All Forum Posts by: Account Closed

@Ana Marie B. I’m sure there are 1% deals to be had in almost every market if you look hard enough..but that doesn’t mean they are in the Class A neighborhoods I’m targeting for my investments. It’s still very interesting to hear the perspective of others.

@Joe Splitrock respectfully, I could not disagree more. The reality is that I could dump my cash reserves into these properties, recast the mortgages and be cash flowing each one tomorrow if I wanted to. I think that it’s a far better strategy to have that option and not exercise it unless it becomes necessary.

Having excess reserves gives me MANY more recoverable scenarios than 2 months reserves would. In the event of a crash everyone with 2 months reserves gets roasted, cash flow be damned because a you won’t have it come a 50% crater.

Strategic foreclosures ran rampant in 2008. Your mortgage is a contract and like any contract you can choose to break it. If you’re suggesting that having liquid assets would disqualify you from executing that strategy somehow....then make them illiquid.

@Kimberly McCall I would honestly suggest taking on a partner if I were you. I took on a partner in both of my first 2 deals and it was THE difference maker. The partner could put up the cash on the front end if you’re able to provide some sweat equity in finishing the basement and finding the renters. There is always, always, always a way to make it work.

@Brandon Wulff I am a realtor and an investor in the Phoenix market. I'm looking to JV with some folks on a few deals in niche markets. Being connected to the baseball world definitely makes yours a niche market. If you want to chat about some options I'm open to it. I have 2 other rentals that I did a JV on with my brother here locally. We can run through specifics if you're up for it on a DM?

@Jerry W. Thanks for the perspective! I realize it’s not a strategy for those nearing the end of their journey, congrats to you on managing 30 units! That is quite a feat!

In Phoenix the median home price is $250k so a large number of units isn’t an option when you’re targeting Class A&B.

I’ve been very deliberate about my approach because it has to fit my lifestyle. These first few years I am certainly going to be relatively vulnerable, even at my level of reserves. The idea of having $50k skin in the game and being able to potentially yield $45-50k per year in equity with 3% appreciation and principle pay down blows my mind. Three years ago I was convinced that I’d work the rest of my life as an engineer to retire with maybe $1M at the age of 65. BP has exploded my mind surrounding the prospects.

@Cory Binsfield I appreciate the encouragement and your perspective on the market. Assuming $5500 PITI, I mentioned I would cover 4 years with 50% occupancy or 50% rent crater. Here is how I came to that:

$5500 Income/Month becomes $2750 Income/Month in either scenario leaving me to cover $2750/month from reserves (I self manage and my properties are fairly new so capex is limited). $2750 * 12 months * 4 years = $132k in reserves to cover either scenario.

As has been mentioned, I find the Phoenix market has changed drastically since the crash. What was once a market highly dependent on construction, is now a market poised for industry. Several noteworthy employers have already migrated here. Obviously there is no crystal ball which can predict how the job market reacts in the event of an unforeseen catastrophic event like the GFC.

@Will Fraser I’ve dabbled with the idea of focusing on a VRBO property to supplement my cash flow issue. I understand the Phoenix market and the Phoenix market alone so out of state investing is a bit out of my wheelhouse. Same concept though, increased cap rate. Thanks for the insight!

@Zachary Beach I could not agree more with your last statement about leverage vs. reserves. I love the idea of hedging against inflation with something like holding my reserves (or a portion thereof) in gold, thank you.

People see 90% leverage and just love to light you up disregarding all other factors. Personally I want to have enough reserves to be as passive as possible about my investments. I know everyone loves the idea of flipping, BRRRR, value add, forced appreciation, etc. My trade off is moving every year. This is what I love about REI, no two situations or sets of goals are the same.

@Joe Splitrock I never said I had $1M in net worth. I think I made it pretty clear that I’m highly leveraged which kind of implies that I have low net worth in these investments. Maybe you just needed to get some criticizing off your chest?!

Following it up by saying I only need a couple months in reserves is literally insane.

People who were highly leveraged with hefty cash positions during the crash did not foreclose unless it was a strategic foreclosure. I think people all too often consider all debt as bad debt. Debt that is insured by hefty cash reserves is still good debt IMHO. The question is, what kind of reserves do I need as an insurance policy to make sure I’m in that same position in the event of a massive disaster?

@Josue Vargas when faced with a choice between theory and experience, I’ll choose experience every time.

Appreciate the well wishes. Good luck to you as well sir.