All Forum Posts by: Christopher Morris

I have properties in all neighborhood classes. On paper, my C rentals have amazing cash flow. The reality at the end of the year is always much different. I get way more vacancies and repairs. In these neighborhoods it's just much harder to rent the units to somebody who will not wreck it on the way out. My B+ rentals are a different story. I get repair calls maybe once or twice a year, and tenants often stay years at a time. The C rentals still cash flow better, but the difference is marginal and honestly not worth the extra headache. 90% of my gains have been through appreciation and forcing equity through value add. I'm at a point now where I am able to live off of my cash flow, but it took me a lot more units than I thought it would. Honestly if you are trying to retire off the income just purchase value adds in the best neighborhoods you can afford. Rents will increase and you can pull equity out of these homes when they go up in value. 

On the other hand, you can flip in any neighborhood as long as you are buying at a steep discount below ARV.

@Christopher Morris

You hit the nail on the head.

The “retire on real estate cash flow” gurus sell the dream of quick retirement from cash flow.

Buy two houses a year that each cash flow $1000 a month and retire in 5 years, they preach.

Or invest passively in real estate syndications and financial freedom will soon be yours, they promise.

What they don’t tell you is:

In order to owner enough real estate to generate say $10,000 a month income let’s say, you need at least $2M of capital invested in YES cash flowing real estate.

Let’s say one could buy rental real estate that provides a 6% annual cash on cash return. It could be either single family or multifamily. And truth be told, a 6% ConC return year one is hard to find but let’s stipulate to that return.

To get $10,000 a month, $120,000 a year off 6% annual cash on cash, how much capital does one need invested?

$120,000/0.06 equals $2,000,000.

So in my mind the target should NOT be cash flow but rather building net worth.

Despite what the gurus say, sufficient cash flow to be financially free can only come once one has sufficient capital to invest.

Let’s be clear I only buy apartment propeties that cash flow but immediate cash flow to put spendable dollars in my pocket is NOT the primary goal. The primary goal is appreciation adding value building equity and therefore net worth.

I’ve been at this “game” 46 years  and there is no magic bullet.

It takes time, discipline and consistent effort.

But it can be done in 10 years.

Of course this means living below one’s means - ie spend less than they make - to develop and build cash and capital that can be invested and then watch ot grow over time.

Hope this helps.

Arn

@Christopher Morris

You got alot of great insight already. I'll add that every successful real estate investor i know personally has a w2 job and none intend to get rid of it anytime soon.

Making real estate your primary income source isn't passive unless you have access to significant capital. Not debt but YOUR money. The example that Arn gave you probably gets a whole lot more expensive when you give 8% of gross to a manager to make it passive.

If you're going to self-manage you should definitely pick market(s) that you are familiar with. I'm not a big personal fan of Easton or really anywhere in ABE, but it's generally held its own even as a decent number of people make that crazy-*** commute into NYC. I think they've really been helped by the full/partial telecommute, as it's not terrible if you had to go into the city once or twice a week, but if everyone goes back to full-on 5 day offices I think there will be some exodus. 

In any case, it's generally more affordable than NJ especially when it comes to property tax so I don't think you're off-base looking in that area. I think Bethlehem and some of the satellite areas are nicer than Easton especially going up 33 as long as you stay spitting distance to 78. Get in your car on weekends and go drive some of the places like Nazareth, Hellertown, even Wind Gap isn't terribly far. I lived in the Poconos for a few years as a kid and my father still lives just off 33 near Wind Gap so I know the area pretty well (and my daughter's up in Bethlehem). 

@Christopher Morris

To assess a market, consider population growth, job market, economic growth, rent-to-price ratio, cost of living, school districts, and growth benchmarks. A steady annual growth rate, diverse industries, and affordable living attract residents. Factors like real estate trends, property taxes, and competition also play a role. Easton is a promising market due to its proximity, affordability, and steady growth.

Good luck!

Hi @Christopher Morris I'll let you know my wife and I got to Fi via house hacking in New Jersey. Plain and simple the reason we were able to acquire the properties we have over the years is because we leverage low money down loans. We have never purchased a home for more than 10% down. Most of the homes we have purchased are 5% down. The way I see it is most homes will cost you 25% down and renovations out of state will be difficult or very expensive so the ability to force appreciation becomes tough. Most out of states deals end up looking like an IRA, decent returns, safe but meant for very long term to get anywhere. BRRR house hacking using 5% down loan and applying down payment to renovations forcing appreciation is tough to beat and allows you to move quickly in NJ.

Quote from @Christopher Morris:

I tried looking into this from a few avenues and haven't come to a conclusion. 

I started my first FHA house hack back in November 2023. Being that my year living here is coming up, I was hoping to refinance into conventional and buy again with the 5% Fannie Mae.

But... I started looking into the FHA streamline product and spoke to my lender about it. Roughly, it seems I could save $350-500 a month in payments with the current interest rates using this FHA streamline. (going from 6.75 to 5.5-5.75)

What I fear is that this forces me to stay in the property again for another 12 months. Is that true? I was hoping to be onto my second house hack in Q1 of 2025. 

Anyone with the expertise that can help me out with this situation?  

Thank you! 

I recently joined BP, and I’m reviewing older questions:

FHA Streamline Refinancing is an excellent option for lowering your monthly payments, especially with the potential rate reduction you're seeing. However, it typically doesn’t have any occupancy requirement post-refinance, meaning you aren't obligated to live in the property for another 12 months just because you did an FHA streamline. The key occupancy requirement for FHA loans is at the time of the original purchase—usually requiring you to live in the home for at least a year.

If you've met the initial FHA loan requirement of living in the property for 12 months (which you would have by November 2024), you're typically free to move out and house-hack again, even if you choose the FHA streamline option
 If your goal is to acquire another property in Q1 2025, refinancing via FHA streamline shouldn’t prevent that. You may also purchase another home using FHA financing as long as you are outside the 100 mile radius rule. 

@Christopher Morris so here's how this works. If you refinance it as your primary residence, then yes, you will be signing a new Mortgage at closing that says you intend to occupy for 12 months, essentially resetting your clock to another 12 months.

But here's the huge kicker. You can do a FHA streamline refi on an investment property, and the rate is the same as a primary. So, wait until you buy another primary residence first using the 5% down Conventional, and THEN do the streamline refi on your existing property as an investment property. Same rules, same guidelines, same rate, just no occupancy requirement.

Working with the right loan officer makes all the difference...

Best of luck!