All Forum Posts by: Jon A.

I don't operate in the turnkey space. But as a point of information, what practically would be the difference in what you're looking for and what a turnkey provider provides outside of the fact you own the property - and own all the risk - during the renovation process? Turnkey provider presumably buys a rundown house, renovates it, sells it to a landlord who rents it out. The company you describe would have you buy the property, have you pay them and their people to renovate, then you would rent out the property. Seems like the same deal, other than your point of entry and your increased risk.

The answer to this question is market specific. My market, for example, is littered with multi family homes so, if viewing for investment purposes, it would rarely make sense to buy a single family (unless you planned to add value by converting it to a multi fam). But you may live in a market where there are few multi fams in neighborhoods you believe are investible, in which case you have little choice. I would always recommend buying small multi fams but at the same time plenty of people got their start w single family homes.

I would only waive inspection if a) I knew everything structurally was sound and b) I planned to do a full gut rehab and replace everything already. The fact two buyers already backed out would give me pause... Perhaps the solution is just ask to do an inspection up front, before solidifying the deal? That's actually what we do in NYC - agree on price, perform inspection, then do contracts if we still have an agreement.

Quote from @Phyo Ko:

I bought the place for 1.2m each unit 3bd 2.5 b with 2 car garage in imperial beach ca. I put in over 100k with hold cost. Pm says I can get 3.6k a month with 8% for his fee

Unless you provided more details lower in the thread, I think people are going to need more info to really advise.. So you're all in at $1.3-1.35m. What are your monthly expenses including debt service?

What were your original numbers? $3,600 is gross rent for a $1.2m property seems really really low.

How could you be underwater if you only dropped $100k on renovations, which seems reasonable for a two-family fixer upper? Did you pay more than market value?

One easy way to cut expenses and possibly cash flow positive is self manage. According to your PM, that's an 8% increase in cash flow. I see a lot of people here having cash flow issues while each month paying a PM to do work that frankly isn't that hard and will help them better understand the business.

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Quote from @Eliott Elias:

Cash flow is real, appreciation is a myth. Shoot for numbers that work RIGHT NOW. I have read too many posts of people who bought too high and can't sell anymore because they thought their property was going to appreciate 

 Yeah. Question should be rephrased as cash flow vs. equity. I don't know any investor who banks on or factors appreciation into his or her numbers. But at the end of the day we're all trying to acquire equity bc equity can always be converted into cash flow. Lots of investments throw off cash. The beauty of real estate is wealth creation.

 >I don't know any investor who banks on or factors appreciation into his or her numbers.

Ironic because I have used nearly a dozen RE calculators and they all had entries for appreciation forecast.  The key is to be conservative in these, and all, estimates.  

I don't doubt that all calculators have this entry. And if you're a syndicator or someone else trying to convince others to let you invest their capital, you will need to give them projections RE appreciation. But the investors in my network largely invest their own capital, so the primary concern is whether they'll get their capital back in one year, two years, etc. Appreciation often does not get you your capital back in the short-term; rather, it leads to long-term wealth or a step up in asset class when you exit the asset. Keep in mind I operate in NYC so strong long-term appreciation is more or less guaranteed once you find a cash-flowing asset.

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Quote from @Jay Thomas:

@Jon A. It's amazing how easy it is to have positive income with negative cashflow. In some cases, all you need to do is make sure your loan principle pay down is higher than the negative cashflow and voila! You have income that goes in your pocket each month. It just requires a bit of planning ahead to make sure that this occurs. So if you want to start making some passive income, this is a great place to start!

This approach is particularly useful if you are investing in rental properties or other real estate investments. Not only will your loan be paid down each month, but you'll also benefit from any appreciation of the property, which can help to increase your net worth even further over time. With proper planning, you can turn a negative cashflow into positive income and start truly benefiting from your investments.

 I appreciate the spirit of your comments, @Jay Thomas. But I personally would never do a deal if the deal only made sense with me factoring in principal payddown. I won't cash flow negative period. And I wouldn't suggest anyone else do it. Fwiw I operate out of NYC, one of those high cost of living places where people say you can't cash flow bc property is so expensive, and I always cash flow positive after stabilization.

