All Forum Posts by: Dan K.

My father past away recently and I started managing my widowed mother's estate. I just finished their taxes with their CPA and I can say from first hand knowledge that real estate is the most effective way for immigrants to obtain the American dream.

My parents immigrated to California in their 20's from Asia with no money, and could not speak English. My father studied to become a plumber and my mother worked in a dry cleaning shop. They purchased their first home in 1985 after saving 10 years for a down payment. Every 4-5 years they would use the equity in their existing home to get a HELOC/refinance mortgage to purchase another house. We ended up moving several times around Southern California while growing up as my parents employed what we now call the BRRR method. They did this a couple of times after I left for college and in total amassed a total of 6 rental units in California. They self managed these single family homes but also used a property management company for the ones that were further away. They did this while they continued to work in plumbing and dry cleaning until they retired at age 62. They never took foodstamps or government aid. They were members of a Christian church when my father was alive.

Their real estate portoflio to include their primary home is worth 6.2 million, and their passive income rental brings in over $240,000/year. After accounting for social security and other investment income like IRA/Lifeinsurance/Stocks (of which was made possible because of real estate cash flow) my mother would be classified as part of the1% and earns a corrsponding Passive income.  They shopped at Ross/Marshalls even when they were multimillionaires ,and you would never know how wealthy they were if you saw them walking by. They were like that couple in the "The Millionaire Next Door" book by T.Stanley. I'm thankful that my parents were able to live the American dream before my father passed away, and that my mother has a secure financial future during her remaining years.

Its difficult to get ahead even if you can speak English and are educated but how much more so if you are a poor immigrant. For those starting out in real estate who wonder if real estate really works, I'm a witness who can attest that it does.  It equalizes  the playing field allows anyone with grit a real  shot at the American dream. 

Here's to your success!

@Matthew Stallings

I own STR in Cali a Texas. Cash flow is great on STR however I did suffer some setbacks when covid hit but the market is bouncing back.
   However the time it takes to manage an STR is probably 5-6 x more than what it takes to manage a passive rental property. 
when you factor in time value of money the ideal way is to own an STR with high appreciation. 
   Also if you average stay on an STR is less than 8 days , then you will be paying higher taxes than a traditional rental so you have to factor that in. 

I’m trying to refinance 4 investment properties. ( Texas , California , Kansas ). 
these  are all 4plex propertie that are rentals. 

I did a refinance 15 months ago on these properties and my rates are little high ( 5.375 % ). I have an 800 credit score. 
Prices have risen so I’m sure my equity position is more than last year. 

Looking for a lender who can do ALL 4 properties at the same time.  Or around the same time. 
hoping to get rates below 4% if that’s possible. 

ive gotten quotes from Aim home loans for around 3.75% for a 30 year for my properties.

Wondering if there were other options. 

I allow pets in my rentals.  I have size/breed limitations  (under 50 lbs) as outlined by my insurance and require a pet deposit. I have pets and I have no problems with people who want to have one themselves. I had this one female millennial who moved in 6 weeks ago and we have had no issues so far. Today, I received an email from her showing me she was approved for an emotional support animal and had an ESA letter. She cited "Covid stressors"  Now  she is planning to move in her 95 lb dog into her apartment and doesn't want to pay the pet deposit or pet rent.  I have a tenant next door with little children and they are going to be very upset with such a massive dog moving in.  This lady obviously planned the whole thing from the beginning.   Do I have any recourse? 

@Shiloh Lundahl

Really appreciate your insight into your growth as a REI. I was pro for a awhile but then stopped as I focused on growing my business. I stepped away from BP for 2-3 years.

I think I hit a plateau. I got to 50 doors but I'm having difficulty getting to the next level. Part of the reason is that for every door it requires more of my time and I don't have any more time to put into REI.

Looking to "scale " without putting in more time as I already put it plenty and because that's what my family is telling me. They say I'm already putting too much time in REI.

I think I need mastermind group.

Any suggestions ?

Thanks

@Mike D'Arrigo. Thanks for your response.  Since you live in Cali you’ve seen first hand what appreciation does. 
my point is that as long as you have a cash flow neutral or slightly positive property in California the equity growth is hard to match. Even during the worst downturn in 2008, while home prices plummeted , rents stayed about the same and eventually rose so I was able to hold onto that property without issues. 

Example :  paid for property for $500,000 that broke even in 2005 with rents , at the height of the real estate market. I definitely over paid. Rent was $2600 but it paid for all expenses and netted me $40 a month.i consider this cash flow neutral. market crashed in 2008 but I contiene to hold the property. Home price dropped by 40% however rents never dropped. In fact they continued to go up. 

Property is now worth 1million despite going through the worst recession ever. 
rents are not $4500 btw.  

I would not be able to find any deals like this in Kansas or Indi and I own there personally myself as well.

An investor can speculate as long as the cashflow is stable in my opinion. 

So many pundits told investors to stay out of cyclical markets after 2008 and I ( and many others )listened to them and avoided California and coastal markets.  Investors investors did well when they zigged when others zagged or basically when they ignored the pundits of avoiding. 

@Alex Olson. Agree that it depends on ones cash position.i see that your from KC.  I purchased a couple properties in Johnston county. Purchased for $400,000 in 2014 and it’s likely worth $660,000. Cash flowed well and I have no complaints and I still own it. 55% appreciation in 6 years. 

However looking back i would have done better having purchased in a higher equity market like California. As long as It was cash flow neutral , the same property would have returned a lot higher equity. 

What I’m personally finding out  from experience is that Cashflow , although highly regarded , is slightly over rated. Conversely appreciation ( or “gambling “ ) is looked down on more than it should be. 
perhaps that’s the slant on this forum or the cash flow people are more vocal. 

Thanks for your response. 

@Account Closed California is not landlord friendly and a higher tax state.   Aside from that why is California bad?

I've invested in both Cash flow markets and equity returns markets for the last 15 years.  The cash flow markets were in Kansas and Texas. The equity markets were in California.  While the cash flow markets (Texas and Kansas) produced solid returns with good cash flow, the equity growth were modest. For example, homes that I purchased in 2013-2014 have appreciated 50-60% Texas. Respectable at best.   Compared to California homes which appreciated closer to 80% during this same time period.   The big different is that homes in California were about 5X the cost of homes in Texas and so on the front end they seemed much more risky.  Investing in 1 California home of $750,000 created  more wealth than buying 5 Texas homes for $150,000.  

Cash flow properties are safer but I don't think investing in equity growth is "gambling" as many people state in REI forums. I think that if you can break even, investing in equity rich areas like the coastal areas might be the smarter long term play. Cash flow properties give you money to live on, but equity growth is what will really accelerate your wealth. I realize there are players on this forum who have gotten rich on just Cashflow investments alone. However, for the medium size investor, investing on equity growth might be the smarter long term bet. Your thoughts?