# Finance



## Jaws (Dec 20, 2010)

griz said:


> what ur asking is pretty much akin to "hey i got this mole what should i do?"....
> 
> Go ask a pro, your accountant.
> 
> ...


:laughing:

I talk to our CPA, that's why I bought my pick up last December :whistling not really looking for advice as much as gathering info. This place is like throwing a conversation topic around at happy hour, 100 responses coming from 100 directions 

Just like furniture or beds or tools vacation spots I like this place for a good conversation. 

I can see the value to both sides. I go back and forth. Rarely finance anything but my truck being financed doesn't really bother me as I put 50k miles a year on it and change them out regular. Other stuff not so much.

I like the cash in the bank for the most part. If something bad goes down or an opportunity arises I want to have the funds to cover my ass or take advantage of the opportunity.


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## Jaws (Dec 20, 2010)

Joasis said:


> Sounds like you are fixing to bust a move.
> 
> My accountant told me to rent everything and it is 100% deductible. I own everything and depreciate. I have been buying a new truck every year now and looking at the payment as an expense. Works.


Nah I do mine in December, I bought a new rig on the last day of the year. I do the same as you pretty much but not every year. Just checking out the other thoughts on the subject


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## hdavis (Feb 14, 2012)

New or used (I prefer used), pay cash. Same with tools.

A loan is an added risk.


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## hdavis (Feb 14, 2012)

BTW, I doubt you'll ever see an accountant incorporate risk in their calculations. They aren't qualified to do it.


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## Golden view (Feb 16, 2012)

I like it when people owe me money, instead of the other way around. 

If I get hurt, have some life-changing event, get lazy, WWIII breaks out, or whatever, I won't have all these payments dragging me down, and I'll have money coming in for a while from various contracts.

This is small thinking though. Wealthier people, bigger businesses finance big to expand fast. Is that what you want to do?


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## FrankSmith (Feb 21, 2013)

I used to pay cash for everything. As my credit has increased borrowing money makes more and more sense. 

I bought a Transit earlier this year. I put nothing down. I look at it that I can use the cash I would have paid for the vehicle as a down payment on a rental property. The rental property will pay the van payment but the payment will go away after a few years and the rental will still be generating that money and being paid for. 

In other words money is cheap right now. It's not hard to use your cash to make enough money that the interest on the loan is not a problem.


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## Jaws (Dec 20, 2010)

Golden view said:


> I like it when people owe me money, instead of the other way around.
> 
> If I get hurt, have some life-changing event, get lazy, WWIII breaks out, or whatever, I won't have all these payments dragging me down, and I'll have money coming in for a while from various contracts.
> 
> This is small thinking though. Wealthier people, bigger businesses finance big to expand fast. Is that what you want to do?


Always a good question. Figuring that out this year. Risk aversion including debt is part of that. 

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## hdavis (Feb 14, 2012)

FrankSmith said:


> I bought a Transit earlier this year. I put nothing down. I look at it that I can use the cash I would have paid for the vehicle as a down payment on a rental property. The rental property will pay the van payment but the payment will go away after a few years and the rental will still be generating that money and being paid for.


Did you buy the rental?


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## FrankSmith (Feb 21, 2013)

hdavis said:


> Did you buy the rental?


I bought one last fall that I am about done fixing. Once that one is rented I will begin looking for the next one. I am always at it and try to keep the cash available to pursue it. I actually enjoy it more than I enjoy construction for customers and hope to spend a larger percent of my time on it in the coming decades.


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## Calidecks (Nov 19, 2011)

In this industry especially. I'll bet there's no one on this forum that can tell me what their income will be in two years let alone 5. You can guesstimate but not have a solid number.

I feel an added element of control when I'm not owing money. It's not always what makes the most money wins. There's a lot of variables I take into consideration.

All it would take is one good fall from a balcony and my life could change forever. I like being mostly debt free.


_______________________
"Hindsight Specialist"
_________


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## KAP (Feb 19, 2011)

Different businesses have different rationale for leasing/buying new/used...

If you choose to finance, whether new or used, in most cases, it's because you don't have the funds to do the outright purchase. Just realize these companies have thought about it from every angle and there is no scenario where they don't make out including 0% financing...

What matters most is realizing that financing is like having an employee you can't let go no matter whether it's performing or not, you have business or not, or you get injured and can't generate revenue to cover the payments... you can certainly get insurance to cover those scenarios, but it's just another employee added to the list that you can't let go should the situation dictate...

But you get to depreciate the asset no matter what, so the idea that you get to write off the finance charge is not a good business reason to finance in most cases, as you're simply only getting a percentage of that money back based on your tax rate...


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## Jaws (Dec 20, 2010)

I feel that's pretty incorrect as far as funds not being available being the reason people finance. I have clients who have planes who finance cars. :laughing:

One in particular told me when I was 19 basically what Inner said about investment income vs interest. I was building a boat dock on his second home. :whistling

I do see the reason folks don't want payments though, and am interested in the responses in the thread including yours. 

I like having cash available, as much as possible. If I had a ton of cash I can see the point of buying cash and having the cash, but I ain't there yet :laughing:


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## KAP (Feb 19, 2011)

FrankSmith said:


> I bought one last fall that I am about done fixing. Once that one is rented I will begin looking for the next one. I am always at it and try to keep the cash available to pursue it. I actually enjoy it more than I enjoy construction for customers and hope to spend a larger percent of my time on it in the coming decades.


Interestingly enough, this dovetails into the discussion nicely... your CAP Rate increases dramatically on a rental when you have as little debt as possible (preferably no mortgage)... the more debt/serviceable items, the LESS you will make each year... setting aside the income to fund future projects and/or repairs is a much better use than making truck payments...

If you're looking at this as a long-term strategy, look into a formula of flip/flip/cash purchase for the rental (how many you need to flip to get to the cash purchase will vary from area to area)... in doing this you will ALWAYS be at a double digit CAP Rate while your asset continues to appreciate even if your occupancy rate is only75% out of the year... after the first two-three rounds you will easily be able to set up a LOC to deal with emergency expenditures for your rentals...

But this works as it is usually a long-term appreciable asset or NET income producer (as opposed to a vehicle which is not) as you're also taking the depreciation and you don't pay capital gains until you take the money out...


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## Jaws (Dec 20, 2010)

KAP said:


> Interestingly enough, this dovetails into the discussion nicely... your CAP Rate increases dramatically on a rental when you have as little debt as possible (preferably no mortgage)... the more debt/serviceable items, the LESS you will make each year... setting aside the income to fund future projects and/or repairs is a much better use than making truck payments...
> 
> If you're looking at this as a long-term strategy, look into a formula of flip/flip/cash purchase for the rental (how many you need to flip to get to the cash purchase will vary from area to area)... in doing this you will ALWAYS be at a double digit CAP Rate while your asset continues to appreciate even if your occupancy rate is only75% out of the year... after the first two-three rounds you will easily be able to set up a LOC to deal with emergency expenditures for your rentals...
> 
> But this works as it is usually a long-term appreciable asset or NET income producer (as opposed to a vehicle which is not) as you're also taking the depreciation and you don't pay capital gains until you take the money out...


