All Forum Posts by: Chris John

@Samuel Dumond

Congrats on the purchase!  That's exciting.  Also, I love the question.  I wish I'd asked the same thing when I was getting started because I think things would've grown a lot more quickly for me.

If I had it to do all over again, I'd use your suggestion of buying 2-4 MF and using fha or conventional loans.  Ultimately, as prices increased and debt retired, I'd 1031 them into bigger properties or do cash out refis on them to buy more 2-4 MF until you get to 10.

It's not hard to imagine a scenario where you fairly quickly get to 10- MF units and then can 1031 those into 10+ apartments.  Anyway, that's the route I wish I'd pursued and the strategy I will be sharing with my own children as I believe in sustainable growth.

I will say that you're correct about the dti ratio though.  I'd work closely with a trusted lender and an accountant and let them know your strategy so they can talk you through it over the years.  I know I've frustrated my accountant on more than one occasion by showing more income than he wanted me to, but I had to keep my lender happy too.  I felt it was cheaper to pay a little more in taxes, but to keep my dti solid enough to get the next loan.  Of course, part of this strategy would also center around keeping the spread between rents and mortgage payments at an acceptable level, so you may have difficulty participating in too many low down payment fha loans depending on your actual salary.  I'm a teacher, so I definitely needed to put 20-25% down to keep that spread large enough to qualify for the next loan.

In the end, the world loves a man with a plan, so you're gonna be great with whatever route you choose.  Please don't hesitate to reach out if there's anything you think I can help you with.  Best wishes!

@Steve Vaughan

"The people that always recommend a 30 don't do cost/benefit analysis on
the rate difference and have certainly never paid off a mortgage before."

I'd respectfully disagree with half of this statement.  

I think the "cost" is the opportunity cost of not investing that equity at a higher rate.  Equity is money that's literally invested at 0% as it provides zero marginal monetary value.  The "benefit" is the added liquidity and higher returns that come along with investing money at a rate above 5% or so. 

I totally agree with the second half of your statement though.  I've never paid off a mortgage.  haha.

Best wishes

Go with the 30 year and invest the extra $250/mo.  It will give you more liquidity, plus, in 15 years you can pay off the entire mortgage and have extra money left over if you invest that money at a rate of 5% or more.

I'll never understand the logic behind 15 year mortgages.  They offer no benefit that I can see.

I didn't realize there were realtors in Columbus, Ohio that weren't with Reafco!  Maybe hit them up?

@Ethan M.

I have no evidence to support my opinion and don't really want to go down the rabbit hole of trying to find any, but here's how I've always seen it.  All things being equal and assuming "good" properties that don't have gigantic underlying problems, have "normal" tenants, "normal" upkeep, weren't purchased as "home runs" that are almost impossible for you to duplicate again, etc. I see it as a simple risk vs. return tradeoff.

Lower (or negative) cash flow probably means more leverage and/or a hotter market and most likely a higher final IRR.

Higher cash flow probably means less leverage and/or a more stable market and most likely a lower final IRR.

If you can survive the tough times with the low/negative cash flow properties, you'll probably make more in the end.  The problem is that some expose themselves too much and can't hold on during the occasional downturn. 

I know my personal risk tolerance and financial limitations (high school teacher for most of my adult career), so I insist on enough cash flow to grease the wheels in case of tough times.  However, I have definitely made a lot more money through appreciation and debt retirement than cash flow.  The way I run my numbers is right for me, but different than my friend/mentor's.  But the way he runs his numbers is right for him. 

IMO, you just kind of have to know what you can weather financially if times go bad, what your risk tolerance is, what your time is worth in terms of the time suck that is real estate investing vs. other investments, etc.

Good luck and best wishes!

I'd start nice and easy and buy around a 90k SFR with 20-25% down (the less the better) that was solid and only needed some slight cosmetic updating. I'm guessing that would just about tap out your budget though, so make sure you can cover the mortgage if things go south until things get up and running.

I'd begin saving for the next one and tap into the equity in that one as time passed and it increased in value.

Whatever you decide, good luck!

I feel like my compassion is dead for those that voted (and continue to vote) for it.  Maybe tomorrow, but today I just can't get there.  I do feel bad about not feeling bad about it anymore though...

@Quincy Holder

My investment strategy is pretty vanilla. Conventional loans for properties sourced on MLS. As rents and equity grows, I refinance cash out and buy more. There are definitely more lucrative ways of doing this, but it works for me and my family as it's not very time consuming. If you decide to pursue this boring route, I'd suggest getting a lender and making sure you have an adequate down payment, credit, and debt ratio. If you already have that, awesome. If not, a lender should be able to point you in the right direction to get where you need to be. (I love my lender and can provide you his details if you don't have one).

In the end though, and as corny as it sounds, it really is about the journey and not the destination.  I'm sure I'm not the only guy on here that would give it all away and trade places with you if I could.  A 20 year old with ambition and a plan is unstoppable.  And, being broke and 20 (not saying that you are, but I was!  haha) is a LOT better than being old and having money, so make sure you enjoy!

Best wishes and please feel free to pm me if there's anything that you think I can help with.

@Elijah Robinson

The world loves a man with a plan.  I like that you're figuring out where you need to be instead of just moving in a general direction and hoping that you end up in the right place.

If the lender referrals don't work out, I'd be happy to send you my guy's information.  He's done loans in California, Nevada, Alabama, and Florida.  I'm not sure about Ohio, but I'm guessing he could do them there as well.

Best wishes!