All Forum Posts by: Brandon H.

I would not buy right now.  Pricing of new construction is too high in the Jacksonville market to yield a decent return - particularly given the economic uncertainty for the next 12-18 months.  I cannot speak to how many new homes have come on the market in Jacksonville YoY but I'm not bullish on demand holding up (again, the aforementioned economic uncertainty).  

For additional information, the company used to be called "Jax Investments". They also appear to run a related business called "Holistic REI" or "Holistic Investments". They all are pretty much the same company it seems. I had a good experience working with Brian Scrone and his team. My complaints primarily center around the property management company they recommend (Suncoast) who are, at best, marginal. Obviously, Suncoast is a different company with different people so I cannot fault Jax Investments for this.

If your score is already above 700, why do you care about getting it higher?  You should already qualify for the best rates available.  I'm not sure what advantage you're looking for.

Mostly uneventful. Rents have increased to $1476/month. Total hard expenses (mortgage, property taxes, insurance, HOA, property mgmt) are $1039; net ~$437/month in cash flow with almost 11% cash on cash return before vacancy and tenant placement fees.

Suncoast has been marginal - I've had to do lots of hand-holding and following up about things because they seem incapable of handling them.  For example, they've been collecting the wrong rent for months now and communication on it has been nonexistent except for when I ask - I am unclear as to when they'll finally get it resolved.  Another example within the past year was where they charged me the wrong mgmt fees and it took over six months from my initial pointing out of the discrepancy until it was resolved - this one literally took over a dozen emails.  To be fair, every issue has been minor and a fairly small amount in terms of dollars but it has been a constant source of annoyance/frustration.  For this reason, I've had considerable pause with pursuing another investment to be managed by Suncoast and may or may not go with another one.  Unfortunately, it's hard to find good deals and even harder to find decent property mgmt companies.  

If it were me, I'd pay my parents back first.  Financial logic would say pay the bank first because the rate is higher but your parents are only loaning you at a such a low rate because they are your parents.  Don't take advantage of their trust.

When you defer taxes (e.g. traditional IRA or a 401k), you end up paying the taxes at your effective tax rate (i.e. in retirement at a variety of tax brackets). Whereas with a Roth, you pay at your marginal tax rate (which is going to be higher than your effective rate). Roth IRAs can be a good deal for people with low enough income where they pay little in taxes now but they are overstated in their advantages. If you're worried about picking one horse, do both as suggested by @Steve C.

Yeah, I'm surprised more people haven't shared specifics (e.g. most people didn't share to the same level of granularity as I did).  Maybe we should've provided a template to populate with people's numbers to help compile our dataset.  

I do think there are a lot of turnkey companies out there that are just pawning off bad investments and the market is blindly gobbling them up.  Too much cash sloshing around so good investments are harder to come by.  People are buying properties that only return 3% cash on cash - they are one month vacancy away from losing their profits for years!  

Alternative theory: Perhaps turnkey investors are more inclined to be more passive and "set it and forget it" and don't spend as much time on BiggerPockets. I'm still leaning towards the above though. Turnkey is a great place to start for first time investors but, at a certain point, you probably need to start doing your own fixer uppers (e.g. BRRRR) or you'll never scale...

Update on my numbers:  
Purchase price = $165,320
Rent = $1,476/month
Mortgage = $647/month (30 year @ 4.75%)
Property taxes = $212/month
Insurance = $42/month
HOA = $21/month
Property mgmt (8%) = $118/month
Cash flow = $437/month (~11% cash on cash return)

This is before CapEx (the property was new construction so I haven't had many repairs), tenant placement fees and vacancy (I haven't had any turnover). Return is down a little bit due to the taxes finally being reassessed (as expected). In years with turnover (assuming one month vacancy and paying the tenant placement fee), my return drops down to ~6.34% cash on cash return. Please note that these rates do not include any principal pay down - simply annual cash flow divided by my initial cash outlay. The cash on cash return isn't bad but not some bombshell either.

I think there are very few circumstances where it's worth cashing out a retirement account and paying the penalties.  In my view, retirement should always be separate from your real estate investing activities.  Then, if something goes terribly wrong with your real estate portfolio, you at least know you're retirement is taken care of.  

My advice:  roll the old 401k over to Vanguard and buy the ETF VTI (total market index) and then promptly forget about it until you're old enough to withdraw from the account without penalty.  

First, I would like to thank everyone for reviving a thread that should've died off months ago.  There are other threads on this topic have been discussed ad nauseam.  Please go there, read about the comments from your fellow cultists or anti-cultists as you so desire.  

Second, to clarify - I fully understand how the math works with this.  What I was commenting on was the fact that this "strategy" comes up again and again and most people just scream about how it works but can't explain how it does.  It makes no sense for people to do this when most of the advocates don't even understand math.  It's literally the same zeal you hear from cultists.  If it works for you, great; but please don't force everyone to guzzle your Kool-Aid.

Third, the reality is that the risk of running aground is too great for most people. It is easier to simply make extra payments towards your mortgage and be done with it. Even if you go down the road of the math with your average daily balance and the effective rate on the HELOC, you're getting to the point of slicing hairs (reference: Pareto Principle or diminishing marginal returns, your choice). You're better off spending the time you would be managing this velocity banking "strategy" working more to get more income, finding deals, managing you properties, spending time with your kids, etc. Keep in mind that one mistake or a few days delay and you're going to be upside down and would've been better off taking the simple route of paying down your mortgage the traditional way.

Lastly, a reoccurring theme with velocity banking is false equivalencies (e.g. HELOCs that you can get the same terms as your mortgage don't exist, statements how VB caused a mortgage to be paid off in just a few years when really it was the extra principal payments, etc.).  Something to be aware of...

 Alright, I'm getting tired of playing velocity banking policeman.  This thread really needs to die off.  What Jason Primrose is highlighting isn't even an apples to apples comparison.  He's comparing paying $1k more per month to a mortgage versus applying $5k via velocity banking.  It's a scam, people.  The calculator link he provided is even trying to sell you "Essentials Education" and pretends like it's an investment.  

If any of you want to wear tin foil hats and drink Kool-Aid, that's fine with me, but please stop masquerading a cult as some mathematical magic.  It's not - anyone who tells you otherwise is either lying or hasn't figured out how math works.