Now your on my speed. Debt to income is another big player in this question for me. I'm like Frank, always looking for a good rental, thinking of doing a spec later this year or early next year. All that comes into play


The guy with the plane doesn't have to worry about that lol

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## Jaws (Dec 20, 2010)

Californiadecks said:


> In this industry especially. I'll bet there's no one on this forum that can tell me what their income will be in two years let alone 5. You can guesstimate but not have a solid number.
> 
> I feel an added element of control when I'm not owing money. It's not always what makes the most money wins. Theirs a lot of variable I take into consideration.
> 
> ...


That's the big one. If every year was like this year or last wouldn't be a problem. That ain't gonna happen though :sad:


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## KAP (Feb 19, 2011)

Jaws said:


> I feel that's pretty incorrect as far as funds not being available being the reason people finance. I have clients who have planes who finance cars. :laughing:
> 
> One in particular told me when I was 19 basically *what Inner said about investment income vs interest.* I was building a boat dock on his second home. :whistling


And there's the misnomer for most... unless a unique circumstance, except in the sense that a vehicle serves a specific business purpose, it usually isn't an investment that produces income or is an appreciable asset but a capital drain... interest added to the equation only exacerbates that fact...




Jaws said:


> I do see the reason folks don't want payments though, and am interested in the responses in the thread including yours.
> 
> *I like having cash available, as much as possible.* If I had a ton of cash I can see the point of buying cash and having the cash, but I ain't there yet :laughing:


Then stop giving it away to the bank... :laughing:


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## Jaws (Dec 20, 2010)

KAP said:


> And there's the misnomer for most... unless a unique circumstance, except in the sense that a vehicle serves a specific purpose, it usually isn't an investment that produces income but a capital drain... interest added to the equation only exacerbates that fact...
> 
> 
> 
> ...


0% giving it away?? 

I agree about the truck though. I COULD buy a used 10k truck and not worry about it. But I like new for different reasons right now. Not having it break down being a big one, just because I like it is another. Lol. 

I think my interest is actually 2% on my truck. In only owe about half what I paid in December though, I put a lot down. 

My point was having that cash in the bank is worth the 2% to me. 

Not 100% sold. Just my thoughts

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## KAP (Feb 19, 2011)

Jaws said:


> *0% giving it away?? *


It's psychological... if it's 0%, there are usually limitations based on credit and/or models or shorter length of repayment, but if it's offered, it's usually funded by the manufacturer or dealer... and what do you think that means? It means YOU ARE PAYING for that option in the pricing of the vehicle to begin with... IF you actually get it and it's not switched to "well, we couldn't get you 0%, but we got you 2.99%", which is still easy to justify and what they count on, that 0% is on what you are financing GOING FORWARD after it's already been baked into the cake for the COST of the vehicle which includes that money upfront that funds rebates and 0% interest loans... 

Do you really think they are offering you a loan that costs you nothing? Like I said earlier....

KAP said:


> *Just realize these companies have thought about it from every angle and there is no scenario where they don't make out including 0% financing...*


Let's put it another way... say on your next spec build you mentioned, you offered 0% to get buyers... how would accomplish that without adding to the cost of the house upfront? 




Jaws said:


> I agree about the truck though. I COULD buy a used 10k truck and not worry about it. But I like new for different reasons right now. Not having it break down being a big one, just because I like it is another. Lol.
> 
> I think my interest is actually 2% on my truck. In only owe about half what I paid in December though, I put a lot down.


Now think about what you just said... you put a lot down... WHY when it was only 2% as you said? Why put anything down? Why are you happy that you owe about half what you paid in December if the interest rate didn't matter?...




Jaws said:


> *My point was having that cash in the bank is worth the 2% to me. *
> 
> Not 100% sold. Just my thoughts
> 
> Sent from my SM-N920V using Tapatalk


The bank loves that the 2% is worth it to you to keep in the bank because money in a bank account isn't yielding much nowadays (the flip side of low interest rates)... in the meantime, you got to pay 4.2% more for the same vehicle of which some goes back to the dealer in "dealer reserves"... there is NO scenario where they don't make out... how could it be otherwise?

If you want to, it's very easy to justify making a loan at 2%, and no-ones probably going to change your mind on that one, but as long as you're going into it with your eyes wide open, both on what you're actually paying for it and legitimate business reasons, more power to ya'... if holding onto that money is going to generate a ROI that is 5X in another investment than what you're paying in interest for not using it, even more justification to do it...

The way I see it, whatever cash you have that you want to keep in the bank to earn really low interest, you got somehow so it's working for you... :thumbsup:


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## Joasis (Mar 28, 2006)

Inner10 said:


> He told you to do that because CCA calculations are more work for him. That's a classic lazy ass accountant recommendation.
> 
> You can't write off payments like an expense, you have to depreciate the asset.


My accountant is anything but lazy. Super conservative. And can justify every expense. I have read multiple opinions on always renting everything because of the 100% expense taken, but as I have discussed many times, owning your own equipment can allow you to lower a bid when you must to secure work. 

I absolutely believe my accountant or I would not use him...but he accepts what I do and my reasons...and he is obligated to tell me the most financially prudent way to go. 

For instance, my CPA is a farmer....big farmer. His family, all CPA's with him, farm probably 3500 acres, and they lease combines and tractors. Get new ones every year. Never any maintenance, and if it goes down, the leasing company provides another machine in 24 hours. And it is 100% deductible. 

I have three issues with renting. One is the time to get equipment on site, another other is availability. And the real killer is keeping a telehandler on site any time at all and the rent goes on....if it was based on meter hours, then maybe. But it is based on days and weeks. 

I haven't had an offer in a year or more that I can recall, but as the rental businesses have grown in our area, they call and make offers to buy every piece of equipment we own, and we in turn agree to contract with them to rent only their machines, and the only exception is when they don't have a specific machine available in 24 hours. They also would have paid market price to buy every machine we own. 

But then, you lose the ability to compete in a bid against a contractor who can place equipment on site and eat the time for weather delays, or whatever...because you are renting and he is not. It could be as bad as bidding against a lowball guy with no insurance.....so we keep the equipment. 

I don't know how much equipment most guys keep, but for us, we have 3 telehandlers, 5 scissor lifts (3 fueled RT's), 3 Z-booms, a 60 ft straight boom, and a 12 ton RT crane, Bobcats, excavator, and a trencher. Some of it is old, and it ain't pretty, but I own it and in my humble opinion, you are a step above the competition when your name is on your equipment and not Hertz or United. A semi truck to haul them on....and yes, it is an expense, but a depreciation as well.


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## FrankSmith (Feb 21, 2013)

KAP said:


> Interestingly enough, this dovetails into the discussion nicely... your CAP Rate increases dramatically on a rental when you have as little debt as possible (preferably no mortgage)... the more debt/serviceable items, the LESS you will make each year... setting aside the income to fund future projects and/or repairs is a much better use than making truck payments...
> 
> If you're looking at this as a long-term strategy, look into a formula of flip/flip/cash purchase for the rental (how many you need to flip to get to the cash purchase will vary from area to area)... in doing this you will ALWAYS be at a double digit CAP Rate while your asset continues to appreciate even if your occupancy rate is only75% out of the year... after the first two-three rounds you will easily be able to set up a LOC to deal with emergency expenditures for your rentals...
> 
> But this works as it is usually a long-term appreciable asset or NET income producer (as opposed to a vehicle which is not) as you're also taking the depreciation and you don't pay capital gains until you take the money out...


