All Forum Posts by: Jeffrey Holst

They are a starting point but can depending on market be off by large amounts. 

@Dee Hutch also as far as wording its fairly simple

Dee agrees to purchase xyz property and abc property for a total price of $N

This is fairly common.  You also can get your bank to write separate mortgages each even when they are on the same contract if you want.   

@Brian Garrett thanks

@Joe Villeneuve I think you missed my point.  

#1 sure you still have access but if you plan is to put it in an account and live off the interest your cashflow is 100 per month

#3 i didnt say it effected the appreciation I said you got the benefit of 5x the appreciation.  Ie if you own 5 150K homes and there is 5% price growth then you get 5% on 5 homes instead of on 1 home.  if you had one your portfolio value would go up $7500 if you used leverage your portfolio value would go up $7500 for each of the 5 homes for a total increase of $37,500 which is 5x as much.  

When I say I am buying cash flow what I mean is I trade dollars in my bank account for streams of income.  Certainly there is no difference on appreciation on the individual property whether or not it is free or clear on that we agree completely.  I love leverage and I also like to have tenants pay it off but it doesnt always make sense.  It is a math problem, in your example sure take the loan makes great sense, other times like when you are forced in to 5% loans with 20 year ams it and high fees on a property you plan to keep for a few years it doesn't make sense to take a loan.

I have loans on 2 condos, 4 duplexes, a 12 unit, and a 19 unit but dont have loans many low priced single family properties 

Well then @Brian Garrett I guess Ill have to stick to Chattanooga for now.

@Brie Schmidt is completely correct that your ( @Jacob Prelle) questions are far too broad for any one person to answer and be sure to get what you want correct but I will say this.  It is possible to to get to 10K a month in the 7-10 years your are talking about but it is also very possible you wont ever get there.  The best thing you can do is find something that works for you that makes some cash flow and study the crap out of it. If it still works then buy it cause you wont ever get to 10K a month or even 1K a month if you dont get in the game.  

All that being said if you question was what would Jeffrey Holst (me) do if he was me had 80K to put down and wanted to get 10K a month as fast as possible.  Then the answer is he would buy a 80K duplex in a market like Chattanooga with no leverage in a better area (class B or high C) that rents of 600 or more per side, and would hire a local manager after interviewing several.  This play would not get me anywhere near the 10K I want but it would get me $700 of it pretty quickly which means I would 7% of the way there.  I would definitely fly to that market and meet local investors and most importantly local bankers.  I would after I had my duplex fully rented and cash flowing for a period of a half a year or so start looking for another one in the same market.  I would go to my bankers I met and get one of them to loan me 75% of the equity on the first duplex and I'd add that 60K (it might be more if you raised rents and bought right) to the 4-5K I already had from the cash flows.  After this loan my cash flows would go down to about 250 per month but I'd be in a position to start looking for the next one, Id have more than 20% to put down on it and a local banker who liked my business.  I'd then start looking and repeat.  By doing this you should be able to get to about 5-6 duplexes with 20-30% equity cash flowing about 100-1250 total per month in about 2 years.  Then if rents keep going up even a little (which they typically do) you will be at cash flows about 1500 or so within 4-5 years.

No I realize thats only 15% of your goal but this is where it starts to really take off.  You have your job income so you have been piling up this 1500 a month for awhile and have like 20K in the bank or more and you get to buy duplex number 6 or 7 and then you have 1750 a month coming in and 10 months later you get another one then 8 month for the next and then 7 then 6 and sometime around year 10 you have about 15 duplexes all cash flowing 300-350 and you are about 1/2 to your goal.  

But wait theres more.  You have on your first duplex for 10 years now and the values have gone up a little so you sell it and use the proceeds to pay off duplex 2 and possibly 3.  Which causes you to lose the 350/ month on duplex one but gain about $1000 by having 2 free and clear duplexes.  And then if you can handle working another year you can pay all the extra cash down on duplex number 4 and get that one paid off.  At which point about 12 years after today you have 4-5 free and clear duplexes cash flowing around 5-6K a month another 4-5 with loans cash flowing another 2-3K a month and you can rest easy. 

Of course you are not me and I am not you so you might have a completely different strategy. Or you might buy that first duplex and happen to run across a sweet deal on a quadplex and might sell that 2 years later and buy a 20 unit.  There are so many possibilities.  

Any the main point is you need to figure out what you want to invest in and make sure you learn as much as possible about those assets.  

Best of luck

I am also interested in Florida,  does anyone have any thoughts on where one could get decent returns on rental units?  Id consider multis, single families vacation rentals whatever.  

This thread is interesting to me.  I have a couple of multi families one near Chattanooga and another near Detroit.  I currently live in Chattanooga and Huntsville is only a couple hours away.  Perhaps I should also be looking in Huntsville.  Are there any brokers that have multi families in the area or wholesaler lists that I should get on?  

@Chris Gordon @Joe Villeneuve  I think the answer is simply what are your goals.  We buy cash flow thats how we do it but what does that mean.  To me cash flow is the net income you recieve after all expenses including your mortgage payments.  If you have a fixed amount of cash you can use it in multiple ways to increase cash flow consider the following ways to invest 150K

1) 150K in savings account yields about $1200 per year in interest assuming you find good accounts, in this scenario cash flow is $100 per month

2) $150K used to buy a single property for cash. Lets assume for simplicity it exceeds the 1% rule and rents for 1600 a month and your costs are right at 50% so it cash flows $800 per month

3) $150k used to put 20% down on 5 houses identical to the one in 2) above.  In this scenario, you put down 30K on 5 properties and each property cash flows before mortgage payments $800 and each property will have a payment around $700 per month (I am assuming you will end up with 5% loans and 25 year amortizations which pretty typical on investment property in my experience at the moment) leaving cash flow of a total of $500 per month, significantly less than the $800 or so you got for buying 1 for cash however you will also be paying down the mortgages at a rate of about $200 per house per month which is another $1000 per month in potential gains.  Bringing your potential return to $1500 per month.  

If there is appreciation in prices the leveraged portfolio will gain even more quickly 5X as fast and the non leveraged option 2.  However the opposite is also true that it will decline in value 5x as fast in a down market.  So in the end it seems to me that the issue do you want maximum cash flow or maximum potential net increase.  We buy cash flows but we also include a component of leverage.  We do this because it fits what our goals are however because each deal is different and each persons risk tolerance is different you may or may not want to leverage.  You might want to put 50% down and get two properties for the price of 1 instead of 5.  

Personally we have some free and clear properties and some 30% down and recently we bought 3 duplexes with 70% down because we had a 1031 to do.  In the end it important to think through the numbers and remain flexible to make the choices that work for your situation.