All Forum Posts by: Lane Kawaoka

@Kristina Xie

New Your is an example of a primary market which are NOT ideal for cashflow investing.

Sophisticated investors look at the Rent-to-Value Ratio and look for at least 1% or more to be able to cashflow after expenses. You find the Rent-to-Value Ratio by taking the monthly rent dividing by the purchase price. For example a $100,000 home that rents for 1,000 a month would have a Rent-to-Value Ratio of 1%. Most people I work with live in primary markets (as opposed to Birmingham, Atlanta, Indianapolis, Kansas City, Memphis, Little Rock, Jacksonville, Ohio, or other secondary or tertiary markets) where the Rent-to-Value Ratios are under 1%. Plus we invest in red states so we have good landlord laws on our side too.

This is going to sound really duh but use the money to make a great ROI than the interest rate you are paying on the HELOC.

You give up control but gain diversification and pros run your investment.

If you're going into syndications, vetting a sponsor that you trust is important, but also talking with other limited partners (LP) is probably the best way to see what the true experience is like. You'll see a lot of projections out there at around 15-20% IRR, but at the end of the day these are just projections, with all the competition flooding into the multi-family space these days, what you should really be looking for is a solid track record.

Say you can rent it in the HOA community, and be able to earn at least a 1% Rent-to-Value Ratio that would be ideal, when I was doing rentals I used something like https://www.rentometer.com/ to compare other rents in the area. But you could also vet a property manager, especially since you're not looking to put in much sweat equity. 

Then to leverage and build up more passive income, you can get a HELOC.

Prioritize positive cash flow.

When vetting a deal if you're looking for appreciation see where you can implement forced appreciation, where you, the investor have some control rather than being at the mercy of market appreciation.

Forced appreciation could be done in the form of operational (changing out property management to enforce rent increases, getting rid of delinquent tenants, reducing property expenses, etc.) or interior/exterior value-add work (unit renovation, amenity/facility upgrades, paint, roof, etc.)

Great job! First one is the hardest.

Syndications are hands-off for LP investors, but it also comes down to net worth, assuming the $60k/$100k/$150k is an investor's net worth and not how much liquid cash they currently have available, syndications wouldn't be the most prudent way to start, as they tend to have higher minimums ($50K+ depending on the sponsor), most investors shouldn't start off investing 50% of their net worth in any one deal. 

Starting off with a single-family home whether it be a longer-term rental or short-term rental is the best way to start and gain experience before deciding if you want to transition to syndications. Just know that the short-term will be more hands-on since.

Agree with @Brock Mogensen, interviewing the sponsors is great, but talking with other pure-passive investors is probably the best way to see what the true experience is like. You'll see a lot of projections of around 15-20% IRR, but at the end of the day these are just projections, what you should really be looking for is a solid track record.

Make sure you have your team in place with "boots on the ground" whether that be your property manager or whoever is going to be doing the repairs for you. They are going to make or break your margin for cash flow.