All Forum Posts by: Chad Matthews

@Brian G. - super insightful. Thanks for sharing and confirming much of what i was thinking as well. When it comes to Real Estate there is certainly more than one way to success. I appreciate the simplicity of a slow and steady approach but I enjoy the thrill of the hunt and re-positioning into to something even more lucrative. I am 47 and plan to "retire" when I am around 52. At that point I want to enjoy long walks, cruises with my wife, road trips, and dabbling with the periodic flip or property rehab. I appreciate the reminder of keeping the ultimate goal in mind because, when we don't, we can easily lose our way or find ourselves less than fulfilled. I hope thinks are going well for you in Burbank!

@Brian G. thanks for sharing the 10x's return. That isn't something that I have come across before. Do you happen to know why investors choose the 10 years / 10 x's metric rather than say, 5 years or 15 years? 

I will admit, there is some comfort in having solid equity in a property, just in case values tank, rents drop, hyperinflation occurs, there is a run on banks, and simultaneously cows jump over the moon - If there is a worst case scenario, I could get out easily and in tact. But I also realize that, in exchange for so much equity in one property, I am giving up the opportunity to multiple growth.

Thanks @Calvin Ozanick and @Nathan Gesner - I really appreciate your insight. I will spend some time looking at the chart and projected returns ... and then wrestle with the battle of selling or stay put. Staying put is the "easy" thing and takes the least effort (that sounds pretty nice when I'm sitting on the couch!). Selling is probably the "right" thing based on long term growth and projected cash flow. Then I'll have the next question ... what to do with tenants when selling?!

Thanks @Theresa Harris and @Brent Paul for sharing your insights. 

I'll admit it ... I'm a collector. I really really like to buy real estate but I don't really like to sell it. That being said, I have a sneaking suspicion that I should be trading up, leveraging more, stacking, etc. 

I would love some advice from those of you out there who have a method or systematic way of knowing when to sell. Are there certain metrics that you use? (for example ... Do you sell when depreciation vs. value hits a certain point? Or do you sell when you have a certain percentage of equity?)

And ... for those who would rather speak to a specific scenario; here's mine. Single family 3 bed 2 bath. Purchased for 140,000 and current value is 240,000. The rent is right about $1500, which is in the top 80th percentile. I have owned this property for 2 years. What would you do? Sell? Refinance? Sit and stay?  ... 

What would you do? Why? 

I think that I know the answer but I would appreciate your perspective!

It is great to see some local folks who are active on BP. The Corvallis market is tough and almost never cash flows at this point ... take a close look at current vacancy rates as well. The recent development rush has brought more units to the market and is outstripping demand. Philomath currently has several significant apartment developments happening as well. 

I own several properties in the area but find if extremely difficult right now. Money is cheap, prices are high, and off market deals are difficult to find right now in the area. If you want to find your way into some of the more remote towns like Monroe or out toward the coast in Eddyville or Toledo you may have better luck.

Your situation sounds like it would be ripe for a house hack scenario ... search for a duplex or four plex to help the numbers get closer to working. You'll have to hunt hard and be willing to purchase something old that needs work but, with some sacrifice and elbow grease you can get started.

Hari - Another reason that I like the 25% LTV is because that is a sweet spot for me with financing. The rate is better when the equity in the property is higher. This approach always depends on strategy. I have 17 doors, all cash flowing right from the start. In my area, there seems to be something nice that happens after 2 years - my cashflow has doubled. Some investors look for, "a minimum of (50, 100, 200) per door going into a deal. I have found that, regardless of my entry target (50, 100, 200) my rents have increased enough over the first 2 years that my cash flow doubles (that happens based on making a property a little nicer and having the luxury of strong rental markets where I am at).

I am happy to hear that you are asking the questions and looking to get started - I tell all of my friends to "plant a tree" today and it will be shade tomorrow. The sooner you can plant (even a tiny tree) the sooner it starts to grow. After planting enough little trees, you eventually have a forest!

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $294,000
Cash invested: $30,000
Sale price: $384,000

This was a bank owned property that we had to pay cash for. It was in pretty good shape and our plan was to do a few cosmetic upgrades. We offered 70% of the projected ARV and the bank countered. Plan was for new carpet / flooring, new paint, and a new fence for privacy in the backyard. Our hope was to be in for about 15K of repairs and sell for 399K. As happens, things took a little longer, we decided to add granite and new appliances, and costs grew closer to 30K.

What made you interested in investing in this type of deal?

This deal was close to home and was appealing because of its location.

How did you find this deal and how did you negotiate it?

This was a bank owned auction property. I knew the value far better than the large national bank who was holding the note.

How did you finance this deal?

Financing was done through a partnership with an investor.

How did you add value to the deal?

We provided cosmetic fixes.

What was the outcome?

Successful sale after a longer than desired holding period.

Lessons learned? Challenges?

Find the balance between improving and sale price. If an improvement will just drive the price higher but not provide greater net cash in my pocket, it isn't worth it.
I won't be so "willing" and "nice" in taking contingent offers from buyers unless I have a sizable non-refundable bit of earnest money. If the buyer doesn't have skin in the game then they aren't "in the game".

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $294,000
Cash invested: $30,000
Sale price: $384,000

This was a bank owned property that we had to pay cash for. It was in pretty good shape and our plan was to do a few cosmetic upgrades. We offered 70% of the projected ARV and the bank countered. We were willing to go a little higher because the property was in very good shape and we didn't expect too many unknowns. Plan was for new carpet / flooring, new paint, and a new fence for privacy in the backyard. Our hope was to be in for about 15K of repairs and sell for 399K. As happens, things took a little longer, we decided to add granite and new appliances, and costs grew closer to 30K.
We listed for 398K and had an offer within the first 2 weeks. A BIG MISTAKE was accepting an offer that was contingent on the buyer selling their house. Their realtor assured me that their house was market ready and would sell "within 2 weeks" - 4 weeks passed, our listing grew cold, and the buyer failed to get an offer on their house. MY MISTAKE - I will never make the mistake again - Next time I will take a large non-refundable deposit or reject the contingent offer. When our house went back on the market, agents were suspicious and asking, "why did the previous deal fail" - it took us 6 more weeks to get a buyer. We had to throw in a new roof to spice up the deal.
All told, carrying costs, realtor fees, and final sales price meant that we made about 30K in profit. I'm happy that we were cautious with our estimates before we purchased; it allowed us some breathing room.
Typically I purchase properties for buy and hold, long term income but, I like to be nimble and make the money where the opportunity presents itself.

What made you interested in investing in this type of deal?

This deal was close to home and was appealing because of its location.

How did you find this deal and how did you negotiate it?

This was a bank owned auction property. I knew the value far better than the large national bank who was holding the note.

How did you finance this deal?

Financing was done through a partnership with an investor.

How did you add value to the deal?

We provided cosmetic fixes.

What was the outcome?

Successful sale after a longer than desired holding period.

Lessons learned? Challenges?

Find the balance between improving and sale price. If an improvement will just drive the price higher but not provide greater net cash in my pocket, it isn't worth it.
I won't be so "willing" and "nice" in taking contingent offers from buyers unless I have a sizable non-refundable bit of earnest money. If the buyer doesn't have skin in the game then they aren't "in the game".

I am in a similar situation. My 12-plex does not currently have sub-metered water. Human nature leads to waste when the product costs us nothing. This is a simple "trajedy of the commons" scenario - when each tenant finds that they can control their own costs, they will.

I am looking forward to sub-metering soon and increasing my return and overall property value.