All Forum Posts by: Marcus Auerbach

Great examples, love reading these stories. Equity is where it's at and most people chase cash flow. - And no, that does not mean you should buy cash flow negative deals!!

If you are building a typical cash flow portfolio (aka lower price point properties) you are creating a very maintenance-intensive business. You pay for that cash flow in the form of headaches. And giving it to a PM does not solve the problem entirely - ask anyone who has lived it for a decade. 

Landlord burn-out is a thing.

If you buy one single-family home every year over the next 30 years and let's say they are all at or above median price for your city, you have a low maintenance portfolio with at least 50% to 70% equity. Do the math how much that would be. 

If you were to cash-out refi every year an amount equal to the annual appreciation and not exceeding what your annual rent increase (rate of inflation) can support, your business is borrowing money. 

And borrowing money is not income, it is not a taxable event.

@Henry Clark this is the retirement scenario and it almost does not matter what the loan costs are. You only cash out the equity you gained and what the rent increase will fund - so your leverage and your cash flow remain unchanged.

I would argue it is a very conservative strategy, it's exactly what pretty much every financial advisor tells their clients to do with their 401k, live of the increase, maintain the principal.

Except, with RE it's tax free.

If you have bigger commercial properties, but also in general with a single family portfolio, you could even use a LOC and draw as you need, refi every few years. Its basically when you realize you have more properties than years to live even if you live to 100.

What's the point of trying to pay it all off? Start enjoying the cash flow and skim off the equity gains, and if it's more than you need personally, do something good for people around you - isn't that why we got into real estate into the first place?

Great question! Designing a logo, working on your website, setting up LLCs and yes, networking - all things wanna-be investors do to make them feel like they are "doing it".

Today networking looks different: you work with people on something and then both of you decide if you want to do that again. In other words, your network develops as you grow your business, not before you start your business.

Of course, there is still value it talking to guys, joining a REIA (like the RPA in Milwaukee) but IMO it is not how you find business. People get tired of you if you just "network" them without a specific purpose. As an investor for 15= years I don't think I have ever bought a deal based on networking. 6000 yellow letters yielded me one deal, 98% came from the MLS (of course, that is also, because I basically live on the MLS, so there is a huge bias)

As an agent my business finds me via my YouTube channel. I make myself available online - basically on demand - if someone wants the latest numbers about Milwaukee and an explanation WHY the market is behaving this way at the moment it is, there are your insights - for free, whenever you have a few minutes and nothing expected in return.

Tough to answer your question, stabilized means something different for everyone, but let me try to give you some context.

Cap rates don't really apply for 1-4 units, only 5 and up. 1-4 units are appraised via comps. Multifamily comps here in Milwaukee range around 6 or 7 for most properties, can go as low as 5 for high-quality assets and 9 for distressed properties.

Total ROI including equity should be in the high teens at least for stabilized assets, prob in the 20s for the first years. CoC return by itself is a poor metric, a lot of people ask for 10% CoC, but the reality is that in order to achieve 10% your are hemorrhaging in other areas like capex and equity - and that is typically a much larger number.

Our properties are typically only between 5% and 6% CoC and on the lower side, but also in good schools districts, so equity and depreciation are better.

In God we trust, all other bring data. Click to enlarge.

Yes, even though the market would favor good flips I think. Speaking for my market, ten years ago the flip model was gut rehabs, now you go broke with that, because you can't get the purchase price low enough to reflect the SoW. In 2025 I would pick ugly, and "paint and stage". You definitely don't have to worry about not finding a buyer!

At least the market gives us stuff to talk about. As an agent, I have never seen such low transaction volume as we have right now in Milwaukee. At the same time we see prices go up 11% in Q1 YoY. Very strange.

@Eshe Harvey  I love your enthusiasm, but here is a dose of reality:

- real estate investing is NOT rocket science, it's actually pretty simple (however, not easy)

- Robert Kyosaki said getting wealthy is pretty mundane, repetitive and boring, he was right

- networking is totally overrated. New investors always think that's where it's at. The reality is you build your network by doing deals and AFTER you have worked with someone you both decide to do that again.

- the only thing special you need is passion for REI, the energy to keep grinding when it gets tough

- read books about REI until the content becomes repetitive to you, that will benefit you a lot more than meeting someone for coffee who see's "something special in you

I remember the feeling of excitement and opportunity when I first discovered real estate investing (17 years ago). I was totally mesmerized and wanted to talk to people on the inside, who knew the "secrets". 

So you understand why I am telling you this, because I've walked that path. 

I had a pretty average REI career not far from you here in Milwaukee. 8 years after my first property (and a lot of BRRRRS, nights and weekends) I was able to quit my corporate W2 and we have only grown the portfolio ever since - my wife is in charge of operations now. I volunteer at our local REIA - the RPAWI .org and teach young investors.

I do that for FREE because I feel that is paying it forward and when they need an agent, I refer them, because as a broker I work in a different price range. 

I would never tell anyone I see something special in them or meet them for coffee one-on-one, just saying..

Looks like your median is now $314,000 - that is quite expensive, I was surprised to see that. But BP is nationwide, so that should not matter as much.  It seems to me that most posts here are from people who want to get started and don't even know what questions to ask. Read a few books is really the best you can tell them..