All Forum Posts by: Shiloh Lundahl

@Veronique Leroy I would say it is possible if you force equity, hold for a few years and then sell and then average the return of the whole profit over the timeframe of deal. In other words, an IRR calculation.

Have you ever considered doing lease options? I have found that they worked really well when it comes to getting better tenants and better rents, and having less hassle, less headaches, and then getting a higher sales price; without paying closing costs or realtor fees. Then you can trade up to another property where you can force equity. 

@Basit Siddiqi Have you considered getting an assistant to manage all of those things rather than a property manager.  Depending on the location of your properties, an assistant might be much better than a property management company. An assistant can do most everything that you need done and they work directly for you rather than a property management company that has several clients and you’re just one of them.

Also, again, depending on the location of your properties, have you considered doing a lease with the option to buy?  It takes about a quarter of the effort to manage a lease option property that it takes to manage a rental property. In other words, you can manage for lease option properties with the same amount of effort that it takes to manage one rental property. So it would cut down dramatically on your time, effort, and headspace. You can also trade up these properties quicker into other properties where you can force equity.

Who here has 50 to 100 properties or more, and has built a net worth of over a million dollars in real estate and is still building? 

What are your goals for this year?

Looking to network. Do you find it difficult to network? And where do you find others to network with?

I'm focusing on the BRRRLO strategy. It's the BRRRR with the lease option rather than just rent. I find that it produces better returns and work great to trade up and accelerate wealth building.

I am personally buying a lot in Casa Grande, Arizona. I think it is a good market with growth potential and it still has properties they can be purchased from wholesalers for around $150,000 that after you put $40,000 they are worth around $240,000.  You may need to leave about $20,000 into the property after refinancing and you may only cash flow about $150 a month, however you can create $40,000 to $50,000 of equity right up front. 

@Dennis Silver A turnkey investment will probably be much more passive than an vacation rental. However, turnkey properties tend to be a slow path to wealth and are highly dependent on appreciation and time to pay down the principle if you have a loan on it. And the longer you hold a property, the more larger repairs will need to happen and then the property will need a remodel to update it before you sell it. And right now interest rates are pretty high so cash flow and cash on cash returns are pretty low. So if you buy a turnkey property at market value right now, then the returns tend to be pretty low for a long time.

Another option that can still be pretty passive but that can create a higher return is a shorter time frame might be a partnership. Partnering up as the money partner with a successful operator who can find under market valued properties and can get them fixed up and force equity can create wealth quicker. Sometimes this strategy is called a slow flip. Rather than flipping a property quickly and paying short-term capital gains taxes and paying between 7% and 9% percent to sell the property, you could find a tenant that wants to buy the house but may need a little more time to qualify or save for a down payment. That person could become a tenant buyer and could buy the property at at future price that is set up when they move into the home. That saves the 7% to 9% closing costs, and has lower taxes at the sale. This strategy is just as passive as a turnkey property but the returns tend is much higher within a shorter period of time. In the average deal set up this way, the money partner comes in with about $35,000 to $50,000 and splits the $70,000 gain that has been created within a 3 year period of time. 

So a partnership may be another passive option other than turnkey that may produce a quicker and higher return. 

Hi @Ivan Castanon. A lot of people are giving you advice without enough context as to what you would like to do other than get a higher than 3% cash on cash return and other than only putting down 20% - 30% as a down payment.

Something that is important to know to give proper suggestions is what you want the investment to do for you and how active you want to be in the investment.

In general, the more active you are, the higher your return, the less active you are, the lower the return because you pay for others to do that work for you. Information like: Do you want to manage the property yourself, or do you want to pay a property management company to do that for you, is important to know because it will start to narrow your options.

If you want to be more of an active investor, finding the deal yourself direct from a seller, doing some of the work yourself to fix it up, and then representing yourself to sell it on your own is probably the most active you can be and will give you the highest return in the shortest amount of time. Also, co-living situations or top performing short-term rentals can produce a pretty high cash on cash return but again they are pretty active with a high turnover of tenants and guests unless you find someone else to manage them and then you are usually paying a good portion of the profits to the manager.

