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All Forum Posts by: Matthew Terry

Matthew Terry has started 28 posts and replied 130 times.

Post: When investing out of state, how did you decide where to invest?

Matthew TerryPosted
  • Rental Property Investor
  • Mesa, AZ
  • Posts 138
  • Votes 144

@Alyssa Feliciano I was in your shoes about 4 months ago. There are many markets that provide good investments for a relatively low entry fee and most have been pointed out to you.

The key is to invest in good people that can advise and support you. After I realized that there are 10-15+ markets to choose from, I started researching companies that cater to investors and offer somewhat of a turnkey approach. Not necessarily buying a fully rehabbed "like new" property, but a team that will connect me to people they trust and have years of experience with; property management, title, insurance, contractors, lenders. I started by researching agents who focus on investors because they are most likely to work with all these other professionals. I found a company in Oklahoma that is stellar and I'm closing on two Section 8 properties with them this month. They are experts in Section 8 and I chose Section 8 to mitigate the risk of vacancy and not getting rents paid. 

I would suggest, however, that you save up more money before you pull the trigger. With $14K, you will be very limited in opportunities in decent neighborhoods and put yourself at risk if anything unforeseen goes wrong. Even a $60K house will cost $12K for downpayment and you still have to consider another $4-$5K in closing costs and you absolutely should have reserves, 6 months of the mortgage payment plus a couple grand for unforeseen capital expenses. So you are looking at $20-$21K to buy a $60K house while mitigating risk of potential downturn. With that said, remember you can pull from your IRAs and 401Ks if you have them without penalty and don't have to pay it back or take the income tax hit for 3 years. 

Post: Cash-out refinancing gone?

Matthew TerryPosted
  • Rental Property Investor
  • Mesa, AZ
  • Posts 138
  • Votes 144

@William Lee

No problem here. I'm closing on a cash out refinance on my rental at the end of the month. I kept it at 69.5% LTV because you get better rates under 70%. Keep looking and/or adjust the money you want to take out.

Post: 5% IR and 100% LTV, no credit check needed private loan?

Matthew TerryPosted
  • Rental Property Investor
  • Mesa, AZ
  • Posts 138
  • Votes 144

www.springfieldloanfinance.com

Unprofessional website, domain registered in April 2020, logo says "since 2001", reached out to me on Linkedin advertising 5% IR, up to 100% LTV, no credit check, secured. The CEO was a fixture\furniture salesman before he became "CEO".

Many red flags, but maybe this is just a wealthy individual with terrible marketing skills wanting a hobby and I could actually secure a 100% LTV loan at 5% for 25 years interest only? Maybe he has a couple million in cash laying around and doesn't trust the stock market and with 0% interest rates, he is doing this to get some income?

Post: Does single family work in the Phoenix area?

Matthew TerryPosted
  • Rental Property Investor
  • Mesa, AZ
  • Posts 138
  • Votes 144

I agree with all here. You can look at areas like Laveen, Buckeye, Casa Grande, Apache Junction, Maricopa, etc and find lower price options. 2/2 are more affordable and may have better RtV. As someone mentioned, you can always put more cash down to create better cash flow. If you want to venture out from SFH, there are several multi-family opportunities with 5-6% CAP rates that are under market rents. Like someone also said, appreciation is key. Phoenix is a very job diverse market, massive population growth, the standard of living is relatively low (aside from real estate), there is a major supply shortage of "starter" homes and costs are high to build new homes which all create higher property and rent prices. Maybe network a bunch and find some investors interested in a partnership on a $300K house so you only need to put $30K in and spread the risk out and have more capital to deploy later. If you are only making $100 a month in cash flow, that maybe $400 a month in 5 years.

Off-market deals are pretty easy to find once you connect with wholesalers and brokers and there are still a handful of hard money lenders to leverage cash purchases and conventional lenders with 6 months or under season periods to refi fast. 

Personally, my strategy is to buy 10-20% of my properties in Phoenix for appreciation and the other 80-90% in better cash flowing markets with lower prices and use cash-out refi on my phoenix properties to fund purchases in the midwest and south.

Of course, betting on appreciation with absolutely no guidance as to what the future holds because the world has never been in the situation in modern history is a risk you may not be willing to take. Make sure you have plenty of cash reserves. I personally keep 6 months of mortgage payment plus $5K for unforeseen capital expenses. Phoenix appreciation and rent increases outpace much of the nation, so it may outpace the fall as well.

Post: I want to get in RE but...

Matthew TerryPosted
  • Rental Property Investor
  • Mesa, AZ
  • Posts 138
  • Votes 144

@Ryan A.

Fundrise has been great. I threw in $13K and selected an income fund and I made about 9.2% in 2019, paid quarterly. They have higher return programs for accredited investors. They do a fantastic job of explaining the reason and business model for every equity or debt deal they do and keep you updated on each one. Right now they are sitting on about $200M in cash and are playing defensively until they start seeing the lag of effect of COVID-19 put major downward pressure on property prices and construction projects that are incomplete and they will deploy that cash hoard (8-16 months). Fundrise is essentially a REIT, but they cut out several of the middle investors to make it more profitable for retail investors. The downside is that your capital is very illiquid, unlike a REIT, it takes a minimum of 60 days to sell shares and there is a penalty if you sell before 5 years. It is a middle-ground risk\reward between the stock market and syndication and they allow the average middle class the opportunity to have direct ownership over property and notes without much risk. You spread your risk with 140,000 other investors but make less. You can also invest in the company itself as their plan is to IPO one day.

