All Forum Posts by: Burke Ericson

@Shan Vincent

I did it, shot myself in the foot. As long as you get your numbers right, go for it.

@Samuel Iwu

Haha, sad is right lol

You don’t want to be sad. Be patient and don’t be greedy.

I got greedy, I liked the idea of the building and the money it made. It was beautiful and was clearing 3,000 a month! In about 10 minutes visiting that building I was convinced. That’s what got me in trouble, my brain shut down because I fell in love with the property.

Be well

@Mike D'Arrigo

Mike,

My goal is to buy/1031 cash flowing properties cash, taking equity out and buying more.

In the markets where I have been looking in Sacramento, Texas, Alabama and other usual suspects I am seeing stuff that was selling for 25k in 2012 now going for 150k. Some markets are only up 50%, but my inquiry is to see if it is realistic that houses are intrinsically worth 2-5 times what they were worth just over half a decade ago? That’s what I see all over the place, California is actually tame as far as multiples of appreciation.

My larger concern is that the economy may be headed south. While having a trade war may not kill the US or China immediately other economies and stock markets might serve as the first domino. I just look at how high everything is and wonder “how high is this going go?”

Even if these inflated properties to a mid point of half of their current values wouldn’t it be better to hold the cash, pay 30% gains and redeploy after prices normalize?

I mean do you think this is the new normal?

Thanks!

Burke

@Jack Orthman

I really appreciate your response, but I am not entirely clear... do you mean you would just cash out entirely and then reinvest that after paying capital gains?

I have been thinking about it and maybe I can do some 1031 and also take boot so there is a good cash reserve. I am thinking I can buy some stuff free and clear, then take out equity and fund more down payments AFTER the 1031.

@Samuel Iwu

Hey man, I’ll chime in here. I was granted an experience to do a nearly million dollar property exchange last year. I made a list of mistake and lost a lot of money, realness.

I bought 3 buildings free and leveraged 2. The cash cow of all of them would of covered the mortgage of the two leveraged ones and then some, but I missed a huge flaw and sold out of fear. So I made some terrible mistakes, but now I can advise you with simple things that cost as much for me as a college education!

#1 get a thorough inspection or 2.

#2 Do all your numbers and do them again.

# 3 Price in what if’s for each capital expense and vacancy.

#4 negotiate once you get your inspection!

#5 walk away if anything seems wrong with numbers, the building or the neighborhood.

As for your leverage question, if I were you, I would leverage 3 and keep 25k in reserves. I know that seems like a big cushion, but you really don’t know what fresh hell might pop up!

Bonus, since you are not doing a 1031, I’d say do one place at a time. That will help you really focus in the beginning!

@James Pettinelli

I did it last year. I took time out, did a 1031 in a city I had never been to. I have a few suggestions.

Determine management before you buy.

Go and see the property/s, go see them at night too.

Do your numbers and don’t forget to include stuff not listed on the pro-forma, water, yard, salt, snow.

Have someone else look at your numbers.

Get an inspection or two!

Don’t be afraid to walk away!

Good luck!

My family owns a duplex in LA free and clear. Due to rent control, these properties are generating about 20% of what they could, it is bad. The property is in one of the most popular neighborhoods in LA and I think even in their very basic state we could get 800,000 to 950,000 for the two bungalows.

Last year I did a 1031 with a similar property and I purchased 22 units for the price of one house in LA. It was difficult to meet the 45 day time limit, sell a house and get a bunch of others in contract, but I did. I learned a lot but I made some serious mistakes that still haunt me. I am feeling risk adverse ever since, but my sense is things are gonna go sideways with the economy and I feel like we need more income and reserves to weather a storm (which may or may not occur).

Considering that I have this other property I can sell, I am not sure if I should. Or should I sell and sit on the cash, or do another 1031? The property in question is heavily depreciated, but the more I look at rental markets across the country I am starting to see that there may be a massive bubble going on. So the question is, would a 30% tax hit be better than buying rentals and having them lose a huge amount of equity?

For example: locales that make sense to buy rentals in my state have appreciated 100-300% since 2010. If things go to hell, I could invest in these kinds of properties and lose far more than the 30% we would have paid in taxes.

Or if I consider turn key out of state, I am seeing properties that have appreciates 4-5 times their value in just 10 years!

Ultimately my goal is cash flow, but I realize I need to value the assets long term value as well.

Anybody with an opinion or experience would be appreciated!

@Burke Ericson

Also, consider that rent control may become statewide and expanded the SFRs. The laws are ridiculously biased against landlords and you can expect to eat it bad if you have to do an eviction.

@Sam Dennis

It sounds silly but I have many properties I like on Zillow and in the last few months I notice that the majority are having their prices lowered in various CA markets. That indicates to me that the market is changing. It’s simple but I think there is merit to it.

@Sam Dennis

California prices are already falling!