All Forum Posts by: Jack B.

Whether you like leverage or not depends on how close you are to retirement and how much risk you are willing to take on. Don't forget they can call the loans any time in most cases.

My 3/4 million dollar leveraged properties that have vacancies keep me up. My paid off 150K house that's paid off doesn't make me blink even if there's a vacancy. If I wanted to retire, I'd de-leverage. If I'm still trying to snowball my portfolio, you bet I'm loading up on bigger and better deals with more debt.

If you can make a profit flipping it in 3 years, maybe, but the next investor may be wary of the maintenance coming due in 2 years by then and ask for a discount. What would be your return for other investments accounting for risk as well? Can you make 20+k a year from 200K invested in a dividend stock or index fund? Unlikely...BUT a dividend index fund won't have much risk considering how diversified it is.

Commercial Property Advisors on youtube and on the web in general has a lot of what I believe to be good info. I currently invest in SFH but have been watching their channel for the past few months to learn about MF as I transition from SFH to MF to scale.

And yes I'm aware of the 10-31 exchange, It's part of my plan. I've been reading and collecting guides and due diligence worksheets on apartment complex purchases. The biggest reason I'm considering doing it is that I have enough equity and cash to buy up to 4 million in apartments with 25% down. I'm looking at making $100 a door per month on 40-80 units. 

I currently manage my four Seattle area expensive single family homes myself, but even with four tenants it's turning out to be true that at 4 units you need help. Yet hiring a property manager for just four units doesn't scale well. It appears to scale much better for an apartment complex. Also, besides the increased cash flow because of the number of units, the risk of vacancy is reduced. To further spread the risk, I'd look to buy 2-3 different buildings, so that not all my money is tied up in one giant complex that if it fails (hurricane, earthquake, sink hole, insurance doesn't pay out, etc.), costs me everything.

I'm also looking forward to being able to take advantage of economies of scale when it comes time to raise rents every year. That's up to a 24K a year pay raise at bare minimum, not even counting on reducing expenses, utility bill backs, etc. And that's just the beginning. I live frugally so I would save the vast majority of that money and keep doing bigger and better deals. 

The key thing that keeps me from doing this right now is risk. I will still have to deal with all the major problems the PM brings to me. Lawsuits, (counting on it with that many units), evictions, trashed units, etc. Yes, I could build massive wealth with this strategy, but it's still a job of sorts. Sure the PM deals with the day to day stuff, but the major problems are still on my plate and can still give me an ulcer, so to speak. But in order to build more wealth at this point I need to really scale more and keep scaling. That said, I could just pull the plug now and retire and have 2-3 times my living expenses in passive income, go and enjoy life. But I think I would enjoy life more if I had 300K coming in every year and getting huge pay raises every year, to the point that time, I'm pulling in one million a year cash flow. I can of course invest that into index funds and build even more wealth and go party Justin Bieber style, lol. 

In any case, I now see how the people who end up with hundreds of units do it; they hustle and keep doing bigger and better deals. Well, I've been doing that with single family homes (one of my homes alone is worth nearly 3/4 million) but to really see increasing returns to scale apartments seem the way to go. Not only that but it gets me out of the day to day management. I'd have a live in property manager, in exchange for reduced rent/free rent/stipend/whatever is common for the areas I'm looking at (Nevada and Florida). Washington has too low a cap rate for apartments...

What would you recommend for 30 year composite shingles? I've read terrible things about CertainTeed as well as Owens Corning and a number of other common brands. Complete with class action lawsuits and negative reviews galore. One of my houses is in a development that received a letter from the HOA about a settlement with CertainTeed for houses that were roofed with CertainTeed.

Sadly, every roofing company I've received a quote from recommends these known to be a problem brands. I don't want to spring for a metal roof because I won't hold the houses forever and don't want to pay twice as much for something that won't be worth it by getting metal roofing installed though I realize it's the superior roofing choice. Or so I've read. Seems tough as nails from personal experience. But as far as composite roofing shingles, what would you recommend? 

I think the logical answer to this is to calculate the IRR, NPV, and ROI as well as take into consideration your CoC return and the risk free rate. If you're earning 3% for a million dollar asset while you risk being sued, you are better of selling and putting your money into treasury bonds or a REIT index fund like VNQ.

I think you have to take a numbers based approach. Can you make similar if not more money elsewhere with equivalent if not less risk? I think if you crunch the numbers and see what you'll have after taxes and what your return will be in an alternative investment you can make a better decision. 

At all times remember, at the end of the day, quality of life is why you do this, so don't hold onto property that makes you miserable. Make your money and go be happy. No one is promised another day.

 This. I'm truly amazed at the kinds of things people sign without really reading or understanding.

I was worried about buying another property in 2014 in case of a down turn. I'm glad I bought it. It's made me 110K in two years. 

That said, it helps to understand the economic fundamentals of real estate, supply and demand, trends, etc. 

I don't believe we will see a MAJOR downturn for a few years to come, but all real estate is localized. Some place are in a down turn NOW. At the end of the day, as long as you follow the golden rule and buy for cash flow primarily, you will be OK. Appreciation, if it happens, is a bonus.

...is after all taxable, lest you do a 10-31 exchange, etc.

I know it's not cash flow, but at the end of the day, even though you don't realize it until you sell, can one not consider it unrealized income at least until they sell?

At the end of the day, the gains weren't all made when I sell, they are allocated to each year they property appreciated.

@Brandon Turner

I know what you mean. Just about every other applicant claims that their dog is a service dog, with a big grin on their face. And just about all of them are pit bulls or some other restricted breed. I like the approach posted above, the most qualified tenant. I don't give tenants anything other than what is required as far as denial of application, which as you know, in WA you must now provide written reasons in a specific format as to why you denied them. But generally I'm really vague. Hey, HR doesn't get to tell me why they didn't hire me, why do I have to tell people why I didn't rent to them? Even though I do, you better bet I'm going to protect myself legally.