All Forum Posts by: Chris Rich

I have watched countless videos on real estate investing. Some investors are all about buying “doors” to rent. Then there are the flippers and developers. Please help me understand why, besides getting monthly income and putting off taxes, people are so stuck on rentals. I understand producing cash flow to demonstrate I have an income to be able to borrow in the future….so I don’t mind starting with a few rentals to bring that in but then I want to transition to building single family homes. Personally I want to PUT people in homes they will OWN. To me it seems while I pay tax on the sale of a single family home, I get a bigger chunk of money to work after each. I just want to make sure I won’t get sidelined with taxes so high it renders the work/sale null and I get little profit. What is the average profit percentage on building a single family home? Any help is appreciated :)

They are different strategies, but the value in holding rentals long-term is in the appreciation and having the asset to leverage. If you have a $300,000 house, that appreciates conservatively 3% a year, it will be worth ~$360,000 in 5 years (5% would be ~$380,000). Then you consider the tenants paying down the principle (~$15,000 ish over 5 years) and you have a good amount of equity.

A couple flippers I know in the Orlando area have recently started holding some of their fix/flip properties because they looked back at some of their past flips, what they sold for and their current value, and regretted not holding some of the properties. There are also tons of tax benefits if you own rental properties.

1 Vote

Phoenix, Arizona

Quote from @Jenny Lu:

Quote from @Chris Rich:

Quote from @Jenny Lu:

Hi fellow investors,

I recently inherited a fully paid off investment property, I estimate it's worth $500k. It is currently cash flowing $1300 a month. I have student loan debt from grad school with a balance of $160k, and the monthly payment is about $1100 a month with 17 years left on the loan. I also have a primary home and high child care expenses for my young children. I'm in my early 30s and am wondering what is the best way to use the investment property to improve my financial situation and what's best for the future. With my current job, I make enough to cover my mortgage, student loans, child care expenses, and I'm putting about 7% into my 401k.

Any thoughts on what to do with the investment property would be greatly appreciated (keep it, pull out equity, sell it, etc). Thanks in advance.

What is your interest rates on your student loans? I wonder if it would make sense to open a HELC on the property, pay off the student loan, and then focus on paying off the HELC.

Student loan interest rate is 3.8%

Then nevermind. I highly doubt you could find a HELOC rate even close to that right now.

0 Votes

Los Angeles County, California

Quote from @Duarte Marques:

Being out of state and to minimize risk I don't want to do any major rehab, what do you think about buying turnkey property so that it casflows around 200 bucks a month with all costs associated? I know I won't be able to force appreciation and refinance like the BRRR method but at this moment being out of state I would like to build a steady cashflow stream of income and in future years maybe start applying the BRRR method because I will be able to take more risk.

Turnkey can be great, especially in certain markets where traditional properties may be too expensive to acquire and cashflow. One big benefit with turnkey is you shouldn't have any major maintenance expenses for 5-7 years, which allows you more freedom with the cashflow. Depending on the area, you may also see an immediate equity bonus at close which you can leverage in the near future. And while appreciation isn't a given, what is a given is properties appreciating long-term, on average, 3-5% annually, with some markets (Orlando) seeing 8-10%. And even if you look at the home values during the 2008 crash, when home values began recovering, they went from -20.9% in 2011, to -15.9% in 2012, to -4.1% in 2013, to +3.0% in 2014, +10.3% in 2015. BRRRR method requires a very good team or a deep knowledge of the market and how to find the deals.

1 Vote

Quote from @Nathaniel Irizarry:

Hello,

I'm looking to relocate to the Orlando area, I've only recently been learning about real estate investing and I would like to connect with people and learn and build relationships. I'm also looking to purchase my first home, preferably multifamily, to house hack.

Welcome to Orlando Nathaniel! Depending on what part of town you are looking to live in, house hacking could be an excellent option. But overall, I think buying pretty much anywhere in Central Florida is a good long-term investment as long as the numbers make sense for you.

0 Votes

Quote from @Lisa Martin:

Property manager for one of my properties failed to notify me that the tenant left with no notice. It wasn't until rent was 2 months unpaid that I messaged to ask what was going on. Long story short it took them a month to notify me of a vacancy and only told me after I asked. It took 6 weeks to get a rent ready bid. They said it will be another 2-3 weeks until the work is done. It is a fairly standard turn with paint, cleaning, junk out, and soffit repairs. AH!

Management agreement states 30-day notice for me to end the management agreement. I'm thinking of changing management companies ASAP as I have another manager in the same market. The reason I would leave is current manager is doing a terrible job and making me bleed $. Do I give the 30 days' notice and keep letting this ride or just tell them their management is unacceptable and move on immediately? I have 3 properties with them and hate to burn bridges, but this is my investment!

