Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 16%
$32.50 /mo
$390 billed annualy
MONTHLY
$39 /mo
billed monthly
7 day free trial. Cancel anytime

Let's keep in touch

Subscribe to our newsletter for timely insights and actionable tips on your real estate journey.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions
×
Try Pro Features for Free
Start your 7 day free trial. Pick markets, find deals, analyze and manage properties.
Followed Discussions Followed Categories Followed People Followed Locations
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: Andrey Y.

Andrey Y. has started 114 posts and replied 1826 times.

Post: How you can profit from a Big Mortgage

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Rick Ortiz:

@Andrey Y.

Dumbest thing i heard in a while. Can you have both? Yes! But casflow will not fluctuate as much. Appreciation will. So you cant act like you have cracked some code that no one has figured out. Its a matter of a balanced portfolio. Some properties cash flow more than others some appreciate more.

If your so intetested in having a big mortgage i would love to sell you one of my properties in philadelphia. You can have my $500k mortgage. I will take the cash right about now and buy a similiar property in 6 months when prices come down AND have enough left over to buy another cash flowing property 15 min away from that one in NJ. This way we are both winners in your book.

 My parents, who moved from communist dictatorship bought property in NJ from the 90s, not knowing the first thing about finances, didnt know English, and had no idea what cash flow is. They never calculated cash flow or cash on cash return (and still don't).

What saved them and made them wealthy was profit (appreciation). Not cash flow which is erodes into CapEx anyway. Conservatively, even if they made $20K per year per property in equity gain, Thats a lot of PROFIT from 1992 to 2020. It sure is a hell of a lot better than the $100/mo. in "cash flow y0" as long as your tenant is paying the rent and the hot water heater doesn't go out.

Post: How you can profit from a Big Mortgage

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Jay Hinrichs:
Originally posted by @Justin Tahilramani:
Originally posted by @Andrey Y.:
Originally posted by @John Collins:
Originally posted by @Andrey Y.:

 I am actually cash flowing AND profiting in Hawaii specifically because rental income growth goes hand in hand with appreciation.  I would STILL profit even if my rentals were unoccupied. You cannot say the same thing.

The reason I can cover missed rent payments is because I focus on profitable markets, not to be confused with "cash flow" markets on paper.

What the hell are you talking about? You can cash flow without rental income? At what price point, what mortgage did you take out and how much interest are you paying on it? Simple math is all I ask for.  

 Very simple example. An investor owns a $800K home in a city in California. They earn $60K per year appreciation over the long term (which is $5K per month), which the Turnkey operators will tell you you should accept a $250 per month "cash flow", more than half of which will go to fixing up your boiler, or roof down the line, while the property value doesn't even keep up with inflation.

Do you think @Account Closed @Matt R. @Jay Hinrichs @Amit M. (investors who invest for PROFIT) are worried about their tenant not making the April and May mortgage payments? Because all of the people I see worried on all the threads popping up, are not invested in profitable markets. They are invested for "cash flow" because that is what they have been hearing and reading about for the last 10 years.

This is intended to teach, so we can all learn from something like this. At the end of the day, we are all trying to become better investors. Leave the advertising to those who are trying to sell you something. 

This is total BS speculation. Homes in CA do not appreciate long term at the rate of $5,000/month. You are out of your mind if you think that is the normal rate of appreciation. You are the one that is going to get hammered when tenants cant afford to pay their high dollar rents. Also - you are WAY off base about cash flow rentals. Affordable housing is probably the #1 issue facing America today. There are 1000 Americans that are barely able to keep up and need affordable housing for every 1 American who can afford to live in a HCOL area. You can have your own opinion, but dont share it in public forums like its the gospel. 

Well lets look at a real life example 684 Encina Grande Palo Alto CA  one of the highest cost per sq ft in the country .. I bought it in 85 for 180k  I think it peaked at 2.5 or a little better.. lets say in 2019  so in 35 years it went up 2.315 million.. and of course rents at what I paid would have by the mid 90s given me massive cash flow of 3k a month easy on that one house..   2.315/  35X12  =  420 months/ 2.315 = 5,511 per month of appreciation gains.. add in 3k a month for Positive NET NET NET cash flow for say 25 of those years or 300 months X 3,000 = 900,000 in positive cash flow over that time.  for a grand total of 3.215.000 gain on a property bought in 1985 at fair market value and just a basic 1400 sq ft rancher on a 6k sq ft lot.. And now you know why I cant even think about why I sold that house for 500k in 91.. 

