All Forum Posts by: Account Closed

I’m curious to know what kind of investment returns you’re expecting or experiencing in the current Phoenix Arizona metro area. If you’re willing, please let us know what your go, no-go thresholds are for both single family and multifamily:

IRR

CASH ON CASH

NET PRESENT VALUE

CAP RATE

@W Stephens is your realtor bringing you the offmarket deals from wholesalers in the valley? I get at least 10 of these each day from various sources that fit your description.

@Brandon Roberts if I were in your shoes I’d buy your next house contingent on the sale of your current house. You can take the personal tax exemption on your current place, put whatever amount your comfortable with into your next primary, and then put 20% down in your next investment property. In this scenario youd end up with all prime rate loans.

If you take the HELOC your rate will be higher and all your cash will be "borrowed". In my scenario you come away with some cash free and clear.

@Michael Plaks wouldn’t you still pay taxes on the principle as taxable boot? My understanding is that you can’t pull cash out on a 1031 without triggering boot. Does that somehow not apply to opportunity zones?

@Shiloh Lundahl all great things to consider. Couple of things to note in my situation tho. First that I’m a realtor so we can claw back 2.7% on the realtor fees after my split. Second, that I’d pay no immediate capital gains tax regardless of when I sell in a 1031 exchange. Third, that in a sellers market there’s no way I’d offer 2% concessions at closing. You’re representing what I would call worst case, for me at least.

Basically though, the takeaway for me is that an extra year on the hold period would absorb all transaction fees given the same growth assumptions.

@Shiloh Lundahl I do agree that my ability to grow my portfolio is being limited by my approach right now. My theory here is simple, maybe too simple, so let me know you’re thoughts.

If I'm holding $1M in assets (90% leveraged as you know) through just the next 2 years that appreciate at 3% and my principle pay down on those assets is roughly $1,350 per month I should yield $30k + $16k per year in equity (assuming my cash flow is break even after PITI, maint, and capex). After just 2 years I'd have gained $92k or 92% of the $100k that I've currently got sunk in these deals. Without ever adding another dollar from my own pocket I could yield better than 46% ROI per YEAR just following the historical rate of inflation. Yes, markets go down. And yes, 3% is the average not necessarily the rate in any given year. But as you can see here I'm expecting the gap in supply to hold in the short term.

At some point it would only make sense to roll that equity via 1031 into something that cash flows much better and allows me to reset my portfolio in an advantageous manner....Particularly if it allows me to scale more quickly and never touch my original investment outlay.

This is my plan, by all means...poke holes

In it!!

@Pete Barrow when we hit another 10 year depression where unemployment is 30% and 80% of the value of all the publicly traded corporations in America is wiped off the board over the first three years.....going into foreclosure on 2 properties is going to be the least of my problems.

Finding new renters for 500 doors sounds like death by a thousand cuts to me.

@Brian Ploszay I think to expect prices to drop significantly you have to expect a drastic production of entry level housing. Personally I think the market is just out of balance because developers had to target the luxury end after the GFC. Until there is a paradigm shift I don’t think the entry level volume is going to come online for quite some time. The labor shortage we are experiencing in construction trades alone drives these prices higher, combine that with the movement in the cost of lumber and you have a mess on your hands. I believe we are seeing the results of that with nobody coming to the rescue any time soon. Again, just my humble opinion. Supply is not outpacing demand nationally, or locally for that matter.

@Brian Ploszay Why do you expect this year to be slow?

@Shiloh Lundahl I appreciate the insight. I agree that my approach is absolutely not meant for building wealth quickly. I’m 35 and have a long race to run. I do love the idea of mixing in some cash flowing assets once I’ve got my feet under me a bit more.