All Forum Posts by: Allan C.

You both make good points, but like everything else the points are not absolute. Well, I fully align with Marcus that the largest value of REI is equity growth via debt paydown and appreciation. Debt paydown in my markets is 1-2x FCF and appreciation is 3-5x FCF.

I also agree with Joe in minimizing dead equity. However I favor refi as the means of equity stripping instead of selling. So many transaction inefficiencies with selling & buying... and I don't sell because I already have a stable asset that I know well. 

Just hire a 3rd party company that takes care of this for you - worth every penny. In one of my markets assessments are performed every 3 years, and the cost of 3rd party appeals will cost 30% of 1 year savings. 

@Lincoln Waite are you comparing market rents correctly? Do other rentals in the area cover utilities? If not then pass utility costs back to tenants. If so, you'll need to figure out why you're not making money - is it other operating inefficiencies or your debt terms?

don't get separate meters as that cost will be difficult to recover. Look up how to implement RUBS instead. 

@Jeremy H. I don't have a dog in this fight, but I'll side with others on this debate. For any commodity market, costs are passed to consumers when demand balances or outstrips supply. If operating costs increase, then customers/tenants will eat the costs in tight markets. If supply exceeds demand, then the lower cost supplier will set market rates, and high cost supplier will lose money.

for the current case of real estate, most markets have more rental demand than supply. So while current market rents may not reflect higher insurance costs, after 1-2 years when owners realize higher costs and go through renewal cycles, market rents should increase. If you're in a market thats going through a population exodus, then you are correct that it'll be harder to pass through costs  

you are debating macro-economics while ignoring supply and demand fundamentals. 

@V.G Jason I've been wondering where Carlos went as well. Hope he is ok as it seems odd for him to go cold turkey on this forum. 

@Venice Victory not sure if you picked up prior comments about ordinary tax rates. The worst part about being HML or incurring interest income is being taxed at marginal tax rate. With your goal of $40k/mo you're at upper fed bracket, plus any applicable state taxes.

One of the best advantages about REI is tax shielding, thus you can defer taxes to double net annual income if you do so through passive income. Even if you defer your tax liability by 5 years, you can double your net gains after you pay taxes when disposing an asset (cap gains and depreciation recapture). If you achieve 15%+ IRR that means you're doubling your principal in 5 years on any deferred tax obligations.

Also note that cap gains ceiling is 20% and depreciation recapture is 25%. This is significantly less than 40%+ ordinary income rates.

It's not that Stu has tried and failed with this asset class, but he is pointing out that you have very preliminary understanding of investment principles and should look to expand your knowledge before being accountable for OPM. 

the fact that you're confusing mortgage payments with T&I impound is indicative. Cash flow also isn't a monthly metric but rather annual at best.  

But I respect the passion and you seem to have the motivation to keep growing. Advice is for you to do this for another 5+ yrs to go through some real ups and downs to get a better sense of realized cash flows (net turnovers, evictions, capital events, etc). 

I have been sitting on sidelines since 2022 after picking up 3 assets that year, but I'm in buy mode this year. My issue with last few years is sellers were comping to asset valuations in lower interest rate environment.  Now that we've had 12+ months of peak rates, I've seen sellers become more realistic. 

sitting on sidelines wasn't a big deal when equities market grew by 20% each year and treasuries were yielding 5%. 

House care, lawn care, condition of cars, street conditions, absence of pay-day loan shops... basically all the things you look for when determining where to live yourself. 

Do the in-laws have any income currently? Discuss capital gains rates at various income levels with your CPA - their obligation may be lower than you think. Perhaps an installment sale will also achieve what you want if you can keep their income below a rate thrshold. 

if they are sensitive to capital gains, then think through options where you can get it stepped up.