The last one I purchased was paid for cash. It was cheap and the money was there. I have questioned the decision. I will make more money per dollar invested on the ones that are financed.


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## KAP (Feb 19, 2011)

FrankSmith said:


> The last one I purchased was paid for cash. It was cheap and the money was there. I have questioned the decision. I will make more money per dollar invested on the ones that are financed.


I'm all ears... :blink:


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## Bambamm511 (Jan 29, 2014)

Finance all the way. Take advantage of section 179.

I'll gladly pay 3-4 thousand to a bank to give me a 40k loan. I can do a lot more with that cash in my pocket.

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## Inner10 (Mar 12, 2009)

Californiadecks said:


> I don't know what will become of my life's situation for the next 5 years. Not worrying about that or payments is worth much more than the latter has to offer to me.
> 
> 
> _______________________
> ...


See that's it, people fear debt, but infact sometimes you can make more money by incurring debt. For people who money burns a hole in their pocket it's probably best to pay cash, for those who can manage money financing can be a more productive option. 



Californiadecks said:


> Makes zero sense. Why use the bank if your tying up the 10k anyway?
> 
> _________________


Because it keeps the money in your hands and shifts the liability to the bank.



hdavis said:


> New or used (I prefer used), pay cash. Same with tools.
> 
> A loan is an added risk.


No it's REDUCED RISK, the bank is taking the risk instead of you!



Joasis said:


> My accountant is anything but lazy. Super conservative. And can justify every expense. I have read multiple opinions on always renting everything because of the 100% expense taken, but as I have discussed many times, owning your own equipment can allow you to lower a bid when you must to secure work.
> 
> I absolutely believe my accountant or I would not use him...but he accepts what I do and my reasons...and he is obligated to tell me the most financially prudent way to go.
> 
> ...


The way you have chosen to do it is the more profitable route, if renting was more profitable rental companies wouldn't be able to make money.

Accountants like to sell people on leasing/renting because it's vastly easier to calculate and it matches cash flows in the same period.


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## Inner10 (Mar 12, 2009)

Bambamm511 said:


> Finance all the way. Take advantage of section 179.
> 
> I'll gladly pay 3-4 thousand to a bank to give me a 40k loan. I can do a lot more with that cash in my pocket.
> 
> Sent from my SM-G930V using Tapatalk


Sh!t thank you, try explaining that to the rest of CT. :laughing:


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## Calidecks (Nov 19, 2011)

Inner10 said:


> See that's it, people fear debt, but infact sometimes you can make more money by incurring debt. For people who money burns a hole in their pocket it's probably best to pay cash, for those who can manage money financing can be a more productive option.
> 
> 
> 
> ...


 Nope, has nothing to do with how responsible you are with money. 

If I couldn't hang on to money, how did I save enough to pay cash? Your analogy falls flat. 

My point is even if I could make more money with that money elsewhere it's not worth it to me. I couldn't careless about what I could make with my "car money". 

_________________


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## Calidecks (Nov 19, 2011)

Inner10 said:


> See that's it, people fear debt, but infact sometimes you can make more money by incurring debt. For people who money burns a hole in their pocket it's probably best to pay cash, for those who can manage money financing can be a more productive option.
> 
> 
> 
> ...


Don't pay the bank and see what that does to you. Its an absolute risk. Especially to a sole proprietor.

_________________


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## Inner10 (Mar 12, 2009)

Californiadecks said:


> Nope, has nothing to do with how responsible you are with money.
> 
> If I couldn't hang on to money, how did I save enough to pay cash? Your analogy falls flat.
> 
> ...


It doesn't fall flat. In our industry we go from famine to feast, we work on a large project and then get a big payout at the end, we don't get a paycheck every two weeks. So when you collect on a big job you see this big fat stack of cash sitting in the bank and you get all horny to blow it. For those who just can't let it sit there, they either go buy a boat or they invest it in their business by getting a piece of equipment. 

I don't get your point either, even if you could make more money by financing you wouldn't. Ok Mike, sure, we get it, you don't care to make more money because it's not worth it to you. If I had your money I'd burn mine.


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## Inner10 (Mar 12, 2009)

Californiadecks said:


> Don't pay the bank and see what that does to you. Its an absolute risk. Especially to a sole proprietor.
> 
> _________________


Sure it's still a risk but it's less of a risk because the bank is taking on the liability.


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## NJ Contractor (Nov 12, 2016)

Jaws said:


> Do you buy vehicles new or used? Always cash or Finance? Or finance only if interest is a certain percentage? Your vehicle only or crew vehicles too?


The last 2 vehicle purchases (my daily driver and a work van) were both no money down, 0% interest. I can put the $60k to work elsewhere and make more of a return. However, if in the future interest rates creep up and I have the cash on hand to buy outright, it's not out of the question. I look at it on a case by case basis.



> How about equipment? Skid steer/mini ex/tractor, shop equipment ect...?


I no longer own any skid steers, excavators, etc... I either subcontract this work out or rent as needed. As far as tools and shop equipment, I pay my credit card balance in full every month to get the 2% cash back reward.


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## Calidecks (Nov 19, 2011)

Inner10 said:


> Sure it's still a risk but it's less of a risk because the bank is taking on the liability.


I guess what's really dumb about your argument is using money that should go to pay cash for your truck for your business is basically just a loan for your business. Why not just take out a business loan? Not sure what the difference is.

Its nice to not need to do either.

_________________


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## Calidecks (Nov 19, 2011)

Inner10 said:


> It doesn't fall flat. In our industry we go from famine to feast, we work on a large project and then get a big payout at the end, we don't get a paycheck every two weeks. So when you collect on a big job you see this big fat stack of cash sitting in the bank and you get all horny to blow it. For those who just can't let it sit there, they either go buy a boat or they invest it in their business by getting a piece of equipment.
> 
> I don't get your point either, even if you could make more money by financing you wouldn't. Ok Mike, sure, we get it, you don't care to make more money because it's not worth it to you. If I had your money I'd burn mine.


 Then go and tap into ever bit of capital you can borrow. If it pays that much. Using your vehicle Money is a poor man's loan to himself. Basically. 

_________________


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## overanalyze (Dec 28, 2010)

I am a fan of both. Last year we paid cash for 2 vehicles because we could, still didn't drain the account and was able to put money into our retirement accounts. Accountant said it was a good move and it helped our tax liability immensely.

This year we just bought a new ProMaster and financed some of it. We didn't want to drain the account, we got a good rate, and if we want to pay it off at the end of the year because things went well for the year we can. If not the liability is very low and easily affordable. 

For investment real estate I prefer to use the banks money. We get cheap rates and we can budget and forecast easier that way. 

It works for my partner and I. We have a few meetings a year with our accountant to make sure we are doing things the best we can.


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## Calidecks (Nov 19, 2011)

It also depends greatly on where you're at in life. I have no desire to grow my business anymore than where I'm at. In fact I'm taking on less not more. It makes no sense for me to be forced to use borrowed money in fear I may end up losing due to the interest. You in essence become a slave. Because now you have to invest to keep from losing money. 

No thank you!

_________________


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## Bambamm511 (Jan 29, 2014)

Inner10 said:


> Sh!t thank you, try explaining that to the rest of CT. :laughing:


Depends what vehicles you want to buy as well. I don't care that I am paying $50 a month in interest to the bank. I also don't want to spend 47k in cash when I can use someone else's money. 

