring it to the attention of the construction foreman and insist that they fix it. The one item I was really adamant about was the height of the shower head in the master bathroom shower. My husband and I are not what anyone would consider tall -- he's 5' 10" and I was 5' 7" at that time (I've shrunk since then and am now 5' 5½"). But, after the plumbing crew had done their part and I came by for my weekly inspection, I thought the placement of the pipe stub for the shower head was too low. So, I got out my trusty tape measure and measured the distance from the floor to the pipe. Then I went into the model and measured. Sure enough, there was a large difference. I don't recall now what the difference was, but it was significant, and even I wouldn't have been able to comfortably wash my hair. I insisted that the builder had to have the plumbers re-do that pipe and I, like you, used the argument that it would be a whole lot easier for them to do it then, before the sheetrock and marble were installed than for them to have to remove it and then order a new slab of marble. And, yes, a plumber has to be pulled off the work crew at another homesite to go back to yours to run a new gas line, and that has to be coordinated with the bricklayers, etc., etc. So, pour yourself a glass of your favorite beverage, kick back, and relax. You'll have a wonderful home at the end of this adventure.