So total net gain in this real life home in the SF bay area and not even the BEST part of Palo Alto ( Barren Park)  saw a return if I had kept it and rented it starting in 95 for the 5k a month it would have rented for then.  my monthly gain would be 7,654.47 PER MONTH.. 

So while the statement that not all of CA grows at 5k a month over time is certainly very true.  there are parts that have and do and have done better.. but its a long game cant take a snap shot.. like if you bought in 07 peak and sold in 2011 probably lose money you bought in 2011 for the 900 or 1 mil would have sold for then. you make massive gains the last 9/10 years. 

its kills me to write this out and the shoulda woulda coulda just comes screaming back.. And I owned another one in the same neighborhood I built as new construction and was all in at 700k and today that one is easy 3.5 mil.   

Any way back to the appreciation versus cashflow regularly scheduled thread. 

If I lived in another part of the country and I did the same thing started as an agent at 18 and a broker at 20 and the play was to stack cash flow rentals because appreciation is gambling etc.. that's what I probably would have done and would done.

Keep in mind in the 50 60 70s and into the 80s people got started in real estate buying cheap land all over the country as an investment

it was not until about 2001 2002 that smart folks said hey CA real estate is sky hi lets start selling mid west rentals to CA people and other high priced markets.. that's how the turnkey industry or OOS investing industry started.. No one was rushing to Memphis in the 90s to buy rentals from CA. for an example.

 Very well said, Jay.

"Keep in mind in the 50 60 70s and into the 80s people got started in real estate buying cheap land all over the country as an investment"

People lose their breath saying 'real estate can't go up forever' ' you just got lucky'

So it was the same guy in the 50s, his son in the 70s, and his grandson in the 00s, hoping and dreaming that these investors just "got lucky" and I'll just buy "next year" when the market correct. They have been waiting for the right moment forever. They take no action. 

All you have to do is go on the internet or talk to someone like Jay to get the last 40 years of data. Instead they will listen to gurus on podcasts who make a commission each time they refer someone to buy a 'Turnkey cash flowing' property in Birmingham, Memphis, or Indy

Post: How you can profit from a Big Mortgage

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Patrick J.:

@Andrey Y.

And you'll never realize any gains until you sell. Why can't you have both cash flow and appreciation?? Your logic is ridiculous and there is no need to over analyze numbers down to per sqft.

 Stop reiterating the same lines you read online and actually think about this.

I bought a property in Mililani, HI for $140,000, $40K down. Do you know how much tax free gainz (bro) I have realized? $170K via two CASH OUT refinances.

That's 4X my initial investment and and infinite return. I can take out a 100% or 80% loan right now and mail the lender the keys! I am done with the property as far as I am concerned.

Try doing this with a $60K Memphis or Indiana 10 CAP!! property that was worth $50K in 1980 lol

Post: How you can profit from a Big Mortgage

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Carl Fischer:

@John Teachout

Positive cash flow is good. Negative cash flow not so much.

BAMs are also good today because you will be paying back your loan with less valuable money. The dollar today will have more buying power than tomorrows dólar or the 2040 dollars. Dumping $2T in the country debt diluted the dollar and could be considered manipulation of our currency.

BAMs are a play in the currency market while tenants make your payments for you.

Borrowing as much as you can at a low rate should be a great move at this time-it may make you thrive not just survive. Think about it.

 This is well said. Couldn't have said it better.

Look at what they are doing. They are literally devaluing the dollar. Its becoming worthless. Holding cash or paying down a mortgage is a bad business decision, now more than ever.

Did you see the $2.2T they just printed? Magically! That number could be $6T by the end of the year. Then they will look you in the face and tell you it was a good decision.

A property who's valuation cannot beat inflation is one you cannot put a BAM on to take advantage of the situation, so it's the worst type of investment to be in. I'd rather invest in a 401k today than buy a "cash flowing" property. Enjoy those CapEx costs ladies and gents!

You were lied to! By the cash flow gurus. They already benefited because they sold you the property, course, book, or commission. Now you are left with a "High Cap rate!!" property.

High Cap Rate means they didnt want it so they sold it to ya.

Post: Landlords... Stop being so hard on your tenants

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @James Wise:
Originally posted by @Jay Hinrichs:
Originally posted by @James Wise:
Originally posted by @Account Closed:
Originally posted by @James Wise:
Originally posted by @Account Closed:

I've been reading through the forums here and I've read a lot of posts about how the tenants should have the money saved up to pay rent in an emergency, and if not they should use a credit card or the money in their retirement account to pay rent.

