All Forum Posts by: Ronald Perich

 Exactly. I have a nine-unit building near several other apartment complexes. They charge about $125 less per month than me (because they are much smaller unit with one less bath). But if I replace the A/C, it's not based on the rent I get, it's based on the cost of an A/C unit. Those other owners are going to pay the same as me, too. Same with replacing a hot water tank, an heater, etc. The only variable is I have an extra bath and a much larger unit so turnover might cost more from a paint and carpet perspective. 

But neither of those are priced according to the rents... they are what they are.

I seem to remember Ben having a spreadsheet which built in the cost of CapEX and was solely based on the components that made up the residence (maybe when you were talking about $30,000 pigs). That's the kind of analysis you need to do to determine what your "real" expenses will be.

@Logan Hassinger,

I have to agree with you. When you have a sufficiently small portfolio of properties, you'll tear into your cash flow pretty quick if you include property management. However, always factor in PM costs so you can get out of the day-to-day management of said properties some day. And the property must CF with that PM cost on top, even if you're doing nothing more than cutting yourself a check every month for the "cost" of the PM. That's what I do. Now I don't spend that PM "check" I receive every month - I save it for the next purchase.

The real danger zone is between 10 and 50 doors. You can't afford to hire a FT person and yet you can't manage them while you're working FT. That's when a partner (or spouse) could be of big assistance. Split the responsibilities, time, etc.

Once you understand the basics of investing, I'd also recommend What Every Real Estate Investor Needs to Know About Cash Flow... and 36 other key financial measures" by Frank Gallinelli. 

@Ryan Billingsley, I know you had moved but now see you're back over in Wentzville, MO. If you are back in the area, I'd recommend Tim Elefros over in O'Fallon, IL. He's a member of the Metro East REIA and spoke a couple of time on effective tax strategies. Of course, who you choose to use is entirely up to you. And all that other legal-jazz.

@DJ Cummins had a resident pass away in one of his residents. Pretty sure he outlined how it went. That's why I have it written in my lease. Yes, I have a death section in my lease.

@Brian Andrews, I like that advice. I purchased three separate parcels with a single loan. I wish I had done separate loans on each. Would have given me more exit options. I'm certain I could get these broken up at a later time, but thinking more about exit up front makes a better overall opportunity.

@Mark Douglas, congrats on your first purchase! Looks like you are off to a good start! Just think... for the $11,000 you're paying (down and repairs), you have a place to live for a year practically free. After that, you could have a place generating well over 10% return on that initial $11K! Forever!

@Account Closed, I do now understand where you were coming from. Especially in value plays, I can see where a property may cash flow negatively in the beginning and become a cash cow after a while. Reserves and such are critical to success (and where many get into trouble).

That said, I shy away from appreciation as a strategy. Probably because of the market I am in and my strategy for investing. 

Playing the appreciation market is probably safer than playing the stock market, but is still based and impacted by a number of outside forces over which I have very little control. One misspoken word by Janet Yellen and banks stop lending. A government body tries to reduce the cost of their water supply and you suddenly can't give houses away. A state stops paying its bills and one of the largest employers in the area, a college, lays off 700 people.

None of these events will do much for the buy-and-hold guy, either. But if you do buy it right and you do maintain it and you do plan for a worse-case scenario, at least you have a fighting chance of riding out the storm.

I guess it's a matter of preference, personal portfolio, and tolerance for risk. Also depends on where you are at in your investing lifecycle, too. Having a mix of different styles can help to hedge each other. But when you're just getting started it's tough to have several different styles all going at the same time.

@Dave Foster. Now I understand what you were describing... It's a thought. But from what I heard during our initial conversation, they are pretty happy on their 15 acre farm and I doubt they are looking to move. But I might have that in the hip pocket as an option for them to consider as well.

For me, the 1031 could work for them (and me) if I could find another property we could acquire. They could be completely worry-free and provide some of the initial capital. I'd work the property, management, acquisition, etc. and receive some of the ownership as well. They have passive income and no worries, I acquire more properties, etc.

And if we structure the initial deal correctly, we can execute this at a time that works for all of us. Use the lease-option to begin, complete the sale when we find the next property.

Tnaks again for all of the great ideas!

@Account Closed, I think @Brad Saari was asking you if you could expand on your answer. @Matt Donley made a broad statement that all good deals will eventually cash flow. You took exception to that but didn't explain why in a way many could understand.

I have some thoughts on how you might add appreciation, but I honestly am not sure what you were referring to either, especially without lifting a finger. Perhaps you wouldn't mind expanding on your answer?