All Forum Posts by: Ken M.

Ken M. has started 141 posts and replied 1723 times.

Hey everyone I wanted to throw this out there and hopefully get some honest feedback from folks who’ve been in the game longer than I have.

I have a rental in Arizona that I’ve held for a few years. Right now, the mortgage is around $1,479 and I’m renting it for $1,895. On the surface it looks like it cash flows, but when I factor in reserves (30% for vacancy, maintenance, management, etc.), I’m actually operating negative every month.

I've run the numbers a few different ways, and unless I'm missing something, it just doesn't work long-term if I want to scale. I'm trying to follow the BRRRR method and build real wealth, not just hold onto properties that "look good" on paper.

The tenants are still in place and I’ve been debating whether to:

Sell it and free up equity
Try to raise rent (market may not support much more)
Hold and hope for appreciation

I’d love to hear how others have navigated situations like this. Do you dump underperforming rentals to scale faster? Is there a better way to structure this so it performs?

Appreciate any real insight — just trying to do this right and surround myself with people actually doing it.

Thanks in advance.

– Will

You're right. Interest rate is the key to cash flow when prices are high, like they are today. I figure the rate needs to be about 4% for most properties. That just isn't going to happen using banks for a new loan.

I've found that I have to buy from sellers who are not on the MLS, that have low interest rate loans, that are willing to let me take over their loan and buy at a discount. I've just bought three on the west side of Phoenix that went to my investors, but these are hard to find.

You have to be patient and if you are going to take over someone's loan, you have to be well financed to stay out of trouble. I actually put together a spreadsheet, I just enter pertinent information to figure which properties meet the criteria and most do not. That doesn't mean it's time to throw in the towel though. If you know what to look for, the gems are out there.

0 Votes

Quote from @V.G Jason:

Quote from @Ken M.:

Quote from @V.G Jason:

Do not think it's this that breaks the camel back.

It's likely something we don't expect.

Or the consistent inventory that delists by Oct/Nov, re-lists the following March coupled with new inventory that creates an inventory logjam.

It's also now not just rates that are preventing sellers from selling-- it's also being underwater on the loan.

And people just don't have the income to qualify. Even if rates were dropped, it won't be enough to offset the huge increase in the property, increased insurance costs increased tax costs. A lot of markets are maxed out. (not all markets of course, it's a big country, but a lot of markets are at too high of a debt to income level).

Inventory has doubled in Phoenix in the last couple of months. DOM over 90 is consistently growing. People aren't buying. The West Coast is slowing down.

Phoenix is like Sedona and Scottsdale-- peak season is probably Oct to March ish. So off-peak just to play devils advocate.

The reality is no one can afford houses at these rates, no one can afford to cut a check to get out from underwater if they re-fi'd in 20-22. What's the solution?

Actually Scottsdale is Hot, Hot, Hot - lots of properties selling over in the $1,000,000 market. Mostly cash sales.

0 Votes

Quote from @James Hamling:

Quote from @Mark Cruse:

Quote from @Ken M.:

Quote from @Mark Cruse:

Quote from @Ned Carey:

Baltimore city's states attorney Marylin Mosby committed this fraud and got away with a slap on the wrist. I think it is shameful that the courts were so easy on her with such clear evidence against her.

Hers was a little different from this, but I get it. Not sure what the punishment should be for this. I'm not sure how they are catching people. People do it all the time. How do they know if someone didn't move into the property? I know with the VA loan, no one is staking out the residence to see if the person moved there. How are they finding out, outside of maybe them defaulting on the loan.

It's a lot easier than it seems in today's computerized world to catch fraud.

Most people don't realize that with mortgage fraud, they include wire fraud (escrow transfers funds by wire ) and bank fraud. The transaction involves a bank. There can be other charges as well. Pretty simple to make it stick. There's a "paper trail". But, as stated above there is neither the will nor the man power to charge for "simple fraud". Prosecute Large, flagrant fraud on occasion, maybe.

If you do a simple driver's license address to home address match, to loan address match, IRS tax address to home address match, to loan address match, you could probably identify a great deal of fraud. But that's gestapo tactics and I don't think that'd be tolerated.

