All Forum Posts by: Aaron Hollingshead

@Meryl McElwain - Ha!  Wow, what a wild story!  I guess the last resort for me is I just pay the damn money and wait 90 days.  There are worse things in the world I suppose.  That would definitely make me lean towards chasing down my money whenever it's legal to the extent of the law though.  

This has been discussed, but I thought I'd share my experience in Portland, Oregon with my rental property and why I'm trying to get out as quickly as possible to get my money working for me. Just need to vent!

I live out of state, so when my tenants began not paying due to Covid, I asked my property manager if he could help. I was essentially told there was nothing they could do (and he told me I was "lucky" to have received rent in May).  Can't ask them why they aren't paying, can't verify employment, can't do much.

Several weeks later I asked him to follow up and was told "there's not much point.  If they wanted to pay, they would be paying". I asked if they'd adopted a process for contacting tenants who weren't paying and was told no.  Then he went on to inform me that new legislation prevents them for contacting tenants to ask about payments or to suggest payment plans.  

So, I have to wait them out until the 6 month moratorium ends, at which point I need to wait another 6 months before I can demand rent. 

Well fortunately for me (or so I thought), they are on a month-to-month lease.  Not so fast...in Portland, month to month means that they can give me 30 days notice but I have to give them 90 days as well as pay them 4,500 for relocation.  And forget about keeping the deposit as a form of rent collection...This is brutal.

@Account Closed - the rent is, I believe, as high as it can be.  Bedrooms are all small, bathroom off the kitchen and on a busy road so we're attracting young roommates as tenants rather than a family...those factors are dictating our rental amount.  

@Tyler Gibson - there's no way in hell I'd keep this place if it were in NM...I do see your point about the emotional side of this one, I can't deny that.  I do want to move back in 10-15 years at which point I'd like to have a house free and clear, but it wouldn't be this particular house.  

I have 6 doors in New Mexico that net me around 1800 each month in rental income.  They are in an area where I don't expect to see much appreciation, but they do kick me off descent income each month.  

My 7th property is in Portland, Oregon.  On this one, I'm losing approximately 600 each month.  So all in all, I'm taking in around 1200 each month after the NM gains are offset by my OR loss.  If I were to sell the house in Oregon, I'd walk away with around 115,000 and could 1031 exchange into a quad in New Mexico or something like that which would bump my monthly income to more like 3,000.  

My rationale when I bought the Portland house was that I'm from Portland and I was afraid that if I didn't buy something I'd eventually just be priced out of my home city.  That's the main reason I am still considering keeping it is that worry.  I guess the other thing is that when I purchased it, I sort of drew a parallel to stocks - my Portland house was like a growth stock/hoping for appreciation whereas my New Mexico houses are like dividend stocks/income producers.  

What would you do?  Am I crazy to hold onto it or should I just keep it?

@Theresa Harris and @Whitney Hutten - maybe you didn't see that it's a 20 year 6% loan. I can't get conventional lending on this place for a few reasons - ergo not 400 a month but around 680 a month mortgage...PITI is around 150 a month. Whitney, you're probably right about the net out after all of those expenses...that's why I'm asking the question...not sure the right call! Thanks for the input

@Kris L. Thanks for the reply! I’m not sure what you’re referring to but I’d be in the back by 300-350 a month. I have a manager that charges around 10 percent. It’s a tough call!

This latest flip of mine has gone over budget.  At the moment, it looks like I can sell for a profit of around 7k-12k, or if I refinance, I recon I'd have to come out of pocket for 5k.  

Purchase: 50k

All in purchase and repairs: 101k

Projected sale price 120-123k

Market Rent - 1,200

Monthly payments (6%, 20 year loan + insurance + taxes) - 830

So, my monthly plus/minus would be around 350 dollars (granted, that's assuming perfect conditions, no repairs, vacancy, etc)

I don't need the cash flow right now, so I could live with the above scenario, although I know it's not ideal.  If I sell, 10k is nothing to scoff at, but it's just not what I'm used to returning.  I've also considered starting to rent my places for a year or two to reduce my capital gains taxes so maybe I could gain a bit more equity that way.  What would you do in this situation?

So, there's an idea I've been toying with for a few months now.  I know @Brandon Turner loves to talk about funnels...but what about this idea of a mountain or a peak or a tipping point?  I pride myself on making my own decisions with my money so while I know that conventional wisdom says I shouldn't pay down mortgages, I just don't necessarily buy that!  It doesn't account for different goals...for instance, paying off rentals would provide stability, peace of mind, higher cashflow, something tangible to pass on when I die, and a myriad of other benefits (yes, I know, with a myriad of drawbacks too).  

So here's my latest hypothesis...there must be a peak or a tipping point where it makes sense to pay them off.  For example, I'm 36 now and have a net worth of around 350,000 with 800,000 worth of real estate.  Last year I made around 15k in rental income.  If I paid off my rentals in 5 years (which I think I could do), I'd be netting around 50k a year...might not make sense now.  But, say I spent 3-4 years growing that inventory to more lieke 1.5-2 million, then spent 6-7 years paying it off (10 years total instead of 5)...then I'd be in a position where I was making, hypothetically of course, more like 100k a year and could go work at starbucks (something I would actually love to do, lol) and just enjoy the rest of my life...

So in sum, should this real estate game be looked at from two perspectives - accumulation and pay-down?  I feel like so many people are just stratified on either end of full on leverage or pay all for cash, and I wonder if this is an alternative people should consider?  

What are you working towards?  

During my 5 years in real estate I've flipped 8 houses and acquired 7 rentals while working overseas.  In my account, it's been a good run.  The problem is I've had trouble figuring out my vision for where I'm headed.  It's not that I've got shiny object syndrome, on the contrary, I have found my groove with flips and rentals.  But I'm not sure how big I want to grow and I wonder if having a mission or a goal would help me.  

This all came from me seriously considering paying off 6 of my 7 houses which would take my cash flow from around 15,000 a year currently to about 50,000.  I know that conventional wisdom (and 99.9% of BPers) love the value of leverage and might call me crazy but I just keep wondering about the value that reducing my debt would bring.  

Additionally, imagine this.  Right now I have a net worth of around 350,000.  If I pay these off in 5 years, that number should be closer to to 800,000...Sure, I could leverage and hope to get more properties, but on the flip side, I might be able to position myself to be close to early retirement by generating this large amount of yearly income.  

I have tried to look up stories online of people blogging about WHY they paid off multiple investment properties off early and sharing their experience, but all I come across are models and opinions (mostly against it).  I'd love to hear from somebody who has taken this route.  

Have any of you paid your properties off with a long-term strategy, goals, mission, etc?  Thanks! 

@Phillip Rosin I have a guy I use for all of my projects.  For this one, I just said "can you go tell me what makes sense for that space" and he sent me a sketch back with this layout.  He gets cabinets/countertops from a wholesale dealer which keeps costs low.  I'd investigate if a local investor can recommend somebody like this to you - that's how I found him ages ago and it's been a great partnership since.