Yes, they signed a contract to pay a certain dollar amount for a certain period of time but no one saw this disaster coming.

Instead of forcing them into debt or draining their retirement accounts why don't you just let them leave. Let them break the lease and go live with family or friends. Or you can give them a lower dollar amount to pay for the next 90 days.

The truth is that you should have adequate reserves for situations like this as a "professional investor". Try to have some compassion for the average person who makes very little money compared to you and probably lives paycheck to paycheck.

 Do you think it's practical to ask Grocery stores to give discounts on food whenever someone is having a tough time? Should Walmart do the same when they're selling t-shirts? Where do you draw the line?

 If it was the deciding factor in whether or not they stayed in business I'm sure they'd consider it.

I'm not saying let them live there for free. I'm saying to 1. agree on a lower payment and or 2. let them break the lease (keep the deposit if you'd like) BUT don't tell them to 1. leverage high interest credit cards, 2. use their retirement fund, 3. use their kids college fund, 4. etc...

 What does staying in business have to do with your thread? You haven't advocated for anything that would assist a struggling business keep from going under. Nor am I confident you'd even be qualified to do so.

james you being on the firing line with hundreds if not a thousand plus homes to manage I have to think you have had strategy communication with your owners and your tenants.. I just have one rental that is run by a PM and i have been getting updates from them on how they are planning to handle our tenant/property.. these are high end white collar professionals that i believe are still working.

I think the issue is not really a moral issue.. but it certainly is a reality issue.. Now 30 days ago I was pretty certain that without govmit help we were going to have an apocalypse in work force housing owners.. And made a post 30 days ago wanting to know how landlords would handle this as a business owner.. Most responded if they dont pay its not my problem and we evict etc.

As one who had to work out about 200 plus bad loans in the GFC that i held the paper on.. that taught me that workouts are best if you can do it.  No one should not pay their rent if they have the means.

And with all the fear on BP the last two weeks it appears through the stim package unemployment etc Big brother is going to come to the rescue and there should not be massive no pays.. at least I am thinking that.. 

The risk I see though for landlords is again kind of like the GFC were you had strategic defaults.. people made money they Could pay their mortgage but they chose to let their credit get trashed and squatted for years in many cases or walked.  I know at least how our C/D class renters operate and think ( having had 300 of those) and they get checks and I fear the last thing they are going to do is pay rent if they think there is a moratorium on paying etc.. that is where I see risk right now.

But working with tenants through this is just a REALITY and my thought is and us lenders learned the hard way that taking a tough stand with someone who cant pay you anyway is just going to lead to more trouble.

the idea that most renters have a 401k they can draw from or a big savings etc again in my experience at least in work force housing this thing dont really exist for many if not most.

Lastly one of my bizz partners owns a 150 unit B class in the northwest his manager sent an email and said be prepared for 40% no pays for one to three months.. now with all this bail out I dont think it will be that bad..  And for him who basically owns it free and clear its just lost revenue not a huge nut to crack..  But if you have 40% non pay with the crop of newbie syndicators and highly leveraged deals there could be some failures in those assets if this persisted for any length of time.

So bottom line now with bail out and with landlords being polite yet firm this should not be the worse case scenario many are worried about.

It has been a wake up call to highly  leveraged landlords though that 2 to 3 months reserves maybe inadequate for safety.

The reality is that the Government has taken a lot of the decisions out of the hands of the homeowners. We've got strategy and backup strategy in mind yes, but it's a fluid situation with a lot of unknowns right now. What exact course of action landlords and property managers should take to attempt to make the most out of a bad situation won't be totally clear until the shoe drops.

This is truly an unprecedented situation, so those that think they've got themselves totally prepared for it are kidding themselves. We just won't know how everyone's portfolio is going to react to this until they've been given the chance to do so. 

 Dunno, I'm a bit worried. How's Portugal looking for buy and hold? I may have to relocate soon :)

Post: How you can profit from a Big Mortgage

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Jay Hinrichs:
Originally posted by @Andrey Y.:
Originally posted by @John Collins:
Originally posted by @Andrey Y.:

 I am actually cash flowing AND profiting in Hawaii specifically because rental income growth goes hand in hand with appreciation.  I would STILL profit even if my rentals were unoccupied. You cannot say the same thing.

The reason I can cover missed rent payments is because I focus on profitable markets, not to be confused with "cash flow" markets on paper.

