All Forum Posts by: Chris H.

Even once I achieve FI, even if I achieved FI very solidly (six figure income after setting aside a significant portion for maintenance every month), I still can't see myself ever getting to the point where I'd buy a new car.  Maybe a used, 5-8 year old Mercedes, if I want to live large...

I just can't help but see a newer car as a depreciating asset that loses 50% of it's value in four years.   That's almost a 13% average annual loss! Why would I put money in to that?? 

Just the way I think about money, I guess.  I mean, I'd love to drive a new Tesla, I just can't picture myself buying one even if I could afford to buy it cash.

I'd love to, however, get a dinner in a different country every week without thinking about the cost!  (Probably flying economy and using awards miles for half the flights, of course...)

I have been, in the past, doing it slowly- I'd buy a distressed house with 20% down, fix it up and put a renter in there, and only have maybe a 60% LTV home. I also did a couple flips in the last year.

I'm moving in to the BRRR strategy now after having done it on two properties a couple years ago. I'm going to be a bit more aggressive and try to get as many properties as possible with it.

Health insurance is an interesting one.  We'll see what happens with it.  My worst case: I'm a dual citizen in an EU country and could move there for healthcare.  However, I'd like to think I wouldn't need to do that, since, as I get older, I'll also be paying off those mortgages, which will increase the income.

I visualize working when I want to and having the free time to partake in activities I want to.  I also visualize travelling quite often for a month or two at a time, and doing a house flip or picking up another property once in a while when a deal is good enough to keep in practice.

But mainly, I want to be able to spend time with friends and family and travel.  I live on as little as possible right now and have the spare income (and methods- I churn credit cards for free airline miles) to travel, but my full time work doesn't give me the vacation time to use it!  Incredibly frustrating.

My personal goal is a $4-5k overall cashflow.  I would put aside $1.5-2k for maintenance/savings, since these are investment properties, and $500/mo for health insurance, and live on $2-2.5k per month.  With no major expenses (I live in a duplex that covers its mortgage), I should get by fine on that.

I figure it'll be around $600-700k net worth. I'm using heavy leverage, so $4-5k cashflow on that net worth is possible, but that's why I also have to save a lot of it for maintenance. I am trying to use a BRRR strategy to achieve it fast.

Over the weekend, I read Jake & Gino's book. Made a lot of sense.

What is everyone else's thoughts on RUBS?  It seemed like a cornerstone of Jake and Gino's strategy, but I've never, ever seen it in my market before; generally, tenants pay their own utilities in a house, and landlord pays utilities in apartments.

Having the tenant pay their own water/sewer/garbage can easily knock $90 off the expenses on a $600 apartment building, which can very well end up being a 25% increase in NOI. That's night and day. But I'm a bit skeptical about whether tenants will actually accept it.

Also: There's basically nothing in the book about the how of implementing RUBS.  The only thing I've been able to find when googling for RUBS in my city is this company that bills with submetering, but I don't think that's RUBS and there's no info on what the costs look like.

Is RUBS just "take my utility bill every month, divide it by the number of units (proportionally adjusted for square footage), and have my property manager bill the tenants"?  Or is there something more to implementing it?

@David Thompson what did you mean by "accredited"? 

Can BRRRR work for MF properties?

Do you normally buy and refinance with a regular commercial mortgage or do you use hard money for the initial purchase and then refi?

How are you raising the money to purchase these if I may ask?  Are you using lenders, or owner finance agreements, or do you just have enough income from previous investments to pay the 25% down outright?

Thanks for all your help! 

 The issue is, unfortunately, twofold:

(A) It's harder to do now that I've passed four properties. I have to go to portfolio lenders, and the local portfolio lender I've found charges a (relatively) high interest rate and will only do variable APR (locked for first five). With interest rates rising, I don't want to overstretch myself with too many SFR's that will suddenly have rates go up later on.

(B) Rates are going up, making my cash flow slimmer and slimmer.

It's still working for me, just not as comfortably as it used to.  Some of my early properties looked like this: $500/mo mortgage, $900/mo rent, and 25% equity and zero down.  Now, they're more like $650-$700 on the mortgage, due to portfolio lender and higher prime rate.

Leverage equity how?  It's hard to get HELOCs on investment properties.  Are you thinking 1031 exchange?

@Owen Dashner , @Jeff B., @David Thompson, I really appreciate the input!  I've been thinking about what you've shared here a lot and running a lot of numbers.

I've mixed between flips and buy-and-hold-with-refinance to get my cash back.  It seems like the best route, then, would be to start focusing on flips until I've got enough liquid capital to pick up a large MF or two.

So, to make sure I understand this right, in a MF example, you'd look for a MF building with a normal cap rate in which you think the rent could be raised?  Say, for example, a 10-unit at $450/unit with an 8% cap rate, that could be raised to $450.

If the building has, for example, $200/mo/unit in fixed expenses (management/utilities/taxes/insurance/etc), then going from $200/unit/profit to $250/unit/profit would be a 25% increase.  So in theory, I'd be making 10% cap on my initial purchase.  Or, I could turn around and resell the building immediately once I have new renters in at the higher price, at a 25% higher price (still 8% cap rate), essentially "flipping" the apartment building.

Is my understanding correct there?

Then, the next step is figuring out how to actually find undervalued units. I feel like SFR's are undervalued because people are either irrational financial actors (buy more than they can afford, get divorced, etc) or have fragile finances (i.e. lose a job, can't pay for the house, inherit a house they can't pay for, etc). But generally, MF owners are more rational financial actors, so it would be harder to find one on the general market.

So I'm having a hard time figuring out how I'd go about finding undervalued off-market MF properties.

David mentioned MF meetup groups, but wouldn't the people you meet there also be looking to make profitable sales?  Seems like sharks hunting sharks.
(I have access to a bit of money via HELOCs though, so I've thought about acting as a money lender to other SFR investors before. I don't think I can come up with quite enough help buy 5+ unit MF's in cash though.)