All Forum Posts by: Craig De Borba

Hi All,

I’ve been learning a lot reading though the threads in this community and finally have something to post about.

My background: RE appraiser and loan financing way back pre-2008 crash, helped family landlord multi-units while growing up.

Situation:
Inherited a duplex but thanks to the change in California Prop 19 it will be reassessed to current market value. This reassessment will be a 1,000% increase in property taxes eating the cashflow. There is a mortgage on the property for 20% LTV (~3.7% int rate). I hope the rate passes and is not refi to todays rates, but I don't know how that process works via a Trust.

My plan:
Sell this property and use as a seed to build a portfolio out of Calif. that I can retire with in 5-10 years, and eventually turn these 2 doors into 20 someday.
Due to current interest rates + tax reassessment, cash out refi to acquire more units will make it negative.

Some basic location criteria
1. States where I can get more for my money. I think I can turn these 2 doors into 8 or more.
2. States that are landlord friendly
3. Lower property taxes, good economic growth, low unemployment

I live in Texas but prices here are getting really high, unless I am looking in the wrong area. Other out-of-state areas I have seen mentioned in the forum are: Ohio, Arizona, Oklahoma, Arkansas.
Any suggestions for geographical location?

Starting with $500K cash + financing I could increase purchasing power to acquire more units vs. paying all cash.

Would you put the min down payment (20-25%) and finance the remainder or pay all cash and not carry any debt?

The properties need to cashflow or at minimum pay for themselves, because long-term goal is to replace my job income.

Considering circumstances and long-term goal, how would you do this?

Thank you

Hey Craig, totally can relate with you being from an expensive real estate market - I moved to Columbus a few years ago (from Portland, Oregon which was super expensive) to become a full time real estate investor, and ever since, I've completed quite a lot of BRRRRs, flips, and own a successful rental portfolio here in Columbus Ohio. There's so many catalysts for population and job growth (Intel, Honda, Amazon, Nationwide Hospital, etc). I can definitely tell you there's still a lot of positive cash flowing and 1% rule deals and you get amazing appreciation. As an investor and agent here in Columbus Ohio, if you have any questions or want to connect, definitely reach out!

Excellent points Jimmy, Thank you!

0 Votes

Quote from @Billy Daniel:

Hey @Craig De Borba! I really like where your head is! Everyone's situation is different, but here is what I would do in your situation:

Sell the duplex and 1031 into something else. Due to the current cost of capital, I would be putting a large down payment on multiple properties. 20-25% isn't doing it for me. I'd be somewhere in the 40-50% range or more. If the right property came along, I wouldn't be against buying all cash. My preference is just to spread my risk across multiple properties.

I am biased in that I'm a Realtor in Arkansas and own several properties here. If you have any specific questions about our area, feel free to DM.

Thanks, Billy. great advice. Revising my goals a bit. Larger down payments seem to be the direction so far, which makes total sense for these times.

0 Votes

Quote from @Douglas Skipworth:

Quote from @Craig De Borba:

Starting with $500K cash + financing I could increase purchasing power to acquire more units vs. paying all cash.

Would you put the min down payment (20-25%) and finance the remainder or pay all cash and not carry any debt?

The properties need to cashflow or at minimum pay for themselves, because long-term goal is to replace my job income.

Considering circumstances and long-term goal, how would you do this?

Thank you

Have you read Millionaire Real Estate Investor by Gary Keller? There's a great section in the book that helps answer your question with simple math under 4 scenarios (see Buy & Retire below). Besides a few basic assumptions, the 2 biggest variables are (1) when you're going to buy and (2) when you're going to retire. The good news is that you've already answered those 2 questions!

Buy & Retire
1. Buy today and retire on the cash flow today
2. Buy today and retire on the cash flow in the future
3. Buy overtime and retire on the cash flow in the future
4. Buy overtime and retire on the cash flow and equity pull out in the future

Congratulations on getting started, on inheriting the duplex, and on making your first BiggerPockets post!

Thanks, sounds really helpful. I just ordered that book and will take a look at this.

1 Vote

Quote from @Travis Biziorek:

Craig, you're in a good position to do something interesting as long as you're smart about it.

I like the idea of selling and going out of state. The Midwest seems to be one of the only areas that still cash flows with current interest rates. Folks seem crazy for Ohio but it's a bit too hot for me.

I have 12-doors in Detroit and I'm still extremely active there. You have the cash to go off-market, do a cosmetic rehab and pull most (if not all) of your capital back out.

