All Forum Posts by: Chris John

@Marty Johnston

I appreciate the response.  Dm coming your way...  haha.

@Wesley W.

I told the listing agent I wanted to make a full priced offer on my current residence after walking through the front door, through the living and dining rooms, and out onto the back deck.  I'd been there for about 30 seconds. 

I didn't need to see the kitchen, family room, bathrooms, bedrooms, etc. because it already checked off the boxes that were important to me.  Only they know what their boxes are.

As it goes, it's the second best decision I've ever made (you never know when your wife might read your real estate posts...). 

Ah, as a math teacher, this post feels like the time Cliff Clavin was on Jeopardy.  Right up my alley!  haha

 "I blame the way they teach math in school for the struggles found doing this. They teach/use story problems backwards. They should use story
problems first to teach the math, instead of teach the math, then apply"

@Joe Villeneuve You'll be happy to know that they're teaching it this way more and more (at least my math book is set up this way).

"They think they're super-special mentally, all the horsepower upstairs
in the world -- but they're not and it's laughably obvious at times."

@Jim K.  I'm not sure what you're getting at here?!?!  I'm pretty sure that I'm super-special mentally (and if my mom were still alive, she would definitely confirm.  However, my wife is on your side.  So....  haha.)

I tell my students all the time that their brains are still maturing just like their bodies.  I think the biggest problem we have is promoting kids based on age instead of ability/maturity.  It's crazy what kids can understand (that they couldn't previously), when their brain is more mature and ready for the information.  Some of these kids come to high school at 5' 7" and graduate at 5' 9".  Their "short" friend as a freshman go from 5' 4" to 6' 3".  Why wouldn't their brains be doing the same thing?

Rents in my corner of the world have risen rapidly over the past 10 years or so.  I'm finding several smaller commercial, residential properties (5-10 units) that are very below market on the rents.  I apologize for my ignorance on potential rules and verbiage, but I'm wondering how realistic this strategy is in the "Real World"?

I'm vaguely familiar with debt yield and a former student that's now a commercial lender told me that their bank is comfortable at around 8-10% (10-12 multiplier).  My thoughts, for example:

Buy a 1M property with a current noi of 70K for a cap rate of 7%. Based on the debt yield, I'd apparently have to put down somewhere between 150-300k although I'm guessing at least 200 - 250k for a 75-80% LTV. I'll add another 50k in renovation costs and assume 300k (250k + 50k).

Then raise rents (a property we're looking at has rents at around $900/mo, but my property manager feels like he can get them to $1400-1500/mo over a couple of years). So, assuming all of this is accurate and doable, let's assume a new NOI of 100k.

If I assume a 7% cap rate (what I bought at in this fictional scenario), it should sell for around 1.4 million and I'd roughly double my 300k in a couple of years.  What I'd rather do is refinance it for 1M - 1.2M (again the 10-12 multiplier), get my cash out plus a little, having a cashflowing property and money to go do it again.

Is this something that people do?  Is there more to it than this?  Would a lender give cash out like this on residential?  I just don't know enough about commercial, so I'd love feedback.

Thank you!

I'd echo what @Jaron Walling says about townhomes. A lot of times the numbers look great, but once you start factoring in the HOA fees they look less good.

Also, not that anybody cares, but I wanted to name my twin boys Jarrett and Jaron, but my wife didn't, so Mason and Jackson they are...

@Joe Villeneuve

Man, if I'm ever in your neck of the woods, I'm going to message you and try to buy you lunch or a beer or something and pick your brain if you're up for it.  Our investment philosophies are extremely similar (although I assume you're a lot better at acting as I'm terribly lazy) and I've broached this subject with you before, but I'll try to be more specific. 

I understand that there are fees associated with borrowing as well as selling, but the fees for borrowing are less.  Also, in California, we have Prop 13 which keep our property taxes low.  For instance, if I sold my properties, the new owner would pay about triple for taxes compared to what I pay.  So, if I were to sell my property, I'd expect to pay triple the taxes on a new, similar property.

Have you calculated how much that impacts the sell and reinvest vs. the refinance and reinvest numbers?  I know that not all states have a Prop 13, but it feels so significant to California investing.  I'm so afraid to sell my California properties, but definitely follow what you're saying as I just refinanced my properties and am currently investing that money...

Thanks!

@Steven Birch

I think you're in the same situation a lot of us are in at the moment (could be wrong as I'm anything but a national expert).  Anyway, I think at the current rates (assuming you qualify and a 220k house didn't need a lot of money put into it) you could probably make a property cash flow, no?

I'd be more concerned about the cash flow and ROI than I would about the 1% rule. By the way, the 2% rule is an absolute fantasy where I live. Armageddon would have to happen first, I think.

Having said all of this, who knows what's going to happen in 2021 based on the pandemic, economy, and eviction moratorium?  Also, if you look out of area, you can probably still find some 1% deals. 

Good luck on a productive and safe 2021.

@Ondrej Brown

I can't disagree that 2021 should be... interesting.  I'm personally trying to stay a little more liquid than normal.  If things do go south, hopefully it'll get me through in decent shape.  One never knows, however.

Regardless, have an awesome 2021 and stay safe, brother!

@Greg Gangle  I hear what you're saying (even though I don't ever plan to know that feeling.  haha), but just remember that equity is money invested at 0%.  Your house appreciates the same amount regardless of whether you have no loan or are upside down, so I figure I may as well retain some liquidity.

I totally realize that not everyone shares my views though, so best wishes!

@Jay E.

Did you buy down the rate?  A lot?  I'd definitely shop around on those points.  I could be wrong as it's literally been decades since I was a failed lender  :(  , but that sounds like A LOT of fees.