All Forum Posts by: Timothy M.

Timothy M. has started 2 posts and replied 59 times.

I disagree with some things Joe says, but he's spot-on right here, Lien, and respectfully I think your math needs some work.

If you pay an extra 10k-40k for the property, you:

1) have to put down an extra 2.5k-10k;

2) and you have to pay interest on an extra 7.5-30k.

Thus, your cash flow ABSOLUTELY changes. The equation is quite simple, no? Cash returned via rents / cash invested = simple cash-on-cash calculation. Your suggestion would make the numerator lower while increasing the denominator.

In every world this is a mathematically inferior situation to paying less for the property, unless you are willing to gamble that the 10-40k is a drop in the bucket because the place is going to explode upwards in value...? Even then, your cashflow is demonstrably affected.

1 Vote

Originally posted by @Gary Crawford:

Initially, when reading the title of the article, this sounds like a get rich quick scheme or simply too good to be true. I will keep this short and concise, but most of what I have done can be replicated by almost anyone with some work ethic and proper direction. December 26, I closed on my first rental property in Columbus Ohio, it was a C Class Duplex.

33,500 Purchase Price
80,000 Appraisal
1225 Rent

My partner and I instantly had 40k each in equity after putting about 17k each. From there we purchased a 5-unit building for $111k via Lease Purchase Agreement (Property stayed in seller’s name, gave a 10k down payment and continued making payments on the property. We bumped rents up and are currently going through one eviction. I would say we can sell for about 250-275k right now after renovations and rent increases. That leaves each of us with 80k in equity. I won’t be breaking down each deal but I was able to replicate on 5 other duplexes and daycare in Columbus, as well as 2 Single Family and a Condo in Vegas.

Now, 2 weeks ago I was really stressing while in Europe having to worry about evictions, loans, toilets leaking, etc. I decided the best idea was to liquidate some of these problem properties. After some deep thought, I realized the best way to liquidate was to become the bank on these deals and offer owner financing or subject to depending on the deal. Now I will give you one example: I purchased one property for 120K using a hard money loan, did some light renovations, handled an eviction, and agreed to sell it to one of the tenants with a 60K renovation budget. The agreed sale price is 400K, I will keep the mortgage under my name at $1200 and collect $2400 per month, cash flowing a little over $1000 per month and 200K of equity at the agreed purchase price.

Adding up my portion of the equity in the properties and my liquid cash totals to $1,105,000 putting in the net worth of 1 million + at the age of 26. Now I think 1mm is great and all, but this number doesn’t have significant value to me. My monthly cash flow right now is just under 5k and I would really like to be at 8k by the end of this year and 12k per month a year from now. Things seem to be scaling much quicker now so I wouldn’t doubt if I blow these goals out of the water. I can proudly say I do not wake up each morning thinking about going to “work.” This isn’t arrogance, this is just the lifestyle I have been able to develop through real estate.

I have set a goal for myself to do at least 1 week a month traveling, to force myself out of the rat race, which is so easy to get caught up in. Hopefully, I can double that number and work remotely.

Feel free to connect,

GC3

So my understanding is that MOST of the time, appraisers typically use most-recent-sales price as a guideline for the appraisal value unless you did significant renovation to bump up the property value. How did you convince the appraisers to come in at more than 200% of your purchase price...? Or was this just a case of an *extremely* distressed seller who wanted (needed?) to unload their property for less than 50% of its market value?

0 Votes

Originally posted by @Amy Aziz:

@Lauren Juarez Hi Lauren, you can invest in land its alto cheaper and no loans are required, it's an easy way to double your profit and get turn over quickly, but just like any real estate investment path you take you will need to have some upfront capital.

I'm sorry, wat

PSA to anyone else: no, there is no "easy way to double your profit and get turn over quickly."

4 Votes

400k private lender at 4% with no points/fees? Err... that individual must not like making money.

0 Votes

I sincerely hope this works out for you, but... holy cow, talk about a risky move.

0 Votes

Did you buy the whole duplex, or just half of one? What area was this in - Carver/Langston?

Update us after the refi! Great work-

1 Vote

@Daniel Kidd Quick question, Daniel - you noted a purchase price of 105k but a sale price of 110k? Do you mean that you paid 110k for the purchase after they put it up at 105k?

Great work on your first buy and hold-

1 Vote

Originally posted by @Lucas Mills:

Originally posted by @Caleb Heimsoth:

Originally posted by @Lucas Mills:

Originally posted by @Caleb Heimsoth:

@Lucas Mills how do you define easy? The easiest path to get there? Or the easiest “cash flow”? Easiest path is over many years and lots of saving or investing (short of inheriting money).

Easiest cash flow is probably investing passively in a note fund. Call it 5k a month so 60k a year. Earn 10 percent return and you’d need 600k.

Hey Caleb; good question. That’s something I’m still trying to determine, myself, and to find a balance between the different strategies available to me.

