All Forum Posts by: Michael Thach

 The flips I mentioned were when you invest into a flipper group. For example I generate at this time ( one of the harder times for flippers ) about 9-12% in return, I charge 35% to my investors of their profit. So if my investor make 10k, I would charge them $3500. I usually have around 30% in the deal myself. So I would have the best interest for the flip to go well for the group. My investors would be limited partners. If you have any questions or need help to make decisions let me know.

I live in Las Vegas and operate close to 30 MTRs in town. 

I build one out of a single family house and turned this into 5 units. Each is making around 1600-1800 after airbnb fees. Considering this is just a 2400 sqft house the cashflow is quite good but downside is it will cost you around 100k in renovation and around 15k in furnishing for each unit. So is very cash intensive. 

Another play I did is a multifamily unit with investors. Is a 5plex. We spent half a year renovating and furnishing. As a 5plex the NOI is about 45k. We have 58k this year with the renovations and vagancy and will have about 90-100k NOI this year. In commercial real estate terms speaking, we are doubling property values here. Downside is very cash intensive. We pulled around 500k together to make this play happen.

Many of our clients/investors bought 4plexes and do the same plays. We designed some, furnished and manage them. For investors they can expect 1.5 to 1.75 more money vs long-term rental. Downside is initial investment per Unit ( 1-2 bedroom apartments ) will need about 30-40k renovation, 10-15k furnishing and if you hire people like me, it will cost you another 20k from getting the long-term tenant/vacant  and unrenovated apartment out to your first MTR tenant in your dream MTR property. Is a very cash intensive play but for big earners this is a good investment because with the investment into their properties they are reducing their taxes. I have high cash generating investors who need to save taxes. This way they have a good cashflow, a lot of credit for capital gain due to capital improvement and a forced appreciation of your asset. 

You will get some travel nurses but those are not in the amount you think you will get. It's a little overrated in this forum that the main clients are travel nurses. 

I strongly discourage MTRs built in a single family house. The cost to income ratio doesn't make sense. Using a 350k house to produce 3500-4500 income before all the fees is not an good investment. You either room hack the heck out of it or you buy multifamily. As said is cash intensive and it make sense to team up. Better have 50k invested and making around 6-8% cash on cash the first year and after running that business for 3-4 years sell or refinance the property and collect your initial investment of 50k + 40-70k in forced appreciation. This would be wiser than saving up 300-400k to run your own MTRs.

I have close to 30 units which are all doing MTR and are managed by us. Many of those properties were build by my team for investors. Let me know when you have questions or need anything. 

What do you need ? I am an investor too. 

Hi Michael, 

welcome to BP. 20k passive in 10 years is a very modest target when your investment capacity is 80-100k in the first 4 years and 5-10years up to 200-300k. 

I think a mix of investment methods are needed to optimally increase your cash position and asset value, while keeping taxes low. 

From experience I know you make around 7% per house flip where you invest into a flipper. If you are not taking out the 7% gain after about 3 months ( typical length of a flip ) and you let it compound in a year. You get 4 flips with 7% each. Because is compounding you get around 30% in return. This means if you invest 100k you will make 30k passively in your first year already. The issue here is high capital gain tax, the 30K capital gain will be taxed with 25% + your personal income tax, when you two are able to invest 80k-100k the first years and later 200k-300k then your tax bracket is already very high. For that reason I would suggest to keep some of the flips or buy some of the flips outright. For example if you buy a fixer upper for 200k put 70k into renovation, you can use the 70k for capital improvements which are totally tax deductable. Means the next flips are capital tax free. You want to keep some of the better flips not just for delaying/avoiding taxes but also use it for passive cashflow, appreciation, loan amortization and just to control assets. 

If you use the flips to keep it as long-term rental or short-term rental is up to you. Short-term are making about 1.5 - 1.75 more than regular rental after management and utilities but require a bigger initial investment. A rough estimate is 20-25 USD per SQFT for doing short-term. 

All being said. A mix strategy with a portfolio in single family houses focused on long-term to decrease taxes, multi-family properties for short-term for passive cashflow and flips for more $$$ to invest is the best strategy. Of course markets also tends to play a role. So being flexible, adaptable and skillful in more real estate investment ways will lead to bigger success. 

Real estate investment being an exponential grower, 20k passive is hugely underestimated. Think about it year 5 to 10 is about 1.25m invested, 240k passive means just 19.2% in return. We have already 30% return in the first year just by flipping. Not adding the different plays with avoiding/delaying taxes, appreciation, passive income and so on.

  Real estate tends to be overestimated in the first 3 years but hugely underestimated in 10 years. 

I would never ever recommend flipping out of state or country. You can not control your construction workers, their schedule, their timeline, their quality of work, the material they use. 

If you can trust your relative, do it with your relative. Flip with them. Wholesalers are of course making a profit in between. You are left with 8-12% after renovation when things goes well. Flips can generate monthly income if you lend your money to flippers. Usually flippers flip a property in 3-4 months, but construction is only taking 3-8 weeks, means they are always having a property in the pipeline, means you can in average get a check every 5-6 weeks. 

I don't think you need a book for real estate. Is pretty straight forward. I think call your CPA, explain your situation, ask your question. Fees per hour are $150. Will answer all your questions. I think 1 hour is enough vs reading up on all other info you might never need. 

furnished will be an airbnb play and will get your more $$$ and when you have it furnished anyway this would be the way to go but it requires more management and few new skills. When you are ready for it, go for it, it will be worth. 

Moving to another property with the furniture and renting it out for long-term is possible. Is the traditional route and more passive. 

Always lease agreement, even between best friends. If you want to have flexibility sign shorter lease terms. 

8% annually is the average what stocks are making. Let's assume you have 100k, with 8% ROI in stocks you made 108k in a year. Great !

Now lets say you do real estate with the same 100k. You buy 2 properties with 50k down. The down payment is 20% for investment, means that you have 2 properties for 250k each. Means total 500k real estate value. Historically you make 4-5 % in average in real estate appreciation, so 500k becomes 20-25K in equity. This is just appreciation. 

We have depreciation to help you lower your taxes, which is about 18.18k ( 500k property value / 27.5 years depreciation ) of non taxable income. So if you make 118.18k in taxable income, you only need to pay tax on 100k. 

We have passive income, in better cases you will get few hundred bucks per month after all expenses. It's a little harder now with interest being so high and rents are usually lower than mortgages but this is going to change soon. 

Loan amortization for 30 years, each month about 20-25% in principal of your loan payment is paid by your tenant. Which is about 160 bucks. 

I can agree it takes longer and you need to make more phone calls then just going online and make a sell or buy order but if you are going into stocks with the approach to just simple do a " buy or sell order " then you won't make 8 % in average for a long time. Even stocks require a lot of Due dilligence... the same applies in real estate. 

Above is only a long-term play explained vs stocks... we can also go short-term and you make +30% a years where real estate are not moving simple by flipping properties but this requires more work, knowledge and a team.

Real estate can be owned for free while stocks never can. You can buy a property for 200k with 40k down, the value goes up to 300k and you want to cash out refiance and take out the extra 100k, the bank will give you 50k out of the 100k equity. Means you got your initial 40k back and you still own the property, you still benefit from passive income, appreciation, tax benefits and loan amortization. Stocks can not be owned for free. Your cash is tight up pretty hard and if you take them out, stock swings can put you upside down and you are not able to fill the holes. When you are upside down in your property value you still have a tenant to pay the rent and don't worry when the economy is down, everyone will rent. Rents are increasing during recessions. Stocks don't have this safety net unless you are a bear / short seller but this requires a lot of due dilligence, capital and is for sure a fulltime job.