Now if I am only looking at a 20k vehicle, then maybe I'll pay cash.



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## Calidecks (Nov 19, 2011)

If they are offering 0% they are more than likely offering a cash incentive as well. It's usually "either or". 

_________________


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## Calidecks (Nov 19, 2011)

Take on too much and it starts to interfere with my personal life. Like golf. Bigly!

_________________


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## Warren (Feb 19, 2005)

The way you have chosen to do it is the more profitable route, if renting was more profitable rental companies wouldn't be able to make money.

Inner:
Wouldn't the same argument apply to banks and finance companies?


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## Inner10 (Mar 12, 2009)

Californiadecks said:


> I guess what's really dumb about your argument is using money that should go to pay cash for your truck for your business is basically just a loan for your business. Why not just take out a business loan? Not sure what the difference is.
> 
> Its nice to not need to do either.
> 
> _________________


Because vehicle financing rates can be vastly lower than what the bank will give you a LOC for. 



Californiadecks said:


> Then go and tap into ever bit of capital you can borrow. If it pays that much. Using your vehicle Money is a poor man's loan to himself. Basically.
> 
> _________________


If you can make a higher return off it absolutely, but it's not practical unless you can borrow money for a real sweet-heart deal.



Californiadecks said:


> It also depends greatly on where you're at in life. I have no desire to grow my business anymore than where I'm at. In fact I'm taking on less not more. It makes no sense for me to be forced to use borrowed money in fear I may end up losing due to the interest. You in essence become a slave. Because now you have to invest to keep from losing money.
> 
> No thank you!
> 
> _________________


I wouldn't consider it being a slave, honestly I'm sure you have investments, on average what's your yearly return on them?



Californiadecks said:


> If they are offering 0% they are more than likely offering a cash incentive as well. It's usually "either or".
> 
> _________________


Certainly, but it worth crunching the numbers. For my car it was a better deal to take the 0%.



Warren said:


> The way you have chosen to do it is the more profitable route, if renting was more profitable rental companies wouldn't be able to make money.
> 
> Inner:
> Wouldn't the same argument apply to banks and finance companies?


It would be if vehicle and equipment financing and purchasing wasn't such a numbers game. One month there is 20% in manufacturer discounts but the financing rate is though the roof, yet the cash discount is bogus...and could even be higher than the price for the financed rate. The smart buyer finances on an open loan at the high rate, and pays it off in cash the following day, and the bank suffers.

Next month is 0% financing, cash discount that works out to 1.5% per year, but not instant rebates from the manufacturer. The guy who is looking to pay cash gets a vastly worse deal than he would have the previous month, and the guy who finances the whole enchilada is probably at a wash. 

I get your point but the comparison is a little apples and oranges, what I should have said to J was that his method of investing in equipment vs renting is the most profitable in the long term.


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## Calidecks (Nov 19, 2011)

I'm not saying borrowing isn't a better ROI, I'm just saying not borrowing is worth more than money to me. Because yOU can make more, isn't always the deciding factor. Its not the guy who dies with the most money wins. And because you found a vehicle loan at a low interest rate, doesn't necessarily mean your paying less. In fact they are getting their money and you just think you're getting off with a cheap loan. In other words if they are still getting their money you are paying one way or another. 

_________________


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## Calidecks (Nov 19, 2011)

Almost always when there's a 0% there's also a cash incentive. I'd say 100% of the time. Its "either or".

_________________


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## Inner10 (Mar 12, 2009)

KAP said:


> So the HO puts down 20%, the house value drops 50%, and the bank can either go after you for the 10% difference along with any lawyer, late and collection fees, but you may also be subject to IRS income taxes. If you have a non-recourse mortgage, the bank can only have the mortgage or the house, but if you have kids in college or getting ready for college, you're potentially locked out of PLUS student loans...
> 
> Now that initial 20% is also not the only money the HO would lose... they would lose any additional principal they would have paid up to that point, and the bank gets to KEEP ALL THE INTEREST they accrued up to that point... not to mention the HO would ALSO lose the MAJORITY of the money they paid in real estate taxes...
> 
> ...


So KAP, in financing you think the lender carries less risk than the borrower? 

You think it's less risky to buy outright than to finance?


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## Inner10 (Mar 12, 2009)

hdavis said:


> Theoretically banks shoot for risk adjusted returns. That's a combination of % down and interest rate. The borrower can lose the full value of the car, but the lender can only lose a portion of that.
> 
> Credit consumers and credit providers operate on very different parts of the "gambler's ruin" problem.


Almost all financing is risk adjusted, it's risk adjusted because the lender holds the risk.

The borrower can't loose the full value of the car because they haven't paid it, the lender has!


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## KAP (Feb 19, 2011)

Inner10 said:


> So KAP, in financing you think the lender carries less risk than the borrower?
> 
> You think it's less risky to buy outright than to finance?


Why do you think the lender asks for a down payment on existing market valuation, getting ahead of the payments/valuation, and gets the majority of the interest in the front half of the loan?...

As is usually the case with vehicle financing, most finance a home because they don't have the money to purchase it... BUT, a home has advantages a car does not... appreciable asset, tax write off, etc.

But look at the example above and assume the HO had the money to buy the house... after the first 5 years, because they had no mortgage, instead of paying the bank mortgage and interest, they would have been able to pay themselves and would have been more than a 1/4 way to paying themselves back (assuming the same 4.5% interest paid to the mortgage company which, as you've know and have stipulated, double-digits are actually attainable) PLUS still have the house which historically will increase in value (IOW - won't stay at 50% value after recovery)... consider, over the same 30 year period, at only 4.5%, instead of making $810 payments for principal and interest to the bank they invest it, that SAME MONEY will grow to $600K (go to only 8% and they'd have $1.1 MILLION), and they would STILL have the house fee and clear, which would have in all likelihood ALSO dramatically increased in value over the same period...

The bank knows the value in this... it's why it's in their interest to do so and why they they get paid so much and their buildings are so big... as you can see, ultimately at the HO's short and long-term expense...


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## KAP (Feb 19, 2011)

NYgutterguy said:


> My head hurts
> 
> 
> Sent from my iPhone using Tapatalk


LOL... when you see how much the bank makes versus you and who carries the most risk, that's completely understandable... :laughing:


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## hdavis (Feb 14, 2012)

So you owe $20K on a car, and don't make payments. Banks repos and sells the car for $8K unless it isn't road worthy, in which case it's scrapped for ~$200. These are realistic numbers, BTW.

Depending on which scenario, YOU owe the bank the $19,800 plus cost of repo and sale, plus court costs for when they sue and get an enforceable judgement. That tacks on a few extra thousand. Now they can attach your real estate, bank accounts,...

If you have good contacts within the dealer financing world, you can pick up repod vehicles for 20~30% under blue book. They're even cheaper at auction.


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## Inner10 (Mar 12, 2009)

KAP said:


> Why do you think the lender asks for a down payment on existing market valuation, getting ahead of the payments/valuation, and gets the majority of the interest in the front half of the loan?...
> 
> As is usually the case with vehicle financing, most finance a home because they don't have the money to purchase it... BUT, a home has advantages a car does not... appreciable asset, tax write off, etc.
> 
> ...


I asked you two simple questions and you answered neither.


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## hdavis (Feb 14, 2012)

So, here are some of the loan arrangements big companies will make to cover expansion, down turns, etc

-Borrow against equipment
-Borrow against receivables
-Borrow against inventory - this may be materials, or the traditional
construction loans.