What the hell are you talking about? You can cash flow without rental income? At what price point, what mortgage did you take out and how much interest are you paying on it? Simple math is all I ask for.  

 Very simple example. An investor owns a $800K home in a city in California. They earn $60K per year appreciation over the long term (which is $5K per month), which the Turnkey operators will tell you you should accept a $250 per month "cash flow", more than half of which will go to fixing up your boiler, or roof down the line, while the property value doesn't even keep up with inflation.

Do you think @Account Closed @Matt R. @Jay Hinrichs @Amit M. (investors who invest for PROFIT) are worried about their tenant not making the April and May mortgage payments? Because all of the people I see worried on all the threads popping up, are not invested in profitable markets. They are invested for "cash flow" because that is what they have been hearing and reading about for the last 10 years.

This is intended to teach, so we can all learn from something like this. At the end of the day, we are all trying to become better investors. Leave the advertising to those who are trying to sell you something. 

A lot of this is simply playing the cards your dealt.. when I was starting in the industry in the mid 70s I lived in the SF bay area so that's were we invested Northern CA.. the thought of going across country to buy a rental was not contemplated..  It was the only thing we knew. And as luck would have it the SF Bay area has seen some pretty dramatic appreciation over the decades coming out of the 70s prior to that prices were no different than almost any other part of the country and maybe lower than many..  You also have investing philosophies at play you have the refi till you die have no real equity in any property no matter were it is thought process.. then you have other investors who are far more conservative and don't want debt.. Its personal choice at that point.  

lastly its hard to time the market but there is no denying when you enter and when you exit directly correlates with your success.

The bigger issue I see as of today is the threads of Lenders pulling out of financing rentals either raising the bar or freezing all together.. Freezing is what caused much of the melt down in the so called Cash flow markets in 07 to 2011.. you start to have markets that can only be traded in for cash and your not going to have price appreciation your going to have prices go down.. At least that's what everyone saw happened in the GFC..  I Mean you could buy homes in Detroit for 10 bucks.. you could buy new construction in Fort Myers at Sherriff sales for under 50k.. 4 plex's in AZ were selling under 100k that were sold 5 years earlier for 350k..  

I for one am all for partaking if deals come up.. its the business we are in.. But I certainly do not want to see a repeat of the GFC mortgage market.. 

Exactly. And many people would have you believe that appreciation is all accidental, speculation, and not predictable in any way. Those who say that either aren't paying attention or are trying to sell you something.

 Those of us who underwrite for profit (and not cash flow) aren't worried about tenants not covering our mortgage payment for 2 months so we can collect the "$200 cash flow! 9 cap!" who advertise here and all over blogs and podcasts.

$200 cash flow - no it's not

9% cap rate! - a high cap rate means a less desirable asset, don't brag about it lol

I cant believe investors still fall for this with all the information we have.

Post: How you can profit from a Big Mortgage

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @John Collins:
Originally posted by @Andrey Y.:
Originally posted by @John Collins:
Originally posted by @Andrey Y.:

 I am actually cash flowing AND profiting in Hawaii specifically because rental income growth goes hand in hand with appreciation.  I would STILL profit even if my rentals were unoccupied. You cannot say the same thing.

The reason I can cover missed rent payments is because I focus on profitable markets, not to be confused with "cash flow" markets on paper.

What the hell are you talking about? You can cash flow without rental income? At what price point, what mortgage did you take out and how much interest are you paying on it? Simple math is all I ask for.  

 Very simple example. An investor owns a $800K home in a city in California. They earn $60K per year appreciation over the long term (which is $5K per month), which the Turnkey operators will tell you you should accept a $250 per month "cash flow", more than half of which will go to fixing up your boiler, or roof down the line, while the property value doesn't even keep up with inflation.

Do you think @Account Closed @Amit M. (investors who invest for PROFIT) are worried about their tenant not making the April and May mortgage payments? Because all of the people I see worried on all the threads popping up, are not invested in profitable markets. They are invested for "cash flow" because that is what they have been hearing and reading about for the last 10 years.

This is intended to teach, so we can all learn from something like this. At the end of the day, we are all trying to become better investors. Leave the advertising to those who are trying to sell you something. 

Lol, yes... if everyone had Kushmer and Trump's parents we could all play that game but the majority of people need to stay afloat while being landlords. Specifically while starting out, which is people on BP. They don't all cruise out to a cushy 500k a year job at a law firm between collecting rent checks.

You can't talk big before you have the means to do so. 

