All Forum Posts by: Rob Hakes

Also don't forget to calculate ROTI (return on time invested). If you care about free/personal time, don't marry yourself to a part time job and do a long term rental with a good PM. If you have the time to spend, then shoot for the high ROI, but expect more work.

@Nicholaos Koufoudakis

Do you have the ability to set up a Series LLC in your location? this makes it easier to set up each entity on your own, and some banks are well versed enough to make this work. I have Series LLC set up so if i add a property the bank can fairly easily create an account for each series. Again, locations vary on this for sure

@Jonathan Diaz

The properties are easy to manage.  Its the people (tenants) that are a b#*!?...... bugger.

@Asia Jones

I've purchased some partials from @Chris Seveney and they have worked out great so far.  They have been passive, steady, and quite boring (just how i like it!).

Its defiantly a good idea to do as much due diligence as you can on the seller if you are looking at doing a partial or a note fund.

If it goes non-performing you need to make sure you can trust the person who will be responsible for getting the note re-performing and you need to understand the contract so you understand how the event of a non-performer should play out.

I would definitely put Chris in the upper echelon of note investors based on my research and experience.  He is one of the few that is crazy enough and knowledgeable enough to get his hands dirty at a high volume in this scary investing niche.

He is typically very busy so don't worry if it takes him a day or two to reply to emails ;)

@Jason Watt

Things have been very stable with these properties still.  Both tenants are up for renewal within the next months, so that will be telling on how all that goes.  If cash flow is your only metric, then these may not be the best investment just because how thin the margins are with purchase prices and tax expenses going up.  

I definitely think that overtime these will be a good one for me as it seems all of the run up in housing prices continues to push up the value.  Of course the Zillow estimates has them at about a 25% increase over the 3 years i have had them, but even if it were only a portion of that it looks pretty good.

@Frank Visaggio

I dont know your exact situation, but i think it would be tough to be at a negative income after depreciation on a househack.  only a percentage of the mortgage counts against it.  If your are renting out 25% of your house then you can only write off 25% of the expenses including mortgage interest taxes and insurance, and the principle portion of your mortgage cant be written off.  POssibly though if you were renting out a bigger portion of the house.  

If you are trying to make it a legal MIL apartment, then alot of municipalities dont want it over a certain percentage.  

@Frank Visaggio

We have been renting out our downstairs for a while now.  If you do claim the income on your taxes then a good accountant will help you figure out the depreciation of that portion of the house (ususally as a percentage) and you can also right off a portion of the expenses (insurance, utitlities, etc).

There are some implication if you plan on selling the house in the future as you will have you pay recapture on the portion of property that was depreciated if you sell for higher than you bought it for.

From my experience any good accountant with some real estate knowledge will just treat the income and expenses just like any other unit.

As long as we keep getting free money from the government popping into our bank accounts every few months, then yes things have changed as we know them.  

@Jonathan G.

Yea i have heard of them.  I started looking at lending deals with them a few years ago, so i have been getting emails ever since.  Its been interesting to see how rapidly they evolve and change.  At first they were selling turnkey, then promissory notes on new commercial, then notes on growing equipment (for marijuana probably).  I starting closing in on a deal, then backed out.  It just didn't make sense based on what else is available in the market.  Their notes are a lot less secure.  They do offer a higher yield, but if you look at how long your money sits in escrow before it starts to earn interest that higher yield gets zapped pretty quick.

@Caleb Heimsoth

Thanks for asking.  Yes 2020 was a breath of fresh air for my turnkeys, finally.  Steady rents, without a bunch of big service calls.  I think the pandemic actually helped with this especially for the tenant that is section 8.  As far as the returns, i think this year dug me out of the hole from the previous years.  

Here are the numbers for the Spartan Properties

Original property - Cash on Cash return of 6% and 11% if i don't count principle paydown as an expense

2nd Property - Cash on Cash return of 9% and 14% if i don't count principle paydown as an expense.

These numbers are as accurate as i can get them considering i considered ALL up front expenses as my cash in (not just the down payment, or 'return on equity' number) there was no creative handy work to make returns look better in these calcs.

Analysis - I think these CAN offer a better return than the stock market especially if counting equity as a return.  They are, however low returns considering the risk of having some bad years interspersed.  Still comparing them to 9-10% performing notes that have not missed a payment in 3 years.

The 2nd property shows some hope of appreciation as the Zestimate suggest that area has appreciated about 20% in the last two years.  The 1st property has not shown any signs of appreciation.  I know those are only estimates, but gives an idea of trends.

Overall - These could be good investments if i could raise my rents to match the increase in tax expenses.  Could happen overtime.  I have not approached refinancing to a lower rate, as I don't know if it is worth it.  

Keeping fingers crossed again for 2021!!