It's crazy how much I have to manage the manager :-(

Give notice and hire the new company. The new company should be able to at least begin the onboarding process while the 30 days is elapsing. Man, that is such an unacceptable turn time. Given how long the bid took, they should have prioritized your property.

1 Vote

Quote from @James Gillice:

Hello BP,

I bought my first rental property in early 2022, an out of state (KCMO) SFH. I bought from a turnkey company that is endorsed by BP. The home was not "turnkey" per say, but was sold by another investor through them (not sure the exact details, but this fact was disclosed beforehand). I got in before rates skyrocketed (4.25%). I used a HELOC on my personal residence for the down payment. Things went really well for the first year. Even with HELOC payment and maintenance costs, the cash was flowing and I was making several hundreds of dollars every month. I was planning repairs and upgrades while also paying down the HELOC in preparation to buy a second property. I though I had this figured out.

Then in early 2023 the repairs started increasing, including a major repair. A busted sewer line near the street (but not close enough to the street for the city to be responsible) cost me about 6K, plus maybe 3-4K in other repairs and maintenance around the same time (some elective, not mandatory. Like I said the cash was flowing). Plus I lost out on rent for over a month as the house was uninhabitable. I used up every bit of reserves and had to use the HELOC to make payments for a while. Now the tenant has moved (end of Nov) and I've just got the inspection report and repairs needed. The house has been pretty trashed, probably 12k in repairs.

The other side of this situation is the fact that since I bought the house, I've been laid off from work twice. I worked for a year in a just barely (not) enough to get by job. So things have been incredibly tight financially. I now have a new job that pays "enough" but this recent hit is making me re-consider my options going forward. Here are various ideas and factors that I'm considering...

1. Sell the home and cut my losses. Lose my 4% interest rate and search for another property. A year ago I could have sold and been debt free. Now I'm not going to get enough to pay it all off.

2. Keep the house but find a better property manager. Renters Warehouse is the manager that came with the house. They have been unsatisfactory but I don't have anything to compare to so I don't know if it's worth the effort to find a new one. Their repair processes take forever and they are horrible with communication. And theres about 10 points of contact so I never know which person I need to talk to to get something done. All information is second or third hand. They don't allow me to be as "hands off" as I'd like to be. Any recommendations in the Kansas City area?

3. Keep the house and try to find better vendors/quotes for the repairs. I've always gone with the PM recommendations because I really don't have time to do the research myself. But I've got to believe there are more competitive offers out there. Any recommendations in the Kansas City area?

4. Make the needed repairs as quoted, keep the same PM, and hope this bad patch is behind me. I'll be pushing the current limit of my HELOC (only 20k left) which will be bad if more emergencies come my way.

5. Send previous tenant to collections for back rent and repairs needed. Is this a complicated process? How much will it cost me up front? Will it even work?

In typing this out, I realize that I will need to seek better vendors and a new PM if I'm going to keep the property. So basically the question I have is...do I sell or keep the property at this point? Any suggestions or advice of any kind for this situation would be great.

Thanks in advance.

That sounds like a lot of bad luck up front, James. I'd agree, abandon Renter's Warehouse. You would like to think the PM company would have good vendors, but not all of them do and unfortunately sometimes the vendors get sloppy because they know they have a steady stream of work from the PM company.

I'm not sure if you should sell or not. Being financially strapped personally can definitely make owning a rental challenging, but if you can get through it for at least another year, you should be back in the green assuming you are in a market that is still appreciating.

0 Votes

Quote from @Jenny Lu:

Hi fellow investors,

Any thoughts on what to do with the investment property would be greatly appreciated (keep it, pull out equity, sell it, etc). Thanks in advance.

What is your interest rates on your student loans? I wonder if it would make sense to open a HELC on the property, pay off the student loan, and then focus on paying off the HELC.

0 Votes

Los Angeles County, California

Quote from @Omar Tinoco:

Hi,

my parents are retired and are planning on retiring to colombia. We have a house in Pennsylvania and want to rent it out or sell it.

I'm leaning more towards renting than selling cause the house is almost paid off and we can rent it for $19000 a month which is $19000 cash flow.

A friend of mine had a recomendation of some possible tenenats that are looking to rent.

My only concern is its a family of 7, 2 adults and 5 kids the house is a 4 bedroom 2 bath 1200 sqft is this too many people?

Hey Omar, I'd agree with most of the other commenters... if the house is almost paid off and cash flowing $1900 a month, I wouldn't want to sell because it sounds like too good of a situation.

