All Forum Posts by: Austin Fruechting

At some point you just can't do it all yourself. It's the same as owning/managing a business or being the head of a department. Sure you could do all their jobs better than they could, but you simply can't do all their jobs. If your standard is to run and treat them as you would... to do the job as well as you would... and you will just do it yourself since you can't meet that standard... then you will cap out your growth pretty quickly, just as you couldn't scale any business with that standard. A good rule thumb is 80% in business. If you can find someone that will perform tasks at 80%+ that's acceptable. 

I think it's great at the beginning to do things yourself in order to make additional money to move quicker and have the knowledge to implement better systems. But if you're never willing to hand it off, you'll either cap your growth, or just replace your day job with being a property manager. 

I spent a TON of time early doing everything myself, learning, implementing systems, and even starting and selling a property management company. At this point I have 156 rental units. To maintain those I average one hour per week, and that includes the additional time at the end of the year prepping stuff for the accountant. I don't need any more properties, but I love the deal making side of things. So I spend a lot of time finding and creating deals....    -your mythical hotshot landlord

I've been creative almost every time. I've used lines of credit, credit card advances, credit cards for materials, personal loans, big seller credits, and combinations thereof.... and equity partners when the deals were too big for the other methods. 

I don't even think it's close. Yes, I spent A LOT of time early on, learning, setting up and refining systems... now to maintain my 156 units I spend on average one hour a week. That includes the additional time at the end of the year prepping additional info for the accountant. I'm 32 year old and neither my wife or I work. 

If I would have wanted to achieve the same annual income result with stocks and started investing in that when I started in REI, I would have to invest over $25,000 PER MONTH (that's assuming the historical returns of 7% and the 4% safe withdrawal amount).

Nice Jordan! I forced most of the appreciation on this one. It was down to the studs in the kitchens and baths and fully rehabbed. I bought a 32 unit package that I bought in June and used equity partners. This 6-unit had enough equity that had I sold it, I could have done the 32 unit without partners. So I decided to sell it to be ready for the next time a great deal came along. 

I wasn't actually planning on 1031-ing. The timing just happened to work out. I was just planning to sell it, pay the taxes, and sit on the cash until the next deal arrived. Say the sale net $100k and I would have $30k in taxes to pay. I would rather pay taxes, have $70k and wait for a great deal vs using a 1031 and forcing $100k into just an ok deal just to save those taxes. You make your money when you buy, and a lot of people end up not buying right because they're trying to save a few tax dollars today. 

Thanks Vish!  I'm pretty amped about it. 

Thanks Chris. I don't knock people for going with the big boys for longer fixed rate terms at good rates, but the long term benefits of building a relationship with a portfolio lender shouldn't be ignored. The ease of loans and then special deals have put me much further ahead than just rate shopping. 

 It's from having a long healthy relationship with a portfolio lender. 

 There was so much involved in making this happen, way to much to write out here. The amount of emails back and forth to get there is incredible. The best negotiating book I've read so far is Never Split the Difference

 Thanks Mindy - this is an exciting one. It also moves our ownership to 101 units. That's fun to crack that benchmark. 156 total, but I have some equity partners on a couple packages. 

You make your money when you buy! I'm closing on a 22 unit portfolio that consists of 12 single family homes and 5 duplexes. The sellers first offer for the package deal was $1,140,000. Through a LOT of strategic communications and negotiations, I eventually got them to accept a price of $790,000. 

The appraisals came in at $1,264,725... $474,725 above the sales price! So just by closing on this deal my net worth goes up by nearly 1/2 a million bucks. 

.

But this gets even better... 

Since I bought so well my bank only required 10% down of everything including closing costs. I sold a 6-unit building which net just enough to 1031 for the down payment on this portfolio. So there will be no money out of my pocket to purchase the portfolio. 

There's a value add play too. The properties need approximately $200k in work and I wrote the contract for $890k with a $100k credit at closing. My bank will escrow that $100k for me to draw on as work is completed. 

I will only have to come up with the ~$100k to finish out the work. I'll do some of it cash and I'll pull some short term debt at the end. Then when the work is complete (6-8 months) I predict the value to be ~1.55 million. At that point I'll refinance at 70% LTV which will put ~$300k back in my pocket and cash flow ~$3k per month (my 6-unit was about $1k per month)

SO +1/2 Million net worth... with no money out of pocket to buy... AND half the rehab costs are covered... 

THEN at refinance +$200k cash in my pocket from before the deal... AND +$2k more in cash flow