All Forum Posts by: Allan C.

@Justin Cox leave it all in one account to simplify the administrative burden. However, I’m a believer of tracking everything on a spreadsheet, including liabilities (ie. taxes, etc).

While a spreadsheet (or software) complicates matters, it helps you run your business like a business. I track expenditures by category and over the years monitor how I’m improving efficiency.

Like all businesses, your goal is to reduce opex and grow margin. You can’t efficiently improve what you aren’t stewarding…. operative word efficient.

@Eagle Yeh cash flow is a function of risk and effort - higher risk and higher effort markets yield higher cash flow. The risk can be in the form of low appreciation potential, crime, lower quality tenants, etc.

Markets with strong fundamentals will attract investors, thus people will compete and drive returns down. So if you’re looking for a 1% market, it means you’re looking for something that requires more work or has more risk. Nothing wrong with it, but just need to set expectations accordingly.

@Blake Ramsey evaluating markets is the right approach, but i believe it’s less about the numbers but the attributes. Markets are efficient, thus returns will match investor sentiment. These sentiments reflect factors such as appreciation potential, regulatory risk, business risk, effort and more…

The question you should ask yourself is how much effort do you want to put in and how much risk do you want to take on. Higher returns mean more effort and/or more risk - fact.You'll also need to look at multiple metrics such as cash on cash, IRR, size of down payment, capital efficiency, diversification.

If you’re early in your career you’ll have more appetite and ability to take on risk and effort to build equity. Over time you may consider optimizing your portfolio or even repositioning. As you choose your market it would be good to consider long term goals. It’s hard to think far out today, but it can save you some headaches down the line. You’re asking the right questions.

@Ethan Miller cash flow is a good metric, but those who only know how to calculate CF are usually less sophisticated investors. The end goal is compounded annual returns (ie IRR), and that is a metric, though imperfect, that can compare different strategies.

In high cost markets you will more often rely on rent growth to eventually cash flow if you are not doing value-add. Think about it this way, if expenses grow 3% while rent grows 3%, you will have increasing NOI over time since expenses are a fraction of gross rent (say 30-50%).

Inflation is real, so you’ll need to account for it regardless what business you are in. Increasing rent is not a binary question of ethics.

@Abhishek Maloo your real costs are loan interest and incremental insurance - both are fairly insignificant (even in CA). Staging is your decision and likely not liquidated damages you can recover.

The big question is sale price difference. Just get the property listed asap using prior photos with staging and don't restage. Hopefully you can get another buyer at comparable price and you can keep your focus away from the EMD distraction.

@Abhishek Maloo what exactly is your loss? Get your house listed again and under contract with a new buyer - at that time you can determine whether you have a loss, if at all.

@Natalie Kolodij what is the best approach for a multi-partner situation when not running through a LLC? Should all partners get the title deeded to a TIC so they can deduct mortgage and tax expenses properly? Let's assume that one partner has the loan under individual name but all partners splitting expense obligations.

@Anthony Bednarek be cautious partnering with another person. It’s hard enough making a 2 person partnership work, and adding more people complicates matters, especially if you are all very green to the business world.

I’d you decide to bring on a new partner, I suggest focusing on very short cycle deals (ie exit within a few years). Everyone’s motivations and personal situation changes over time, and that will cause issues for long term partnerships.

Also ensure you draft up a robust Operating Agreement.

@Marco Antonio Hernandez separate LLCs for each property is overkill in most scenarios, and you can search the forum for plenty of guidance on this topic. It all comes down to risk vs effort and cost.

Ask yourself how much equity is inside each asset (ie, not the value of the property, but your equity in the property), and what % of your net worth does it represent. Then do research on how much effort and cost is required to maintain a LLC (bank accounts, accountants, SOC fees, lender limitations, insurance premiums, interest rate differences, etc).

It’s more efficient for most ppl to get umbrella insurance and focus on operating the business with integrity.

@Angel Glancy $400 is not worth the time and effort to pursue. There are some lessons learned here with the acquisition process, but suggest to focus your energy on forward activities.