All Forum Posts by: Dustin Beam

 My first was really 12 units...I sold those after owning about 1.5 years and did a 1031 exchange to by the 11 townhouses I have now. I realize how some might not see this as scaling, but the total rents on the 11 units will be about 60-70% higher than the total rents on the 12 that I sold.

I should also say that my original 12 weren't in full need of rehab. Interiors were average with need of some updating for the area and class they were. The exterior was in bad shape. Paint peeling, rotten wood, etc. 

But on to your point/question, how did I do it? First I ran the numbers as acutely as I could. I made a spreadsheet (available for download here on BP) that frankly got me pretty dang close to what the real numbers ended up. Not perfect, but close. So I knew (or thought I knew) it was a good deal. I figured if I just left it at status quo, I could make some money. 

But it didn't take long where I basically made the decision that I didn't want tired, run down property. I wanted to offer a nicer place to try and attract nicer tenants and maybe some higher rents. I was new, so you might not be surprised to hear that capital was tight. So I used the cashflow to fund improvement. First was to fix and repaint the exterior. Pricey, but looked great afterward. Then when units emptied I used saved cashflow to replace carpet w/ LVT, repaint, and replace dated countertops. Just depended what was needed. Rents went up a little because of it.

So basically I made no actual cash on those until the sale. It was tough at times, but the underlying fact that allowed it to ultimately succeed was that the numbers worked in the first place. At any time I could have stopped the "upgrades" and simply maintained and the cashflow would have worked.

My new property had new challenges. Where the first 12 properties had 11 out of the 12 units filled, my current 11 only had 4 units filled when I bought them. Four occupied units wouldn't even cover the PITI.

Four of the empty units needed new floors and paint. One of those empties had the AC/furnace coils, water piping, main electrical panel, and water heater all stolen. Those are being fixed now. Several unit had tons of crap (furniture, clothes, etc) all left behind. Luckily, two empties didn't need much to rent, got those rented very quickly which now covers PITI. The rest will probably take in the ballpark of $35k-$40k to replace all flooring with nice LVT, repaint, repair, and replace stolen items. But since I put all proceeds from my previous sale, which amounted to basically 30% down, my bank gave me a $50k LOC for repairs.

Think there's stress involved? Haha, definitely. But I bought someone's problem...at the right price which is key. And I should say that "the right price" is IMO. My advice to newer newbies is run number, run numbers, run numbers. Included everything you can even think of. And do like the line from "The Patriot"....aim small, hit small. IOW, aim as accurately as possible and if you're wrong, you'll probably still be close. And then jump in the pool even if you're not sure if the water is cold. Have the confidence to know you won't drown. Thanks for reading this book if you made it this far :)

 Hi Dean, sorry for the late response, I just saw your post. Can you expand on your question a little bit? I'm not totally sure what you mean.

You're probably aware, but ROI and IRR are not the same thing. I would shoot for a much higher IRR than 10%. But that's just me, like what is said here often, we all have different goals and strategies.

On my previously owned property, I basically kept rolling the profit back into the property, which turned out to be  a 1.5 year flip. It profited well (IMO) but used that to purchase my new properties. 

I'm currently fixing up units that were left distressed. So long story short, I haven't pocketed any cashflow, but in a roundabout way it was used for future purchase. 

Once I get these units fixed and rented, I believe I'll cashflow fairly well. I think I'll split the cashflow in something like 25% to me, 75% to business for expenses and/or future purchase.

If you're gonna hold it forever and it cash flows at a return you're happy with, who cares? 

Of course the flip side is that if you ever sell, you're hurting yourself then.

I don't feel like I lighting the world on fire, but maybe I'd fit in the thread starters description. Been investing for almost two years and have 11 units. I did by buying a personal residence and fixing it up (basically a long term flip). 

Used that money plus savings to buy 12 somewhat distressed units. Fixed a lot of things and did value add to the property. Sold them in a 1031 to buy the 11 I have now in a better neighborhood (C class to B). 

Time will tell but I believe I should be able to cash out refinance in about a year and come close to doubling my portfolio with that money. 

Nothing magic about my story. I have a solid above average job, but nothing spectacular I assure you. 

I easily and cheaply formed an LLC prior to my first purchase. Financing was not a problem. YMMV, but I didn't have any problems like people above are talking about. Only potential downside is your down payment amount.

As far as protection, some people believe umbrella insurance is enough, some don't. There won't be a consensus agreement on that. For me, the upside of an LLC far outweighs the downside.

Are you asking if you should circumvent the actual seller (father) by using the daughter who has POA? If the father is coherent as you say, definitely not. If he isn't, IMO then it would be ok in my opinion to use the daughters' signatures.

Imitation is the sincerest form of flattery.

 It's funny you say that. I was just having a conversation w/ my father in law's girlfriend. She asked me how work was going, and I went on to tell her that with my personality type, I really can't be passionate and fulfilled when working for someone else. And then went on to say that "I don't want to HAVE to work" . I could tell from the look on her face that I may as well have said "I dont' want to work". 

She told me "well, we all have to go to work". Besides that being a very popular, but incorrect, opinion.. She missed the point entirely. I want the freedom on any given day to do what I want to do. I don't like that I HAVE to be at my desk every morning Monday-Friday. I don't like that I have to ask permission to miss a day. 

Like you, I want the freedom to choose what I do any given day. I want true freedom way more than money. Money just allows that freedom to blossom.