All Forum Posts by: Account Closed

I think everyone should think of  risk, cash flow needs, growth needs and come up with an asset allocation that makes sense to them. That should drive the decision on where to invest. Is this $1M your life savings? Or 10 % of your net worth? How is the rest of your portfolio allocated? Everyone here will pitch their favorite investment and honestly those answers are worth the electrons they are printed on without looking at the bigger picture. Your long term success is much more likely to depend on this rather than scattershot investment ideas.

I dont think its fair to collect application fees and background check everyone who applies. I personally dont ask for application fee and credit check until we both have agreed that the tenants will get the property assuming the credit checks out (they know the requirements). It pisses people off when they pay money, are qualified and get denied for whatever reasons. I think that's pretty understandable.

So my process is 1. Phone Screen, 2 Showing. 3. If the tenant wants the home and if I find them suitable (no red flags in the showing) then I ask for the application fee. 4. If it clears, take a deposit and sign lease.

I do keep the house on the market and keep showing until I get a deposit to protect from tenants changing their minds (this has happened). But I dont process more than one paid application at a time.

@Ethan Griffel My A class tenants manage minor repairs and one of them even painted my house ( it needed it) for cost of materials alone. I live abroad and dont have a PM so that is the easiest for me. They always get pre.approval unless its an emergency. Works if you are remote like I am with a big time difference.

I do agree with you in that clearly your capital investment should make a decent cash profit after paying all expenses. However a paid for rental does that more easily than a highly leveraged one. And a paid off property has the higher cashflow (but lower ROC). If it is truly income to live on that you are searching for, then paid off rentals beat leveraged rentals for an equal amount of cash flow (but with lower ROC). 

Joe completely ignores the concept of a balance sheet. The cost of an airplane is accounted for by depreciating it over its lifetime. And it maintains value on the balance sheet until it depreciates to zero (after which it still has actual residual value). But yes, payback period is considered by business for any investment and I stated that myself.

Any business runs on profit/loss income statement (very important) but also balance sheet (assets/liabilities). In Joes model, there is infinite leverage and therefore unlimited liability. The house is always an asset on your balance sheet and can be converted to its cash value by sale. So it is not as useless as Joe would have you believe. Companies also use strong balance sheets to raise debt and equity and acquisitions. 

Dang Leslie, but everyone says I can be a millionaire without a dime in my pocket doing wholesaling and using "OPM" if only Id just go do it. Its supposed to be EASY dammit!

Have you ever had any work done in your home? Like a kitchen remodel maybe? How much supervision and planning did that take? And you were there all the time. Now multiply that by 10, add hundreds of miles of distance and you not being there. Add to that a crazy environment for finding contractors, inflated prices on all your hardware, trusting your contractor to do the right thing when nobody is looking, and you can judge your own chances of making any money on this deal. Plus with just $80K where is the rehab funds coming from? Hard money? Yet another huge risk.

So you are saying that when United airlines buys a 300M dollar aircraft, they only make a profit when profit on that plane alone exceeds 300M? That is not how business accounting is done. You depreciate the cost over the life of the asset. Except in housing the value of the asset actually can increase over time. What you are talking about is payback time which is less important if the asset holds or increases its value over time. For a truly depreciating asset like a car or truck or plane it makes sense.

Cash flow on leveraged C class properties is a myth. Cash flow on a paid of A class property is steady as she goes. When your cash flow is 200/month any repair throws it off. When it is 2000 per month, you easily absorb those things. Now can you make money on the C class rentals? Maybe. I operated a bunch of them over several years and the mortgage pay down plus appreciation made a tidy return. But I wouldn't depend on the cash flow to buy groceries.

Having said that, on a large enough portfolio you should be able to average things out to a more predictable cash flow. But thats with 10-20 SFRs at least.

Im roughly 30% Equities, 30% owned real estate, 30% Syndications/Private Funds and 10% Private loans. Plus some cash. Never could get comfortable with crypto due to its inherent value of zero.  But same concept. Diversify and relax!