All Forum Posts by: Ashley C.

@Bobby Balentine

Hi Bobby and congrats! I recommend staggering your lease lengths so you don't suddenly lose a whole bunch of tenants in 12 months. For example, I would offer some a 3 months, some 6-month, some 9, and some a year. If anyone comes back to you and says that they're not interested in whatever term you've offered them, ask them if one of the other terms is works better and let them have it. This way the tenant feels like they have some say in the matter and they're not completely powerless with the change in ownership. From these folks I would require a modest initial rent increase. Be upfront with them that you're moving the property toward one year lease terms and market rent eventually. This way you get an immediate small bump in NOI, your value goes up, and you stay as occupied as possible.

Some people aren't going to want any change at all and they'll be ticked off and leave in 30 days. Most excellent. Now you start testing higher rents on these vacancies. For example $10 higher. If that works then $20 higher for the next applicant. Keep moving it up until you have trouble renting that last vacant apartment. Then you know you need to ease back just a little bit, and you've now found where the market will accept your new rent rate.

If you add property improvements to variable lease terms and modest rent increases for legacy tenants, you might find yourself with grateful folks who'll agree to stay on even as you raise their rent again. Your picture could look very different in a year. Best of luck to you.

@ThomasRoy Penland

"Major companies play this game every day to protect themselves. If you want to play with the big kids, play the same games."

Agreed! Along the same lines, set up systems and tools today as if you were playing in the bigs, at least to the best extent possible. You'll gain traction and leverage to support future growth.

@Alyssa Strom

Thanks for your golden nugget about credit score screening being disallowed! Can I ask how you stay on top of changes like that? Are you proactively searching, have a keyword alert, signed up for municipal updates, is the word making the rounds of the local REIA etc? I'd like to fold something like this into my systems.

Just now reading through the PDF for Podcast 200: "A Step By Step Guide to Buying Your First Real Estate Investment." Under #6 Set Your Goals, I found "...How do you see your real estate portfolio looking. What are the quantifiers you need to hit to have a "successful" property. Do you want a certain cash on cash return, or a certain ROI, or a certain amount of passive income each month. Figure out what you want."

I understand cash flow as passive income to replace a 9-5 job, but I don't yet see how COC or ROI can be used to my advantage. I'm sure there's a combination of life stage, where you are in your investment career, tolerance of risk, growth vs. asset protection. Any insight would be great. If you have any recommendations for RE finance/math books that'd be fantastic. I have a lot of learning to do!

@Michael Kinsella

Back at you Michael! Thanks for pointing out the "rate and term" refi as opposed to the "cash out refi." Seems like there's lots of volume around cash out refis, and who wouldn't want the cash in pocket? I'm pretty conservative, so my plans will probably be some mix of paying down debt and taking out cash. How to assess what that mix should be is a question for another day. Take care.

Hi all! I'm diving deep into my education and realize I've got a mental block in regards to wealth. Mindset. I've don't feel low income, but I guess that's where I am - my freedom number is $2k/month. My financial set point is very low, I'm working on getting a bigger vision, but I'm struggling. Because, long term standard of living and, well, math. I'm trying to drill it into my head that it doesn't take thousands of doors and decades of time to significantly change your financial future. I mean, I know that's true in general but for me specifically, meh. Mindset, right? Here's my attempt at what it would take to have $1M net worth from real estate. I'm fiscally conservative. Am I working the numbers right?

Assumptions: 50/50 partner who gets half of everything; 75% leveraged; 25% equity; 20-unit mom and pops.

PORTFOLIO EQUITY

per 1M asset = $250K equity or $125K equity/partner; need $8M portfolio to have $1M equity stake.

$ TAKEN AT REFI

Purchase: $650/door/20 doors; GROSS $156K; expenses 55% leaves $70,200 NOI / 8% cap = $877,500

Forced appreciation: $700/door/20 doors GROSS $168K; expenses 55% leaves 75,600 NOI / 8% cap = $945,000

Take out $67,500 at refi; $33,750 per partner x 9 buildings = $303,750

($1M assets = @ 9 buildings purchased at $877,500)

CASH FLOW $100/DOOR FOR 180 DOORS (20 doors/9 bldgs)

$100/door/180 doors x 12 months = $216K or $108K/partner per year

TLDR: today I made a smart choice. I committed to learning what works for the investors who inspire me and copy, copy, copy. What decisions have you made?

The ability to make decisions quickly and move forward is a key factor in successful RE investing. This is a real issue for me - my screen name should be "I can complicate anything." I'd like to share my decision today to model myself after successful investors and do what they (and their experience) say works. Now, that's been on my jumbled list of "things I really ought to be doing" but after last night I've made the explicit decision to commit to this path. And here's why.

I started analyzing deals yesterday following Michael Blank's 10-minute analyzer, data from LoopNet, and an Excel spreadsheet. Gotta say I was knocked back a little by how far apart my valuations were from broker/seller valuations. In the heat of the moment I thought I'd misunderstood something and I doubted my numbers, especially % expenses. A few of the listings included proforma market rents with significant opportunity to raise rent; these properties were under pending contract. I started churning a little bit... my numbers are way off, other investors are already on these deals, clearly I can't compete, yada yada yada. What did these obviously wise and well funded investors (why the heck did I assume that? Blame it on 2 am lol) know that I didn't?

So naturally I stopped focusing on learning deal analysis, zipped over to the forums and found plenty of very new investors just like me worrying about how to crank their expense calculations down to 25%. And in every single post, I found seasoned investors saying "Whoa now Sparky, you've got to stick to 50-55% and here's why (fill in rock solid explanations here...)." And after a fevered hour or two of clicking links, I came back to where I was when I started. 

Long and short of it: Stick to what works. It's a struggle staying steady at this untested, enthusiastic, and under-educated point in my investment career. I love me the shiny things. Stop playing with shiny things. I'l trust that what works for the rock stars is going to work for me.

@Damaso Bautista Thanks for pointing the way to these videos.

@Lei Lu are you considering buying a 2nd principal residence and turning the first home into a rental, and growing your portfolio that way? If so you might also want to factor in the IRS 2-out-of-5-year rule to see if you can save yourself capital gains tax on the sale of the home. There are restrictions on how quickly you can sell and still realize a gain tax free. I don't know how to post a link but I found a helpful explanation at the balance.com "paying capital gains on the sale of your home - the profit from your home sale might not be taxable." Scroll down to "The 2-Out-of-5-Year Rule." Best of luck whatever strategy you choose!

@Andrew Postell, in the hard money scenario, the new loan pays off the hard money, essentially cashing out that lender/investor, right? So you wouldn't walk away with cash in your own pocket but you would have satisfied your hard money guy who might then fund you again for another purchase. And you'd control the refi'd property. Just making sure I'm getting the details down. Thanks Andrew.