All Forum Posts by: Casey Miles

* meant to say improve my DTI not increase it. Doh!

@Brian Burke

I'll tell you why cap rates were a major focus for me early on. Reading @James Kojo profile he's been doing it longer than me so I'll just speak for myself.

I used to get into the cap rate debate with more seasoned inventors, probably like yourself over and over again and then I determined it was the perspective that I or you were looking at it. In my early RE investment life cap rates translated, and still do, into cash flow/CoC.

I know that a cap rate is what an income stream is trading at BUT more importantly it was a quick indicator of what my cash flow would/could be. We can really get into the weeds on this but generally a higher cap rate equates to a higher cash flow. 

You talk about when the casino closes. When I first started I wasn't thinking about when the casino closed but weather or not I could continue to play the game and increase my anti. Right or wrong when I was only making $40k a year at my day job and sold almost everything I had to buy my first "rental property" I needed cash flow. Cash flow for repairs, vacancy, etc. At that point how much my property was appreciating or if I could reposition it to increase equity wasn't important. Now fast forward, cash flow has allowed me to increase my DTI, etc. I've been able to keep playing the game, increase my anti and now I can't wait for the casino to close. In the long term we all need to focus on the total return of any investment but I really think this comes with time.

What's important to me now wasn't important then and vise versa. Again, you are "right" about what you said about cap rates but understanding perspective and knowing not everyone is playing with the big boys yet is important. And my no means am I with the big boys but cap rates have fallen from my primary focus and appreciation, repositioning, etc. have taken its place. But without making cap rates a primary focus early on I wouldn't have even been able to walk into the casino.

I see this all the time on complexes in the Phoenix market. I think it's a way to generate calls/leads mostly. When I see these properties I quickly (back of the envelope) underwrite the property, determine NOI, and divide by whatever the current trade rate is (cap rate). It's annoying but I think it's the sign of a definite seller's market.

@Matt R.

Thanks man. I appreciate your time, really. I wish I had the stomach for CA real estate but i'll leave that to the big fish.

Take care,

Casey

@Michael Swan Thanks for the info. I'm leaning towards doing HELOCs on my existing properties and buying more. It's already what I am doing I would just need to scale it. Currently I only have HELOCs on two. Boy do the appraisers play it safe when it comes refinance/HELOCs! At least around here they do. That's why I was considering selling and 1031ing into something else. I'll still have the dead equity problem (although not as much as I do now) with refinancing/HELOCs but it'll still be an issue compared to selling.

Hi @Matt R.,

I haven't calculated my YOY equity gain. You'll notice in my first post that I mention this. I know that appreciation and equity gain really separate the boys from the men in RE. However my thought was that if I'm sitting on a little over 2m in real estate and have roughly 1m in equity (after fees/closing costs) and I possibly leverage that via 1031 exchange into 4m worth of property now I have 4m gaining at X growth VS 2m gaining at X growth. A lot more analyzing needs to be done but isn't that the meat and potatoes of it? I guess different asset classes appreciate at different rates so I'd have to consider that.

So at the very least maybe I'm trading cash flow (not gaining) but my appreciation is against 4m vs 2m. What am I missing?

Thanks Matt,

Hi Ashley,

First, good luck to you and your husband on your first "investment" property. Very exciting! If you stick to it you'll look back on this one day and appreciate the simplicity of having to paint a unit after the fact. You really have to consider the totality of the deal. Sometimes I do things that I don't "have to do" but I do them to go to bed at night and it'll come back to me somewhere. Karma type thing.

The long and short of it is that real estate life gets a lot harder than this. I do however know that money can be tight so I understand the concern. If it were me this wouldn't be the hill I die on.

Good luck Ashley,

Casey 

@Joel Owens Thanks for the advise Joel. There is no way I'd put all (or even a 10th) of my equity into a syndication. I simply don't have the stomach for it. And to your point, I'd like to reasonably protect my equity as I don't make $500k/yr :)

I'm "making" 5-6% because I'm managing it. The effective is closer to 3-4%. My goal is 12% CoC but I'd settle for 10%. If I could figure out a way to make 100-120k a year while continuing to gain 3% growth I'd be a happy clam.

Good Morning, 

@Leslie Pappas @Todd Dexheimer. I was referring to this blog (#15): 

https://www.biggerpockets.com/blogs/9145/65780-syn...

I'm sure there are several syndication options. So can I indeed 1031 into a syndication or does doing so require a less common tricky method? Good point Todd on possibly not being able to re-invest the entire $1M. I overlooked the reserve account.

@Michael S. I too have looked at Tucson as a possibility. What do you think the year over year growth is? I definitely don't want to deal with Class D properties to gain the return. I'd go out of state before I'd do that. Ditto on the labor going up, it's really gone up! We should have coffee/beer sometime to compare strategies, etc.

@Ryan Fortier Not that I doubt you I'm just surprised my banker has never mentioned this. Is this just for certain amounts/property types? I know that in the early days I didn't have squat from a net worth standpoint and as long as I had 25% down, a decent personal DTI, and the property itself cash flowed well enough that was all I needed.

@Stone Jin Who did you use for your 1031s?

Thanks Everyone,

Casey

I've got decent equity (>50%) but compared to sales the appraisers around here are pretty conservative on heloc(s)/refi(s). Plus I'd rather heard the cats so to speak into one or two properties.