The $60k/yr appreciation is flat out incorrect. Capital gains taxes, erosion of the property ,depreciation and a cap all cut into it. I have followed homes in Van Nuys, Burbank, Studio City (well, much more expensive there) in that price range and followed them over the past 13...14 years. They've hit a ceiling and will succumb to sprawl as well as new builds after a certain point. 

You can have artifically inflated markets like 2011-2019 but really, there is a cap and it's not infinite. No one is earning 60k/yr in appreciation on a 800k house in a neighborhood like Burbank with no tenants. 

 "The $60k/yr appreciation is flat out incorrect. Capital gains taxes, erosion of the property ,depreciation and a cap all cut into it."

Really. Ok. So tell me, how does capital gains taxes, erosion, depreciation affect a "cash flow" property whose value doesn't even keep up with inflation? Lol you're making my point for me

Post: How you can profit from a Big Mortgage

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @John Collins:
Originally posted by @Andrey Y.:

 I am actually cash flowing AND profiting in Hawaii specifically because rental income growth goes hand in hand with appreciation.  I would STILL profit even if my rentals were unoccupied. You cannot say the same thing.

The reason I can cover missed rent payments is because I focus on profitable markets, not to be confused with "cash flow" markets on paper.

What the hell are you talking about? You can cash flow without rental income? At what price point, what mortgage did you take out and how much interest are you paying on it? Simple math is all I ask for.  

 Very simple example. An investor owns a $800K home in a city in California. They earn $60K per year appreciation over the long term (which is $5K per month), which the Turnkey operators will tell you you should accept a $250 per month "cash flow", more than half of which will go to fixing up your boiler, or roof down the line, while the property value doesn't even keep up with inflation.

Do you think @Account Closed @Amit M. (investors who invest for PROFIT) are worried about their tenant not making the April and May mortgage payments? Because all of the people I see worried on all the threads popping up, are not invested in profitable markets. They are invested for "cash flow" because that is what they have been hearing and reading about for the last 10 years.

This is intended to teach, so we can all learn from something like this. At the end of the day, we are all trying to become better investors. Leave the advertising to those who are trying to sell you something. 

Post: How you can profit from a Big Mortgage

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Joe Villeneuve:

Cash Flow is a great goal...if your analysis and decision making (choosing markets and properties) is solid.  Accepting low CF, just because it's CF, is just as foolish as increasing your DP in order to CF higher due to the lower loan payment.  Thinking that way is a result of a lack of understanding of basic math.  It's a result of focusing on the answer...instead of the formula itself.

It's also a complete lack of understanding of the difference between Total Cost and Actual Cost...and why the Actual Cost is the only one that matters.

Cash flow is a great goal. Totally agree there. How do you think CapEx is paid for. By your cash flow!

My markets have  great cash flow over time because of the high rent growth. Real estate is not a one year investment.

You ("cash flow investors") are speculating that your tenant is going to come up with the rent EACH and EVERY month so you can get your cash faux.

I can be the worst landlord ever but I still end up with a property worth double my purchase price in 10 years. An investor who spent their entire time on BP and podcasts ingesting thousands of hours of CASH FLOW advertising, their property (midwest home worth $75K now that was worth $50K in 1988), inflation adjusted is worth the same.

Appreciation and rent growth is the key.

Post: Corona will have heavy impact on economy and lead to foreclosures

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Henry Lazerow:

I disagree and do not see this virus as a long term issue. Real estate falls last in a downturn (often many months to show any affects) and by the time that comes the virus will likely be a thing of the past. You can get a rough estimate by how long it took other countries to flatten the curve. I expect the market to rip back quickly when this is over unlike past recessions. Lenders are offering a lot to mitigate foreclosures/hardship on home owners. From Wells Fargo site... They also will waive payments up to 12 months if home owners need it extended. 

"Home Mortgage customers

If you're unable to make your payment due to COVID-19 related hardships, we're offering a 90-day payment suspension. To request this assistance, sign on to online banking and email us through our secure Message Center. We'll respond to you within 3 to 5 days. If you set up automatic payments with Wells Fargo or another bank, you'll need to manually stop those payments."

 Do you have a direct link to the "secure messaging center"? I couldn't find it after logging into my account.

I have two tenants in a property with a Wells Fargo mortgage, and I know for sure one of them (a bartender) will probably not make April's payment. If this is truly a loan suspension (no interest accrued, no credit effects, in writing, etc.) I am definitely going to take advantage of this.