All Forum Posts by: Michael A.

@Awet Hagos I like that you have criteria and goals. I'm learning anytime someone posts about their point of view. Over the years I've put together a spreadsheet where I plug these few numbers in to see what a deal will do for me. It has the insurance and tax rates for my area, plus the maintenance that I feel comfortable with. The only real variables are the rent charged and the purchase price. It spits out a few different metrics (cap rate, ROI of cash flow, ROI overall, etc,). Ever thought of building a tool like this that you can keep on your phone? Comes in very handy for me! Hope all is well.

@Cassidy Burns Looking to add rental #2! Market is super hot and there are so few properties on the MLS. My goal is to try and change up my strategy a bit to find a good deal, even if it's off market.

@Cody Benedetto This is also my rule. I have enough faith in the compound interest that mutual funds offer to commit to a 401k as a piece of my retirement plan. I don’t usually understand it when I hear individuals say they “don’t trust” the stock market. What is it that you don’t trust exactly? And at retirement you shouldn’t really be exposed to stocks much at all anyway in your 401k.

Real estate is a pivotal part of my long term retirement plan and is something I’m committed to. But cashing out a retirement account feels like robbing Peter to pay Paul. And if COVID has taught us anything it’s that the rental market can also have its insanely turbulent times too.

@Spencer Gray I am right there with you. Whenever I hear of investors requiring 20-25% cash on cash return for a deal to work I get green with envy. Never ever going to happen in my market. 12% on paper is what I try for, but 10% is perfectly acceptable if somewhat low risk. I like to remind myself of the tax benefits, amortization, and slight appreciation that will accompany the cash on cash return. If all goes as planned it ends up working for me.

My goal is to hit a certain cash flow number in 10 years, so that is also a criteria I consider given that the stock market landscape is so turbulent these days. I’m still invested in securities but am absolutely not putting all of my eggs into that basket.

Hope all is well with everyone out there today.

@Adam Upchurch - The cashflow when viewed as a percentage of the total hard cash it took to buy the property and get it rented. This is typically down payment + closing costs + repairs to get the property ready to be rented. I look for small 3bd/1ba SFH's that are about 1,100sf. Even if the property looks totally turnkey I still budget $1,000 to swap locks, touch up some paint, replace a faucet, upgrade a toilet, etc.

When running numbers on a deal I view the potential return on the property as if it were a dividend-paying stock: total ANNUAL cash flow / down payment + closing costs + repair costs = cash-on-cash return %.

I am looking at a deal now for $185,000 that probably rents for close to $1,400 and cash flows around $300. My local market is exploding so good deals are scarce. I am not able to be an all-cash buyer. This deal is just shy of 10% but has some good upside so I may look into it further. 

Sorry if you already knew everything I just said - figured I'd chime in either way! 

@Katie Greenman Keep in mind that as you grow your real estate investing, you’ll also be growing your income. Your salary plus rental income will one day eclipse the limit of the Roth! What a great problem to have. Invest in that now while you can.

@Brad Gibson I know you've received a lot of feedback and are basically out of the woods now, but I just want to let you know that I feel for you. No one enjoys this process. I had to go through this all summer and fall. It was so taxing on me. I suffered an actual panic attack and collapsed in my bathroom. Fortunately my wife was home to help me. It did not come down to moving possessions onto the lawn, but it still was tough. 

Were their things safely collected by them as of today? I'm hoping that your extra 24hr grace period was at least of use to your prior tenant. Hopefully you can get it rented again shortly. Keep your chin up and remember why all of us mom and pop landlords do what we do: our kids, our families, and our futures. 

I'm an advocate of NOT touching your 401k. If you aren't interested in contributing to it anymore and want to exclusively save and invest in real estate going forward then do that. But that 401k that you started at VERY early age is likely going to be a very secure nest egg to fall back on way down the road in case something happens to you. If it's inconsequential to leave it alone I would do so. $35,000 in a 401k at your age right now will be $1,000,000 when you retire if you never contribute another dime for the rest of your life and buy an S&P 500 mutual fund. Everyone here obviously believes in the awesome power of REI, but I wouldn't throw caution to the wind and destroy this excellent potential nest egg you have. And besides, you already have a down payment on a property in addition to it! You sound very financially responsible. And good on you for sucking it up and living at home while you stockpile cash. Most young people are too vain to entertain that, so they throw money away on rent in a cool downtown neighborhood 20 minutes away from their parents so their Instagram posts are cooler.

Congrats @Ryan Copeland! This seems like a great property, so best wishes to you in 2021! Keep us all posted. 

Hi All,

After a year of hell I remain undeterred in my quest to expand my rental portfolio. After dealing only with SFH I am eyeing a quad of studios. Wondering if you can share your quad horror stories in general.

As an aside, the property is in a C neighborhood, should remain flat-ish in value for the near future, but fits my strategy of cash flow well. I’m hoping I can acquire for $299k w/ 20% down, and a rent of $3,000/mo per current occupancy. Building is in good shape - no major repairs. Water is not metered separately, so I either have to add sub meters and hope I get paid or just pay for it myself which seems unwise.

Hope this finds everyone well - thanks in advance for the conversation.