If you sent a letter to every government loan borrower in the last year and required the address of the borrower be filled out and compared it to the existing databases, you'd have the same information, If someone didn't return the information, you call the loan due.

I mean there are ways to do it, but then what? You have a mess on your hands. ;-)

The solution is to not offer a discount for owner occupied homes, don't make the requirement in the first place, stop playing games with it and be more honest as a government,

That's just not going to happen either.

Mortgage fraud charges can be used as a "hammer" or threat, when dealing with other charges.

Most only require you to do one year. Everything you named, the person could just say Im in the process of getting all that changed. Soon, that year will be over. The legislations cant even keep up with what they have now. How would they do all that? Seems to me, unless you are watching the home its no real way to do this. If you defult I can see it on the radar but other than that, I dont see them figuring it all out.

I have seen as short as 30 days OO ok'd to flip a place over as a rental with mitigating circumstances, like job relocation etc..

I don't know of any that handcuff a person to longer than 12 months and many turn a blind eye after about 3-6mnths.

What matters most is performance on the debt. And securitization of the debt.

Fraud schemes, yeah, I see going after them no doubt but the average person who has a rental or 2..... no, long as things are paid nobody cares.

"as long as the mortgage is paid, nobody cares" is exactly right. Goes for Subject To as well, it's only when payments start getting missed that anybody says anything.

0 Votes

Quote from @Stephen Jones:

BP,

I've been wrestling back and forth on whether or not I should sell my entire multifamily portfolio and get out of the game, so I figured I'd throw a post on here to get a little insight!

My current portfolio consists of 160 multifamily apartment units, over the course of a 10 year period it has taken a lot of hard work and sacrifice to get to the point of where I am.

Most of my portfolio is mainly B class properties, with some A class properties mixed in. All in decent/good locations. All properties have been managed very well over the years and currently has a great tenant base with no vacancies.

The main reason of potentially wanting to sell is that the maintenance calls are starting to wear on me. I manage all these properties by myself and it just takes a toll dealing with 160 people on a daily basis. I've went down the road with a management company before, and I refuse to go back down that road. It is what it is, other people don't manage or treat the properties like the actual owner. It is essentially, my baby.

I am also only 37 years old. Which I'd like to think is still a fairly young man lol. So do I hang on for 5 more years or so? I still do enjoy the game of chasing deals, it is what really keeps me going and gets me excited, but managing after the fact has just turned to wearing on me a bit.

Also, most of my property is based in Illinois (it is my backyard) and the taxes around here are brutal. It's just not the best state to be invested in, as I'm sure you all know.

I would absolutely miss the cash flow aspect of it though, getting re occurring income every month is definitely something I weigh in not to sell.

I would prefer not to go into numbers on here, but if it comes down to it, I will. If inboxing me is better to get into the numbers game, feel free to do so!

I know that is all fairly brief, so if there's any other questions, feel free to ask! I appreciate all the feedback!

Done properly, 160 Units should throw off a pretty good income AND a FULL TIME handyman. Look over your numbers and figure out what you're doing wrong.

9 Votes

Quote from @Sam B.:

Mortgage fraud is minimal these days. What will burst the bubble is stupid investors buying cash flow negative properties banking on appreciation.

Hmmm, what is "minimal"? is $100,000,000,000 minimal or is . . .?

0 Votes

Quote from @Mark Cruse:

Quote from @Ned Carey:

Mortgage fraud charges can be used as a "hammer" or threat, when dealing with other charges.

1 Vote

Quote from @V.G Jason:

Do not think it's this that breaks the camel back.

It's likely something we don't expect.

Or the consistent inventory that delists by Oct/Nov, re-lists the following March coupled with new inventory that creates an inventory logjam.

It's also now not just rates that are preventing sellers from selling-- it's also being underwater on the loan.

Inventory has doubled in Phoenix in the last couple of months. DOM over 90 is consistently growing. People aren't buying. The West Coast is slowing down.

0 Votes

Quote from @Moses Stealy:

Crime rate your chance of becoming a victim of a violent or property crime in Hartford is about 1 in 30. So I was just wondering what would be the best way to go by this property.

