All Forum Posts by: Deniz Eker

My current state is too expensive for me to buy right now. Other states like Ohio , Philadelphia, Baltimore and Delaware seems easier to get started in. Should I just up and move to start business ? Or figure out how to invest long distance.

@Caleb Heimsoth Absolutely.  Like I mentioned above, I'm well aware this wasn't a home run deal, but it was my first deal and I was able to acquire a solid property in a great area that should steadily produce income for a long time.  As you know turnkey can mean many things and this property was rent ready, but I knew it had some things I would need to upgrade in the near future.  I could easily reduce my budgeted cap ex and repairs to 5% each, which are numbers many investors on BP and locally use, to "improve" my cash flow to ~$115/month and make it look much better. But the truth is I budget conservatively and would rather have excess reserves than be scrambling to come with cash when expenses come up.  

The equity gain through forced appreciation has also allowed me to have very strong cash reserves that could help me cover the monthly expenses for a couple years should I get no rents with all the COVID-19 stuff going on.  So that security of this asset is a huge piece of mind.  First deals are rarely a slam dunk, so to get a quality asset which can produce cash flow even with conservative budgeting and allow me to draw out enough equity to give me a lot of financial flexibility is a win in my book.  I know this wouldn't be considered a great success for many others who've been doing this for a while, but I'm in it for the long haul and my wins will get better as I learn and do more.  

@Deniz Eker IT is all about exit strategy. Buy and hold is less risky especially in a turbulent market because you are looking to make your money back over years instead of months. IF the market tanks for a few years you you aren't worried because you have cash flow from a buy and hold where as a flip could wipe out a lot of cash.

Thank you Jason.I like buy and hold but looking to BRRR options and deals at this point.This helps

I'm baking in a 10-15% buffer in home values just as a conservation standard in buy-holds Deniz. My strategy is a 'straddle' actually of two Buy & Sell for every one Buy-Hold currently. This is a method to play the percentages and stay in cash (flexibility) while holding assets as well. You can never go wrong over the long-term in holding income producing properties as long as you bought well, but staying in cash also allows you the flexibility to pounce on deals that will surely arise from the current economic environment. I'm limiting my flips to 3-months to keep tight reins on market valuation fluidity. In other words, if I bought a home today that has a $400K ARV in todays market, but 6-12 months from now, the market changes significantly, and the 'new ARV' is $300K, I will have lost profitability to time, not the actual value of my rehab.

In the end, residential-ARV is a collective consciousness or 'opinion' as opposed to commercial real estate valuations which are cap-rate and income-to-expense driven, rather than emotional and comparative in nature as residential real estate is. I personally don't believe that real estate values will recede more than 5 to 8% (if at all) as supply-demand is still in our favor and the new buying generation (Millennials) are still buyer-driven and will continue to drive demand, barring anything more drastic than the current economic factors.

I hope this helps Deniz.

Thank you for the clarification.I think 2 buy and sell to one buy and hold is a great idea.

The current transition we're in reminds me of Warren Buffet's old adage -"Be fearful when others are greedy and greedy when others are fearful." There are a lot of deals to be had right now if you're patient and know where to look, but it also depends on your investment criteria. Either way, it's especially a great time if you are a cash buyer.

While the value of real estate assets may recede, the data from the last three pandemics show that listings do recede in number, but home values actually remain consistent due to the supply-demand factor. However there are many more factors in play. When property sales reduce, this creates more renters, which is great for buy-hold investors as long as you buy well.

If you're a flipper, I would buy cautiously and only buy in high velocity markets and in the median price range where the largest number of buyers qualify - which is dependent on market you operate in. What I wouldn't do now is build new homes or commit to renovations that require more than 3-months to renovate and sell. I personally believe that this will be a short to mid-term lag and we'll see the economy and housing market recover and expand in Q1 of 2021.

This is also actually a great time for "subject-to" purchasing which is an excellent way to monetize the current real estate landscape. “Subject to” investing is a method of purchasing property that leaves the seller’s loan in place. In essence, it allows you, the buyer, to purchase real estate without qualifying for new financing for the property – in essence what you're doing is buying real estate that is “subject to” the existing debt. The same rule applies though - work through the numbers and decide if you believe you can rent, lease-purchase or sell the property within a predetermined period of time while mitigating risks and knowing your exit strategy.

@Deniz Eker where are you buying? I live locally in a suburb of Cleveland and am looking at SFRs right now.