All Forum Posts by: Alan Grobmeier

@Syed H., I guess this means I’m doing it ‘wrong’?  ;-)

@Joel Owens, it sounds like I’m doing it ‘wrong’.  My interest rates are in the 4’s.  How are your clients getting loans in the 3’s?

@Douglas Gratz, I'm not sure what you mean by "do you find yourself always take less money than the bank might be willing to give in order to keep a positive cash flow?"  Could you explain?

The ppl I am competing with to buy are not investors, they are owner/occupants.  I, after refining my business model, buy my properties in the best school systems in the area.  My 'favorite' demographic is a married couple with little johnny & susan around 5-9 years old.  The ONLY reason I will lose them as tenants is due to them buying their own place or moving out of the area.

It truly is a long term play.  But if you are patient you can eventually cash out ALL of your own money out of the properties and be living off positive cash flow (if you want).  Here is one of my examples:

Bought 2012:  175k, 50k down  (note that I am basically buying my cashflow)

Initial Rent:  $1075/month

Initial PITI: $825/month

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Today's value:  275k

Rent:  $1575/month

PITI: $825

NOW you have some choices. You can do a cashout refi. But due to new IRS rules you can only borrow a maximum of $175k, the initial buy. The new PITI would be about $950-$1050 a month, depending on who/how you cash out.

But now I have none of my own cash in the property and a $500 per month positive cash flow.  And, most importantly, I'm not paying much in the way of tax on the positive cashflow.  Income - (expenses+interest+depreciation) = not much.  ;-)

Or you can just continue on with $750 positive cash flow and pay more in taxes.  :-(

This was over a 8 yr time period in an UP market.

My properties are all 3/2 single story.  I eventually put 100% ceramic tile through the whole house.  I'm in AZ, so this may not work for you.  As a result, I can increase my income by charging pet fees (not deposits) and a per month pet fee.  Never had a pet hurt my tile yet.  ;-)  ANYONE can rent one of my places.  Obviously I limit which breeds I accept, but that's about it.

I don't have a lot of CapEx as my places are under 30 years old, and hopefully under 15. Not a lot of moving parts to chase. I screen really hard as I have had as many as 20 parties apply for my places.

Hope my explanation helps.

@Douglas Gratz, depending on the part of the country, you CAN cashflow B/A properties with 20% down.  But it is getting much more difficult.

I am one who has 'subscribed' to the A/B property model.  At one point in time I owned as many as 10 properties.  I am now down to 6, having sold my 'dogs' when my business model was not as exact as it is today.  I also purchased in an 'up' market as I started my buying in AZ in 2010.  Talk about 'dumb luck'.  

Due to the fact that rental demand is high, I have been able to increase rents quite aggressively without losing tenants.

I have NEVER done an eviction & I can count my slow pays/lates on less than one hand.  My average stay is 5+ years.  It's about as close to 'push button' money as you can get.  Maintenance is done via home warranty.  I have averaged about a 'turn' per year and have gone a number of years without ANY 'turns'.  As you know, vacancy is the real killer to the real estate business.  

As @Jay Hinrichs, it is a long term play.  But the rents will at least track inflation, perhaps exceeding inflation.  The 'key', if there is one, is to put down enough money to make it cashflow a reasonable amount on day one.

Hope that helps.

@Quentin Bomgardner, my SDIra owns a property.  I looked at some of the non-recourse products to increase my ira holdings.

Imho they are purely appreciation plays.  Costs are high, interest is high, and terms kinda suck.  It might work for others, but I don’t see it working for me.  UBiT looks like a royal pain.  My cpa of 35 years has never filed a UBiT return, which is another layer of complexity.

My goal of having a rental property in my ira is to have income/buying power that tracks inflation.  My ira property is in a great school district, great tenants, and pretty much runs itself.

Hope that helps!

@Carl Fischer, why do you think it is better to hold a property in a Roth vs a traditional ira?

I look forward to your response.

Thx,

Alan

Where you live, as long as it’s not a $hithole.  ;-)

Excel works for me.  I’m thinking of adding access to my pc & going that route.  ;-)

@Account Closed, all I’ve done is conventional loans, or used my va & rented behind me when I moved.

Some ppl buy a property as a residence with the full intention of moving out in a year and buying another.  They then rinse/repeat. Better loan percentage, but you could have to pay PMi if under 20% down.

@Justin Caputo, 4 unit mf @ $300k is probably C class at best.  You will be chasing rent while being transitioned back to your drama filled junior high days.

My .02, if you are looking for push button money, this ain’t it!  ;-)