All Forum Posts by: Jeremy Horton

I might go for the 8 unit

I don't see the value in the rest, nor would I want to keep them for any amount of time. I don't see major long term value in most of them

I'd echo what @Jay Hinrichs did - sold his C/D properties and went for the A/B properties.

I personally don't invest in crap areas or crap properties (too old w/big deferred maintenance/can't value add/sheds/ 1 bathroom SFHs etc those are all deal-breakers

Why not add in a 5 year ballon payment for your added risk?

I prefer my money now, but if someone wants to pay me way more than something is worth, then ok, I'd consider it.

But I wouldn't do it without a 5 year ballon at the minimum

Lots to go over here with an attorney honestly

I agree 100% - part of the problem is a lot of RE investing these days is marketed as a get rich quick scheme where you'll be able to buy a few rent houses, make monthly passive income, retire and travel the world. And there's a ton of social media influencers pushing this fake narrative - rented cars, houses, jet interiors to take pictures/videos etc - some of them are pretty good at making it look real. The essentially throw the bait out there. 

So initially I think it looks really good to new investors. Then pretty quickly they'll find out that you'd need A LOT of houses to do this. This means A LOT of deals, A LOT of capital, A LOT of time etc.

This was actually my initial thought process, that's what got me interested. I invested in the stock market prior. 

Now I primarily use RE for diversification, the tax benefits (down the road, I have to pass them on now), appreciation and equity capture at the buy. I have a few relatively high cash flowing properties but they also have higher repairs/maintenance. Then add in the capital expenditures if you keep the property long enough. Add in property management. Add in vacancy. the list goes on. The cash flow is nice but it isn't THAT great (ie: it's overrated) even when it looks good on paper.  

The equity capture at the buy is not talked about enough - a lot more people interested in cashflow and section 8, than buying a property at a 20%+ discount. My last one I purchased for 150k, put about 10k into it - it'd sell for 210k in 3 days. It cashflows about $500/month - take out PM, now were down to $340, take out repairs ($150/mo), down to 190, take out vacancy etc and it probably does a little better than breaking even. It cost me 40k (20% down and 10k rehab). But I made 50k in equity, Day 1. Great neighborhood, great house, schools etc. Maybe should've been a flip but I think it does awesome over the long term because of the location. 

If I were to take the cashflow I made per year and the equity capture at the buy - the equity capture would blow it out of the water in most cases. This is where the real wealth is generated. Then let it set and appreciate over the next 10 years and I think you end up with good diversification. Does it beat the stock market - maybe, I don't really know to be honest. I'm probably 60/40 for stocks/RE right now. 

I have a handful on rentals now and I genuinely enjoy doing them, but I think I'll be switching to something else in the next year or so. The full-time W2, kids, regular life combined with running a company, managing rehabs etc is getting tiresome. In the end I think I'll sell them all, take the cash to invest in one business and be done. 

 Ok - I'm going to be honest here - 5 doors - what's that in cashflow? Cash-out refi for 110k to use for a reserve and a flip (that refi will lower your cashflow significantly). Your new stream of income is "considering" getting your RE license and your mom "building" a daycare business you "may work" on as well. This is a lot of talk but nothing has actually happened yet. 

Have you replaced your income? Do you have a retirement account? Have you estimated insurance costs? Do you have kids? What kind of lifestyle do you want to life - ramen noodles and OJ every night? Do you have a husband or wife (all things considered these days)? What's the back up plan if shtf? 

I personally wouldn't do it - a 9-5 really isn't that bad. It sounds like you haven't actually replaced your income & benefits at work either. Loans are harder to get without a W2 job. You lose the benefits and a steady stream of income. How long have you been investing in RE? Are you a pro? If not, I'd tread extremely lightly. 

You can't tell me you don't have several hours each night even with a 9-5 to work on business ventures? Are you going to bed at 11? Are you getting up at 5? No? Do that first. 

I think quitting your W2 is a great long term goal. I'd work on maximizing my time and becoming a seasoned experienced pro before I even thought about quitting my W2. 

It seems like there are several big engagers I can think of off the top of my head, then there's a consistent middle of the pack (I recognize their names) - these are all quality posters 

Then there is a slew of people who ask one question, have a few posts and never engage again. There is the same weekly questions over and over - ah almost forgot the ohio crew (little gang of realtors from Ohio pushing their narrative - I'm sure some have success but I have heard just as many if not more horror stories from the area, especially out of state investors who invest in Ohio). 

There needs to be some improvements to the forums - the organization is particularly bad, I find. The search function sucks, if it even exists anymore - it's become so marketing, advertising and click bait oriented. 

I'm taking a little bit of a break this year to focus on scaling, streamlining and re-strategizing going forward. Part of my plan is to better track my existing portfolio. I may plan to pivot to a different area in the future. 

My properties are all property managed so I get the monthly and annual statements from them. I'm considering taking the numbers from there (they do calculate cashflow, % vacancy, % repairs and all that) and making spreadsheets with graphs/charts so I can track everything on a property by property basis and the portfolio as a whole. 

