Investor · Sarasota, FL · Member since 2016 · 45 posts · 19 votes
I have 18 rental properties Free and Clear bringing in 18K a month and worth around $1.6 million. I happily manage them myself but I want to retire in 7 years at the ripe old age of 55. How do I do this?
Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes
9y
I love this thread....Jackson Michigan is where you live or where you invest? at $18,000/month cash flow living in Jackson Michigan...where you can buy a 5 bedroom 2500 sqft home for less than $50K. You probably only need $1800/month cash flow to live in Jackson Michigan and retire!
I would hire a full time personal real estate manager at $1000/month and some kind of profit sharing to motivate them to do a good job ($1000+ based on performance) and live pretty at $16,000/month cash flow at almost 200K/year income (AFTER taxes)
You should then live in Florida,Oregon, California, Arizona ....heck buy vacation homes in all of those states...and really retire.
I cannot imagine that in retirement you cannot afford to manage ONE person (a manager of all your real estate holdings) during your retirement.
DO NOT sell these cash cows when you are making $18,000/month!
Property Manager · Queen Creek, AZ · Member since 2016 · 608 posts · 426 votes
9y
@Adam Klugh At some point you will need to divest yourself from the day to day management of assets to be retired. Either find a professional Property Manager you actually trust or invest in a different investment vehicle that requires no hands on management.
Either way, you are going to end up trusting someone to manage something that you are invested in. Some trust real estate, some trust the stock market etc.
Growth most likely involves some element of risk or park it in a bank and draw measly returns. Of course, this site is real estate based and obviously, most of us believe in that vehicle.
Leverage yourself for the next 7 years to increase the value/return! Maybe even diversify the markets you are in so as to spread the risk.
Jackson is cheap. We are looking for a $1-2 million apartment complex. We will cash-out refi a portion of the best performing, most stable properties that we plan to keep long term. We will use that as the down payment on the apartment complex and over the next 180 days liquidate as many of the single family residences as we can deferring the tax into the apartment complex. (We actually have a way of getting rid of all the rest of them at full appraised value, but that's for a separate thread and you can message me if you want to know more about that).
If this strategy works as planned, most of the loan on the new apartment complex should be paid off. We could then re-leverage the complex and use that cash as down payments on 2 more equally sized complexes or one much larger complex. This should drastically increase monthly cash flow AND consolidate the management.
Experienced investors please tell me now where I'm going to screw this up so I can prep for those issues you already know I'm going to run into.
So... We've decided on a plan. But first, I must come clean to the crowd.
THE LIE
The profile I gave you all is actually for a client of mine. To answer how he got to where he is today... He's flipped over 100 properties to finally land where he is today holding an impressive portfolio of cash flowing SFRs free and clear. Jackson is an awesome buy and hold town. The only place I know of where you can buy a $100K property in an B-class neighborhood that rents for $1200-1300 a month. The rent to value ratios are awesome and you don't have to be in a ghetto to get them. I own 5 myself which I started to accumulated at the end of 2013 while working a full time job and getting my MBA.
The reason for the lie
The reason I mislead you all, was that I needed your help with the heavy lifting. I knew that If I could summarize this guy's profile in one sentence I would get more minds working on this coming up with better ideas than I could have ever done myself. I went into this meeting looking like a genius full of options thanks to the BP community.
Now for the strategy
After having a very productive conversation with @Dave Foster and another strategy session on Friday we've decided to take advantage of rolling a good portion of these properties into a large apartment complex through using a reverse 1031 exchange.
Jackson is cheap. We are looking for a $1-2 million apartment complex. We will cash-out refi a portion of the best performing, most stable properties that we plan to keep long term. We will use that as the down payment on the apartment complex and over the next 180 days liquidate as many of the single family residences as we can deferring the tax into the apartment complex. (We actually have a way of getting rid of all the rest of them at full appraised value, but that's for a separate thread and you can message me if you want to know more about that).
If this strategy works as planned, most of the loan on the new apartment complex should be paid off. We could then re-leverage the complex and use that cash as down payments on 2 more equally sized complexes or one much larger complex. This should drastically increase monthly cash flow AND consolidate the management.
Experienced investors please tell me now where I'm going to screw this up so I can prep for those issues you already know I'm going to run into.
Hi Adam, the first Adam was caught in a lie and he got kicked out of the garden. There wasn't a second chance.
Investor · Sarasota, FL · Member since 2016 · 45 posts · 19 votes
9y
@Levi T.@Richard C.@Chris Purcell ok guys, I guess I'm a big swindler which is why I tagged everyone and gave the full scenario (which I could not have fit into a single sentence to explain the scenario)
But anyway, what do you three think of the strategy? All of you are experienced flippers - do you have any thoughts?
