All Forum Posts by: Steve Vaughan

Quote from @Nathan Gesner:

In a really good market, an investor can achieve 1% of the money invested. So $4 million invested would produce $40,000 monthly cash flow.

But there are many variables along the way.

"In a really good market, an investor can achieve 1% of the money invested. So $4 million invested would produce $40,000 monthly cash flow."

 We're getting our $40,000 a month and $40,000 a year mixed up.  Or maybe our 1%/mo vs 1%/yr. 🤔

For me, each $800k of mortgages carried generates $3500/mo or $41,000/yr as an example. These avg 5.8% and truly effort-free.  You can adjust the amounts as needed. If you want $40k/mo, X $800k by 10 basically.  

My managed b&h b-class assets generated about 6% in net cf my past couple years. Self-managed but outsourcing repairs and maintenance 8%, self-managed DIY repairs and maintenance 10%. Per year.  

Your return will largely depend on how you operate it. Having management in place always costed me 12% even with a '7.75%' fee.  So $40,000/mo divided by 6% x 12 would be $8,000,000. 

Technically central WA is Inland NW, not PNW🤔.  But thanks for the mention @Jay Hinrichs 

I'd invest in my backyard, outside the city of Seattle. Too many pro-tenant RCWs. 

The key for me wasn't to invest in the 'best place' but to know a market so well that a deal jumps off the page when it appears. You will recognize it because you will know relative value.  

While a western WA deal might not meet some Midwest cf metric like 1%, it will be above the market cap rate or below FMV of comparibles and give you options.

We best do that in our backyard or own sandbox. 

With good software available so readily I'd say nah, but you have a partnership with non-family.  

That complicates enough I'd consult with an entity/asset protection pro.

I don't hold residential assets in LLCs unless partners got involved. Then I'd probably have an LLC. Not really a tax question as the membership % decides who does, gets and deducts what.

My primary is a 2-family also and I use turbo tax for that and my other rentals.  It's simple but not always easy. 

Have your closing docs out and know what ratio the county assessor applies to land value (ie 300k assessed value, $50k land =1/6).  Turbo tax will prorate your depreciation for you when you input the purchase date but you need to input the land value (1/6 your PP in my example) and what % the rental is of the dwelling.  Mine is 25%, many are 50%. 

A tax pro will not save you time or effort but they may assist if you're unsure. 

I never used a tax pro because extensions are so common.  No way I'll have taxes hanging over my head into October just because they're too busy with others to file on time. 

Quote from @Tiffany Palaskas:

Quote from @Scott Johnson:

@Tiffany Palaskas Do you still live in it now? If not, do you own the primary home you're living in now?

 No, we don't. We moved out end of November. We bought our house in TN with only 5% down. So have another mortgage here. 

I just got a message from the new tenant that moved in in November,  that her and boyfriend are now breaking up and she wants out of the lease. And not sure what the boyfriend plans on doing. They are both on the lease. So now I have a whole different issue to deal with. It wouldn't be that big of an issue if we still lived there, but we dont. I had previously posted the property for rent, showed it and screened the tenants.  

Exactly. This is a sale for me. You already live 12 states away. Mid-term will only compound your mgt headaches. 

Hopefully your one side will vacate properly and clean.  Easier to sell with 1 side show-ready. 

Sell, get the tax savings while you can. Hard to give up such a low mortgage rate, but in the end that's small potatoes compared to potential OOS problems. 

Treasury bills are essentially a short-term loan to the government, 1 year or less, bought through your brokerage acct. Today the yield is around 4.17%. Last year 4.75%. 

Right now money markets and HYSAs are paying at or better than t-bills so  I'd stash my cf in a money market mutual fund. 

My job every month is to operate with as little $ as possible in banks that pay nothing, getting every dollar possible into my money market accts earning 4%+.

I'd pay off any mortgage at 6.5% or higher.  Too far above risk-free HYSA or money market yields. 

Then I'd plug the balance into my plan.  If no other debts to pay off, I'd seek diversity in liquid debt mutual funds like BDCs.  Good yields and not super correlated to stocks or RE. Liquid and stable, unlike PML or syndications.  

Quote from @Shiloh Lundahl:

We all know prices kept going up until mid 2022. 

Having sold 90% in 2022 and gone to equities, I'm more gone out the exit tunnel than on the sidelines, but my prediction then to maybe start sniffing around again in '26 still seems about right to me. 

If buying right, it's always a good time to buy of course. Hopefully those that stayed on the sideline until the 'time is right' will start underwriting specific deals and recognizing path of progress opportunities that offer multiple operational and exit strategies.  

Can these 'tokens' easily beat a yield of 8%?

Anyone can buy a stable senior income fund like FLBL with the click of a mouse and no liquidity or complexity issues.  That's your competition.  

Welcome @La Toya Flowers Butler !  Glad to have you!