I also want to plan exit strategies when the return on equity gets low. I track everything at the "buy" on a spreadsheet as far as income, expenses, CoC return, ROI and have another spreadsheet to estimate and track all rehab costs. I track everything tax related as well.

I'm planning to have ROI, rents, cashflow, expenses, debt service, repairs/maintenance, return on equity, appreciation (I think this works over the long-term, kind of hard to predict in the short term especially with what we've seen in the last few years, but I usually conservatively estimate this anyway at 2%) and return on equity. Probably need to run some IRR numbers with different sales possibilities as well.

How do you all personally track your properties? My portfolio is still relatively small so I can input this info manually, I think it would take me maybe a couple hours at the end of the month. 

Anything else special you track that helps analyze your properties? Payback period? When the best time to sell is (when return on equity gets below a certain point consistently?) 

 I partly agree - I think many agents are clawing for anything they can get right now, 1% or 0.5% is better than 0%, right? 

I mean this is a 500k house, if my math checks out. 1% is still 5k (especially if it's an easy sell). I don't know the market but that's still equivalent to almost 3% on a 200k house. I've always thought that the market in that 400-750k range gets screwed on commissions. Probably not doing a ton extra to sell that house but realtors were certainly reaping the rewards. 

98% of the agents I had were nothing more than transaction facilitators - I used an agent for one deal - my first, that's it. As far as what most of them do - they set up a simple filter based on the info that you gave them, then you look and find houses that you like within the filtered range, contact them and let them know you want to see it, then they show you the house (based on their schedule around other clients). So the buyer is really finding the house anyway, they'll likely find FSBO (unless you have a crap realtor that filters those out, which wouldn't surprise me).

As far as the OP - I know realtors are hurting where I'm at. I follow a couple brokers on social media and they are having these cold call days where they call everyone into the office and they literally cold call for hours on end. Then the next week they were doing it again. The DOM is up, inventory is up, sales price/list ratio is down about 6%- so it's got to be getting harder. This is good - let the market work without government intervention, and without the NAR withholding every detail about a house and essentially lobbying to maintain 90% of this career field

@Henry Clark @Rebecca Graziano

There's a lot of different ways to source self storage - I think first you have to decide development vs buying an existing facility (an existing facility doesn't necessarily need to be a storage facility). I'm currently doing both. I'm analyzing existing properties while I research the development side - I would really like to develop, but it just depends where the best location and returns are going to be (but I love a clean slate). You can also contact mom & pop places. I would suggest going local for the first one - I think it's much easier to manage.  

Next you need to calculate your size deal - generally speaking we're talking 10-25% down. So if you have 100k downpayment then you can do a 1mm SBA loan or a 250k 25% down commercial loan. Make sure you keep plenty in reserves. I don't think starting a small place, say an acre with 50-75 units would be a bad place to start (can buy smaller tract of land, closer to town for cheaper) also less risk due to the overall cost...

I created a spreadsheet that I use to analyze existing storage units. You would use a similar one to analyze SFH/MFH deals - except your self storage one will be a lot more in-depth - how many units, size per unit, rate per unit, unit mix etc. Then you need to vary the rate and occupancy to find where your success/failure points are. Then calculate your cashflow/payback period/roi from the expenses and income.

Once you can analyze then you can source. I'm using loopnet, crexi, google maps, various websites that sell commercially zoned land - I generally leave the filters open for property type - I don't care what is existing as long as the zoning is right. There are some self storage brokers as well (bellomy, argus etc) - google search for self storage brokers, sign up for their listings and flyers then start to analyze the properties. You'll see if deals pencil out or not based on your spreadsheet. 

For me - I must have value add - whether that means expansion, increasing rates, occupancy %, moving to automation and managing remotely etc - there needs to be a for sure way I can add value and streamline operations. Also the location has to be great - that's the one thing you can't change about a property. 

Also - don't rush the process. There is a ton more involved than BRRRRing a SFH - you have buying/developing, managing, operations, various softwares (RM, CRM), security (cameras, gates, lighting, signs, locks), lockouts...the list goes on. I made an account over on self storage talk .com - lots of stuff that you may not have thought about over there.

And remember there is always another one - if you fail to prepare then you prepare to fail...and as Henry says - start small and make your big mistake early. This cannot be emphasized enough - if you STAY in the game you will win - the key is staying in the game...

 "guaranteed investment returns"

Tells me all I need to know about that business model right there

Depends what it's for - if we're adding square footage or something that needs to go on the deed then yes we'll do permits and an inspection 

Generally, if I know the contractor/sub does good work, I don't worry about a permit and inspection. It generally just complicates things. It's going to be more expensive if I have to get someone different, then I have to file to get an inspection and all that - it's basically a bunch of unnecessary BS. 

I usually just say "it was like that when I bought the place" whether I added it or not