@Levi T.@Richard C.@Chris Purcell ok guys, I guess I'm a big swindler which is why I tagged everyone and gave the full scenario (which would I could not have fit into a sentence)
But anyway, what do you three think of the strategy? All of you are experienced flippers - do you have any thoughts?
There was this young investor who wanted to buy a few hundred units, but had little or no money. He found some partners to help make it all happen, and with their help he managed to secure favoriable financing from a local bank, plus down payment capital.
There was one little white lie, he had told all his investing partners how he had experance managing hundreds of units for others. It turned out he had never managed property before, in fact he had never touch a single peace of real estate in his life, and was a renter with zero experance beyound being a sales rep for sporting goods store.
In the process of trying to make the deal work, he said he would be managing the properties, but after a few weeks of owning them, he realized he had no clue what he was doing.
Since he was the managing member of the investment entity, he figured it was within his right to hire a management company to run the portfolio, which he was right in that assumption. However, years later the portfolio defaulted due to the management company actions, and the investors wrote a complaint to the SEC as they lost hundreds of millions due to a lie.
This is when that young investor learned that little white lies in real estate matter, and just like the titantic his dreams sank as he was sentence 30 years for security fraud.
He was never allowed to touch real estate investing again under SEC rules for being a bad actor, because of that one little white lie.
In real estate, your credibility, truthfulness, and trust, is everything. If your confortable deceiving in the context of this thread, could you be confertable deceiving investing partners with a little white lie...
Investor · Sarasota, FL · Member since 2016 · 45 posts · 19 votes
9y
@Levi T. and you don't see the difference between posting a scenario and telling people you have experience that you don't with the intent of getting them to trust you with their money. This was a brainstorming session.
Telling people you have experience that you don't and taking their money isn't a white lie. It's a boldface lie with intent to trick. I apologize if I offended you
@Levi T. and you don't see the difference between posting a scenario and telling people you have experience that you don't with the intent of getting them to trust you with their money. This was a brainstorming session.
Telling people you have experience that you don't and taking their money isn't a white lie. It's a boldface lie with intent to trick. I apologize if I offended you
You just made my point plainly. You made a boldface lie when you claimed you owned these properties, just as the fictional young man in my story claimed he managed hundreds of units.
If you want people to help you on here, don't start off with a lie.
Investor · Gaithersburg, MD · Member since 2013 · 660 posts · 441 votes
9y
You could have just said from the beginning it was a friend of yours. I don't understand why you had to say it was yourself. A simple, this isn't me, but if it was, what advice would you have and everything would have been fine.
Guys, its a story problem. "I have 3 apples. I eat two of them. how many do I have left?"
It doesn't matter that I don't actually have or eat any apples. The purpose is to present the scenario in as concise and simple way possible so that the focus is on the math problem and not relationship between characters. By saying "I own 18 properties free and clear that make 18K a month." Those responding ask their questions directly to me. There are questions people may not have asked like "why aren't you happy retiring with 18K a month?" because they may assume an intermediary wouldn't know. I wanted those questions to be asked and answered.
If my ultimate goal was to trick people into thinking I was something I'm not, why would I tag everyone and give them the full conclusion after it was all over with. I gave a final breakdown because I thought it would be beneficial to everyone involved after talking about it for the last couple days.
Am I only making sense to myself, because I feel like I just entered the twilight zone or something?
Guys, its a story problem. "I have 3 apples. I eat two of them. how many do I have left?"
It doesn't matter that I don't actually have or eat any apples. The purpose is to present the scenario in as concise and simple way possible so that the focus is on the math problem and not relationship between characters. By saying "I own 18 properties free and clear that make 18K a month." Those responding ask their questions directly to me. There are questions people may not have asked like "why aren't you happy retiring with 18K a month?" because they may assume an intermediary wouldn't know. I wanted those questions to be asked and answered.
If my ultimate goal was to trick people into thinking I was something I'm not, why would I tag everyone and give them the full conclusion after it was all over with. I gave a final breakdown because I thought it would be beneficial to everyone involved after talking about it for the last couple days.
Am I only making sense to myself, because I feel like I just entered the twilight zone or something?
Time to re-lie and do a double lie, and finally admit that you DO in fact own $1.6 million dollars free and clear in rental properties that net you 18k a month. Then we can all get back on topic.
Investor · Seattle, WA · Member since 2016 · 143 posts · 68 votes
9y
come on, give the guy some slack. there is a distinction between a lie and a scam. he is not trying to cheat money out of somebody. he just wanted to make it more directed to him for whatever purpose it worked until he told truth. he could have said nothing and moved on. up till then this is the best thread I read on bp about 1031 which I have deep doubts. he should get some credit for that. don't make it a bigger deal than what it is!