All Forum Posts by: Robert Haney

I live and own properties in Sugar Land that I have rented and properties that I have flipped.  I'm not aware of any D-class areas with a Sugar Land address.  Where is your property?

To answer your question directly: SELL

Also, put ALL your real estate profits back into the business until you have enough money to buy + rehab a house for all cash.  

After that you can take your first travel trip to celebrate.  

Otherwise, spending your profits on your lifestyle will keep you "working for the man" (day job) an extra 10 or 20 years.  Wealth from RE grows rapidly when one is working from financial strength, not before.  

Cullen,

I assume you have little cash with which to work.  That means outside financing your properties.  It will likely be slow going for years, but if you stick with it (slow and steady) you should do well.

Rentals are a good way to go, but will be much slower that flipping some properties to build your cash.  If you make X amount per year on a rental you should make 3X or 4X in 4 to 5 months on a flip.

I have rentals and I do flips.  I do everything in cash.  I just sold ($160k sale with 5 months closing to closing) a house that I initially was going to rent.  I would have made $1000 per month renting which is $12k per year.  The flip will make $40k net.  That's 3.3 times the annual rent profit.  Flipping the one property in 5 months equaled owning over 3 rentals for 12 months.

Again, renting is a good slow way to go.  Even flipping will be slow if you are starting with little.  The key is STEADILY WORKING it, AND KNOWING WHAT YOU ARE DOING.

My old day job had a bumper sticker they gave away which said "There is no substitute for knowing what you're doing!"

Sorting through Redfin comps and picking the right ones will work fairly well about 70% of the time. The other 30% requires using HAR as a RE Agent does.  Establish a relationship with a BROKER and get them to give you free access to HAR to do you final comp value for all your houses. Nothing is better than this method on my experience. 

Alvin

GC's that are cost effective for flipping are difficult to find. I've yet to find one. You acting as GC is the only way to learn what things REALLY cost and save a lot of money/profit.  If you're in need of a GC how did you work up your rehab budget?

What are your key numbers on this flip? Purchase price, Rehab budget, and Selling price (ARV).

For my rentals I look at:

Annual Net operating income/(purchase price + Rehab costs)

I'm assuming you meant to include your all-in costs (rehab and purchase) but accidently left it out?

I'm not challenging you, just trying to clearly understand your metrics/goals so I don't offer you properties that don't work for you.  

Can you please state your formula?

(When I look at my "equity" in properties I subtract out selling costs because I always have some. Lifestyles Unlimited does not do this, so their "equity" is inflated/unrealisticstic.

My "equity" is: ARV minus selling costs minus liens.

My "profit" or "gain" is: ARV minus selling costs minus liens minus total cash invested.

What is your cap rate formula since I still do not fully understand?

Thanks

Alex

I'm familiar with the term "cap rate" for valuing apartment buildings (5 units and greater), but you appear to be talking about single family residences (I.E. 1 to 4 units)  What do you mean "cap rate" for these?  Do you really mean return on cash invested ("Cash on cash")? Or return on investment? Or??

I'm a PIG (Preferred Investor Group at $18k) member at Lifestyles Unlimited for 2 years.  I did one SF buy and hold deal before joining.  I've closed 17 SF deals since then - 6 flips, 9 buy and holds and 3 rehabs in progress.  Every deal has been successful - $30k average profit on $170k average selling price on flips.  The buy and holds average about 30% return on cash the way Lifestyles calculates it.  Lifestyles had little to do with my success.  EVERY deal I've done went against Lifestyles teachings! 

Ironically, I only learned one fact due to my Lifestyles Unlimited membership that really helped me. Lifestyles does not teach this and it would take money out of their pockets if they did. That one fact came from one of Lifestyles' successful real estate agents. After looking at about 40 properties with him and not landing any deals (most of them I offered full price cash), he told me how he sells his investment properties. He uses a flat listing broker for the MLS listing to avoid half of the real estate commissions. I did this on my flips and saved about $5k per flip which totals $30k savings so far! I have no need for an agent to "help" me sell and get between me and the buyer's agent to hinder communication.

On the buy and hold, there are many good teachings at Lifestyles.  But most is common sense from my vantage point.  I agree with far more than I would disagree with.  Here are some "watch-outs" that I disagree with:

- "All the passive income from rental properties is tax free" says Del repeatedly.  This is not true.  Some passive income is tax deferred due to depreciation, but all of this will be taxed when the property is sold.  Saying the income is tax free is repeated by underlings too, all a major way to sell.  (A 1031 exchange may also delay the taxes but they will finally come due.  Very few people actually make use of 1031 exchanges.)

- "you have a Capital Gain before selling a property" says Del repeatedly.  This is not true.   It is another selling trick.  A Capital Gain (or loss) can only occur after selling a property.  Many Lifestyles' case studies show a small amount of equity gain after purchase and rehab, but upon selling and paying selling costs the "gain" turns into a Capital Loss.  In other words, selling costs do not cover what is literally celebrated as a gain prior to the selling.  To be fair, it is better to buy a property a little under market value than at or above market value.  I buy rental properties at a price under market value so that, if immediately sold, I can pay selling costs and have a Capital Gain, not loss.   Two great teachings of Del's that I like:  One is "never have a deal loss" and another is "don't speculate on property appreciating".    Lifestyles teaching about obtaining free cash flow return on investment is very good.  The vast majority of SF deals offered by Lifestyles agents to members must appreciate before any capital gain can be realized.  Otherwise, the cash flow must go on for years to make many of the deals winners.

- Lots of people that join Lifestyles for SF don't have much money.  All the SF teaching is aimed at them.  Lots of people joining Lifestyles SF now have a significant amount of money to invest.  There is NO SF teaching aimed specifically to help them.   Goals, needs, and actions can change significantly depending on how much money one has and what stage of life they are in.  Teaching should accommodate this.

For multifamily investing Lifestyles is the only game in town worth joining for the average investor.  At this point the Lifestyles company is mainly trying to build (pushing) the multifamily side of things, which is its strong  suit.  The single family side is MUCH weaker than the multifamily side.  Most people should avoid the $10k cost for single family investing.

The vendors are so-so.  There are some worth having, but many are overpriced.

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Sugar Land

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