All Forum Posts by: John Morgan

Paying off my first two rental properties was the dumbest thing I’ve done. Since then, I learned to leverage my way to wealth. I now have 27 leveraged properties making me MUCH more $. Maybe 15k/month more vs just 2 paid off properties. Plus I’d rather have 27 leveraged properties appreciating at 5%/year or whatever vs just 4 or 5. I’ll tap into that equity later on after it builds up. Refi til you die! The ultra wealthy leverage their way to generational wealth. The Dave Ramsey crowd pays their houses off and makes much less in the long run. But some people are fine making much less and wouldn’t rather not have a mortgage.

@Richard Hoyte

Yes, you will have expenses. But who cares when your internal rate of return is around 70-90% or more. Don’t just look at your $500/month off your downpayment. I calculate 5% appreciation on my properties. I calculate principal pay down on the mortgage over a period of time. Plus you add that to your monthly cashflow and this is how you create generational wealth. Then I’ll tap into that equity in 3-5 years (after rent goes up quite a bit) and do a cash out refi and buy more properties with the cash without using any money out of pocket for the next houses. This is how I bought 12 houses for free not costing me a penny out of pocket. And once you get more and more houses under your belt, the cash flow snowballs and your net worth goes up exponentially within 5-10 years. Don’t just look at the $500/month or whatever you make. Think long term and enjoy all the mailbox money.

@Jay Smith

These people own you. Give them a 30 day notice to vacate. I’ve had enough of them and I’ve only known them for 30 seconds. Life is too short to deal with people like this. Let some other landlord be miserable with them.

@Elvin William

I normally invest in the Dallas area in B and C class neighborhoods. However, I thought it would be fun to buy 8 crack shacks in the hood in Arkansas last year for fun. They cost 25k each on average and so far they’ve been easy to self manage out of state. And these tenants are great. I’m considering buying more in D class areas like this.

Trial and error. It’s pretty easy to do though.

@Jay Hinrichs

Thanks for sharing. Your commercial property sounds like a great deal. How would one get started in buying something like this? All I know is residential and the profits have been amazing for me so far. But if the profits on commercial RE is much better than maybe I'll sell off some of my SFR. I've been investing in RE for 9 years and haven't paid a taxes off my 27 SFR so the tax breaks are great on single family as well. But sounds like commercial is more passive with bigger profits. What would you recommend for a noob commercial investor like me. 1031 some of my properties into my first commercial strip center or office building?

@Don Konipol

What kind of commercial RE are you involved with? I'm strictly residential with 27 buy n hold SFR. I've considered commercial RE but don't know anything about it. From what you're saying, the returns are pretty good, but the risk is a little higher. I like residential because it's passive and easy. Most of my tenants stays for years so there's barely any work or turnovers. The homes appreciate 5%/year and my tenants are paying them off for me. The monthly cash flow is good too so the returns are great. I like to be very passive and worried commercial RE might take up more of my time. Or is it very passive too? I just want to sit back and just collect mailbox money without much work. Is that doable with commercial RE?

Quote from @V.G Jason:

Quote from @John Morgan:

My goal was 10k/month net "passive" income from buy n hold SFR. It took me 5 or 6 years to do this without using much of my own $. Infinite cash flow with minimal work was the goal. Once you figure out how easy it is to acquire more and more properties with OPM or to recycle the equity in them to buy more and more houses without any out of pocket cash, the mail box money snow balls. My advice is to find your niche and buy box, and do it well. Then stick with it and create generational wealth if you care to bring in more $.

 This fixated goal on "10k" of passive income is just losing it's power annually. You need to know what you want monthly in 20-30 years or down the road so rule of thumb is every 12-15 years things go up 40-50% then you'll want probably $20k in monthly passive income. This is just for some people.

Most of these W2ers on BP need to find 3-5 high quality properties over 7-10 years, with min 1:1 DSCR by higher downpayment. Enough reserves to manage 1 cycle of capex + 2 years of vacancies on day 0 of acquiring property. They need to do it while working their W2 and moving up the ladder there. After 8-12 years, they need to sell 1, re-fi one and pay down leverage + keep more cash reservs for cycle 2 of capex. Then later sell the re-fi one in another 5-7 years and have 3 very good properties with cash reserves and 0 debt. That may only be $6-12k/monthly income in 15-20 years. That's okay, REI won't be 100% of you income as it shouldn't.

10k/month was good enough for me to help supplement my lifestyle. And I think a lot of people feel that 10k/month would help them a little. But I agree, 10k/month in 20 years won’t be much at all due to inflation. But I think rent will go up over time with inflation. Hopefully!  Especially when you have a vacancy and can fill it at market rent. I’m closer to 18k/month net with my rentals now after investing in RE 9 years ago. Definitely not enough to retire on now, but it should go to 23-25k/month in 7-9 years when some of the 15 year mortgages are paid off. And if I pick up a few more rentals with the equity I’ve got, 30k/month net seems doable and might be enough to retire on. But I think 10k/month net for noobs is a good goal. They can achieve that in 5-10 yesrs with buy n holds. Maybe sooner if they hustle. 

I self manage my 27 SFR in two states. It's super easy to do and not time consuming. I work full time and consider real estate a hobby on the side. I don't do the work on any houses except cut the grass on two rentals that I rent out by the room. When something breaks, I text someone my tenant's number for them to figure out a day and time to go fix it. Plus it saves me about 30k/year to not use a PM. I'd rather use that 30k to buy another house. lol

My goal was 10k/month net "passive" income from buy n hold SFR. It took me 5 or 6 years to do this without using much of my own $. Infinite cash flow with minimal work was the goal. Once you figure out how easy it is to acquire more and more properties with OPM or to recycle the equity in them to buy more and more houses without any out of pocket cash, the mail box money snow balls. My advice is to find your niche and buy box, and do it well. Then stick with it and create generational wealth if you care to bring in more $.