It's also possible to borrow putting up a piece of the company, but unless you're really going places, I don't think that's a very good idea...

Two rules of thumb:

Growing more than 25% per year can be difficult due to staffing and training.

Growing faster than free cash flow means you have to borrow.


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## KAP (Feb 19, 2011)

Inner10 said:


> I asked you two simple questions and you answered neither.


The answer was right there in the example and I thought it self-evident, but the simple version, as the numbers show, and the burden placed on the purchaser, is yes the lender carries less risk should the worst case scenario occur, and yes it's less risky long-term to buy cash for a variety of reasons... 

That doesn't mean people can pay cash for either, or there aren't reasons why you shouldn't, but why would you WANT to pay all that money to a bank for a mortgage if you didn't have to when YOU could make so much more with the same money?... 

Your challenge is you are looking at one snapshot in time and thinking it applies to all time and doesn't carry significant risk for the borrower but also negatively affects their standard of living in the short and long term... if people get loans to just walk away them, putting aside what they'd lose in the process, banks aren't going to keep lending to them... it's why credit reports exist...

If a bank makes a bad loan, it can still lend... if a HO ends up in the above scenario, they just can't keep borrowing... and the reason for this is the bank has spread the what around so they are protected?...

Risk...


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## Inner10 (Mar 12, 2009)

KAP said:


> The answer was right there in the example and I thought it self-evident, but the simple version, as the numbers show, and the burden placed on the purchaser, is yes the lender carries less risk should the worst case scenario occur, and yes it's less risky long-term to buy cash for a variety of reasons...
> 
> That doesn't mean people can pay cash for either, or there aren't reasons why you shouldn't, but why would you WANT to pay all that money to a bank for a mortgage if you didn't have to when YOU could make so much more with the same money?...
> 
> ...


The borrower has the choice to pay or not pay, the lender has no power to make the borrower pay, hence they hold the risk.

So in your example the home owner ended up -90K. If that same person bought the house in cash and it dropped 50% in value they would be at -100k.

I use to work for a company that financed two vehicles, one of which I drove. The company stopped paying it's bills and after 6 months both vehicles got repossessed, the company went bankrupt and screwed over numerous suppliers for a few hundred thousand. The owner got to walk away from a large amount of debt for only about 20k in legal fees. So who had more risk? 

If a bank makes a bad loan I doubt anyone would want to borrow money from them....same as a person who doesn't pay their debts....no one wants to lend them money.


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## KAP (Feb 19, 2011)

Inner10 said:


> The borrower has the choice to pay or not pay, the lender has no power to make the borrower pay, hence they hold the risk.
> 
> So in your example the home owner ended up -90K. If that same person bought the house in cash and it dropped 50% in value they would be at -100k.


The borrower pays on so many levels... you seem to be just choosing to ignore those realities for whatever reason...

Again, you are looking at a snapshot in time and thinking it applies to all time remaining static... it's a fallacy in your argument and POV... you're also missing that EVEN IF they didn't recover the value over the same 30-year period and it remained at the 50% value (or $100K - extremely unlikely), but they invested the same $810/month for principal and interest they would have paid the mortgage company, and received the same 4.5% interest and NEVER increased the $810/month that amount would have been $600K over the same period so their NET _*EVEN IF*_ they didn't recover would have been $500K PLUS a house that is free and clear EVEN THOUGH they lost the initial $100K in value (which in reality they'd not only recover over that period, but then some)... 

SAME money, SAME monthly amount, SAME interest, SAME term, HUGELY different result... :thumbsup:

And the difference that put the HO $500K PLUS and a free and clear house to boot? They paid cash... :clap:

Now imagine if they increased their monthly investment and achieved a higher interest rate... 

The bank gets it... starting to have a hard time why you don't... :blink: 

Banks goals are to find ways to separate you from your money while making it seem like they are doing you a favor... they do serve a purpose though...




Inner10 said:


> I use to work for a company that financed two vehicles, one of which I drove. The company stopped paying it's bills and after 6 months both vehicles got repossessed, the company went bankrupt and screwed over numerous suppliers for a few hundred thousand. The owner got to walk away from a large amount of debt for only about 20k in legal fees. So who had more risk?


Bankruptcy is an option to all parties including banks and suppliers... and your example shows numerous people who ascertained risk based on your bosses credit worthiness... do you think they would assess him worthy and still make the same loans or extend the same credit AFTER bankruptcy... THAT would be risky... 




Inner10 said:


> If a bank makes a bad loan I doubt anyone would want to borrow money from them....same as a person who doesn't pay their debts....no one wants to lend them money.


Hardly the same at all... you've actually asked a bank if they made bad loans before you borrowed from them?... :blink: It's irrelevant to your loan... Besides, for what purpose would it serve if you plan to skate on the loan anyway?...


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## Inner10 (Mar 12, 2009)

KAP said:


> The borrower pays on so many levels... you seem to be just choosing to ignore those realities for whatever reason...
> 
> Again, you are looking at a snapshot in time and thinking it applies to all time remaining static... it's a fallacy in your argument and POV... you're also missing that EVEN IF they didn't recover the value over the same 30-year period and it remained at the 50% value (or $100K - extremely unlikely), but they invested the same $810/month for principal and interest they would have paid the mortgage company, and received the same 4.5% interest and NEVER increased the $810/month that amount would have been $600K over the same period so their NET _*EVEN IF*_ they didn't recover would have been $500K PLUS a house that is free and clear EVEN THOUGH they lost the initial $100K in value (which in reality they'd not only recover over that period, but then some)...
> 
> ...


Easy TNT.

My points:

- Financing CAN be a more cost effective choice for a business when it comes to purchasing equipment. 

- Financing shifts the risk from the business to the lender.

Your points:

- You are always better off to pay cash since financing is higher risk than paying the full amount up front.

- Borrowing money is high risk for the borrower and low risk for the lender.

Just let the readers make up their own minds.


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## KAP (Feb 19, 2011)

Inner10 said:


> Easy TNT.
> 
> My points:
> 
> ...


If they do actually read our responses, they'll see what a misrepresentation that is... so I have no problem with them reading it and making up their own minds...

As to the rest (for which you didn't answer my questions BTW)... 

______________________________________________________
*Leo G: *I can explain it to you, but I can't understand it for you.

:whistling​


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## Inner10 (Mar 12, 2009)

KAP said:


> If they do actually read our responses, they'll see what a misrepresentation that is... so I have no problem with them reading it and making up their own minds...
> 
> As to the rest (for which you didn't answer my questions BTW)...
> 
> ...


There were questions buried in that novel?


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## KAP (Feb 19, 2011)

Inner10 said:


> There were questions buried in that novel?


Easy to find... they end in a (?)... :laughing:

Had you read one or two, you could have saved yourself some time... :thumbsup:



Good discussion... Have a good night... :thumbsup:


----------



## Inner10 (Mar 12, 2009)

KAP said:


> Easy to find... they end in a (?)... :laughing:
> 
> Had you read one or two, you could have saved yourself some time...


You think I read all that drivel?


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## KAP (Feb 19, 2011)

Inner10 said:


> You think I read all that drivel?


