All Forum Posts by: Darren Mesibov

I'm curious about the same thing as well. When I started saving I didn't have enough to be bothered by the 1.8% return on my money market account, but now that I've accumulated a bit I'm starting to lament loosing to inflation while I continue to save. 

@Will Gaston good feedback.  Would you mind elaborating a bit more on the underwriting process, and what you wish you had known about it?

Do you mind if I ask if you had to do anything creative to come up with the down payment (borrowing, equity partner etc..) or was it just cash?

There is always a next recession in out future. No investor can accurately predict or control the timing or severity of said recession, although we can all waste our time and attention trying. It's my opinion that we should be applying our efforts to plan for how we will react to changing economic conditions, rather than trying to predict their course. Once you've done this you can safely invest (conservatively), even in an inflated market. It sounds to me as though the O.P. is looking for advice on how to insulate himself against the next recession, rather than when it's coming or whether he should buy now.  

@Marcus Johnson maybe I don't have much financial sense either. We (wife and I) had a combined income of about $75k when we both went back to school. We took on about $160k in debt, at roughly4.3% which is a burden we must bear. On the bright side, our household income has increased by over $140k annually. If something happens to my income stream I can replace it anywhere in the U.S. within 90 days as long as I am physically able. Small town, big city, doesn't matter. I felt that it was a reasonable course of action given the returns, risk profile and other options I had at the time. If I can generate similar returns in my real estate pursuits I would consider it an overwhelming success. I have wrestled with some of the same concerns as the original poster. I chose to handle mine by paying off about $30k of my grad school loans first, as those were at the highest rates (6% +/-). Anything under about 3% (undergrad loans) I'm going to stretch out as long as possible, as I suspect they are not even keeping up with inflation. Every year my income goes up, as does overall cost of living, but the payments on those loans stay the same. I suspect it's going to seem like a pretty insignificant burden by the time I'm making the last year of those payments. I am curious to know what you decide to do. Please keep us posted.

@Madeline Hansen

1) I think in your case it might be better to finance, as you can leverage your gain.  This is to say that if you earn 5% of the total property value annually in equity through appreciation and amortization, the leverage would increase your return to 25% on a 20% down payment. For example, $100k property bought with $20 down is worth 103K in a year, and the mortgage balance is down from the initial 80K borrowed to 78K. Now you have $25k equity and have increased your holding by 5k on a 20k investment for a 25% rate of return.  The caveat being that it's much more complicated than that with real world numbers and scenarios

2) I would save more or consider a partner. Not necessarily for a higher priced property, but you'll need some cash for reserves and for the things you can't see coming. 

3) It depends upon your personal situation, how much free time and experience you have and the value of your time away from work. There are many threads here on turn key vs BRRR.

4) This is really state and property specific. Taxes, maintenance and reserves will vary by location and age of property.  In general, however I would say that property age and condition may be a bigger factor. Just do your math carefully and with a pessimistic approach.

5) See above.  There are many threads about this on here.

6) I prefer single or multi family buildings, rather than an individual condo or apartment. SFH and multi family hold their value much better when things go badly. Condos are less marketable in most cases. They are the first to loose value and the last to recover during a slowdown. Also, I would rather spend money on an amortizing mortgage than an HOA. I believe that it's not that hard to make money in real estate during good times, but another recession is undoubtedly coming during my investment horizon. It's those who survive and thrive during the hard times who seem to become truly wealthy. I wish I had a nickel for every investor who lost it all in 2008. My primary objective with any investment is not to loose my shirt when hard times re visit. Condos are not for me.

7) Read/Listen to everything that you can.  Try to remember that some of it is gold, and some of it is garbage and develop the skill of critiquing the information you consume.  Find someone with some experience who's willing to share what they know with you.  Stick with it. 

@James Wise in addition to the valid points you have made, I also think that opportunity cost is often overlooked. Some people would not be wise to spend their time doing a BRRR if they can pay someone who earns less for their time to do the work instead. Moreover, an expert can often do the same job in 10 hours that I can do in 20. To me it seems that turnkey could be a logical way in for a high earner who is not yet an expert.

@Jennifer Perich, I have not read it yet, thanks for the recommendation. I just ordered it.

I am in the Southeast, so I have considered some of the same markets.

I thought briefly about Chattanooga and Jacksonville.  In the right part of the market cycle, I think there are some very good arguments for Jacksonville or St. Pete. 

I wouldn't consider myself very educated on Atlanta, although it's easy to get to from where I live. Would you mind sharing your thoughts on pros vs cons in that market?

@Jennifer Perich I have the same concern about not being able to scale quickly in the beginning. I ultimately concluded that the time to build slowly in the beginning might be worth it. Once I know the market, have the team, and make some early mistakes I believe I will be able to combine those experiences along with my network, some creativity and income from my W2 to make things happen very quickly. I agree that some people are able to do well with BRRR, but for me it's not a good fit due to the shear amount of time and work involved. I think that time can be spent in a more efficient way. I'm also looking at areas away from my home market, which can complicate the BRRR process. I'd rather come up with a bit more cash up front and spend my time networking, learning the market, and finding deals.

What markets are you considering?

@Jennifer Perich I have some previous but not recent experience with single-family and small multi family properties. I agree with you about the Cash flow from smaller deals being rather insignificant for the time invested, but I may take the plunge anyway. I view the smaller investments as a lower risk way to take action and get involved as I continue to gain experience and network. The real value in these sized investments may not be the actual cash flow from the property so much as the experience gained on the path to larger investments. Think of it as an entry level job in a new career.