All Forum Posts by: Sam Yin

Good points! You got me rethinking my endgame a bit. I might start collecting beach properties sooner rather than later. It has taken me 3 years of hustle and grind to finally get over $1M gross rents. But after all the operation costs, it is far less in the actual net. I need to adjust my strategy a bit and I think the time is now.

I once saw a podcast on BP interviewing a guy from Seattle (Thach) and he had mentioned a cash flow number in the neighborhood of $250K/month. That got me thinking and it has been something to strive for. Like many things in life, it's better to set your goals high. I am not sure I can get there this decade, but there is a chance I can in the next decade. I will keep plugging away at it.

After reading your response post, I might try for coastal properties to get to those numbers faster. I might have to take an extended trip to San Diego to check out the scene more closely.

 Bruce,

As always, I think we will continue to get a variety of answers and opinions based on each individual's experience and time in REI. Those that have seen a few cycles will likely remain more calm. This is the same with those who have created a solid income foundation to weather storms. Those who are newer to the game and believe all the headlines/hype may hyper react to one direction or the other, based on who they believe.

I have had discussions with a few realtors, both residential and commercial, and it seems that the tenured ones are more calm about it, but still baffled as to how the market has not taken a larger beating. They feel that the cycle is off and there is an impending implosion coming. To a degree, they are correct... maybe...

MY THOUGHTS, after cleaning my garage all morning:

I feel that the recent outside factors have really altered the course of natural events in REI. COVID, whether you believe it or not, sparked an unusual infusion of government money and a drop in lending rates to stabilize that emergency. Then as the extra money supply started to cause predictable economic outcomes and inflation, the Fed's intervention was to squeeze investment. The issue lies in all the other details that are too long to list. From BLM to CRT to school reforms to cancel culture. It all plays a role in where we are now. Many people refinanced and had a chance to stabilize their assets, both Primary and Investments. Many newer investors, like myself, were able to jump the line quickly due to those factors.

With the aging out of Boomers and the upcoming retirements of Gen X, the culture of our country has shifted quite a bit due mainly to technology and the social media accessibility it created. Because supply became so constricted and material prices skyrocketed, along with all that quiet quitting, in addition to higher lending rates, it put a major strain on builders to create profits for investors. Thus new supply of homes is slower than it could be and prices need to remain high. At the same time, so much equity was created in the recent run-up that those who are already in the market can continue to compete for the higher prices and everyone just moves up a step or two in their ownership ladder since they are already on it. This creates the feeling that it is impossible to get in and confusion as to why people can still afford to make money at these levels. Add to that, the popularity of BP and related REI media, and more investors are savvy to the game as well.

What I see is a continuation of the status quo. I do not see much change in the near future. I see people still investing for both cash flow and/or appreciation, or whatever floats their boat. I see people still pay high and higher prices for their first homes, driving the valuations higher. As long as employers continue to increase wages, people will continue to afford more. As financing gets stretched to 40-year terms, that will only cause prices to climb. 

Although I have not been an active investor for decades like many on this forum, I have been exposed to real estate for many years. I bought my first house while in high school in the 90s. I continued to buy homes every few years as I moved around. But I dove hard into actual investing only about 3 years ago. In that time span, I have put all my focus into making REI my primary source of income and generational wealth-building platform. It is not a hobby for me, it's a lifestyle to sustain the lifestyle I want for me and my family. That was how I created 8 figures quickly. Thus, I am still buying. I closed on 14 mid-September. Then a week later, got into escrow on 9 more and closed that last week, with a 7-day escrow. In fact, I was on a cruise ship and had just enough reception on Wednesday to call the bank to send a wire and close the deal on Thursday before I got back into town.

These are just my opinions. I try my best to leave the politics out of it, but it does sometimes feel that politics impacts the REI space.

@Jeremy Willcoxson

It all depends on your REI goals and the strategy to get there. For what it's worth, I did that. I pulled 457b money early for an investment opportunity. I took the penalty hit and the tax hit. It was worth it. O have also taken the max loan out to buy REI, and paid myself back at 10%. Still worth it.

I used the 457b as a told to escape the employer bonds. It worked. Make sure your purchase has a strong potential to over come the costs of those to taxes within a short time frame. Or else leave it in the 457b. In my case, when I pulled the $50k loan from 457b, the purchase cash flowed even after paying back the loan. When I took the early withdrawal of about $200k (about $130k after taxes and fees), the purchase projected to cash flowed $20k/yr at COE, and had a baked in value of an additional $100k above the asking price at COE. If it were not those parameters, I would not have done it.

