All Forum Posts by: Jim Chuong

@Shakira Walston Go for it! My mother told me once when I was considering grad school that 5 years would go by whether I did it or not. She asked what I wanted to look back and say I had done with the time. It was a very motivating question for me :)

@Jim Chuong. The reason your DSCR is high is you have a loan on a $200K asset. I specialize in more workforce housing. So I'll be all in for purchase and rehab for $70-75K on $100K asset. The asset will rent for $1000-$1050 so my rents are covering more than 1.25 of the PITI+HOA.

@Jim Chuong. I'm so glad you asked. So once I have a rehab complete and refinance out to 75-80% LTV, I now have little/none of my own money in that property because the equity in the property is what I forced in the value. As far as mitigating default, I do 3 things: 1. Make sure the rents MORE than cover all expenses by at least 25% (most of mine or 50-60% coverage). The banks underwrite this as the DSCR 1.25 or greater. I can slash rents to stay competitive. 2. I carry 6-12 months of reserves for all properties so I can weather any bumps in the road (coming really handy right now with COVID-19). 3. And even if I had to fire sale in the middle of the '08 recession (which was a 19.8% decline), I'm still breaking close to even... while it would be painful to lose that equity position, I can fire sale and walk away. Lastly, you have your loan arrangement with the bank where you might be able to hand the keys back to the bank in lieu of foreclosure. For those reading this in the middle of the COVID-19 pandemic, you can also mitigate default by working with SBA to get grants and loans, and talking to your lender about forbearance options.

As far as lawsuits, I'm doing these things: 1. Be a great landlord and fix all health and safety items immediately (reserves!) 2. Carry good liability insurance to protect me from my properties 3. Put leverage on the property to lessen the chances of being a cash target 4. Have an umbrella policy in place to coordinate insurances and protect my properties from me 5. Then put the properties into an LLC (some argue to do this by equity position or individually)

PM me with Q's!

I am currently under contract for closing on a rental property in Huntsville, AL. I chose Huntsville for a combination of factors - its population growth, job growth, low taxes and my affordable budget of 100k-160k SFH with a decent balance of cashflow and appreciation. I hope to buy a few more properties in Huntsville.

I would like to diversify my investments by buying in some other places too. I understand it doesn't make sense to buy in too many places as well. I would like the investors here to list the cities/places they think are an excellent investment choice now for SFH purchases with <175k budget in B-class (& above) neighbourhoods and cashflow as close to the 1% rule as possible.

I live in Seattle, I am looking at out of state investment locations that fit the above criteria.

We are in some unsettling times and many of you have questions about financing options available for investors. Others have questions about the lingo/structure of RE financing. Opening up this forum to send me all you questions you have. I'll do my best to answer all questions submitted here. 

Lets hear them!

I just want to know that For how long is it ok to hold a rental property after buying it? When is a good time to sell?

Is there anyone who is doing long distance investing? investing out of there country or state? Cause I want to know what measures do I have to take before investing in another country or state.

@Jim Chuong What ever your are comfortable with to reasonably lose.  You will be doing several things to protect that money: being a good landlord, repairing all health and safety items quickly, liability insurance, umbrella insurance, maybe an llc, etc.  In the end, your investment is "at-risk", so protect it :)

@Kyle Richey Yes. The refi will decrease your cashflow. If done correctly, you should still have money coming it. Personally, I look for 15%+ COC returns with all reserves figured in AND $175 cash per door (my average is MUCH higher). In this case, I can costs and still be competitive in a soft market.

Now... by refinancing, you are also able to increase your velocity of money to pick up more projects which can offer protection.  If you hold 1 assets, you are 100% occupied or 100% vacant.  If I hold multiple assets all underwritten well and cashflowing, if one experiences issues, the others can pick up the slack. 

This does mean you need to have cash reserves as well, in the case of some black swan event, so you can keep all assets going.  

The counter argument is that if someone is holding a property all in cash they are more protected from this event.  I disagree.  1. If their tenant is paying they are loosing out on more income.  2.  They still have expenses like insurance and taxes to pay.  3. They are a larger target for lawsuits due to their equity position (yes, lending can be viewed as a "defense" tactic).  

Cashflow is KING and so is cash.  The key here is to invest from a position of strength and resist temptation to be overleveraged.