71 Martin Street, Hartford CT

I would never buy a property worse than the neighborhood I grew up in. Some people can do that but, I wouldn't recommend it. You are equipped to deal with the problems of the
neighborhood you grew up in, or better.

0 Votes

Hartford, Connecticut

Quote from @Jay Hinrichs:

Quote from @Mark F.:

1000% no and here’s why. Enforcement on a wide spread scale will NEVER happen. I have personal knowledge on this and it is impossible for the federal government to investigate and prosecute this in a way that would have any real effect on the housing market. I could go on and on about it but I’ll just leave this one tidbit. They just cut 700 vacant FBI positions. Link below.

Your counter point will be “but that tech Director guy said they got AI to help root it out!” That’s great but you don’t understand how investigations work. You can identify it all you want but if there’s no investigators or AUSAs to take the case, nothing happens criminally. Sure, they could call the loan due or force them out or whatever but FHFA has no teeth in actual investigations as that is done by the FBI. Link to that story below.

https://abc3340.com/news/nation-world/doj-plans-to-cut-addit...

https://fedscoop.com/fannie-mae-partners-with-palantir-on-mo...

YUP its the FBI that follows up on these cases.. And they know where the fraud clusters are .

The fraud cases I'm following were brought and are being prosecuted by States Attorney General. No FBI involved. Most states (if not all) have mortgage fraud statutes, too. I suspect the IRS, FDIC and a number of other agencies can initiate prosecutions, but why would they?

As we saw in the last collapse (2008) no one gets excited until everything is on the brink. ;-) I remember watching George Bush on the White House Steps saying "OOPs, we're screwed". or something to that effect. And Alan Greenspan of the Fed said "Well, I didn't see it coming".
Then it's fire engines and shovels and "liar, liar, hair on fire" The agencies are reactive, not pro-active.

0 Votes

Quote from @Waylon Bruce Moore:

We normally have been using our cash to buy, reno, and hold houses for rentals. Recently, my neighbor approached us about buying her home. It needs extensive renovations, and we would probably flip it once finished. There is a return of about 16% and annualized 33%. one of my close friends recently offered to fund any projects we were going to do and since i dont have much expereince in getting loans what is the normal return i should offer them for a loan of about 400k over a 6 month time frame (purchase-reno-sale)?

Some hard money lenders want 1% or 2% upfront with 8% to 12% interest. It just depends. There is actually more to it with Hard Money lenders, they typically won't go over 70% LTV, they decide the ARV, they make you buy the materials and do the work and upon their approval repay you for the materials. Others, once you are experienced and use them a few times, will wire transfer funds and you use their money. As stated, it just depends. Every Hard Money Lender is different. It's the golden rule. They have the gold, so they make the rules. You have the advantage of turning them down and trying a different lender.

Friends and family a straight 10% to 12% with nothing upfront.
Don't forget there is a need for a title Report, Escrow, property taxes, HOA, and other assessments. (Water, Garbage, electrical, and whatever)

1 Vote

Tampa, Florida

← … 62 63 64 65 66 67 68 69 70 71 72 … →

All Forum Posts by: Ken M.

Ken M. has started 141 posts and replied 1723 times.

Post: Not Cash Flowing in AZ — Looking for Insight from Experienced Investors

Post: Will Mortgage Fraud Burst The Housing Bubble ? How Do You Prepare ?

Post: Will Mortgage Fraud Burst The Housing Bubble ? How Do You Prepare ?

Post: Do I sell it all and call it a day??

Post: Will Mortgage Fraud Burst The Housing Bubble ? How Do You Prepare ?

Post: Will Mortgage Fraud Burst The Housing Bubble ? How Do You Prepare ?

Post: Will Mortgage Fraud Burst The Housing Bubble ? How Do You Prepare ?

Post: the spreadsheet says go, but the neighborhood says pause.

Post: Will Mortgage Fraud Burst The Housing Bubble ? How Do You Prepare ?

Post: need to know what the normal cost is for borrowing money from a friend for a rehab.