All Forum Posts by: Stone Jin

I'm sure there is some thread on here about the 1% rule trap.  People spend all their time searching for a 1% rule house and pass on all the good .95% houses that are in solid neighborhoods that will get appreciation. 

The other thing to be careful of when looking at 1% rule is that the market has priced the risk reward based on it.  Obviously 1% on average will have higher risk.

The thing to figure out is what metrics you want for your return. For us it is 10% Cash on Cash and $400 cashflow per month per SFH. I really don't care about what % rule anything follows as long as I can get what I want.

@Patrick Menefee

@Shiloh Lundahl ha, now I know the next time we meet for lunch you can pick up the bill!!!  Congrats on your journey.

I remember when we hit that milestone years ago and my wife and I were in shock for about a minute then we got over it and moved on with our lives.  Having a million dollars in equity doesn't make sure feel rich when our bank account said 100K because we were throwing every penny into real estate.  I think the mindset is different when you have 1 million in cash in the bank vs 1 million in equity that you can't see.  I know as my networth and income started increasing, so has my spending.  I used to buy items only if they are on sale, these days I just buy what I need for that oh so good instant gratification.  

I think an interesting spin off to this conversation would be what first world problems did you not have pre millionaire status vs now post?  For us it became trying to figure out if we were getting the most return on our equity and figuring out all the legal structures to protect it.  When we had no equity, those weren't even a concern.

Let's do lunch soon!!

@Michael Temple, here are the numbers I used on the house in sylvania similar to yours.  Purchase price 100K, rehab 20K, all in at 120K roughly.  Monthly rent is $1400 after taxes insurance cap ex/vacancy and mgmt I expect to cashflow around $1000 a month,  so 1000 * 12 months = 12K/ 120K = 10%.  The numbers are very close to that.    The contractor I used was an acquaintance of mine from high school.  He does okay work but it was up and down.  

What are you looking to get done?

@Michael Temple I'm happy to have a conversation with you offline however I only have 2 houses in Toledo and I bought them both off of the MLS. One is in Sylvania and one is in Brynedale area. Each deal needed 20-30K rehab and after rehab I have about 30-40K equity per property after rebab. I haven't seen anything this winter on MLS worth buying, I made a few offers but were outbid. I would only buy in neighborhoods where I would live in myself with my family. It's hard to answer your question of how close to asking price, it really depends on each deal. I've offered at asking price, above asking price and 1/2 of asking price. You just have to do the math and offer what makes sense to you.

@Nico Ryan Iral @Ben Leybovich

I would agree with Ben that small multi family and sfh are going to be extremely difficult to cashflow in the greater Phoenix market. The listings on the MLS are no where near the 1% rule unless it requires significant rehab or is in a rough part of town. Most houses listed for 200K in east mesa or AJ where I have a quite a few will rent for 1300-1450. Since it seems like you don't have the capital and would require hard money or conventional loan the choice wholesaler deals are likely not viable.

Like a lot of the talking heads on radio, now is a time to stockpile dry powder.  I've just putting into crowdfunding projects where I get 8%-9% returns on shorter term loans or I'm buying in the midwest where the cash on cash still makes sense.  My mindset is if the "real" asset (where I do a lot of work, manage rehab etc etc) can't beat the crowdfunded asset (where I do ZERO work) on pure cash on cash, I'm just not going to chase it.  

@Sky Lin we owned and operated 4 str in chandler for about 6 years so I can speak with some experience. Hoa cc&r can change and they can make it quite difficult if they wanted to. Owning short term rentals is a job. The premium you get in cashflow is paid with your time and energy.

Asking the forum if you should buy a property is not the right question. Asking the forum how to run a short term rental business and what are the pitfalls should be.

Because returns on paper are much better than reality.  Because expectations set by gurus and podcasts are much better than reality.  As I think through this post I try to put myself in a new person's shoes in today's market.  Even with my knowledge and capital I would be very very hesitant to buy.  We own properties locally that we self manage and we own properties outside our local area where we relay several PM companies and we've been doing it for over 10 years.  If I was a new person with little experience and little capital and I'm analyzing deals where my real return is sub 5%, and a lot of talking heads are saying correction this and recession that, I would maybe give up FOR NOW and wait til a better opportunity.  

I wouldn't necessary just say lack of will or lack of why or lack whatever, each person's situation is different but to add to the conversation, real estate investing is a marathon and in a world of instant everything it is hard to wait for that reward.  

@Sky Lin, there are banks out there that will do it, you just haven't talked to the right ones.  The ones I talked to that could do could only do it if you had less than 4 or 6 properties.  

Here is a link to a thread that Bob provide some banks that do it.

Phoenix Heloc

When I bought in 2014 and 2015, i wasn't getting 1% rule either in Phoenix, however with rent increases through out the years most of my properties from that era are now at 1% or greater.  

With that said, I would be cautious with expectation that the next 4 years will be the same as the last 4 years.  Make sure you buy in locations that are desirable and affordable and you shouldn't have any issues getting renters.  

@Arturo Andres Lara The main question that needs to be asked is what type of cashflow and cash on cash returns you can get in the east valley.  I'm curious to hear what others are getting.  I've basically stopped my buying in Phoenix metro due to the low returns.

Thoughts?