All Forum Posts by: Austin Fruechting

If you're trying to use the possible loss of $500 to justify not going forward on the property, then you it's probably not the right property. I would never bat an eye at the risk of a $500 loss if I thought it was the right property. 

You would still be able to renegotiate (or walk away) if something major came up in the due diligence/inspections. Don't think about your $500 at all during this. They still have motivation to close the deal.

Episode 215 looks like the something from a thriller movie.... "She's right behind me, isn't she?"... LOL

Should be a good one!

Thanks Cody, appreciate the info. That's what I would have guessed or said in your place too, haha. I've worked with a smaller portfolio lender that if I did that they would want to escrow it as a LIP (I've talked to them about it before). They will, however, lend me 70% of the appraised with a minimum 10% down. And if I'm doing a value add on an apartment building/complex with all the work being done in approximately a year, they'll do the same 70/10 loan on an as-improved appraisal and it can include all costs (purchase, closing, construction, & carry).

Edit: just trying to add strategies to the arsenal should I head down that path in the future and need them. Thanks for sharing. Always enjoy your input and learning from you. 

I'd say you're looking at cash-flowing $500 per month over time. About $1150 if you are the property manager, but that additional $650 a more of a faux cash flow because that's just paying you for your time and any other investor is going to run their analysis with a PM% factor in it. 

$6800 x 50%expense = $3400 - $2900 P&I = $500

Hey @Cody L. - does the bank ask you what the credit is for and how do you handle that?

Appreciate the sharing of info. 

I am at 141. Average rents in the $700 range. Recently, for some bigger portfolio deals I put together I did bring on equity partners/investors. I only did that after I had proven myself and really knew what I was doing. My ownership equates to 88 of the 141. It took 7 years from the first one. 

I've been without a day job for 2 years and my wife has put in her notice since we're past our freedom goal. I'll continue to put deals together since that's my favorite part. And they don't take that much effort/time on the back end for me since I have a great property manager. 

It all depends on your definition of safe and risky. 

I would personally feel safer with 4 properties of which I own 25% of than I would with 1 free and clear. 

Assume a $100k properties at 1.4%.  So $1400 in rent, 50% expenses leaves $700.  Free and clear you have $700 of income.  With leverage say your payment is $400, so now you have $300 of income... but you own 4 of them for $1200 total of income.  Now what if the worst case scenario happens at one of the properties such as THIS HERE - 5 years of BS from squatters and no income. If you have 1 property you, it's not that you just don't have the $700 in income, you also have ongoing expenses like insurance, taxes, etc.  So lets say instead of +$700, now you're (-$300).  If you had 4 properties with a mortgage you would still be +$500 a month ($1200 - $300/month loss - $400 mortgage payment on that property).   

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EDITING TO ADD:  Now imagine what would happen if you were out of work at that point in time with no other income. What would be safer/riskier? One property paid off that could still lose you money month to month? Or still having positive income even with a property not performing?

 - Here's something I wrote in regards to battling outside negativity:

ATTACKS FROM OUTSIDE SOURCES

You, and every other human being are, by nature, lazy, indifferent, and susceptible to all suggestions in their weaknesses. The most common weakness in human beings is leaving their minds open to the negative influences of other people. Negative influences work on you through the subconscious and wiggle in through your weaknesses.

"Wait a second Austin!! You titled this attacks from outside sources. Why are you starting with saying that I'm lazy, indifferent, and susceptible?!"

Well... because you are. There is no stopping or avoiding negative influences in your life. They will always be there. YOU play the most important in role in everything in your life. It’s YOUR decisions, not your conditions that shape your life. The only way to battle outside negativity is by actively managing your thoughts. You can't control what anyone else does or says, but you can control how you react to it.

DEALING WITH CRITICISM

Big ideas are met with big criticism. Go tell someone, even someone close to you, that you plan to retire in ten years by investing in real estate. See what their reaction is. Unfortunately, as opposed to receiving words of encouragement and support, you will most likely be met with some sort of criticism. You will be told why it's not possible, why it's too risky, and why you shouldn't do it. You will likely even get these responses from the very people who you would have expected to be the most supportive of you and your goals... and it will be frustrating. Be prepared for it and don't let them drag you down.

WHY DO PEOPLE REACT NEGATIVELY?

Sometimes these comments come from very well intentioned people. Your family and friends may try to discourage you in some misguided attempt to protect you. They think they are looking out for you.

Realize that their remarks aren’t as personal as you may think or feel. They are often merely a projection of the speaker’s own feelings of failure and discouragement. People who tell you it cannot be done are almost always unsuccessful people. They may feel average or mediocre at best about their own accomplishments. Regardless, their opinions can be poison if you accept the negative advice. Don’t let them pull you back to their level. Average people will always resent progress.

FIND NEW PEOPLE

Find and cling to people that think progressively and have goals of their own. Go tell a successful real estate investor or a successful entrepreneur about your plans. The difference in their response will be incredible! Successful people will be a source of encouragement. A stranger that is successful will be much more encouraging than your own friends and family. Why? Because they know it can be done. They know that it is possible. They know that if you are in control of your mind, you are in control of your destiny.

CONCLUSION

Be careful about the advice you take. Opinions are the cheapest commodities on earth and everyone has them. If you are influenced by opinions of others and allow others to do your thinking for you, you will have no chance of success.

You must be confident in your decisions and trust in yourself. Trust in your knowledge. Trust your research. Reach your own decisions and follow your goals. When you are met with negativity and all the reasons why you can't do it, accept it only as a challenge.

I don't know where he got his statistics from, but in a REIT isn't someone is making money using all other peoples money? Like syndication on a huge level and the REIT is the sponsor? Assume you were represented all the cash in a REIT. You aren't getting all the returns from the investment. So wouldn't logic follow that if investing on your own where you get 100% of the returns you would do better?

But that's all assuming you are a good investor. If you aren't willing to put in the time, effort, and energy to be a good, successful investor then yes, you would probably be better investing in REITs. 

What happened in the last year+ since your first introduction when you were looking into flipping?  Any research/education?