Post: If the Market is Crashing, Then Why Aren't You Selling?

Matthew TerryPosted
  • Rental Property Investor
  • Mesa, AZ
  • Posts 138
  • Votes 144

Self-managing landlords who want out and have paid-off properties. Over-leveraged landlords in bubble markets. Anyone acting on fear and wants to stockpile cash quickly. These are a few situations I can think of as to why there would be discounts available. These opportunities may exist, but are hard to find at this point because the lag effect of COVID-19 won't result in downward pressure of property prices or rents for several months. Fast-forward 6 months or so when major companies are bankrupt, 30-40% of all small businesses cease to exist and forbearance programs are done, stock market is in full bear mode, a possible resurgence of COVID-19 and the pressure will be real. This is when prudent investors who are properly leveraged and capitalized will be paid for their wisdom. I think many people are comparing this to 2008, but downward pressure will take much longer due to this not being a mortgage-related crisis and the unimaginable stimulus being created. 

Another reason may be that Bigger Pockets community is a minority of the broader investing community. Like David Green says "Rockstars know Rockstars". There is a good chance BP members who bother to respond to your question just don't know many people who invested poorly or have a poor mindset and therefore are trying to liquidate.   

Post: I want to get in RE but...

Matthew TerryPosted
  • Rental Property Investor
  • Mesa, AZ
  • Posts 138
  • Votes 144

I invest in Fundrise, but otherwise most syndication deals are only for accredited investors and I don't make the cut quite yet. You do since you make north of $300K with your wife. You can average 8-10% in cash paid monthly and then another 5-10% IRR after 5 or so years when the property sells. All you do is sit back and watch the checks roll in. The most time intensive part is doing the research and due diligence to pick a company with tons of experience and high success rate.

Post: I want to get in RE but...

Matthew TerryPosted
  • Rental Property Investor
  • Mesa, AZ
  • Posts 138
  • Votes 144

@Ryan A.

I'm in a similar situation as you. It took me a few years of researching, education, and networking to take the plunge. What I've come to realize is that there is greater risk in W2 income than in real estate and returns for REI not only crush 401K and ETF investing returns, but you have access to some of that money immediately. You will replace your W2 income with passive income, while still building net worth through equity, much faster than when you hit 59.5 years old. You have much more flexibility and control in REI than you do in stocks and W2.

However, REI does take slightly more effort, unless you do syndication which still easily doubles the average 8% return of the stock market with similar risk. It is a no-brainer if you care about making as much money as possible without tremendous risk of something like investing in a start-up or trading the news with options. Don't get in your own way because of fear. At least try it out, you are young enough and make enough W2 to make mistakes and still be financially secure for life.

Post: OOS investing. What states outside CA are good to invest in?

Matthew TerryPosted
  • Rental Property Investor
  • Mesa, AZ
  • Posts 138
  • Votes 144

Welcome to REI! I'm new to the game myself and had similar starting capital. I live in Phoenix and I invest out of state because I want to buy\hold and get close to 1% rule. You just can't do that in Phoenix with $35K unless you invest with a partner. Even so, 1% rule doesnt exist as this is an appreciation market, so flipping, BRRRR, and syndication are the typical strategies. With $35K and hard money on 70% ARV, you can find some flipping opportunities. You typically need to have at least $50K and be an accredited investor to do syndication. Of course, BRRRR and flipping present much higher risk in the current recessionary market and Phoenix is one of the fastest appreciation markets over the past 5 years, so it may fall just as fast, depending on supply.

I'm closing on two Section 8 properties in OK City soon. I found a great team to help and I figure Section 8 is a great way to hedge for recession. OKC is historically stable; average appreciation but resilient to economic uncertainty and the government pays the vast majority of the rent with Section 8.

Other midwest markets are on my radar; Indinapolis, Cleveland, Memphis, Kansas City, Little Rock, Huntsville. All have good Rent:value ratios, job growth, population, landord favor etc. Some may say they are too populated with investors already, but to me, that means it will be easier to find a team because of high investor demand. I'm seeing San Antonio mentioned a lot more so I may dig deeper there. 

Post: Are C/D area properties worth it?

Matthew TerryPosted
  • Rental Property Investor
  • Mesa, AZ
  • Posts 138
  • Votes 144

Let's say you set criteria of only buying properties that meet the 1% rule. Since this is a percentage, it doesn't matter how much the property is, you will make the same amount on a percentage basis. You can make $1,200 from a single B class $120,000 property, or you can make $1,200 from three $40,000 D class properties. If D class is higher risk, you theoretically triple your risk, but still make the same amount of money. It makes no sense. So you will need to change your criteria to maybe looking for 2% rule deals if it is in a D class property. I don't know if deals like that are easily found.

Additionally, D class properties typically don't appreciate nearly as fast as B class, so you might be faced with having to put $15K into your $40K property to sell it for $50K over 10 years. Amortization is a joke as well; you can forget about cash-out refinancing in 10 years to buy another property because your closing costs will be more than the cash you can get out.