@David Wilhite

To buy real estate faster often requires more leverage. Paying down your principal faster is a bit counter intuitive to the REI growth phase. But only you can determine what is the best strategy.

To your OP, fastest way I can think of is to pull a HELOC, and sink in ALL you earnings into the mortgage. Live off the HELOC, pay it off each month, and sink in ALL your remaining earning into the mortgage. You will likely be able to pays off you 30 year mortgage in well under 10 years. It takes discipline.

The other way is to make an extra payment EVERY month. That will also reduce your mortgage timeline dramatically.

Those two methods best work for those that treat REI as a hobby and still want to rely on their W2 as their main income. For those that are striving the to leave the W2 and want to live on passive income, it would be futile to try and pay off the mortgage early in the growth phase of REI .

Since this is an REI forum, and your OP was with the intent to buy more properties faster, paying down the mortgage would be counter productive. Save that money, keep buying with leverage faster. If you BRRRR... would that not include refi??? Isn't that just prolonging the mortgage?

In any case, this is just my 0.02. I known it may not be of any consequence to your opinions or anyone else's. Your strategy will always be the best for you.

@Greg Scott

Well said.

One step at a time. Since you are going to buy your first rental, get through a season of rental ownership first. Make sure it's something you can see yourself doing long term before you add on. Worse thing is finding out you do not like Landlording but added what you do not like to you plate prematurely.

@Kris Allen

Ditto!!!!

Thanks Chris. I just opened escrow on Fri with seller financing. It's all new to me. We are set to close this Fri for a quick one week escrow. It never even hit me to ask for a 3rd party servicer.

@Mark Cruse

I recall that thread Mark. It was Crazy Talk!

To each their own. As much as I believe in wealth building through appreciation, the asset must cash flow as well... NOW... NOT 3-5 years from now. It would bankrupt me if I subscribed to that. Or I would need some crazy excess money.

I think most of the time those posters omit clarifying that that they are high income earners and are just trying to side hustle REI. They dabble versus making it their primary income. Otherwise, they would not be chanting that mantra. Think about it, a person with no other income, but invest in negative cash flow. IMPOSSIBLE!!

@Scott E.

Those are the key components you need to expose yourself to as an aspiring RE investor.

Low barrier to entry

Experience tenant management

Experience requested repairs

It will tell you if this path is for you better than any book or podcast.

@Henry Clark

That was probably one of the best post response ever! So true. This generation is lucky, they just do not realize it. Anytime people try to say how difficult it will be for new investors and new generation, I think to myself... Are you just blind? Did you just not do ANY research into what you are trying to invest in?

The internet generation has ALL the advantages. There is almost nothing left to chance. Everything is at your finger tips. The only missing part of the success formula is EFFORT. Move those fingers, do a few searches, pick a strategy, and PUT IN ALL YOU EFFORT and you will succeed. It's virtually guaranteed.

That leads back to the OP. I think it's a good talking point but it is clearly an opinion. I do not foresee too many changes in REI. What comes of it in the next 5 to 10 years will just be the natural progression of REI and it's cyclical nature. I think that for the most part, if new RE investors want to succeed, just follow the path laid out. Start early. Ask questions. Take mental notes and network. Start small and cut your teeth on the basics and progress from there like SFRS, MFRs, Commercial, Land development, etc...

 The properties are worth 1.4M, appraised individually.  There are 3 parcels in total, a duplex, a triplex, and a fairplex. All parcels are contiguous. 

I am buying as a bundle, but with a separation clause to allow separate refinancing or individual sales.

However, from a commercial loan perspective,  its probably worth 1.2M. I look at it thay way in case I might want to keep them together and refinance into one commercial loan later down the road.

Conventionally, properties in San Bernadino, CA generally sell for about 200K-250k/door for your average C neighborhood home. That's up to 4 doors. It may reach 300k/door for a B or A neighborhood. When it comes to apartments, it drops to 150k-200k/door on average. Thus valuations look different. From a commercial perspective, with 20% down, the DCR is only 1.16. That's the lowest I have ever done. I generally like 1.3.

In this case, I just closed on 14 homes last week, one block south of this location. This would make it for easy management due to proximity. Additionally, when I close those 14 homes, I used commercial financing to wrap them all because they were close to each other. they were valued about 2.5M individually, but I bought them for 1.9M as a commercial package. There DCR was 1.4. All this to say that if I mess up on this new deal, i could potentially wrap them all on a refi later into a 23 home commercial loan.

Your thoughts?