All Forum Posts by: Martin LaBelle

Hey @Logan L. congrats on your move to investment while AD. I know the Fort Bragg area well and my wife and I have been investing here about 15 years. I'm liking your two positions here, from a financial perspective, however I'm slightly concerned about the Spring Lake location. At the entry price you mentioned, you may have seen all the short-term appreciation you are likely to. The rent is fabulous, however I'm sure you are already feeling the upward pressure on the rental market reduce.

Also, I'm spending some money looking for off-market deals, and may have some surplus in the near future, so let's connect.

On a closely related subject, I'm really interested in the ways fellow veterans find their way into the business and would enjoy chatting sometime.

@Taylor Dasch I can understand your average home buyer/seller getting into positions where an agent might cut commission just to "get these two" to the closing table. It is at some point a throughput business and you can't spend thousands of dollars arguing about hundreds.

Investors are different because they hoped to profit by the position they got themselves into, and if they misstep it should be their lesson to pay for. They made an underwriting error, they need to fix their spreadsheet, pay their agent, and not screw it up so bad next time.

While I'm not an absolutist, in general, I think asking an agent to lower their commission is cheating a partner in the deal. It's like partnering with a project manager for a flip for 3% share of the sale price, and then at the closing table, asking them to accept less because the deal didn't hit your performance goals. I realize that Agents have an active role in pricing and price forecasting, however shared risk is part of the trade-off between agent and owner.

Remember when you hire an agent to sell a house, you are purchasing access to their business network which in the realm of Real Estate may be quite convoluted and intensive to maintain. The MLS is only one branch of buyers.

If the agent brought you an acceptable offer, they deserve to be paid for it. If the offer can't pay your expenses (like your agent's fee) then it should not be acceptable to you. If the deal can't pay your expenses and you think it's the best you can do, then you and your agent should share in the disappointment (in the proportions you agreed upon).

The only difference between your financial obligations like property taxes and your contractual obligation to your realtor, is that you are in a position of power relative to the agent and not the county that collects your taxes. 

Could you force that agent to agree? Maybe. Heck in many places, you could simply talk to the buyer, fire your Realtor, make a deal in which you steal the commission and split it with your conspirator (buyer). You could do it, because most Agents are so busy making deals they don't have time to sue you over $3k. You could do that... But who are you? Is that what you would do?

If it is, than you'll not do business with me. You'll never be invited to my 4th of July BBQ, you'll never taste my lime-cilantro pork fajitas.... but fear not! There is another way

Congratulate Yourself! You have just taken a rather cheap course in underwriting. Pay your agent and accept this as lesson in cost analysis. Update your spreadsheet and don't screw it up again. This is not a shameful path, it is the path of discipline and strength. It would have cost you dearly to make this mistake on a $500k deal, so - well done getting a discount.

You tell your agent that you are sorry you suggested it. Tell them: it's only that you're frustrated by the return on this one, but that you appreciate their efforts to maximize it. Tell them you're looking for a better deal, with a little more meat, and you'd appreciate (and reward) any referrals that result in off-market deals.

Another angle to my last post, cash flow is a metric, not a goal. Consider a fully liquid portfolio (every house owned outright) - how does the cash flow look ?- Well it looks awesome because there is not a mortgage in sight - sweet right?... Well hang on a minute.

Are we REALLY interested in cash flow, at this point in my career I'm interested in growing wealth. While cash purchasing all your properties makes your cash flow look great, your wealth production is bound to plateau when you run out of cash.

So the question really isn't "How many dollars does this property make me a year?" (i.e. cash flow) The question is "How many dollars does this property produce in relation to the equity in the property?".This "Return on Equity" metric can help you decide if the property is worth owning or continuing to own with your current equity position.

I currently have a property that I own outright. Since 2020 local rent has gone up quite a bit - HOWEVER the house also appreciated so much that the the rent to value ratio has gone down overall. My analysis says the appreciation and rent in the area will level off, and I assess low risk of backslide: What should I do?

If you look at my original investment and the current cash flow, I'm absolutely crushing it in terms of cash flow and RoI. I suppose I could just sit back and let my purchase from a few years ago pay me, however a return on equity analysis tells me I would be better off moving that equity (or some of it) to a different property using refinancing or a sale (1031 exchange).

Precisely how I might move that equity depends on the specifics. The point is that cash flow alone cannot inform your analysis, you need to know how much you are making with the wealth at your command, and you need to compare that to the the opportunities within your reach. 

Cash flow is a metric, not an end in and of itself. Investment requires multi-variable analysis. In certain situations cash-flow is an utterly dominant variable, in other situations cash-flow is less important. 

Consider a large property that one purchases in order to offset their income with depreciation, in this situation we might expect cash-flow to be pretty tight (unless we are very lucky). Others have covered the low cash flow high appreciation scenario, but the point remains that in a competitive market we probably shouldn't expect to get the best of both worlds on every deal.

Sure more cash-flow is better, but making all your decisions based only on cash-flow may cause you to miss opportunities that might forward other goals.  

 Hey Christopher, good for you! PM me sometime. I'd love to hear a bit about the thought process you went through timing your investments in your military career. I'm trying to help educate some of my local Active Duty crowd (I'm at Fort Bragg). I'm also spending some cash developing off-market deals so if you're interested in the Fort Bragg market, let me know. I'm not a dedicated wholesaler but we have made some assignments when our lead generation out-paces our acquisition.

 It's funny how things turn out. I don't expect to use my GI Bill, as I'm right up against the window. However as I look at my current situation (I'm doing well in Real Estate) I find myself more and more wanting to help younger soldiers to look past their service time and set themselves up. I feel that the military is poorly equipped to teach financial literacy or wealth development, and I feel a certain inner glow at the thought of helping to fill that gap.

There are a lot of angles to this, and I can see sound arguments and narratives flowing in good faith from both sides. Here is my two cents, its a small issue, but it is solvable, puts a dent in the problem, and makes good sense to me.

The G.I. Bill should not have a time limit. A military service member should be able to use their educational entitlement at any point in their life. It's not a loan, it's a benefit they earned. Many veterans never use their educational bill because they have to grind and provide immediately after leaving the military. Many GI bill entitlements expire after 10-15 years, right when most service members with a family would be able to use it.

The military is a great option for people needing to jump start their financial life, it's how I became an investor.

The great wealth of the western world is guarded and made possible by humans who raise their hand and sign a blank check (which could mean their life). They should not receive a dated check in return.

Incidentally, funny story. A day after the Creative Financing podcast dropped, my wife got a call asking about Subject To purchase of one of her listings with 60 days on market. We looked at each other like "listening to bigger pockets are we?"

@Andrew Postell excellent. It does makes sense. I'm not trying to be contrarian, just methodical. I've think I've walked the dog down most of the streets I need to on the subject. Thanks it was informative.