All Forum Posts by: Christopher Stevens

We recently bought four properties in six months. Due to a lack of funds, we won't be purchasing anything else for now. Our current focus is to build reserves, streamline our accounts, and generate more cash flow to buy the next property.

Once we get our books in order, we'll work with our CPA to get tax estimates for 2024. This will help us make informed decisions about whether to withdraw more funds from our IRA or wait until 2025. We want to be strategic about how we access funds and how it impacts our tax situation.

Thank you! 

The current cash flow is only about $200 because I have management fee concessions. Those will get used up in about 18-24 months. Depending on how much rent has gone up (after the concessions), if I don't refinance, the cash flow will be about $50-$100 per month. If I can refi at the same rate or lower, that $50-$100 could be double or more. And if rents continue to increase in the area, the cash flow could be closer to $300 per month if I refi in about 2 years. The appreciation at this location should be high over the next 2 years.

Thanks for asking! I look forward to seeing how this property performs compared to the properties in AR. I suspect the appreciation on the TX property will outperform the AR properties. Only time will tell:-). 

Thanks Chris! Sadly, I might have to wait until early 2025 for #5, as my funds have dwindled from purchasing 1-4. Still, we appreciate you and the entire REI team for your support and excellent service.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $250,000
Cash invested: $83,700

My first TX property! I'm excited to invest in a TX property since the Dallas area is booming, and it's close to AT&T stadium. Plus, it's on a corner and REI Nation did another amazing job with the rehab. Thanks, REI Nation! This is #4! I can't wait get to #5+

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

The price was right, REI Nation offered management fee concessions, REI paid down the rate, and the rehad work was spectacular, as usual.

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

REI Nation! They're simply the BEST!

How did you finance this deal?

Guild Mortgage - 30% down with a 5.75 rate. Fees were reasonable.

How did you add value to the deal?

I put 30% down to reduce risk and create more cash flow.

What was the outcome?

I was able to invest in the Fort Worth/Dallas area! I love this area, and I'm excited to now own a property near AT&T Stadium.

Lessons learned? Challenges?

Taxes are high in TX with real estate, so put more money down to create some cash flow. Appreciation should be HUGE for this property over time. Time will tell.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

If you want to get into real estate investing, consider REI Nation. They're amazing to work with, and their property management (PPMG) is exceptional. I look forward to MANY more deals and years with REI Nation/PPMG. Thank you, REI Nation!

So, what do the hours count for when you're managing the property management company? My understanding is there are "Material" and "General" hours. When acquiring a property through a turnkey company, I count those as Material hours since I'm spending dozens of hours acquiring a property that will be rented. Also, if I'm on the board of an HOA, shouldn't ALL the hours spent in meetings and helping to maintain all 34 properties in the complex be considered "Material" hours?

This stuff is SO confusing and seemingly arbitrary, but it's probably clear-cut. It seems (me included) that we want to count hours that shouldn't be counted toward REP hours. I just wish there was a better/easier way to know for sure what counts toward what for REP hours. I've been using REP Tracker, thinking that managing the property management company counts towards Material hours, but that's clearly not the case.

We need an app where one can enter the activity, and the app would show if those hours counted or not. If I had a clear idea of what counted, I'd spend my time creating that app, but I don't even know what qualifies. It's time-consuming enough to track hours, let alone check to see if the tracked hours count or don't count.

Thank you ALL who posted and have continued to discuss this cryptic designation. 
  

I should have double-checked the numbers, but the information it created in about 10 seconds is impressive. However, as mentioned in my post, it's essential to check the numbers.

These new AI tools can help make decisions. If we ask the right questions, we might get answers to understand leverage better, too. Much of what we get from these tools is dependent on how/what we ask.  
 

Check this out! I did a test and input this data into ChatGPT: 

What is the ROI and monthly cash flow on a property purchased for $135,000?

- Property taxes and insurance costs are $101 per month
- Down payment is 30% on a 30-year fixed rate of 5.5% interest
- Monthly rent is $995 monthly
- Closing costs are $5,500

If you have this information when considering purchasing a property, here's what you'll get if you type this into ChatGPT:

"To calculate the return on investment (ROI) and monthly cash flow for the property purchased, we need to consider several factors:

1. Mortgage Payment
2. Property taxes and insurance costs
3. Monthly rental income

First, let's calculate the mortgage payment:

1. Down payment: 30% of $135,000 = $40,500
2. Loan amount: $135,000 - $40,500 = $94,500

Using a mortgage calculator, we can calculate the monthly mortgage payment:

- Principal and Interest:

- Loan amount: $94,500
- Interest rate: 5.5%
- Loan term: 30 years

Using the formula for a fixed-rate mortgage, the monthly payment is approximately $535.89.