This is how I built my portfolio there, and you absolutely have enough cash to build a serious portfolio over the next 3-5 years.

Thanks, 🙏 Travis. I hadn't thought about Detroit

0 Votes

Quote from @V.G Jason:

Quote from @Craig De Borba:

My plan:
Sell this property and use as a seed to build a portfolio out of Calif. that I can retire with in 5-10 years, and eventually turn these 2 doors into 20 someday.
Due to current interest rates + tax reassessment, cash out refi to acquire more units will make it negative.

Some basic location criteria
1. States where I can get more for my money. I think I can turn these 2 doors into 8 or more.
2. States that are landlord friendly
3. Lower property taxes, good economic growth, low unemployment

I live in Texas but prices here are getting really high, unless I am looking in the wrong area. Other out-of-state areas I have seen mentioned in the forum are: Ohio, Arizona, Oklahoma, Arkansas.
Any suggestions for geographical location?

Starting with $500K cash + financing I could increase purchasing power to acquire more units vs. paying all cash.

Would you put the min down payment (20-25%) and finance the remainder or pay all cash and not carry any debt?

The properties need to cashflow or at minimum pay for themselves, because long-term goal is to replace my job income.

Considering circumstances and long-term goal, how would you do this?

Thank you

I stopped there-- you won't. Or if you're definition of retirement is vastly different than mine, maybe you will but it just does not work that way.

For the rest of the forseeable future, we will have a higher cost of capital. That alone is going to mitigate the cash flow and lower the appreciation. Combine that with perpetually higher inflation that's going to help hedge the appreciation, but keep your costs high to maintain. This isn't 2010 where you can buy properties in good areas for $115k and make $1,500 in rent and do that for the next 4 years and scale up to 20 properties with $20k downpayments. People who give advice that did it then have not evolved and see this as a "bubble". This is the new norm.

Financial independence will take 8-10 paid off doors in good areas, with likely 100% in reserves(full capex, vacancy, tenant turnovers) per house. That will take a long, long time. Lucky in 15 years, very lucky in 10, possible in 20-25 if you start in your early 30s or younger.

I would re-do your goals.

Hi V.G. thanks for the feedback. I should have clarified that part of the post or left it out. It wasn't meant as literal 20 doors exactly, but more an expression of wanting to multiply what I started with.
But I get where you're coming from in that last paragraph. Thanks

0 Votes

Starting with $500K cash + financing I could increase purchasing power to acquire more units vs. paying all cash.

Would you put the min down payment (20-25%) and finance the remainder or pay all cash and not carry any debt?

The properties need to cashflow or at minimum pay for themselves, because long-term goal is to replace my job income.

Considering circumstances and long-term goal, how would you do this?

Thank you

1 Vote

All Forum Posts by: Craig De Borba

Craig De Borba has started 4 posts and replied 17 times.

Post: New Member/First Post - DFW Area

Post: Looking for guidance - here’s the scenario, your thoughts?

Post: Looking for guidance - here’s the scenario, your thoughts?

Post: Looking for guidance - here’s the scenario, your thoughts?

Post: Looking for guidance - here’s the scenario, your thoughts?

Post: Looking for guidance - here’s the scenario, your thoughts?

Post: Looking for guidance - here’s the scenario, your thoughts?

Craig De Borba has started 4 posts and replied 17 times.

Biggerpockets Logo Post: New Member/First Post - DFW Area

Biggerpockets Logo Post: Looking for guidance - here’s the scenario, your thoughts?

Biggerpockets Logo Post: Looking for guidance - here’s the scenario, your thoughts?

Biggerpockets Logo Post: Looking for guidance - here’s the scenario, your thoughts?

Biggerpockets Logo Post: Looking for guidance - here’s the scenario, your thoughts?

Biggerpockets Logo Post: Looking for guidance - here’s the scenario, your thoughts?

Biggerpockets Logo Post: Looking for guidance - here’s the scenario, your thoughts?

Post: New Member/First Post - DFW Area

Post: Looking for guidance - here’s the scenario, your thoughts?

Post: Looking for guidance - here’s the scenario, your thoughts?

Post: Looking for guidance - here’s the scenario, your thoughts?

Post: Looking for guidance - here’s the scenario, your thoughts?

Post: Looking for guidance - here’s the scenario, your thoughts?

Post: Looking for guidance - here’s the scenario, your thoughts?