All Forum Posts by: Alan Grobmeier

@Jay Hinrichs

Wait a minute here!  I am a FORMER engineer, recently retired.  And I STILL have a ways to go to get my first social security check at 62.  ;-)  

I have 8 SFR, all in A- to A areas. I have made good enough rents/cashflow to 'retire' and live off rents and my wife's income/job. I don't work much, maybe 30 minutes a MONTH. I used nothing but systems to get to this point as I had a successful and stressful career where I travelled a ton. Both domestically and internationally. I get my rent checks via Chase QuickPay, home warranties on ALL properties so I am not the first line of defense. I screen all my tenants EXTREMELY well and do my own property management. After all, NO ONE will watch my 'babies' like I will! My average stay is 3-5 years. One of my tenants has been with me since the 'beginning', 9+ years ago.

We ALL are not the same.  ;-)  I would rather overpay for a pretty house vs getting into the C-F 'business'.  

I will give my seller financed deal:

"Pretty house".  $235k, 5% interest amortized over 30 years, balloon in 8 years. 20% down.  I had been looking for seller carry as I was closing in the too many loans situation.  :-(  

I bought the property, renovated it the way I wanted for about $5,000.

I have since refinanced the property, balancing my portfolio.  Cash flow is good.  Due to location I never have a vacancy.  It's a hold 'forever' property.

In hindsight I probably overpaid for the property by $10,000.  But appreciation has made it worth much more.  

I'm looking for more seller financed deals to control more property long term.  The biggest 'minus' is that most seller financed deals are for 'junk' properties (IMHO). 

@Francesco Barbati

Your biggest problem is finding out what the seller needs.  Does he/she need ALL his money today (which is usually the case)?  Or do they just want to be out from under the responsibility?  Do they want/need interest income?  

I have had a relatively good experience in my one seller financed buy.  I buy & hold 'pretty houses', so getting a seller financed deal was like finding a diamond.  It literally took me 9 months to find this deal.   

The 'plus':  No banks as I have too many loans.  Much lower than 20% down.  No loan origination fees or BS fees other than 'normal' closing.

The minus:  Probably overpaid for the property by 3-5%.  Appreciation, however, has wiped that 'loss' out a long time ago.  :-)

The same seller just came back to me recently on a property they owner financed.  The 'minus' is that the owner didn't take care of the property.  :-(  The deal was badly structured.  The bottom line is that it will cost about $60k to 'fix' what is wrong.  When added to the 'asking' price, the price of the property is way over market.  Someone is going to have to take a 'haircut'.  It will be interesting to see who it is.  

I recently 'retired'. 8 SFR and our own property. My wife still works. We needed the W2 income to get to where we are today. Banks don't like people owning a bunch of rental property. :-( They also don't like to count like I do. They discount your rent received by 30%, which looks like 'breakeven' (at best) to them. They don't seem to understand that my places have less than 1% vacancy. :-(

I figure I can go creative/owner finance if I see something I want or go to other markets.  Presently I am in PHX and San Diego.  

@Lane Kawaoka

I created a bunch of my own systems to grow my business while working as an engineer for Cisco Systems.  Everything had to be 'automatic' for me to continue my career.  I was/am involved.  Just not daily.  ;-)

For me It all worked out.  Today I am retired.  My former peers are still working.

@Michael Lam

I think you have to go into any 2017 long term hold property with the idea that you will probably lose money in the short term.  If you don't have the stomach (and the cash reserves), I'd stay out until I see prices/values fall.  

But the thing to think about is that the best time to buy real estate was 20 years ago.  The second best time is today.  ;-)

Even if you bought at the very top of the market in 2008, you could still be making some good money.  It really depends on the situation.  What screwed most people was greed without fear.  You need a good dose of both.  ;-)  Leverage was out of control.  And no one saw an end in sight.  Then, oooooops.   

My advice, fwiw, is don't buy all your properties in any one year.  Get rich/wealthy slowly.  After all, you have your whole life to create this, but you can make multiple mistakes and mess it up.

@Kevin Byrne

I didn't realize this was a newer property.  Most of the TK properties I have seen are older.  Obviously you will do better than if you purchased an older place.

It sounds like a pretty solid situation.

Good luck!

I think it depends on what you are trying to do.  I think that leverage is bad right now.  Margins are thin due to higher prices.  But if you were to come in with 50 percent down or all cash, and you are going for a long term buy and hold, it doesn't really matter.

After all when was the best time to buy real estate?  20 years ago.  Second best time?  Today  ;-)

I agree with Jonathan Towell.  Although you may eventually get that type of air bnb money, it will probably take you 2+ years.

@Greg Harriman

Many of us end up successful by 'accident'.  I can attest to my own mistakes not hurting me.

I have 9 SFRs, 6 of which cash flow $500 or more per month, 1 @ $300, & 2 @ 'break even'.  The 'bottom 3' are tying up about 300k in equity and not in good areas like the 'top 6'.  Not a worthwhile deal, to say the least. My goal is to sell them to my renters in the next year and buy a different place using all cash from the sales.  My cash flow would be +1200 a month and cash reserves increased.  By selling them to my renters I can dodge the real estate agents commission fees. ;-)

@Hadar Orkibi

Based on the numbers above, It looks like 27k down for a $329 per month positive cash flow after expenses.  About $3800 a year return.

This does not, however, speak to a lot of the problems with this model.  Memphis is among the leaders in the United States with the highest vacancy rates.  Some of the others are in North Carolina (don't remember which cities, but there are 2 or 3 in NC).  I think Indianapolis is another, but don't quote me.  This can be problematic in attracting future tenants if the present tenant does not stay.

Btw, many of these TK companies are in these high vacancy cities.  After all, you have to be able to get property on the cheap to make this model work.  ;-)

From my own research, most of the TK properties at B or C class properties that are older than 20 or 30 years.  That's what is required for that type of return that is stated.  But older properties also have higher expenses and maintenance issues.  Some of which can be large ticket items that wipe out a years worth (or more) of profit.  Older properties in these low cost areas won't appreciate much when compared to better quality properties in better neighborhoods in the same city.

A loss of your renter could turn disastrous.  It's not a -329 off the $3800 gain, but about $1000 a month.  If your property is being turned yearly, you will lose about another $1000 for the real estate agent to place a new tenant in addition to cost of getting the property back to rentable condition.

Personally, I think it is a safe bet that an investor would be lucky to clear $2000.  And I believe that would be a 'good' year.  I think many other years would be 'alligator-like' with high maintenance costs.

But these TK companies are filling the need of getting people into real estate investing.  I just don't think it will be a good experience for most over the long term (5+ years).