I know, you're just "responding to drivel" without any basis in knowledge or reality... pretty apparent by the responses... :whistling


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## Inner10 (Mar 12, 2009)

hdavis said:


> So you owe $20K on a car, and don't make payments. Banks repos and sells the car for $8K unless it isn't road worthy, in which case it's scrapped for ~$200. These are realistic numbers, BTW.
> 
> Depending on which scenario, YOU owe the bank the $19,800 plus cost of repo and sale, plus court costs for when they sue and get an enforceable judgement. That tacks on a few extra thousand. Now they can attach your real estate, bank accounts,...
> 
> If you have good contacts within the dealer financing world, you can pick up repod vehicles for 20~30% under blue book. They're even cheaper at auction.





KAP said:


> I know, you're just "responding to drivel" without any basis in knowledge or reality... pretty apparent by the responses... :whistling


You have a Phd in finance or something?


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## Bull Trout (Dec 6, 2016)

hdavis said:


> Actually not, home mortage loans are non-recourse - they can take the house and that's it. Loans like car loans they can take the car, sell it for dirt, and take you to court for the difference.
> 
> 
> 
> That's why it's better to sell the car, even if it's upside down, rather than let it get repo'd.




Home loans are not non-recourse, more of a selective recourse, at the moment FHA doesn't seek recourse, but that could change, some FNMA loans seek recourse some don't


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## hdavis (Feb 14, 2012)

Bull Trout said:


> Home loans are not non-recourse, more of a selective recourse, at the moment FHA doesn't seek recourse, but that could change, some FNMA loans seek recourse some don't


Thanks for correcting this.:thumbsup:


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## Milesjcoker (Apr 13, 2017)

Californiadecks said:


> I'm not saying borrowing isn't a better ROI, I'm just saying not borrowing is worth more than money to me. Because yOU can make more, isn't always the deciding factor. Its not the guy who dies with the most money wins. And because you found a vehicle loan at a low interest rate, doesn't necessarily mean your paying less. In fact they are getting their money and you just think you're getting off with a cheap loan. In other words if they are still getting their money you are paying one way or another.
> 
> _________________


You can't buy peace of mind. You can finance stress, though.


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## hdavis (Feb 14, 2012)

Inner10 said:


> You have a Phd in finance or something?


No. Going broke isn't high finance, it's the Gamber's Ruin problem - gambling math. Banks operate on the large number of bets part of the curve (each one a small part of their bankroll). A business like Jaws' operates on the low number of bets part of the curve (each a relatively large part of the bankroll). The returns off of the low part of the curve have to be much higher to control the risk of going bankrupt.

That's the simple way to look at it, you can always go with Monte Carlo simulations to nail down a specific situation better.

Maybe I'll post the curves again later so people can get an idea of how much debt to take on.


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## Inner10 (Mar 12, 2009)

hdavis said:


> No. Going broke isn't high finance, it's the Gamber's Ruin problem - gambling math. Banks operate on the large number of bets part of the curve (each one a small part of their bankroll). A business like Jaws' operates on the low number of bets part of the curve (each a relatively large part of the bankroll). The returns off of the low part of the curve have to be much higher to control the risk of going bankrupt.
> 
> That's the simple way to look at it, you can always go with Monte Carlo simulations to nail down a specific situation better.
> 
> Maybe I'll post the curves again later so people can get an idea of how much debt to take on.


Going broke can be high finance, look at Trump's six bankruptcy filings.

Good thing he financed the development of those hotels so he mitigated his risk and passed it onto the financial institutions...instead of paying out of his own pocket.


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## hdavis (Feb 14, 2012)

Inner10 said:


> Going broke can be high finance, look at Trump's six bankruptcy filings.
> 
> Good thing he financed the development of those hotels so he mitigated his risk and passed it onto the financial institutions...instead of paying out of his own pocket.


Now you're off onto a whole different topic - financing inventory. Jaws doesn't sell cars and trucks, he buys them. I'm pretty sure he already finances at least some of his inventory.

Plus, those were not Trump, they were individual corporations that couldn't keep up with the loan payments. Trump was protected by the limited liability aspect, he just wouldn't be able to build them without the loans.


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## Jaws (Dec 20, 2010)

Milesjcoker said:


> You can't buy peace of mind. You can finance stress, though.


I wonder who's more stressed when they break both their legs:

A guy with 100k in the bank and 800 dollars in car payments on cars worth maybe a few thousand less than they owe (which they could sell, lose a few thousand and buy a beater for 5-8k and can easily sit at home and pay their bills for over a year with out going on welfare or cashing in all their savings or retirement or selling investments they worked their ass off for

Or 

A guy who has two nice vehicles that are paid for, no 800 payment and 30k dollars cash not including investments ect...

I know I'll take the cash. Worth a few points to me I realize the guy could sell the paid for vehicles but I'd rather still have the cash. Less stress


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## Milesjcoker (Apr 13, 2017)

Jaws said:


> I wonder who's more stressed when they break both their legs:
> 
> A guy with 100k in the bank and 800 dollars in car payments on cars worth maybe a few thousand less than they owe (which they could sell, lose a few thousand and buy a beater for 5-8k and can easily sit at home and pay their bills for over a year with out going on welfare or cashing in all their savings or retirement or selling investments they worked their ass off for
> 
> ...


My point exactly. Maybe not made clear enough.


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## Inner10 (Mar 12, 2009)

Jaws said:


> I wonder who's more stressed when they break both their legs:
> 
> A guy with 100k in the bank and 800 dollars in car payments on cars worth maybe a few thousand less than they owe (which they could sell, lose a few thousand and buy a beater for 5-8k and can easily sit at home and pay their bills for over a year with out going on welfare or cashing in all their savings or retirement or selling investments they worked their ass off for
> 
> ...


John you summed up my entire point.:thumbsup:


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## dayexco (Mar 4, 2006)

So I understand this, I have the dollars in my hand, to pay cash for what I want to buy. 

It's cheaper for me, to borrow money to buy what I want to buy? 

I always thought money, costs money. .. silly me , I'm wrong?


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## Inner10 (Mar 12, 2009)

dayexco said:


> So I understand this, I have the dollars in my hand, to pay cash for what I want to buy.
> 
> It's cheaper for me, to borrow money to buy what I want to buy?
> 
> I always thought money, costs money. .. silly me , I'm wrong?


It's cheaper IF you are able to make more productive use of that money such that you can yield a higher return than the financing cost.

I used the example of my investment account return vs the financing rate I paid....but for many the higher return could be the productivity they achieve by having that extra working capital on hand for other business related expenses that come along.

My other example was that by gambling with someone else's money you shift some of the risk off yourself and onto them.


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## Jaws (Dec 20, 2010)

dayexco said:


> So I understand this, I have the dollars in my hand, to pay cash for what I want to buy.
> 
> It's cheaper for me, to borrow money to buy what I want to buy?
> 
> I always thought money, costs money. .. silly me , I'm wrong?


To me it is. Say if I paid 35k cash for a new pick up instead finance. That's 35k in operating capital.i don't have, and I make over 20% on the dollar for any projects we are doing. How much operating capital I have has dictated in the past work i couldnt take on because i didnt have the capital. 

