All Forum Posts by: Jim Truman

@Hershel Mangel you're correct. As a busy professional in the DC area I can't afford to invest here so it'll be out of state, and I also don't have the time/desire to renovate properties. So I'm looking for out of state, good condition, property management, with enough cash flow to make it a good deal. I don't think paying cash makes a lot of sense so with 25% down, I want to make sure I'm not ignoring deals because people on bigger pockets would say they don't cash flow enough but also not getting into a deal that seasoned investors wouldn't consider a good deal. 

@Russell Brazil Thanks for the reply. After posting this question I found another thread, that I didn't find earlier by searching, asking about minimum acceptable cash flow. I'm sure you get sick of answering the same questions!

I understand every property is different and every investor's goals are different. I just wanted to make sure I'm talking apples to apples with people when discussing cash flow. I wasn't sure if everyone included all their maintenance reserves in their calculation.

After reading that other thread I think it's clear that the biggest discrepancy is whether the investor pays cash. Some of the guys won't get out of bed for less than $500/door per mo. But it turns out they're paying cash. Anyone can find a deal that cash flows if they pay cash. I'm not interested in tying that much money up in a single property.

I am not looking for any current income. I want these homes paid off when I retire so they can help fund my retirement. I only want enough income to cover any expenses related to the property. So understanding that is my goal, technically a property that cash flows nothing after setting aside reserves could be an ok investment. But I also don't want to buy bad deals just because I don't currently need the income. 

Based on what I'm reading, and understanding my goals, I'm thinking if I can find a house in a B market that will rent to quality tenants, costs <$150,000, low maintenance, good schools, and cash flows at least $100 after conservative estimates for maintenance, capex, property management, etc, that might be a good deal. This is with 20-25% down.

Thanks Kevin. You found a place that, after repairs, cost 225 and rents for 2550/mo. That's great. Do you mind telling me where you invest? Seems like many people tell me the 1% rule isn't really practical in most locations. Even the Realtor I talked to in Atlanta, which is supposed to be a pretty decent market, said shooting for .08% is more realistic and even that can be tough. 

So I'm doing the numbers right, just have to find the right deal.  

Hello,

I'm running the numbers on properties and planning to purchase one over the next year if we can find the right deal. I want to make sure I'm properly calculating cash flow when comparing properties and talking with other investors.  

I read other investors on these forums making statements like they never purchase anything that cash flows less than $500/mo. This seems almost impossible to me unless I'm buying dumps and completely rehabbing the place.  

Take properties on Roofstock for example. Using the numbers they use for estimating expenses, property management, mortgage, insurance, and reserves, I can sometimes find a property that cash flows $500 or $800 per year. No way I'm finding homes that cash flow that much per month.

So I'd like to confirm, when other investors mention cash flow, are they always including ALL expenses, including set asides for reserves? Are they typically paying cash or 20% down? Of course I can cash flow if I pay cash but it seems most investors prefer paying the minimum down.  

I'm find waiting until I find the right deal but I want to make sure I understand what others really mean when they throw these cash flow numbers around.  

Thanks

@Tom Parris I'm just coming back to this thread after a lot of reading and studying. Would your condos cashflow if you didn't pay cash? I'm finding it challenging to locate single family homes that cash flow, yet along condos with HOA and property management.

@Taylor You're right, I think cashflow will be tough around here. I'm looking outside the area and even in cheaper markets I'm finding it tough to locate properties that cashflow by the time I run the numbers with property management. 

Thanks for the very nice offer. I'm looking at one of Fundrise's circulars now.  

@Account Closed

Too late...we already had a bad experience. We were forced into being a landlord when we move to another state for work having just purchased a townhome (2008). The market tanked, we couldn't sell, and we tried renting it out. The tenant destroyed the house. Based on this experience, we never wanted to get involved in real estate again.  

Our financial situation has changed and we're willing to give it another shot. This time, we'd find a house where the numbers actually worked and we can afford vacancies, maintenance, etc. But, clearly our past experience makes us hesitant to jump in. Even beyond the hesitation from this negative experience, we simply aren't "excited" about real estate. We didn't enjoy shopping for our current house, we don't watch house flipping shows, we don't want to spend our spare time working on a rental unit. We're willing to learn if we decide to go down the REI route but this is why I'm attracted to other options such as Fundrise.

@Tom Parris, are your condos in Tampa? 

I really like the idea of condos for all the reasons you mentioned. In some of my reading though I'm coming across horror stories of HOA's running crazy, and also reading about appreciation not being as good with condos. This obviously all depends on the development and location. But I do love the idea of maintaining from just the drywall in.

Thanks for all of your detailed responses. I certainly don't expect anyone to do my research for me but it is nice to hear some opinions to clarify what I'm learning through my own research.

I thought Fundrise was different from a publicly traded REIT in that I am actually an owner in the properties as opposed to just a stockholder of a company who owns properties. I clearly have to study REIT's further.

The way I'm understanding it now is:

-Think of Fundrise's eREIT as any other REIT

-REITs may have less risk and time investment vs personal properties

-with that comes possibly less return

-REIT could be fundamentally similar to a syndicate but on a larger scale

-REIT's have costs associated with them, as described by @Basit Siddiqi. But could this be comparable to my realtor fees and closing costs to buy/sell, and property management costs?

-Money isn't liquid with some funds like Fundrise. But money isn't liquid if I purchase a SFH either.

Assuming the management is trustworthy, the costs are worth it, I'm willing to accept possibly less return, etc, is Fundrise (or similar outfit) a decent way to own real estate when I don't have the time/expertise to invest in and manage out of state individual properties?

I guess I'm still hung up on the whole idea of mortgage pay down. It makes sense to me that an individual property will eventually be paid off but the rent income continues. This is the whole concept that attracts me to real estate. With a REIT, I'll never own a paid off property. But the company does eventually pay off the properties, or purchases them with cash. So, as a shareholder in a Fundrise investment, can I expect my dividends to go up as the properties are paid off (because they cashflow better?)

Thanks again for all your help. I'm sure I'm not the only one with these questions.