All Forum Posts by: Roy Gottesdiener

@Jasmine Williams in theory this sounds great but in reality 500k equity after paying closing costs and taxes would be around 250k cash in hand, so the 6% CoC you are getting would translate to 1.25k monthly cash flow. Tough spot

@Stuart Udis yes the houses are in areas I expect values to go up significantly, with positive population and job growth

@Stuart Udis totally agree, I just have a major drawback where I can't 1031 and will have to pay taxes so as of now I'm not in a position where selling makes sense, definitely in a couple of years.

@Rick Pozos when you say 50/50 are you referring to flips? I did do several flips where one side brings the money, I take care of everything else and we split the profit. But flips are hard to come by and if you're talking about buy and hold how does the 50/50 split actually look like?

I started investing 4 years ago doing BRRRR, right now I have a portfolio of 6 SFH worth around $1.1M with $600k in debt and around $1.5k monthly cash flow. I'm a foreign national so my cash outs are capped at 60-65% LTV so even though I got great deals I still reached a point where my capital is now locked into these rentals. On the one hand, I realize I just need to let time do it's magic and enjoy appreciation and debt paydown, but I'm looking for ways to continually grow my portfolio by either acquiring more properties or finding ways to generate more income which will be used to purchase more properties.

I tried using OPM but that doesn't work for me for several reasons - if I go down a loan route I can't pay it back because of my LTV cap and partnering for equity requires a lot of work in bulding trust and even then it's for a very small share of equity which is insignificant. Then, products such as HELOC or 1031 exchange are not open to me as a foreigner so even though i have on paper $500k in equity I don't have a real way of tapping into it.

Any ideas or suggestions what I can do now to keep growing would be much appreciated!

@Nathan Frost I had the exact same issue, got excited, bought more and more properties and then I realized that on such thin margins it's just too stressful.

My advice would be forget about spreadsheets and being fully optimized on capital allocation, but rather decide what's your risk tolerance and how much of these losses you can stomach. For me it resulted in selling a couple of properties and decreasing my CoC, but at least I get to sleep well as night.

On the podcast David keeps saying that house hacking is the easiest way to build wealth through real estate, advising to add one property each year paying 5% down.

I'm theory it sounds great but in reality assuming you buy a property in the 500k range, there's no way you'll be able to make it cash flow which makes it hard if not impossible to actually scale and do this every year or two.

What are your thoughts? Am I missing something?

OOS investor looking to send a gift before the holidays for my property manager and contractor, any ideas?

Hey everyone,

I find myself thinking a lot about strategy recently under current market dynamics, wanted to share with you and hear your thoughts.

Quick intro: I've been investing in real estate for the past 4 years using primariliy BRRRR, managed to scale to 10 rentals and the goal is to generate an income sufficient to cover my living expenses within a 10 year timeframe.

I've been constantly buying properties since 2020, cashing out and moving on to the next, when rates started climbing I just took for granted that cash flow is going to be thinner so I adjusted my underwriting (and expectations) and kept telling myself that the real money maker is appreciation, so a difference between $100 and $300 a month is not critical, so I can keep growing my portfolio doing the same thing I did in 2020 and 2021. 

Then the latest property I bought got me to rethink my entire MO. Some numbers: it was all-in for $208,000, appraised for $295,000, my cash out was for $150,000 (due to the required DSCR), rent $1,750 and PITI $1,300, for a cash flow of around $100, and measly CoC return. Still, I was focused on the almost $100k in equity I created, and how in 10 years it'll appreciate and the principal will be paid down, amplifying my equity growth. But what happened to my portfolio is that in a stretch of one month one tenant moved out so I incurred replacement costs, in another I had to replace the water heater, and another had a plumbing issue. When you operate on thin margins like $100-300 a month, no matter how conservative you are, a month or two like that can obliterate your yearly cash flow from the entire portfolio.

Now the way I see it, BRRRR helped me make money in several ways: 1. Forced appreciation 2. Cash flow 3. Principal paydown 4. Market appreciation. Given the current market and rates, cash flow is lower in leveraged properties and CoC lower and principal paydown is also very insignificant in the first 10 years with high interest rates (assuming I don't plan to hold the properties for 30 years). So that leaves the majority of gains in forced appreciation from rehab and the marekt appreciation by buying in the right place.

All of the above led me to decide to sell that property and realize the equity, and convert it into one property bought in cash, without a cash out refi. It will increase cash flow, reduce leverage, and the only downside is that the total asset value would be 50% lower, so I would get appreciation only on $150,000 and not on $300,000, but overall in the grand scheme of things I think it makes more sense, rather than scraping $100 a month but feel like you're fully optimized and every penny allocated according to the spreadsheet.

I also realize everyone's risk tolerance and situation is different, if I have to sum it up this situation to me feels like a no brainer because numbers wise (trust me I ran the numbers) - cash flow would remain the same (assuming I went on with cashing out and buying more) but with lower debt so more room for error, and where I am "missing out" is debt paydown which again, with these rates is really insignificant, and appreciation on a higher total amount of assets, which I'm happy to give up on for the time being and swap it for greater peace of mind.

What are your thoughts? How are you adapting your strategy? Really interested in hearing.

@Joe Villeneuve curious to hear your thoughts about n my situation. As a foreigner I'm capped at 60% LTV and I can't do a 1031 because I'm obliged to pay tax on the sake in my country. On that case would you still recommend selling to grow my portfolio?