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All Forum Posts by: Matthew Terry

Matthew Terry has started 28 posts and replied 130 times.

Post: Housing Market Crash?

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

Like BP insights, macro data is interesting but essentially useless to take action on. Real Estate is local and every market is different. National averages are very different than local market trends. Pay attention to the markets you serve and ignore the national data. Everything being reported so far is an obvious consequence of a pandemic and economic fear. The surprises come when you dig into smaller states, regions, and cities.

Post: Adding another house to property to make the deal better

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

@Cassi Justiz is that a common practice, renting out appliances? Would you normally rent the house without a washer and dryer at a certain price and then give the option of delivering and installing them for $20 a month, as an example?

Post: Great Rental Property

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

@Antonio R Moss you need to define what type of investor you are or investment strategy you want to deploy. Some markets are better than others depending on what you want to do. Are you in it for cash flow or appreciation, do you want to be completely passive, or more active,  or a balance of everything? Everyone has good recommendations so far, but they may not be good for you personally. 

I also need to disagree strongly with the concept that investing out of state is harder. I have a rental property 10 minutes away from where I live in Phoenix and I'm about to close on two in Oklahoma City. I'm no expert in either market when it comes to investing or managing. I had to find and hire a team of experts to help me in both cities. The one advantage, which may not even be an advantage to everyone, is that I can save some money by doing small repairs and maintenance at my local property, but that is my personal choice to actively manage a property. You may want to be 100% passive so this isn't an advantage. I chose OK City because historically, it is a stable cash flow market without volatility in rent rates or property prices. I chose Section 8 investments as a hedge against inflation, recession, and massive unemployment. I believe affordable housing is going to be the safest place to store wealth as we enter a recession, maybe depression, and high rates of inflation. Phoenix doesn't have the characteristics I'm looking for mainly because prices are way too high for the return and Phoenix is almost like a coastal city in terms of appreciation.  

So, I would learn more and create a plan. Then come back to BP and ask this same question, but add more detail like what your strategy is, what types of markets you want to invest in, etc.
 

Post: What would you do with $60k if you’re goal was $5k/mo. income?

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

The "advice" here about options trading is terrible. Unless you study hard and work with mentors for a couple of years, you will most likely lose all your money, and maybe more, and this can happen in a day. Day trading is even worse, complete speculation. Aside from technical skill and experience, you also need a steel gut and a high degree of emotional intelligence to ride out volatility. If you are fantastic at options trading, you may be able to make a 20-30% return annually, but keep in mind that income from options trading is considered earned income and gets heavily taxed. Since you want to make a 100% return, you would actually need to make 200% if you are being taxed at 50%. This is unrealistic unless you take the advice here and essentially gamble your $60K by betting on black (stocks will go up) or red (stocks will go down).  

Post: What will renters look for post COVID-19?

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

Hello BP Mates,

I'm reading a bunch about how businesses are expected to change because of COVID-19. 

Will there also be a surge in demand for rental properties that have an extra bedroom or an office\den? 

One of my investing criteria is at least 3 bed for SFH, but I may start looking for 4 bed minimum in markets that are likely to have a larger population of people who work from home. Maybe there will be a surge in demand for 5+ beds if two offices are needed.

Post: Things to set up now for future investing.

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

Alex,

It is great you are interested in REI so young, congrats!.

My personal mindset is that I'm investing in people (including myself), not properties. REI is a side-hustle for me and I don't have time to be an expert or aggressively market yet, so I need to rely on experts to find and manage properties for me. An amazing deal well below market value can turn out horrible if you have a poor property manager, as an example. Start networking on BP and local REI meetings. It is easier to do this now since all meetings are online. Be transparent and honest that you don't plan to invest for 2 years, but you are in the process of learning and setting up a network to hit the ground running as soon as you can start investing.

Always save up for cash reserves. A VA loan (assuming since you are at a military college?) to house hack is nice, but make sure you can sustain yourself in times of vacancy and repairs. Just because you don't have to put money down doesn't mean you don't need money at all. If you anticipate your mortgage will be $1500/mo, start saving now for about $10K in reserves. 6 months of your mortgage and some leftover for repairs. $10K over 3 years is about $280 a month. Can you stash that away?

As others here have said, credit cards are a great way to build credit. They are also a great way to save money, but only if you are extremely responsible and pay it off every month. There are great cashback and points programs, that if used wisely, can save you thousands of dollars a year. I personally have everything I buy and every bill I get put on a credit card, if it is possible. As an example, If you are buying a ton of things on Amazon, you basically get a 5% discount with every purchase with the Amazon credit card. Some cards give you a $250 bonus if you spend $2-3K within a 3-4 month period, etc. Do some research and pick a card that is right for your spending habits (and that you qualify for). The interest rate shouldn't matter, because you will pay this off every month. 

Post: Best Real estate strategy?

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

Cyrus,

Congratulations for taking interest in REI at 28 years old! I'm a new investor as well and here is a glimpse into my story. We did not start investing until the vast majority of our consumer debt was paid off. This allows us to build up reserves fast, have a lower debt-to-income ratio to get better financing terms, and it just feels more secure.