Regarding the number of occupants... it's not necessarily an issue. General rule of thumb is two heartbeats per room. While it may be higher because of the number of people, risk of wear and tear on the property exists with every tenant. I'd say the bigger issue is the personal relationship. When you personally know the tenants, you are far more likely to be sympathetic and they are far more likely to take advantage of you. I would definitely still screen them and even consider hiring a PM company so that you can distance yourself from it. It's important to remember that the house is an investment, not a charity. I've dealt with quite a few owners who rented to friends (outside of house hacking) and were taken advantage of (lower rent, late payments, relying on emotions) and once you start, it is hard to stop.

Also, just because someone knows them, doesn't mean they'll be a good tenant. I'm a part of a networking group that meets at the same restaurant every month. One of the waitresses was looking for a new residence and one of the people from the group vouched for her. Luckily, I knew her manager who recommended against it and come to find out, they trashed their previous rental after the owner tried to raise the rent $50 after 3 years of no increases.

Just be cautious with any tenants and do the same screening for everyone, regardless of relationship.

2 Votes

Quote from @Sabrina Dagostino:

Quote from @Bud Gaffney:

Hey, what is your current living situation? Congrats on saving so much $! May I suggest a house hack? Buy a 3 or 4 unit or 100 unit multi family. Live in 1 unit, rent out the rest! Rinse and repeat.

Thank you, I appreciate it! I'm currently renting, in a 14-month lease that just started recently, but I have thought about house hacking in the past

House hacking may be a really good idea, especially if you buy in a good area with strong appreciation. Cash flow is nice, but appreciation is where I personally see the real value. In January my wife and I decided we wanted to make the leap and acquire a new house, either as an investment or as a new primary and rent our old primary. Looking at the Florida housing market, and the appreciation of the last decade, its been 5-8% every year, with 2021 & 2022 seeing 20%+ appreciation. We decided it was better to use the money to buy the $450,000 new primary than a $250,000 rental, and then transitioned the primary to a rental because 5% appreciation on $450k is more than $250k.

I know a lot of people think the Florida market is "over-priced," and it is to some degree, but it's relative. I recently read a BP article where they talked about that concept and the value of a house is what someone is willing to pay for it... and people are still paying these prices. We've already seen the market correct itself from the linear value increase of 2020-2022, and houses never really "fell" like a lot of people said it would. Could values go down more? Sure. But is it likely? I don't think so, and neither do most of the experts. Florida, depending on your source, is #1-3 in inbound migration, has 5 of the top 10 cities in the country for migration, #1-3 in economy and job growth. There is a lot of pent up buyer demand. If interest rates start falling, and inventory doesn't see a surplus, I think you will see a hot summer of people buying and driving the values up.

But in hindsight, the best thing we ever did was buy the first house back in 2017. That gave us the ability to gain a ton of equity and leverage into another property. I think the key is to just enter the market, one way or another, and go from there.

Good luck with whichever route you go!

0 Votes

Quote from @Bob Stevens:

Quote from @Chris Rich:

@Sabrina Dagostino There are still some Florida markets that are still good investments if you are appreciation focused, such as Palm Bay and Ocala, where you can buy new builds for $250-300k and rents will be between $1600-$2200, depending on area. Both of those areas have seen 130%+ appreciation in the last 8 years. Now, they are starting to get a little saturated, but you have some nice built in equity once you close. But I generally agree, it is getting tougher to invest in Florida and cashflow if you don't already own the property.

As for Section 8, I don't have any personal experience with it, but I do know a couple investors who do Section 8 rentals. Like Taz said, it can be more of a roller coaster LOL. The guaranteed money is nice, and there are a lot of tenants who are good tenants and appreciate the assistance. There is also a higher risk of getting a bad tenant (IMO) and I have seen some pretty destroyed properties from Section 8 tenants (more so than non-Section 8).

Its ALL about screening. I have had govt program tenants for years and years. Most keep the prop better than some of my cash tenants,

I agree, screening is critical with all tenants. What's your ratio of Section 8 to cash tenants?

0 Votes

All Forum Posts by: Chris Rich

Chris Rich has started 0 posts and replied 102 times.

Post: Why do investors opt to rent instead of flip?

Post: I inherited a fully paid off investment property. What should I do with it?

Post: Buying turnkey for first investment property?

Post: Looking to connect with investors and wholesalers in the Orlando Florida area

Post: Firing of property manager

Post: Things aren't going well. Any advice?

Post: I inherited a fully paid off investment property. What should I do with it?

Post: Planning to rent a house

Post: How would you use 300k to start investing in real estate?

Post: How would you use 300k to start investing in real estate?