All Forum Posts by: Mark Nickoson

@Mark Sewell I agree - markets go up and down.  We are discussing risk management in a thread on the decline of the stock market but the fact is that main street is looking better than it has in a decade.  The FED has injected so much cash into the economy and that liquidity is sloshing around looking for returns.  That liquidity is one of the two main reasons why housing has taken off.  The other reason of course is the demand.  As companies post good earnings the stock prices rise and sometimes they rise too fast and we have corrections.  That is all normal.

As the FED slowly takes back the money added from the Quantitative Easing, we will have times of panic. But there will be a point in time when interest rates will rise enough that it will drive out the inefficient or unwise operators. I've asked for feedback from those using BRRRR about whether they have any limits. I'm starting to come to a theory that the BP community may not be weighing the risk and having mitigation strategies. I'm about to take a loan on a free and clear property so I can bring another property up to tip-top condition and raise rent another $200/mo and also look for the next property. But I'm not going to mortgage both free-and-clear properties.

Mark

@Rob Barry. That is the most well thought and intelligent response that I've received (which I've posted in several forums). The higher cash flow of section 8 is a good strategy, but it may also be a little higher amount of hands-on with tenants. It also tends to be lower priced properties, so good. I also noticed that you are not highly leveraged like many using the BRRRR method. I too have a portion of my assets in stocks, but if I had it to do over again, I'm not sure I would pick stocks. I do like real estate better and think it is more stable.

To everyone else... I still haven't heard from someone who is using the BRRRR method and is leveraged. My original question is if you are using BRRRR, is anyone setting some kind of limit in your business? Like payoff one property for every two leveraged. Or hold 7% as a cash reserve.

Mark 

@Jeff Ronningen, (from page 6) I understand the mortgage part. Here's what I don't understand. If you look at the BRRRR strategy, you are getting as much as a Refinance amount as you can, incurring a debt on each property. What is the risk with debt? It is that you will not be able to pay back your loan and your creditors will foreclose on you. If you own apartment complex with a $2M loan at 5.5%, your monthly payment is $9,166. Say your complex has 25 doors (cost of $80,000 per door) and you get $900/month. That's $22,500 income from rent. Expenses (taxes and insurance, mowing and property management, some capX saving, etc.) take a $9,000 leaving you $4,334/mo. OK, there is a downturn in the economy, a nearby factory shuts down and you've got 4 families that didn't make their payment. But there are restaurants around the factory, a Seven-Eleven, a drug store, a Dollar General and a gas station. Two months later those businesses are laying off workers and you loose another 4 families. You've got all 4 of the first 4 families out. You hire a work crew to clean, paint and repair the 4 units. You are now only making $15,300 a month in rents. And you have abnormal expenses. There is a problem with evicting one of the new batch of families, her husband is active military, and their making rent depended on her employment. Jobs are hard to find and there is now little demand for housing. You can only find one new renter for the renovated apartments. Blaa, blaa, blaa. Now your not earning enough to cover expenses.

So does anybody have a formula that they use to protect the expenses incurred by their mortgaged property.  Does anyone try to pay off a few properties or hold a certain amount of cash?

Mark

 Jay, I know you're a rock star at this business.  I wonder if I can get your opinion.  I have three properties, two are paid off.  The third is 10 years into a 25 year mortgage.  I make a decent income at my work, but with a medium size family and 4BR house, I cannot save much for RE.  I was thinking of taking one of the properties and refinancing so I could do an additional purchase and possibly flip to generate cash.  I'm looking for a discipline for running the business that doesn't let the winnings ride.  I knew a guy here in town that had 110 properties.  Going into 2008, he had decent cash flow.  But when people couldn't pay, he had to make up the difference to make mortgage payments.  Pretty soon he was selling properties at fire-sale prices.  When the dust settled he only had about 30 left.  He decided to go into a different business and sold those 30 a little later.  But I was thinking of always trying to have 1/3 paid off.  What would you do?

Mark 

@Christopher Toth I'm not an expert on the area, but I looked it up on Zillow and Google maps.  Decent brick homes for the Zestimate.  I'd buy one.  The only downside I see is that Dayton City Schools is not rated well as a school district. 

Hey, any of you folks that did a lot of BRRRR and are sitting on a few mortgages, is there something that you've done to protect yourselves if the housing market takes a downturn following the stock market? I've done the buy, rehab and rent. Thinking of starting the refinance and repeat but it also seems nice to have a few paid-for houses. I understand the concept of the velocity of money, but I also understand that increased debt means increased risk. I like talking with people that think about mitigation to risk and have limits in place to protect themselves. Anybody have a rule they use?

@Jim K., It is an amazing story... and great reminder for us to care for one another.  "Blessed are the merciful, for they shall receive mercy."  Matthew 5:7   Your $650 rent doesn't have anything to do with betraying, it is a fair trade for the service that you provide. 

I put my kids to bed at 8:00, do a few chores and then check BP for an hour or so, then go check Realtor.com, Zillow.com or the BP marketplace for deals until I cannot keep my eyes open.  Last night I got to bed at 1:00am.  Up at 6:00 to head to work and do it all over again.  Kinda like Groundhog Day, I keep getting better.  Hopefully I help someone else out in the process.

Mark

Krystal,

     I've lived in Dayton over 50 years.  South of Dayton is where the growth is.  But not every neighborhood south of Dayton is good for investing.  You have to know the areas that are good for rental and there are some.  If you want to chat on the phone, send me a message and I'll give you my cell #.

Mark

Hey I'm just jumping in this thread.  I've watched Peter Schiff for years and though I find him interesting and even compelling in his reasoning, making market decisions based on his recommendations doesn't work.  I once owned an international gold fund based on a speculation of a falling U.S. dollar.  What I didn't understand is all the other world currencies could effect my stock.  I ended up getting out for close to what I got in for, but I learned that each country has investors that are looking for returns and that international money sloshes around in search of good returns.  You might have some investors from Norway who have enjoyed a 25% return from their stock market over the last 12 month decide that they want to move their money into the U.S. housing market so higher and higher it goes.  We can't tell when a bubble may burst.