That's just one example of how I slaughter bank fees asses having good credit and low interest

When I'm old it will be a moot point I hope as I'll be able to do both


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## hdavis (Feb 14, 2012)

Here's a lucid talk about the various ratios for contractors (actually for their customers), it will give you an idea of how much is too much:

http://apps.americanbar.org/abapubs/design/underConstruction/aug10/article2.html


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## hdavis (Feb 14, 2012)

Even more construction ratios, but many of these would be for a finance / business professional and larger companies (If you really want to see where you are in the industry, you have to look at benchmarks):


http://cpaconstruction.com/wp-content/uploads/2012/07/Construction-Industry-Ratios


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## hdavis (Feb 14, 2012)

Jaws said:


> To me it is. Say if I paid 35k cash for a new pick up instead finance. That's 35k in operating capital.i don't have, and I make over 20% on the dollar for any projects we are doing. How much operating capital I have has dictated in the past work i couldnt take on because i didnt have the capital.


Then finance away, just keep in mind downturns do happen.


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## hdavis (Feb 14, 2012)

Jaws said:


> That's just one example of how I slaughter bank fees asses having good credit and low interest


:whistling


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## KAP (Feb 19, 2011)

Jaws said:


> To me it is. Say if I paid 35k cash for a new pick up instead finance. That's 35k in operating capital.i don't have, and I make over 20% on the dollar for any projects we are doing. How much operating capital I have has dictated in the past work i couldnt take on because i didnt have the capital.
> 
> That's just one example of how I slaughter bank fees asses having good credit and low interest
> 
> When I'm old it will be a moot point I hope as I'll be able to do both


You realize that was self-nullifying on a couple of points, right?... :blink:

There's a difference between operating capital and capital reserves as one example... and you are reducing your operating capital by your payment amounts because you didn't have the capital reserves to make the purchase...

You don't slaughter bank fees... they are still there and are in the banks pocket not yours and did EXACTLY what was intended, which is put money in the banks pocket, subsequently REDUCING any return you're after... that's not slaughtering anything but adding a leech...

Following that line of thinking, credit card interest rates or LOC are down in the low single digits and double digit returns are available... why would you then not max out your accounts to achieve the higher returns to "slaughter the bank fees"?...

Why do you strive to never pay interest on a supplier account or business credit card or consider it a point of personal pride? 

Banks have a purpose as does financing, but keep in mind that you have been conditioned to believe things that just aren't true... 0% financing, points, credit card fees, etc. are baked into the cake (meaning YOU pay for it) and are ALL designed to separate you from your money while at the same time making you think the bank is doing you a favor...

Like I said earlier, if you REALLY want to justify it, it's easy and no-ones going to talk you out of it, but what you younger guys are missing is the very thing that is your greatest asset in saving and investing and the bank takes full advantage of is... time... compound interest doesn't work without it... 

So unless you're pocketing said 20%, you don't get that irreplaceable (without a higher cost) time back and every year that goes by without you taking advantage of the very thing the bank does, you lose... for those who have ears...


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## Jaws (Dec 20, 2010)

hdavis said:


> Then finance away, just keep in mind downturns do happen.


Oh i won't forget. One of many benefits of being a third gen builder is knowing from experience and by memory good times don't last forever and don't really last all that long usually so don't get too big for your britches. 

Don't get me wrong I don't finance much, and I pay stuff off quickly. I owe on my truck and my house. I could pay the truck off and not change my life's circumstances except I wouldn't have the cash. 

Everything can be financed. When I bought my boat, mower, he'll when I bought my new furniture they offered 0%... I paid cash. I don't like payments. 

A small truck payment on my personal work truck for a construction company our size is not unreasonable by any standards. Never been upside down on a vehicle to my knowledge


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## Jaws (Dec 20, 2010)

hdavis said:


> :whistling


Other than the colorful and not so eloquent combo of words what's the :whistling? 

Like you said I take low number of risks at a high dollar amount, I mitigate those risks having the cash to back it up. I don't take on work that leaves any one working for me at risk of not being paid. 

So the money in my account brings me a minimum of 20% gp, I don't see how that's not smart if your business requires operating captial. Unless you are rich and have enough for both. :whistling


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## Jaws (Dec 20, 2010)

Appreciate your imput KAP. 

You and my wife see eye to eye btw. Lol. I'll try and fill in later I need to actually do some work now.


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## Inner10 (Mar 12, 2009)

Jaws said:


> Appreciate your imput KAP.
> 
> You and my wife see eye to eye btw. Lol. I'll try and fill in later I need to actually do some work now.


Uhhh ohhh, may be time for a new wife. :whistling


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## EthanB (Sep 28, 2011)

I will finance most things depending on the terms. If the rate is too high then I won't. I'm also not a big fan of cash as inflation costs money. I keep what I need to cover a few months of bills and invest the rest. 

I get the idea of how a huge pile of cash can be comforting but I'm not a big worrier about disaster striking. Financing frequently allows me to buy things earlier than I normally would, which is a pretty big perk if it's something that makes me money. All my vehicles are ****ty and old as they don't make me money so I have no interest in them. Everything else of value that I own, or finance, earns me money. Usually at several times the rate of interest.

We bought a multifamily last year and I was able to get it for almost zero down. We then put a bunch of money into it and get a higher rent. If we bought it with 20% down then we'd have a lower payment but couldn't have fixed it up as much. That would actually have COST me around $3200 a year. If we had bought the building outright(which we couldn't) we'd make about 10% on the principal every year, which is nice, but we're making about 200% on our upfront investment the way we're doing it. Which I prefer. Just one example of how financing can beat cash. 

If the interest rate is over 6% I'm usually going to try and find cash, even if my investments are performing better in the short term. I even use those checks that my cc company sends me sometimes with zero interest for a year. I'll park the money in something that makes interest.


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## NYgutterguy (Mar 3, 2014)

After 139 posts in this thread I've come to the conclusion I shouldn't be in charge of my own finances. I don't know jack chit. 


Sent from my iPhone using Tapatalk


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## KAP (Feb 19, 2011)

NYgutterguy said:


> After 139 posts in this thread I've come to the conclusion I shouldn't be in charge of my own finances. I don't know jack chit.
> 
> 
> Sent from my iPhone using Tapatalk


You need Facebook... :whistling :jester: :laughing:

https://www.facebook.com/redneckchit


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## Jaws (Dec 20, 2010)

Inner10 said:


> Uhhh ohhh, may be time for a new wife. :whistling


Lmao! No not nearly everything, but on paying cash. To say she is risk adverse is an understatement. If she dealt with my business stresses and financials for 72 hrs she would have to be commited. 

I see an angle I play it. She sees an angle and she thinks what if.... and that's why she is not signing the front of the check. Lol.

She does have valid points though and so does KAP. We bought her car new in 2011 and paid it off in 2013, time for a new one. I wanted to get a little nicer car this time (I don't care to have nice **** in my pick up but the family car it's nice) and she says you shouldn't buy that kind of car you unless your going to pay cash and not have to worry about it. She is looking at 18 month - 24 month old explorers and enclaves with decent options, but she refuses to even go look until we move. 

Can't argue with her logic so I wont, but I am still right. Lol

To Hdavis point about down turn and bad times, she absolutely flipped out when I drained personal savings for company bills 4 years ago (that long??) When that resort didn't pay us almost 100k for 100 days. Our operating capital wasn't what it is now and I was scrambling my ass off and pretty stressed out but like I told her I always make it happen. And I did, all payments made, kid stayed in her school (pre school then) and we weren't living on beans and rice. But it was close lol. 

