All Forum Posts by: Timothy M.

@Fay S. w/ respect, I think you missed the point of my question. I asked what, specifically, you meant when you said you "grinded and hustled," and your answer is that you... "ignored the haters"? Can you see my confusion here?

Per your previous post in this thread, you have done exclusively buy-and-hold (w/ a solo flip last year and a solo flip this year). So that means that exclusively through buy-and-hold investing, you have created 1MM+ in value within five years on single-family homes. 

Am I understanding this correctly? 

Goes w/o saying, but to the outside observer, this seems like a somewhat dubious claim. 

Back-of-the-envelope math: you said you have +/- a dozen paid off properties with "close to 2MM net worth". For ease of calculating this, let's say that each of your houses appraises at 150k on average, for a total NW of 1.8M. You claim no debt on the portfolio, and since there is probably no feasible way to earn that 1.8MM net in your day job, you would have had to be procuring properties for dirt cheap, putting almost nothing into them, and having them appraise at that 150k value.

Not calling b.s. on this, just saying that the numbers are suspect, unless you're able to source 10+ deals at rock-bottom prices and put almost nothing into them in renovation costs. I just don't see the math on this - let's say you put away like 70k a year net from your job (which is, to be direct, an aggressively high guess on my part). So you put down like 350k or 400k into the portfolio and created over a million dollars worth of value within 5 years? Am I understanding this correctly...?

So...you've taken some flak in the comments from folks asking if this is a fake post. (Note that I don't believe anyone made any comments at your gender, so I'm not sure why the attack on @Bartosz Rosol claiming that he's mad a woman outworked him...?)

Earnest question incoming here. There's a lot of talk in your posts about hustling, and working hard, and grinding... but very few specifics. Indulge me, if you will - what does "hustling" mean in this context? Calling to find motivated sellers? Prospecting leads from tax lien lists?

I just find it difficult to understand how someone becomes a millionaire in 5 years by just "working hard and hustling". Putting in an extra 20-30 hours a week overseeing contractors isn't going to get you there, that's for sure, so for the math-oriented out there (me!), help me wrap my mind around this.

You're in NoVA (which is huge), but near the DC border, meaning... probably Arlington? Alexandria? Falls Church? Even as far out as Vienna?

I think you might need to recalibrate your expectations at that price point ($350k). That's... a 1-2 br condo in most of those areas. If you're only putting down 5% down, too, I don't think anyone has mentioned, but you'll have mortgage insurance premium due to FHA financing.

Not to be a wet blanket, but after you move out there is almost no chance you'll break even with rent, much less make a profit, with those numbers. 

IMHO, your best bet is to buy a 2-br condo (or townhome) in Shirlington/Alexandria/Arlington and just use the rent from a roommate to offset your housing cost. You probably still won't bank much if/when you move out, but it'll at lease subsidize your living expenses in the meantime.

Hey Brian, trying to see if I understand this. You have 8M in total value, conservatively putting you (and your partners) at around... 1.5-2.0M out of pocket. On this, you're earning 25k/mo in net revenue...?

Back-of-the-envelope calculations here, but that puts you/your partners at 300k net income per year, or somewhere around 15-20% cash-on-cash returns for you and your partners. Is this correct? You're able to reliably source 20% return deals from OOS?

Also, question for you - what split do you offer your money partners? You find a deal in SC, say, and go to a money partner and offer them 10% return on their dough and you pocket the rest? I'm curious how this works as a business model; when someone says they take OPM, how does that look in practice?

Thanks for the additional info on this - I'm a one man (now two, along with my better half!) operation and interested in how other folks have taken it to the next level.

Well... if you're strictly looking for "less expensive" (lower point of entry?) in the DMV area, I might recommend Baltimore. I'd probably look on the med-to-higher end of properties there, as you don't want to deal with the hassle of the lower tiers from far away. Hagerstown, MD, might be another option (full disclosure: I own in both areas).

THAT SAID, if I were in your shoes... I would just take a big bite on a house in the DMV and rent out rooms to other young professionals. 

Will you make money on rental income? Hell no, you'll probably just subsidize your living expenses. I'd bet, though, that your ten-year IRR is much, much higher owning a place in a desirable district in DC and renting out rooms than it would be just buying a blue-collar workhorse of a property strictly to crank out rental income.

Hey Russell - great to see you, too! Completely agree, if you can afford to long-term buy-and-hold in SF, DC, NYC, etc., that is absolutely the route I would take. 

The question is just for the 95% of ppl who won't be able to scale that model (hah, yours truly included!). Dropping 100k on a down payment in any one of those locations and breaking even for 5-10 years, hoping for rents to track upwards and/or principal paydown to increase doesn't seem like a super ideal way forward. What do you do for upkeep on those years when you're barely breaking even / not turning a profit? You have to keep feeding the alligator with a hope of a big payout on the back end?

I'd be curious to see what the IRR is after a medium term holding period (say, 5-10 years) while compared to equities over the same time period, absent some amazing RE appreciation bailout on the back-end.

What do you think about a model where someone buys a few higher-end houses (e.g., DC and NY) over the course of their lifetime, and then picks up workhorse type rental houses to help offset the cost of owning one of those class-A rentals?

Russell, curious where you come down on this - should OP (or any mom&pop investor) in their accumulation phase pick up an asset that has an extremely low rental yield (looking at you, SF, NYC, DC, Boston!) but is in a very desirable area? Genuinely curious to your answer on this.

Take a hypothetical property that costs 500k but only rents for like 2.5k-3.0k a month. This is - by most standards espoused on this site - a terrible rental. Yes, the property cash flows if completely paid off, but the yield is extraordinarily low, and arguably worse than most other options (equities?). The equation looks even much, much worse if we are talking about slapping some leverage on that already-poor-yield play.

So... in your opinion, what's a mom and pop investor to do? Buy that 500k property and hope it appreciates? Or buy 4-5 100k houses in more working-class areas which rent closer to 1k apiece? Or some hybrid in the middle? 

(I'm talking long-term wealth creation here, not just looking at this from the rental income angle)

Anyone else have experience with a non-permitted duplex? Specifically, found a SFH rowhouse that has been (without permit) converted to a duplex; between the two units, the numbers are quite good (2% per month) but I'm wondering how much of a legal headache this could be. The area is zoned R-6 so from what I have read/heard, it is nearly impossible to have the rowhouse rezoned as a legal duplex.

I have friends in other geographic areas that have non-permitted units (looking at you, Chicago!) and it's never been a problem. If it makes a difference, I wouldn't be putting any debt on the building and just purchasing in cash.  

Thoughts?

Good work on carrying it out from across the country! A few minor quibbles with the numbers.

1) how were your holding costs so low (2.4k)? Did you find friends/family to loan you the money almost for free?

2) Just one man's opinion, but your CapEx and maintenance numbers look EXTRAORDINARILY low (+/- $2600 a year?). Turnover costs for one unit per year (already low) might eat half of that, which leaves your verrrrrry little to offset the cost of a boiler, roof, HVAC, etc. I would encourage you to be much, much more conservative on underwriting those two expenses. At least another $1.5k per year, IMHO. This will take your monthly rent income down, but at least it'l be more sustainable..

Good work, and onwards and upwards

@Mason B. The building in question is in Austin. Not a particularly great neighborhood, and ask yourself - if it were such a bargain, wouldn't someone local have snapped it up...?