But let's say that you have a job and are not interested in fixing and flipping or a high turnover type of investment and you would rather be a more passive investor. If that is the case, here are some more passive, yet higher return options.

1. As@Chris Seveney suggested, being a private money lender can be pretty passive once you find the operator and asset you feel comfortable with. You can get between a 12% and 15% cash on cash return each year pretty passively. But what is really important is that you understand the terms of the loan, including the length of time and when you can expect to get the money back, how it is secured, and the process of getting it back if things don't go as planned with the investment. Vetting the operator or borrower is very important. Make sure that that person has a lot of experience, and make sure that there is at least 20% - 25% equity over and above the amount that you have lent and in your agreement it states that they can have no other liens or loans on top of yours. Also, make sure that they have money in their accounts in case things don't go as planned. You don't want to get a call 3 months into a project where you have lent money and hear the operator say that they ran out of money and need more money from you to finish the project or you will lose your investment. But if you can find a good operator and feel good about the asset, then private money lending can be an excellent way to invest passively. I have done this probably over 100 times as the borrower and it has worked out well for me and my private money lenders in that everyone has gotten paid back along with the agreed upon interest.

2. Putting your money into a fund or syndication. This is similar to being a private money lender. You need to vet the investment and the operator. In some syndications, returns may be higher than 15%, but it can be more risky in that there are usually many people involved and if the operator doesn't perform as originally explained then the process of getting your money back can be a little more tricky. I haven't personally done a syndication so I can't comment much more from experience. 

3. As @Dennis McNeely stated you could partner up with someone else on a deal or deals. For example, a buddy of mine called me the other day and told me that his accounted told him that he should buy some real estate to offset some of his taxes. I gave him some ideas of what he could do depending on if he wanted to be more passive or more active. After explaining a couple of options he told me he would rather just partner up with me and be the money partner and I would be the operating partner. So we opened up an LLC and he funded it with $100,000. I then found 3 properties from wholesalers in areas that I invest in regularly and purchased the properties with a hard money loan. We used his money as the down payment and to fix up the properties. We have stabilized 2 properties so far and we are in the middle of the refinance on the second. We will finish with the rehab on the third in about a month or 2 and then we will refinance that one as well. The cash flow won't be that high on these properties initially, but we are not planning on keeping them long term. We have placed tenant buyers in the property on lease options so we get a little higher rents and the tenant buyers take care of the property repairs. The option period is for 3 years. We set the purchase price at about 10% higher than todays value and we don't have to pay for realtor fees or closing costs when we go to sell the property. We also connect them with loan officers to help get the tenant buyers ready to purchase the property within the option time frame. Each of the properties have an estimated profit of around $70,000. So the total estimated profit is $210,000 in 3 years. So a profit of around $105,000 each in 3 years. So about a 35% cash on cash return for my buddy each year on his $100,000. Now I realize that not all situations will go exactly as planned but it is important to have a realistic plan from the beginning based on past results.

Ivan, Hopefully this post was helpful to you in that it helped you consider different options based on your personal situation and real estate investing goals. Let me know if I can be of help to you on your journey. 

@Michael Baum how many Short-term rentals do you manage this way where you are on call all the time?

@Cory Prior There are ways of doing low-money down strategies. However, I wouldn't expect to be able to do many of these deals without quite a bit of experience. At the beginning, I had to use my own money and credit lines and a HELOC. After I gained a lot of experience, I was able to do more deals using other people's money. Now most of my deals are a combination of our business money, bank money, hard money, and private money. We also try to keep a few hundred thousand in reserves.

So I would encourage you to adjust your expectations starting out and develop the discipline of saving money so that every month your net worth is higher than the month before. Then connect with a variety of investors until you find the specific type of real estate that you want to do.  Then do everything you can to study that specific real estate niche and then start to partner of some deals to help you gain experience and confidence.  This process is probably a 1-2 year process.  

@Cory Prior I would say it depends on what you want to learn. If you want to learn about note investing, then you should connect with someone experienced a note investing. If you want to learn about multi family, then connect with a multifamily investor. I teach people about buying single-family homes under market value and then selling them on a lease option. That's the strategy that I use the most and I found it to work out really well.