Like she said everyone gets their ass handed to them every now and again and I guess she looks at it as another payment to add to that stress of things i have to go make money to pay when stuff goes south when I look at it as another thing that's gotta happen that month. Lol

Sent from my SM-N920V using Tapatalk


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## Inner10 (Mar 12, 2009)

NYgutterguy said:


> After 139 posts in this thread I've come to the conclusion I shouldn't be in charge of my own finances. I don't know jack chit.
> 
> 
> Sent from my iPhone using Tapatalk


Didn't you turn 5 grand into a quarter mil?

I think you should be teaching us.


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## NYgutterguy (Mar 3, 2014)

Inner10 said:


> Didn't you turn 5 grand into a quarter mil?
> 
> I think you should be teaching us.




Lost it and did it again. This time with 15k (still holding ) Exactly my point lol 


Sent from my iPhone using Tapatalk


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## Inner10 (Mar 12, 2009)

NYgutterguy said:


> Lost it and did it again. This time with 15k (still holding ) Exactly my point lol
> 
> 
> Sent from my iPhone using Tapatalk


My god man sell!


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## hdavis (Feb 14, 2012)

Jaws said:


> Other than the colorful and not so eloquent combo of words what's the :whistling?


That was it!:thumbsup:


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## KAP (Feb 19, 2011)

hdavis said:


> That was it!:thumbsup:


Now you *REALLY *confused him... that was just... mean... :whistling :laughing:


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## Jaws (Dec 20, 2010)

KAP said:


> Now you *REALLY *confused him... that was just... mean... :whistling :laughing:


I hadn't been confused once in the thread hoss. 

Lots of older folks can't keep up with our colorful lingo. :whistling:laughing:

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## KAP (Feb 19, 2011)

Jaws said:


> I hadn't been confused once in the thread hoss.
> 
> Lots of older folks can't keep up with our colorful lingo. :whistling:laughing:
> 
> Sent from my SM-N920V using Tapatalk


LOL... maybe, but he wasn't the one asking the question about what it meant... :whistling :laughing:


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## TimNJ (Sep 7, 2005)

Jaws said:


> Lmao! No not nearly everything, but on paying cash. To say she is risk adverse is an understatement. If she dealt with my business stresses and financials for 72 hrs she would have to be commited.
> 
> I see an angle I play it. She sees an angle and she thinks what if.... and that's why she is not signing the front of the check. Lol.
> 
> ...




Good Lord, I think I'm married to your wife's twin:laughing:

Thirty four years in business and I have had to do some very creative financial moves.
My wife just can't wrap her head around some of them. I tell her it's "survival instinct". I see the "big picture", but she only sees things through horse's blinders.

The amazing thing is she was promoted recently to Controller of the law firm she works at and is still risk averse when it comes to money.


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## Bull Trout (Dec 6, 2016)

TimNJ said:


> Good Lord, I think I'm married to your wife's twin:laughing:
> 
> 
> 
> ...




I'm guessing most of our wives have a similar thread on contractorwifetalk.com bemoaning our creative financial moves


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## hdavis (Feb 14, 2012)

TimNJ said:


> The amazing thing is she was promoted recently to Controller of the law firm she works at and is still risk averse when it comes to money.


Comptrollers are supposed to minimize financial risk.:thumbsup:


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## hdavis (Feb 14, 2012)

Gambler's Ruin Even with a 10% edge on a coin flip, if you bet 10% of what you have each time, you'll go broke 10% of the time.

You're always rolling the dice.


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## Deckhead (Dec 9, 2010)

Maybe I'm just simpleton. I hate all the ratios and aspects yada yada yada. I did the game of financing stuff. I had to put all of our savings into paying something I got stiffed on.

Since then I swore everything I would buy, except a house would be cash because I don't have to play the what if game. I'm really close to taking a loan on a truck and breaking my own rule but putting 50% down. 

There is definitely something to the borrowing money to make money, all the big players necessarily have to do it. If your return beats the interest it makes sense. I just sucked at business and when I bought stuff cash ultimately never paid any depreciation and could forget about it. I like that.

To each their own, if you're going to go big, you have to play the game. The guy I'm working for now has plenty of money and I'm sure still takes loans and then subsidizes until it's profitable, than pays it off and invests in something new. Dude's a genius when it comes to business. I never was. 

Less monthly liability equaled less stress for me. There really is no right and wrong answer, just what's right for you.


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## NYgutterguy (Mar 3, 2014)

Deckhead said:


> .
> 
> 
> 
> Less monthly liability equaled less stress for me. There really is no right and wrong answer, just what's right for you.



Exactly...I never cared either which way made more sense financially. Peace of mind more valuable to me than $$. If I have to lend my business money when the time comes to buy new or used trucks in order have a Lower payments without draining the business account I will. Couple g's in vehicle payments would keep me up at night. 


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## TimNJ (Sep 7, 2005)

hdavis said:


> Comptrollers are supposed to minimize financial risk.:thumbsup:



Yes, but they too sometimes need to be adept "jugglers".:whistling


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## hdavis (Feb 14, 2012)

TimNJ said:


> Yes, but they too sometimes need to be adept "jugglers".:whistling


Only the good ones.:thumbsup:


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## Spencer (Jul 6, 2005)

I'm late but its Sunday afternoon...

I'm anti debt.

That being said, I have seen my income increase exponentially by taking on debt at key times in order to increase my income potential. 

First time was starting my business. $12k loan to get off my feet, bought a van and some tools. Yes, I was that broke. What I was making did not allow me to get ahead and pay cash. Taking that loan was one of the smartest things I ever did. Paid it off in about a years time.

Fast forward slightly. Used a business line of credit at 6%. It was handy to make tool purchases and take on jobs that would have stretched me too thin. I used the line of credit up until this year at which time I made it my goal to no longer use it by having operating capital reserves.

I also borrowed 100% for my Transit 350 last August. It was like $43k on the loan. To risky looking back. Payment was over $900. As a one man show if you break your leg and don't have reserves it could have been a bad deal. I paid the van off in full in 8 months. 

Currently, zero debt. Don't plan on taking on debt again. Maybe for a vehicle again someday, but hopefully I'll pay cash. 

Debt allowed my to increase my income EXPONENTIALLY. But I'm at the point now where there isn't an ROI for taking on debt in my business unless I'm growing it. 

I'm not growing it, so no more debt.

My goal is to have my home mortgage paid off in the next year or so also. 

As a trim sub I'm bringing in over $150k gross profit per year working solo. Couldn't have got there without debt, at least not nearly as fast, but there is a time where it doesn't make sense anymore and you can become your own bank.

So...I avoid debt. But I'm not afraid of it if I see that it makes sense for me.

Peace of mind of not having debt is worth a lot.


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## Bambamm511 (Jan 29, 2014)

Spencer said:


> I'm late but its Sunday afternoon...
> 
> I'm anti debt.
> 
> ...


I don't know how guys can operate without debt. Right now my supply bill is around 30k from the last week or so. Sorry, I'm not spending 30k upfront.

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## twinfallsroof (Feb 23, 2017)

Bambamm511 said:


> I don't know how guys can operate without debt. Right now my supply bill is around 30k from the last week or so. Sorry, I'm not spending 30k upfront.
> 
> Sent from my SM-G930V using Tapatalk




I finance a job at a time up to 30 days and require deposits on anything over 5k, I can bank roll multiple 4-6k jobs at a time and never actually incur any debt


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