 I started investing late last year by moving into a new primary residence and turning my old one into a rental property. We moved into a house well below our means in price and size, but with great location and nearby amenities. We did this for three reasons: 

1. To prepare for this exact situation, a black swan event, although I was thinking about job loss or major medical expenses, not a pandemic. With an easily affordable mortgage and relatively low utility payments on a 2,000 square foot house, we are confident we will pull through without much financial hardship, even if we had to pay the PITI of our rental out of pocket.

2. To maintain good net income to be able to save up for more properties. We only increased our monthly payment by $300 in our new house, yet we are cash flowing around $400 from our rental property. This was our way of "house hacking" without needing to live with\near strangers. 

3. This will eventually be another rental. We received a 3.2% interest rate and bought below market value. The plan is to live here for 2-3 years and then make this a rental, but we will be perfectly content to stay longer because of COVID-19.

I'm looking at Phoenix, where I live, as my "appreciation" market to engage in flips and live-n-BRRRR and use appreciation to finance deals in cash flow markets like Oklahoma City, Kansas City, and Memphis. At the beginning of March, I correctly speculated that the stock market was going to drop hard, so I cashed out a chunk of my Roth IR contributions (no income tax or penalty). I'm currently under contract for two Section 8 C+ properties in OKC to deploy that capital. My reasons for this are:

1. I want to convert cash to equity because I feel inflation will rise due to trillions of stimulus dollars being injected into the economy. 

2. OKC is a historically stable market and I intend on keeping these for decades, so there won't be a crazy drop in property value after I close and I won't be affected by any drop since I'm focused on cash flow. Rents were also stable or rose in recession.

3. The government will cover rent enough to cash flow in case the tenant loses their ability to pay. I thought this was prudent considering over 20m people are unemployed now.

4. Conservatively speaking, in 20 years, I'll make about twice the money as I would if I left that money in my IRA and I can use my some of my gains immediately (cash flow), rather than at 59.5 years old.

I'm in the process of doing a cashout refinance on my rental in Phoenix because rates are so low and I have 50% equity in the property. We are doing a cashout refi for 69% LTV because you get a better rate staying under 70% LTV and so I'm not over-leveraged in the wake of a crisis. We were debating whether to wait and see what happens to the market but then decided that we would rather have the cash now than to risk lenders tightening up later. Again, because we live below our means and have no consumer debt, we can afford the extra $300 even if our tenants can't pay rent. This will increase our mortgage by about $300 a month, but I believe we can reinvest this cash into other properties and get close to $600 in cash flow (20% down) and still have 6 months reserves. I'm paying around $200 a month in maintenance services for my rental property which I will take on myself to mitigate the cash flow decrease until I can reinvest that cash. This maintenance will take me about 8 hours a month to complete. So with 8 hours of my time per month, I'll be $500 net positive in cash flow. I can then take back that 8 hours if I choose by hiring landscapers again.

My point in explaining all of this is that there are many ways to start investing, but each investment should be very calculated in terms of risk, numbers, and what works for your personal situation. I feel that trying to find the "fastest way to build a portfolio" may be a very risky mindset. Additionally, BRRRR method is one of the riskiest strategies in a financial crisis because you are speculating, taking on risk of a rehab, have capital locked up for several months, and your success is at the mercy of lenders when it is time to refinance out of the hard money loan you needed to buy a property for cash.

I also thought I wanted to do nothing but BRRRR when I first started reading and listening to BP. The enticement of rental income without spending money is real. However, I've come to the conclusion that I need to build up my network of REI professionals more, gain more experience and credibility as an investor, and save up a larger chunk of capital before taking on BRRRR risk.

Post: Will boutique assisted living thrive after this?

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

Hello BP Mates,

I've listened to a couple of podcasts about turning large 6+ bedroom houses into assisted living facilities and there is massive profit involved. Although the barrier to entry is rather high compared to traditional strategies. 

COVID-19 decimated many assisted living facilities because there are large populations of the most vulnerable people existing close together. 

I wonder if boutique assisted living will thrive because demand will surge? Is it more efficient to mitigate and control infection if there are only 5-6 people within the same residential facility as opposed to 50+ in a commercial facility?  Will adult children feel their aging parents are safer AND more comfortable in a 4,500 square foot home rather than a multi-building campus on a couple of acres? Is it easier to enforce social distancing with this strategy? If so, is this message marketable?

It would be great to get your perspective, especially if you invest in healthcare\assisted living businesses now.

Post: Investor Newbie- which type of property to start with?

Matthew TerryPosted
  • Rental Property Investor
  • Mesa, AZ
  • Posts 138
  • Votes 144
Originally posted by @Megan Ransome:

@Matthew Terry

Thanks Matt! It sounds like I may need to wait a while, or restrategize, until I’m better positioned to finance a deal, or use my own credit.

It is all about your personal risk appetite, but risk level for being over-leveraged with no reserves just exponentially shot up due to COVID

Post: Investor Newbie- which type of property to start with?

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

- Even if you find a deal where you can put no money down and still cash flow, please make sure you have money in reserves. At least 6 months worth of mortgage payment plus another $5-$10K just in case there are urgent repairs needed or you have to evict someone soon after you close on your property. 

- Mind the time-value of money: A no-money-down deal that will also cash flow takes more work to find and close. As you know, the faster you own a cash-flowing property, the faster you build wealth and earn income. If it takes you 6 months to find a deal, that is 6 months of potential income and principal paydown you aren't getting compared to how fast you may find a deal with traditional financing.