Next, let's calculate the monthly cash flow:

- Monthly rental income: $995
- Property taxes and insurance costs: $101

Monthly Cash Flow = Rental Income - (Mortgage Payment + Property Taxes & Insurance Costs)
= $995 - ($535.89 + $101)
= $995 - $636.89
≈ $358.11

Now, let's calculate the ROI:

ROI = (Annual Net Income / Total Investment) * 100

Annual Net Income = Monthly Cash Flow * 12
≈ $358.11 * 12
≈ $4,297.32

Total Investment = Purchase Price + Closing Costs
= $135,000 + $5,500
= $140,500

ROI = ($4,297.32 / $140,500) * 100
≈ 3.06%

So, the monthly cash flow on the property is approximately $358.11, and the ROI is approximately 3.06%."

A cash flow of $358 and ROI of 3.06% in year one might not be all that appealing. However, the other benefits of owning real estate are:

- Taxes (depreciation/potential accelerated depreciation)

- Appreciation (this is NOT always guaranteed, but over time, you will have appreciation)

- Building equity (in this scenario, as long as rent is paid, you'll build about $140 monthly in equity)

Please note some expenses that are missing from this are: 

- Management fees (8-10% on average, if applicable)

- Estimated vacancy costs (2-3%)

- Estimated repairs (5%)

Disclaimer: I am a real estate investor and own four rental properties. This is a quick and easy way to get a general idea of potential cash flow and your ROI on a property using ChatGPT. I'm not associated with or vouch for the accuracy of information provided by ChatGPT. This is for general purposes only and not legal or investing advice. Always double-check the data and calculations from any source.

Advice: Information is good, but taking action is the best way to learn. Every action you take is a learning experience that will help you learn and grow. Not taking action means you'll never grow or learn. You will make mistakes, but you'll learn the most from mistakes - this is how to improve your life. "If you don't fail, you're not even trying." Denzel Washington.

I hope this information is helpful. Thank you for reading.

Great question, Jaye! 

I put down 30%, but the closing costs were about $5.5K. I made a mistake and should have put $46K instead of just the $5.5K closing costs. I've updated the post since, so it should reflect the updated cash down. 

Thanks for the heads-up and great question. Good luck with future deals.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $160,000
Cash invested: $46,000
Sale price: $160,000

New property acquired in Arkansas with cash flow.

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

My goal is to get to 10 rental properties within five years. This was my 2nd REI Nation property, and I closed on a 3rd property this month. So, I'm at four properties, but three are with REI, and one is self-managed. With the home I live in, we now own five properties.

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

I found it on the REI website. REI helped with some management fee concessions to make this property cash flow for the first 18-24 months.

How did you finance this deal?

I used CrossCountry Mortgage, which provided a premium rate of 5.5% for 30 years. Rates at the time hovered around 7%, so the 5.5% negotiated by REI also helped with the cash flow.

How did you add value to the deal?

I provided a 25% down payment to help create some cash flow and did my best to provide documents as quickly as possible to make it easy for the lender to close on the deal.

What was the outcome?

This was a decent deal. It provides a small cash flow with little money down. Over time, I plan to refinance to help create even more cash flow, and with time, rents will most likely increase.

Lessons learned? Challenges?

Ask good questions. Take time to think about what you want to say or ask when put in a difficult situation. Don't be afraid to ask for things and allow the other side to make offers. Sometimes, their offer is significantly better than you'd expect or ask for.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

REI Nation does it again! These guys are top-notch! As long as they have inventory and I have money to invest, I'm going with REI Nation. Thank you, Taz, Taylor, et al at REI Nation. Keep up the great work. I appreciate all you do to help me get to where I want to go with my real estate portfolio.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $135,000
Cash invested: $5,500

Small property in Beebe, Arkansas. This property has more cash flow than the Las Vegas property. However, the rate is higher and the capital paydown is significantly lower than the Las Vegas property.

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

Easy turnkey deal. Low cost of acquisition. Higher cash flow than another property. Good rate and property management concessions to help with cash flow.

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

I found it through REI Nation. I worked with Taz to help get favorable terms to increase cash flow and get a decent rate.

How did you finance this deal?

CrossCountry Mortgage

How did you add value to the deal?

I tried to make the purchase fast and easy. Since we closed on another property earlier in January, the lender had all the docs necessary to close this deal quickly.

What was the outcome?

More cash flow than a property (Las Vegas) that I sold in December. And cash left over to pay off other debts and make other investments.

Lessons learned? Challenges?

I learned that keeping another property I acquired might not be the best option. Taking the cash from another property sold and buying more property to create more cash flow. The biggest challenge was deciding to sell one property to generate more and better opportunities. It's easy to get stuck with what's been working and not think outside the box to improve things.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I recommend working with Taz at REI, REI Nation, and CrossCountry Mortgage. They're the BEST for turnkey deals. Yes, things cost A LOT more, making it hard to find good deals and create cash flow, but having a great partner is worth the extra cost.