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All Forum Posts by: Stetson Oates

Stetson Oates has started 1 posts and replied 30 times.

Post: Some Advise From a Very Experienced Investor

Stetson OatesPosted
  • Posts 30
  • Votes 29

I'm a very new investor focusing on long term SFRs.  I do have a background in finance both consumer and commercial.  Since getting in the RE investment earlier this year, I've been surprised by the amount of investors leveraged to their eyeballs.  This list is really good information for guys like me, I'd add using debt responsibly to the list. Debt is a tool, but too much can lead to big problems.

Quote from @Russell Brazil:

You'll need a portfolio that's $100,000,000 with no leverage.

There is less than 10,000 Americans with a net worth that high.


 That cant be right, there's at least 40,000 RE investors on YouTube worth that much!! LOL

I may be misunderstanding but, if you are serious about investing, I would buy, learn, and gain experience.  You don't have to nail some crazy deal to be an investor.  I'll admit, I buy at fair value, acquiring nice properties for lease. My advise is to purchase a property and not worry about buying at a massive discount. If you find one, super!! If you find a "OK" deal, swing and take the base hit.  The sooner you get the portfolio started the better, but don't focus on the home run, take a few base hits.

Quote from @Sean Gallagher:
Quote from @Stetson Oates:
Quote from @Sean Gallagher:
Quote from @Stetson Oates:
Quote from @Sean Gallagher:
Quote from @Nick C.:

There is no correct answer.  Everyone’s risk tolerance is different. I know investors who leverage 100%, and ones that purchase all cash, and plenty in between. 
COC return is a horrible metric. Here's an extreme example to illustrate - if you 100% leverage a purchase for $300k and it's worth $100k and you're cash flowing $5/mo, your COC return is infinite. Sounds good. But the deal is still horrible.

I guess the trouble I'm having is... if I want to maximize cash flow.. analyzing the deal to make a cash offer.  I'll keep digging   


It's great to buy all cash and maximize the cash flow. It's even better to leverage 25% and still cash flow a ton. Debt is a deterrent for lawsuits too. I'm good with a portfolio being 25% to 45% LTV. Still cashflows a lot and uses debt responsibly to expand a little faster.


I'm curious what you are looking at when doing a deal similar to this to make the right cash offer of not too little but also not too much when thinking strictly in terms of cashflow.

My analysis must cover the payment plus $1,000/month if I'm using leverage. The $1,000/month is a gross number and doesn't include Insurance, vacancy, maintenance, or any other expenses.  My thoughts are that the $1,000 cash flow will cover all of these in excess. Now I do know my cash flow number with all expenses, including the ones listed, and I typically end up with a net of $400-$500 per month even though I'm collecting the excess as well.  I also do not spend any of the net and reinvest it in RE or equities.

Copy that, this sounds pretty specific for the same type of home with the same expected rent, is that because this is only what you look for?  Example a cheap home that rents for 1000 might work well but your analysis from above would be a good bit different. 

I only do SFH in good locations. I do the analysis and determine what a payment would be and what cash flow would look like.  If I borrow $75,000 on a $200,000 house I know the payment will be around $600/month.  I’ll pull comps and make sure I can at least rent it for $1,600/month. 

Post: Defend subpoena to trust.

Stetson OatesPosted
  • Posts 30
  • Votes 29
Quote from @Chris Seveney:

@Stetson Oates

If you personally guarantee a loan it means you and everything you own

So if xyz LLC fails to pay a loan and have a personal guarantee, that person can then Go after every other LLC and take assets from those (or anything personally you have - except possibly for homestead and specific items) - this is why we get personal guarantees on our loans we give out.

That’s correct.  What I am referring to is if the LLC is sued by someone other than the creditor, they cannot claim the corporate vail is pierced based on you personally guaranteeing a note for your LLC.

Post: Defend subpoena to trust.

Stetson OatesPosted
  • Posts 30
  • Votes 29
Quote from @Don Konipol:
Quote from @Chris Seveney:
Quote from @Matt Devincenzo:
Quote from @Kranti K.:

I guess land trusts are no use, besides stopping the spam calls. Aren't they supposed to stop frivolous lawsuits?


These reasons are pushed to "the regular people" real world wealthy people I've see don't worry about it. I have a MFR developer client that must be a multiple 100s of millions in net worth(a few thousand MFR units in Socal alone), he signs personally as the president/owner for his entity(ies). It's not much of a secret what he owns.

I'm sure there's some anonimity on assets and he owns more than I know about, but he's never raised a concern with someone knowing about his projects. 


 Yep - let "regular people" feel like they are with the elite class. See it all the time, all it is, is a waste of $. 

