All Forum Posts by: Luke Grogan

That's a great play for cash flow, from the sound of it. Yes, the headache will be there, but sounds like you'll have a team and if you can target 8-10 of these deals, you'll have a nice stream of income... Best wishes on getting it done!

Hey you lazy slob, I wrote one and I don't mind sharing! :P It was also for a duplex, but it was after they accepted the offer and wanted proof of funds, then went and accepted another offer! Oh well, it's still a start to a "wholesome" family letter, but at least half won't apply to you...

$2100 gross rent for $70-80k all in? That sounds like a phenomenal deal. Even if all expenses and debt service cost 60%, you'd still have a 10% Cash on Cash return. How many of those can you find??

Someone could get upset about it, maybe call your real estate broker, if you are using one, and complain about the lack of perceived ethics or courtesy, but they really can't do much about it.

I lost a deal similar to this. My agent was more upset than I was, but I was just surprised they didn't have to wait. My agent called the other agent's broker and her response was basically, "Huh, that's surprising and maybe rude. Just resubmit your offer as a back up."

If somehow your buyer is a lawyer and just wants to make life difficult, he may do that, but doubt he can enforce a contract unless he has earnest money down, or something binding. Just my opinion here...

Yes, I do, and recommend you put aside money every month for property tax, insurance, and plan for income tax. Although my properties are currently depreciating, so I don't pay income tax on them, I do for my consulting business. Basic business management says make sure you have liquid capital for planned expenses and set aside something for replacement reserves and repairs.

I am looking around there also... keep me in mind.

@Tim G. If I couldn't force more appreciation and raise rents, I think that would make up my mind and I'd be pursuing the deal that I do next like you outlined. Someone wise once said, "You'll never go broke taking profit." You may miss out on further profits and you'll definitely get burned if you don't underwrite your next deal judiciously, but you won't go broke on this one deal by taking profit now.

Interesting little debate going on here, but sounds like you've outlined a plan that you like, and seems very reasonable: market out of state, get a deal under contract with favorable escrow terms. What's holding you back from that? That puts the burden on finding a good deal, under contract, with the terms that you want. Go for it! 

I faced a similar decision, but mine was with a portfolio of 8 homes owned free and clear. A little difference since you've already used leverage, but similar in that the fast appreciation is mostly over and there seems to be only 10-12% left in this market, from my estimation.

The question I rolled around was selling and 1031 exchanging, just selling outright, or put leverage in place and either hold until the right time using my PUA rider in life insurance to put roughly $400k in an account earning 6.25% or find properties that produce 10%+ COC returns. I chose refinance and that is what I am currently working on. I've refinanced two using HELOCs and the other six are in the credit review stage of a commercial loan targeting 75% cash out.

Now, I'm in a similar situation as the one you are contemplating: where do I put the money to work? I tend to think that refinancing to around 75%, keeping cash on hand to cover shortfalls or a drop in rental income, then using the balance to fund another deal is a solid bet. You have to produce enough cash to cover debt service and expenses, but you will continue to receive tax and appreciation benefits, since they will continue over the 10+ yr time frame, or at least be a hedge against inflation due to rising rents and appreciation. You will trade one set of problems for another, but it seems that you will cover both sides of the equation with cash flow covering expenses, taking some money off the table in a tax efficient manner, invest in another area, and protecting against inflation.

Can you share your thoughts on why you haven't really discussed a refinance? It seems that the only downside would be a larger prortfolio with higher leverage (should be mitigated by keeping cash reserves if you're disciplined) and that you would only be able to put to work roughly 75% of the $300k equity appreciation, rather than the full amount. Your thoughts?

Ben Zimmerman great real life example and option for a young guy. I went into the AF as an officer through ROTC and wish I could tell the initial poster to do that, but it's too late... By my first assignment (Peterson AFB), I already had a wife and son, so, unfortunately, we were focused on living the good life. Get a nice house, my nice car with my $20k USAA loan, and go out to eat once a week. Pretty soon I was swimming in debt. Contrast that with a buddy I met at my ASBC school who was assigned to LA. He bought as much home as he could qualify for in Los Angeles and rented out all of the rooms to friends. He didn't even keep the master for himself, but took the smallest room with no bath. Three years later, sold the home and made about $100k to buy his next home, plus he learned how to manage tenants that were also "friends" and he knew what he wanted to do. Instead of "living for free" he used his BAH/BAS to pay rent and collected rent from everyone else and saved it in a separate account. Very smart dude, but his mom was also successful and taught him good money skills. I eventually learned a similar lesson: don't live for free, pay your way and save first. No one will save for you, so if you think your housing allowance is free money because your friends are paying your rent, try to look at is as your friends are saving for you and your BAH is paying your rent. IMO, this could be better than a small multi family on your first assignment, unless you can get a deal and do a little fixing up. Best wishes!

Depends a little on the size of the property for me, but I like to put a number in the 10's of thousands, but it is fully refundable on easy terms. Once they provide me everything I need, and I'm able to arrange financing, or assign, or whatever my end game is, it's no longer refundable. Bottom line is not to make your contract work against you so get advice! My agent has recommended a thousand or so, but if I really want the deal and I'm coming with cash, trying to close fast, and I think it's a home run, I feel comfortable putting up 1/3 with the ability to get out of the house if I don't like the way it smells or the color of the door. Another factor is larger apartments or packages. I put 1% in my offer for a $3.5MM package, and they came back asking for $50k deposit and then another $50k non refundable after my DD period and successfully securing funding. I wasn't able to get that funded, so I got my money back, but they didn't want to tie the deal up without some assurance I could close, if I could get it funded.