Donald Trump Changed My Paradigm!!

[Michael Swan]

I am posting this here as GAME CHANGER for me.  It is better placed here in success stories, instead of elsewhere because If I can do this, you can too! 

I mean this from the bottom of my heart. I read about Donald Trump and his then wife and Mother of Ivanka Trump about how the American Dream is alive and well.  It blew my mind!!

I was experiencing an economic crisis of sorts and was learning my entire economic ladder was clearly leaning against the wrong building!!

After I read that Donald Trump bought low in Manhatten and visualized the possibilities and he realized the geographic realities of limited horizontal building prospects and the downturn in the 70's, he was off to the races, I decided to buy low cost condos in San Diego.

If you are just starting out or just have a few investment properties or have experienced a wake up call that your economic ladder is leaning on the wrong building, then this is written for you!!

In a period of two years, I purchased, with long term debt 10 rental condos. The leveraged cash flow was good $350-$600 tax deferred cash flow was good. I was getting $3500-$4000.00 a month. Then guess what happened? Appreciation happened!!

I learned living in pricey San Diego for 75% of being in this earth that our RE here appreciated exponentially in San Diego and then just the opposite occurs and all that I not yet realized phantom equity is lost in the next downturn.

Sooooooo, I educated myself, made connections, and started 1031 exchanging this pricey San Diego Real Estate in 2016 for Apartment complexes in an area of the United States that you would never expect.

That area was North East Cleveland. In 2015, it was ranked as one of the top areas in the U.S. for health care jobs. Plus, it was a great cash flowing area as evidenced by 8 single family I owned there for well under $30,000 each, that cash flowed $400.00 each, after all expenses, including $150.00 reserves per month for cap ex type stuff.

Sooooo, now I have $10,000 tax deferred cash flow per month and 5.5 million in property and 2.5 million in Equity and 87 front doors!!!

If you change the way you look at things, the things you look at change right before your eyes!!

Swanny

[Michael Swan]

Hi @Brian Lacey

I still think that any place with lower cost of living and lots of health care or medical jobs is a recipe for success in 2017.  It is just icing on the cake that in 2016 the Cavs won the NBA Championship and the Indians went to the World Series and lost in a real nail biter.  Plus, the Republican Convention was held in Cleveland too.  What I also noticed about Cleveland from the Summer of 2015 was that people in the suburbs didn't see the potential right in front of their eyes.  Some of the single family I was purchasing in 2014 and 2015 for $30,000 all in, after rehab were $90,000 in 2002, 2003, and 2004.  These people I spoke to in these suburbs were hit hard and believed it was not a good idea to buy.  Too many people lost their homes and did not feel there would be a recovery.  I already went through this in San Diego.  Right now, in about 2 years we have had one vacancy for a few months and then  filled that vacancy.  In our apartments and single family we currently have 3 vacancies out of 87 front doors.  That is about 3.5% vacancy rate in North East Ohio.

In 2011, that's what people told me about investing in the 10 condos in San Diego.  They said it was risky, but I was investing with 20-25% down at really low prices, that cash flowed handsomely. This show some similarities to what I see in Cleveland.  Cleveland is not a sexy play etc...   Again, where are the health care or medical jobs and at the same time low cost of living?

Right now I am investing in North East Ohio.  It is a sleepy area that is beginning to wake up.  My single family are now worth 30-35% more than when I purchased them at the end of 2014 and 2015 in this area. Plus, they cash flow smartly.  Buy based on the combo of cash flow and abundant health care jobs is a great start.  If some of those manufacturing jobs start to come back, it could be huge in Ohio.  

The city of Cleveland is starting to see some growth too and they have been improving the airport.  It used to have a dungeon feel to it.  Another benefit about where I am investing is that Lake Erie is to the north.  Obviously you can't build in the lake.  Another potential bright spot is that with a natural barrier to construction like Lake Erie, we should see some natural appreciation.

The only downfall I see is that the buildings are rather old and the population growth is nonexistent in most suburbs where I invest.  Now if some good factory or energy type jobs start to appear, due to this area being a good value for big companies to operate, that could be a kicker.  With the new administration and leadership with much less regulation it could happen.  I will be watching this very closely in the next few years.  I do still see some foreclosure and short sales in North East Ohio. Although, there are a lot less than 2014 and 2015.  In San Diego foreclosure and short sales are literally not happening right now.

I don't have a crystal ball.  However, I have a solid team in North East Ohio and as long as we can push rents up slowly and consistently, while maintaining high occupancy rates, I will continue my efforts in this area. 3-5 years from now, that may be a far different story.

Just remember, people did not think we would ever recover here in sunny San Diego and really though me investing low here in San Diego was too risky.  We were only thinking about Cash Flow!!  What do you know.  Appreciation happened and my little 3 br 1 bath house 1040 square feet in San Diego is now worth approximately $520,000 in a clearly middle class neighborhood.  My house is worth more now than in the last RE bubble.  Only a matter of time again until this new bubble bursts.  I have over $200,000 equity in one personal residence and my partner has $500,000 equity in her personal residence and we have one more rental property left  here in San Diego that has $175,000 equity.  We used to have another $1,600,000.00 equity here in San Diego that we 1031 exchanged for Apartment complexes in North East Ohio.  Geographic diversification is a good thing with RE too. I have seen the value of my house tumble all the way to $275,000 when the last bubble burst and it is now valued at $520,000.

Swanny