It very difficult, if not impossible to be “invisible” in today’s world and also be able to conduct business reasonably efficiently and effectively.  We sometimes run across investors with multiple entities requiring an avalanche of paperwork to allow them to invest in one of our syndicated investments. 

So, here is my take on use of remote entities.  Set them up for ASSET PROTECTION, NOT to hide your identity.  Set up properly and maintained correctly, they should not allow for liability to pass through to yourself or your other entities, as long as funds are not commingled, seperate accounts are maintained, proper legal forms are filed, and loans are not personally guaranteed or cross collaterized. 
Utilize the most efficient form of entities, Series LLC instead of individual LLCs, LLC instead of corporation (you can elect to have LLC TAXED as a corporation if that is desirable), LLC instead of limited partnership (eliminates the need for a separate entity to be created as general partner).
Set up asset protection that is cost and operationally appropriate for your net worth and in ALMOST all cases AVOID the exotic plans that require a foreign asset protection trust domiciled in Nevis, administered by a Netherlands corporate   entity located in Luxembourg, with documentation kept by an attorney in the Bahamas.  


If you personally guarantee a loan in the LLC's name its grounds for piercing?  I'm not sure that's accurate.
Quote from @Sean Gallagher:
Quote from @Stetson Oates:
Quote from @Sean Gallagher:
Quote from @Nick C.:

There is no correct answer.  Everyone’s risk tolerance is different. I know investors who leverage 100%, and ones that purchase all cash, and plenty in between. 
COC return is a horrible metric. Here's an extreme example to illustrate - if you 100% leverage a purchase for $300k and it's worth $100k and you're cash flowing $5/mo, your COC return is infinite. Sounds good. But the deal is still horrible.

I guess the trouble I'm having is... if I want to maximize cash flow.. analyzing the deal to make a cash offer.  I'll keep digging   


It's great to buy all cash and maximize the cash flow. It's even better to leverage 25% and still cash flow a ton. Debt is a deterrent for lawsuits too. I'm good with a portfolio being 25% to 45% LTV. Still cashflows a lot and uses debt responsibly to expand a little faster.


I'm curious what you are looking at when doing a deal similar to this to make the right cash offer of not too little but also not too much when thinking strictly in terms of cashflow.

My analysis must cover the payment plus $1,000/month if I'm using leverage. The $1,000/month is a gross number and doesn't include Insurance, vacancy, maintenance, or any other expenses.  My thoughts are that the $1,000 cash flow will cover all of these in excess. Now I do know my cash flow number with all expenses, including the ones listed, and I typically end up with a net of $400-$500 per month even though I'm collecting the excess as well.  I also do not spend any of the net and reinvest it in RE or equities.
Quote from @Sean Gallagher:
Quote from @Nick C.:

There is no correct answer.  Everyone’s risk tolerance is different. I know investors who leverage 100%, and ones that purchase all cash, and plenty in between. 
COC return is a horrible metric. Here's an extreme example to illustrate - if you 100% leverage a purchase for $300k and it's worth $100k and you're cash flowing $5/mo, your COC return is infinite. Sounds good. But the deal is still horrible.

I guess the trouble I'm having is... if I want to maximize cash flow.. analyzing the deal to make a cash offer.  I'll keep digging   


It's great to buy all cash and maximize the cash flow. It's even better to leverage 25% and still cash flow a ton. Debt is a deterrent for lawsuits too. I'm good with a portfolio being 25% to 45% LTV. Still cashflows a lot and uses debt responsibly to expand a little faster.

Post: establish LLC after receiving an offer

Stetson OatesPosted
  • Posts 30
  • Votes 29

Never hold a rental in your name. Have the LLC established when you decide to offer on a property as the offer, insurance, title, and loan will need to be in the LLC's name. Also, you need a bank account. Start getting quotes on property insurance, general liability insurance, and an umbrella policy. The first line of defense is the insurance policy, the umbrella is next, the LLC is after that. Also look and see if your state has charging order protection, this is another line of defense. Finance with a bank that's comfortable with a long-term fixed rate mortgage in the LLCs name.

Post: Fraud or no?

Stetson OatesPosted
  • Posts 30
  • Votes 29
Quote from @Rob Hakes:

If somebody is giving you a quote for more than it may be worth, they probably just don't want to do the job.  Sometimes if it seems the customer is going to be more of a pain that we want to deal with, we can add significant amounts to the quote.  Then it is up them to decide.

Just saying

Looking at some of the comments and reviewing your situation, I would move on from this management firm.  If the bid is outrageous, pickup your toys and go play elsewhere. As Rob stated above, they may want you to find someone else. I wouldn't put so much work into convincing them their bid is too high, put that energy into finding a better management firm.