I’m looking for a balance I think. I tried a very aggressive approach and burned out. I tried buying and selling houses on terms, and the sky is really the limit in terms of how much you can make and in what time frame. This may be an excuse for not working harder, but I feel that I could succeed more readily if I had more time and funds to devote to this, as it is a numbers game and I wasn’t reaching enough sellers. I feel like I need to be able to send out hundreds of letters every week, as well as place signs around town on a continual basis. And currently I just don’t have the funds to support that.

So I don’t think that aggressive of an approach is for me, at this point. That said, I don’t necessarily mind a higher risk, higher reward approach if it’s at least a somewhat reasonable way to proceed.

Someone mentioned becoming a private lender. If I save hard for two years I can probably put back 50k. I know this isn’t a ton, but perhaps I could lend that money out 2-3 times per year making 8%-10% each time? I haven’t done the math but I bet I’d be close to 200k if not more after 5-6 years. But, how smart is this approach? How possible is it I could lose all my money in a single deal gone wrong somewhere along the way?

Something like that, while riskier, interests me because it’s a more passive way of building wealth but still fairly aggressive, or so it seems. The thing I disliked most about trying to buy houses on terms was that it made me feel like a salesman, so I like the idea of not having to feel like I’m trying to sell people on an idea.

Then someone else mentioned notes. I don’t know anything about this but I’m meeting with a local guy on Fri who does this to discuss. Maybe this is another good way to proceed?

Basically, I want to move forward as quickly as I can without having to feel like a salesman and churn through countless sellers to do deals. That might mean that I’m ok with being an “active” investor in some capacity, but I just don’t know what all is out there yet. This thread is certainly helping expose me to other options.

So to summarize, I really like the idea of being an equity investor and recycling that same money multiple times per year to accumulate wealth. And then once I’ve got perhaps 500k ‘ish, transitioning to a more conservative/passive investment model which will let me take my foot off the gas and enjoy life on my terms.

Right now my favorite option is saving up and being very frugal for a couple years, trying to put back 50k, and then beginning to invest that as an equity investor multiple times per year until I reach a certain point at which I can meaningfully invest in a more passive strategy like notes, or something like that. But if there are problems with this general approach or perhaps other/better ways or alternatives I’m open to hear them. I would LIKE to meet my 3k/‘month goal in 5 years so if there’s a more active alternative that fits with my general preferences I’d be interested to hear something that might support that, because I don’t think I’ll get 500k in 5 years the way I proposed (equity investing starting with 50k - which will take me 2 years to save up in and of itself).

I don’t have the answer but if you earn 9 percent per year on 50k for 5 years you’d have 76k at the end of those 5 years. So that’s sort of what it would look like as a private lender.

Perhaps my estimate was way too optimistic, but, I was assuming I’d be able to reinvest money 2-3 times per year.

Hey my man - just a quick explanation of how the interest works (no snark intended here at all). Even if you "reinvest" the money 2-3x per year, that won't change your ultimate yearly return. The best you could hope for is for your money to be loaned out every single day of the year, right? Mathematically, it doesn't matter if you have this done with one loan that you held for 365 straight days, or 2-3x on shorter-duration loans as you outlined above.

To make that more intuitive, even if you reinvest 3x a year... each of those investment periods will only be for less than a full year, right? So you won't get the full 10%/year (or whatever you are earning), since your money will only have been invested for... like 3 or 4 months.

If you invest 50k for a year at 10% interest, and you don't miss a single day, and your money is loaned out all year, after a year you have your 50k, plus your 5k of interest, for 55k. Next year if you do the same thing, you'll earn 10% on your 55k, or 5.5k. Sweet, now you're up to 60.5k. So the next year you'll earn 6k on your stack of cash... etc.

To go back to your original question, if you're going super passive, you're going to need like 400-600k invested right now to get 3-5k a month passive income, as others have outlined here. I don't see an easy way for you to get to this without earning/saving a lot more.

2 Votes

What kind of condo fees are we talking? 600-800? The good news is that you're likely insulated from some repair costs (e.g., replacing a boiler or roof). The bad news is that you're paying for your tenants to enjoy a heated pool. :(

I have a condo in Arlington, too, and I still chafe at the 300-400 in condo fees. Come onnnnn, Amazon...!

0 Votes

@Frank Geiger, yeah, totally agreed, we weren't expecting to have the unit rented out within a week. But the PM hasn't even picked up keys to get over there and take photos and put it up for rent.

At what point would you go with a different provider? This is pretty frustrating.

1 Vote

Baltimore, Maryland

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All Forum Posts by: Timothy M.

Timothy M. has started 2 posts and replied 59 times.

Post: How much above asking price would you go?

Post: How I went from ~100k to Millionaire in 6 Months

Post: pay student loans or invest in real estate?

Post: Can't make rentals cash flow without cash

Post: I bought my first rental for $4,000.

Post: Washington DC Duplex BRRRR

Post: First Purchase - Turn Key Duplex

Post: What is the "easiest" way to get 3k-5k in monthly passive income?

Post: Arlington, VA Condo - personal residence, now rental

Post: Baltimore property manager hasn't picked up keys yet after 1 week