How much of a COC return do you aim for? I'm sure your goals like vastly different than mine, so I'll also ask: What do you think a solid COC return would be in my situation. I've seen everywhere from 3%-12% online (15%+ for serious property owners).

I don't think many investors would settle for 3% CoC. At that point, might as well invest in CDs w almost no risk. Personally, I generally don't want to wait more than a year to get the bulk of my money back, and I would be disappointed if I still had any money in a property after 4 yrs of ownership. This doesn't mean I'm cash flowing all my money back. This probably means I've refinanced a couple times. But the goal is always to get your money back as quickly as possible (while being cash flow positive) so you can redeploy into additional assets.

Quote from @Jay Thomas:

@Jon A. It's amazing how easy it is to have positive income with negative cashflow. In some cases, all you need to do is make sure your loan principle pay down is higher than the negative cashflow and voila! You have income that goes in your pocket each month. It just requires a bit of planning ahead to make sure that this occurs. So if you want to start making some passive income, this is a great place to start!

This approach is particularly useful if you are investing in rental properties or other real estate investments. Not only will your loan be paid down each month, but you'll also benefit from any appreciation of the property, which can help to increase your net worth even further over time. With proper planning, you can turn a negative cashflow into positive income and start truly benefiting from your investments.

 I appreciate the spirit of your comments, @Jay Thomas. But I personally would never do a deal if the deal only made sense with me factoring in principal payddown. I won't cash flow negative period. And I wouldn't suggest anyone else do it. Fwiw I operate out of NYC, one of those high cost of living places where people say you can't cash flow bc property is so expensive, and I always cash flow positive after stabilization.

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It's the long-living debate, I'll always take appreciation. How you get cash from that is different than cash flow, but likely greater.

If you mean more money to invest, do you mean month to month specific or do you mean just in aggregate? That's how it'll differ. I'm not a fan of month to month payments, it's the worst trick in the world. That's my personal opinion.

I meant in aggregate, what would help me scale from 1 to 2 to 5 properties in a reasonable amount of time. Maybe the answer depends on what "a reasonable amount of time" is, I honestly don't have a good gauge at this point, that's why I'm here to learn. Thanks for your response! 

 Simple buy one for about 100k, refi cash out, buy another refi cash out, repeat, 

 How do you do this if you buy turnkey though? You've created no equity to cash out.

 Not true, you need a team in place, I just picked up a 3/2 Euclid OH all in 60kish, value 125kish, rent will be about 1300- 1400,,,,,, 100% hands off. 

I don't operate in your market to know the conditions. But why would someone sell a house in turnkey condition at more than a 50% discount? Why not sell to an owner occupant at market? Are these highly distressed foreclosures or something?

Quote from @Bill B.:

@Jon A.

It’s easy to have positive income with negative cashflow. Anytime your principle pay down is higher than your negative cashflow. 

If you have a negative $100/mo cashflow but your loan is being paid down $200/mo, then you have $100/mo income. 

 Yes, I suppose you're right. Though "income" doesn't seem like the right word for that, since you can't access it unless you either dispose of the asset or pay interest to cashout. I've never considered principal pay down when running numbers. Imo poster should simply look at gross rent minus mortgage payments and expenses. what's left over afterwards? Particularly given he/she already owns the property. Not sure things like cap rate matter if you already own the property. That's something to consider before acquisition.

Quote from @Bob Stevens:

Quote from @Zhenchen W.:

Quote from @V.G Jason:

It's the long-living debate, I'll always take appreciation. How you get cash from that is different than cash flow, but likely greater.

If you mean more money to invest, do you mean month to month specific or do you mean just in aggregate? That's how it'll differ. I'm not a fan of month to month payments, it's the worst trick in the world. That's my personal opinion.

I meant in aggregate, what would help me scale from 1 to 2 to 5 properties in a reasonable amount of time. Maybe the answer depends on what "a reasonable amount of time" is, I honestly don't have a good gauge at this point, that's why I'm here to learn. Thanks for your response! 

 Simple buy one for about 100k, refi cash out, buy another refi cash out, repeat, 

 How do you do this if you buy turnkey though? You've created no equity to cash out.