All Forum Posts by: Alan M.

Bay Area = Norcal (Giants, A's, Warriors). LA is 6 hours south.

Still a Boston fan through and through, but do live near Steph Curry and have run into him a few times, so follow the Warriors from that perspective.

Thanks for your comment!

It's worth too much for banks to lend up to that LTV. I was able to get some quotes from banks for about 30-40% LTV. This will be higher as rents increase but there are some long term tenants in there that helped take care of my Mom when she was sick, so I'm not about to jack the rates on them by 30% overnight. I did bump it up 10% this year and will probably do the same next year.In the interim, I will probably take out a loan for 30% LTV. I've looked at doing a deeper renovation but it'd be about $200k per unit and, living across the country 3000 miles away, I don't really want the headache.

I've been approached by one investor that may want to buy them, do STR at about $8,000-10,000 per month per unit (they current rent for about $3800 each, but need updating). I'm debating going back to them and seeing they'll do the renovation, I'd pay them, and then they'd basically sign long-term leases and then sublet them as STR. This would be a good way to get the rents up, maybe to $5000/unit, while still holding onto the property AND getting the renovation done remotely. Thoughts on that approach?

Thanks for your comment. On the topic of syndications, I'm staying away from deals with balloon payments and only selectively doing deals with bridge loans or anything other than medium value-adds. I passed on one deep value add that @Todd Dexheimer had that I probably should have done. The other ones I've done have 10 year fixed rate financing and are done through very conservative operators.

I also don't think there will be a huge downtown, but I do think there will be a 3-5 year period of very slow growth on the appreciation side. This will let rents catch up and also sting those investors (syndicators and others) who were banking on steady appreciation to make their numbers. That'll be a great time to buy...someone with a balloon payment they can't make that has to get out. I'm betting this start hitting the early part of next year.

Yes, was accredited before the inheritance on both income and assets. So syndications are an option I've been doing and will continue to do. I do like the idea of a high yield fund though.

@Zac Ballin what areas of Boston are you referring to? I would be curious

I used to own in Allston but now the appreciation has outpaced the rents and even the same unit wouldn’t cash flow.

@Caleb Heimsoth

Yeah, I posted something similar around selling it holding onto the Brownstone. Now more trying to figure out what to do with it once I sell.

Plan slowly, act quickly :)

The last thing you should do is hold onto the property and do nothing with it - EXCEPT if your plan is to do this for 6-12 months, build up a reserve, and then do something.

If it were me, I'd hedge - do the HELOC, buy one other property, but still leave yourself cash flowing a good amount on both. You get some leverage but don't risk a nightmare ruining your dream scenario.

I recently inherited a big chunk of change. I'd rather not disclose the full amount but I do pretty well in my day job (software sales), and it's about 8x the most I've made in a year. For now a sizable portion of it is locked up in a fully paid off brownstone in Boston, but I expect to sell that within a year or so. About 15% of it is liquid now.

Here's my question: What should I do with it?

Points of consideration:
-My family and I don't need the money or cash flow from real estate we'd use it on right now. We live below our means already, have very little debt (70% equity on our primary home, 1 rental property with about 60% equity), no credit card debt, and bought our cars in cash. 
-I love real estate. I love the idea of having someone else pay our mortgage and gaining wealth through cash flow, appreciation, and debt pay down.
-However, the current real estate market feels super overheated...nothing cash flows except in Detroit, Ohio, or Memphis. Yuck on the appreciation front.
-Cap rates are absurdly low, and there has to be a correction at some point. But interest rates are also crazy low, so even if prices drop, could lock in a low payment.
-I've done a ton of research into multi-family syndications (interviewed 15 of them) and invested in 3 of them so far. Big national syndicators, many on the BP forums.
-I live in the Bay Area and am from Boston...I don't really know other areas of the country aside from some basic knowledge of places like Indianapolis and Phoenix.
-I'd like to retire in 12 years (at the age of 52)

Scenarios I've played with in spreadsheets:
-Highest long-run returns - Investing it all in syndication deals. IRRs of 14-16%, which seem pretty conservative, provide a huge amount of wealth if I just keep re-investing it.
-Taking 1/3 of it and buy 5-6 properties with 50% down and 15 year mortgages. The income alone from those properties would be enough to live on in 15 years and they'd be cash flow neutral for the first year or so. Take another 1/6 and buy a MF here in CA on a 30 year mortgage...cash flow neutral to start, but gets me into the high appreciation market of CA. Take the other 1/2 the money and do syndication deals or invest in the stock market. 
-Do some combination of the above but leave 1/2 to 2/3 of the money in cash and wait for the downturn for some cheap real estate. I love the idea of getting cheap real estate but am I just missing out on gains until the downturn? What if we have low interest rates, low cap rates, etc. for 4-5 more years and I miss out on the appreciation, debt paydown, and cash flow?

I'm sure there is no "right answer" here but would love everyone's input.

I've run some numbers on properties with some basic assumptions (3.4% rent growth, 4.4% appreciation, 25% down) and I'm trying to find the "magic" inflection point for IRR (i.e. the point at which it basically peaks). Anyone have experience with what math lever most influence IRR? I realize it's property specific, but there have to be some rough rules of thumb in terms of what most influences IRR.

I'd let them out of their lease but I'd also look into getting one of these. We got one for our primary residence - the air coming out of the vents was 8 degrees cooler. Now the house gets up to 74 on a 100 degree day vs. the 81 it would get to before. Well worth the cost of the water, which is minimal. https://coolnsave.com/