All Forum Posts by: David B.

Hi all!

I have a Fourplex under contract in a growing area outside Orlando. While I have two houses, this would be my first multifamily. 

Looking at conventional financing, my cash on cash return would be roughly 7% year 1. Which, isn't necessarily ideal. However, I'm factoring in appreciation on this property and annualized rate of return is closer to 22%

 I would like to be able to up the cash flow on this property. I know a lot of investors advise against a 5/1 arm, but when I do the math I see that it would add significant money to my pocket, increase my ConC to 11% year one, and I don't really intend on holding the property longer than five years. Preferably, I'd like to own the property, then 1031 exchange it into something significantly bigger. 

I've heard that the origination points on a ARM make it not worth pursuing, but frankly I don't fully understand that. If it cost me money to get that deal, but my cash flow brings in lots more money yearly, and the property continues appreciation, do i really care about the extra upfront closing costs?

Would love to hear your thoughts. 

*Note: I will be buying the property cash, then CASH OUT REFI in 3-5 months time, after I close on a primary residence. I'd like to refi @80 LTV with the lower ARM interest rate.


 

@James Hamling Do I seem “flipped out” to you? I was asking for advice, not a mandate.  

It appears you were baptized in the fires of real estate with nothing but success from day one. Bless you. But for the rest of us, who made our money elsewhere and are now seeking to expand into new ventures, we’re using these forums to expand our knowledge and trade ideas.

You and Jim should team up if that’s so beneath you. 

I find it interesting that someone who so easily punches down on another, presumably because they’re SO successful that my mere mortal questions are appalling, is the very same person who couldn’t offer a single piece of wise, compelling, or actionable advice? 

Hmm…

This might be a more helpful and specific way to phrase my question.

Given 300-500k to invest now, in this market, would you prefer to A) take that capital and try and pour it into one (or maybe two) big multi family units or B) spread that amongst smaller, less expensive SFH and Multifamilies @ 30-50k down payments a piece.

Hey @Gian Cuffaro! What part of Florida you interested in? I’ve been looking in Polk County, Orlando and Miami. I’d like to dig into Tampa as well, but haven’t got feet on the ground there yet. Definitely an exciting market.

@Daniel Sanchez appreciate the thoughtful response Daniel. Definitely trying to scale real estate opposite my stock portfolio so that in the future they'll both be powerful assets. I definitely want Multi family units, however I am considering a quality SFH or two so that can cash flow and appreciate in some of these hotter markets (Texas or Florida)

To be clear @Andrew Hogan, educating myself is exactly what I’m doing by opening up this discussion to more seasoned investors. I have my own opinions and goals, and I’ll need to make my own decisions based on the market or deal I happen to find. There is no one right away. That said, learning from others experience is invaluable while trying to formulate a course of action. If you have a better way of educating myself rather than videos, conferences, networking and speaking with more experienced investors, I’m all ears… no, seriously. :) 

Thanks everyone for your responses! Definitely considering all the feedback. This is what’s so wonderful about this community.  

@Dillon Cook last question - how does one shop or find SFH portfolios?

Hi @Dillon Cook!

I tend to agree that blue cities/red states is the way to go, as that’s where I think the markets have space to grow and make excellent returns. I love florida and have been looking there intensely. I’m also purchasing homes in Salt Lake City.

Can you elaborate on “taking over SFh portfolio”? Would this simply be an acquisition of someone else’s properties? Would it not serve me to grow this for myself? 

Instinctually, I like the idea of building a portfolio of SFh as I could rent them, let them appreciate, get more experience, and then eventually exchange them for bigger properties. But then I wonder if I’m thinking too small and should aim for bigger. 

@Chris Levarek hi Chris! 

Simple answer is I want to be hands on at first, then develop a portfolio where I can simply manage the managers. 

I’ll never stop doing what I do for work (actor/writer), but I typically have a fair amount of downtime. Even when I’m working on a film, I typically only have to come in for five days- 2 weeks max. And as for writing, I can do that half my day and manage property the other half. 

I’d like to be able to be involved in value add play as I think I have an eye for making properties look good for cheap. 

Since I'm still young, I don’t mind working hard to make sure my portfolio grows exponentially over the next 5-30 years. 

That said, I would need good management firms for bigger investments. Or partners with some experience.

I tend to think that by buying a bigger multi family, that’s probably the move that will grow long term wealth better. So that may be the best option if I can find a deal. Even though there will be some tough learning lessons attached. 

Still interested in STR out of Miami, but recognize that systems would have to be built to streamline the process.

@Joshua Janus thank for the idea Josh. I would love to get a property with a DSCR. Do you have any tips for finding a great management company? Also, what price range do you imagine a property like what you're describing goes for? 1.5 - 2 million?

Hi all -

 
So this is a post that is essentially meant to generate thoughtful discussion about how I should start investing in real estate with the wealth I’ve been fortunate to generate. I have enough capital to do some cool things, but not enough wisdom to know what my best options are. So I’m humbly relying on all of you to help stoke the fires a bit, or maybe tell me if I’m heading in the right direction. Thank you so much for your thoughts in advance. I appreciate the guidance, and I apologize if I come across as a rookie for asking this.

First, some stats:

34 years old  

Job: artist/ entertainer (which means I don’t have particularly steady income, or predictable W2’s. That said, I make a fair amount of money)

Net Worth: 1.55 million. 

Available cash: 300-500k. 

Goals: cash flow, plus high appreciation over next ten years so I can 1031 exchange to bigger properties. 

Properties owned: I own one cash flow townhome worth 550k. I am also buying a new Single Family Home in May that I expect to appreciate significantly, and cash flow slightly. I will be able to force appreciation in this home by finishing a basement with 3 new beds and 1 bath. 721k. Salt Lake City market. 

I have about a 1 million invested in stocks, which provide dividends for me to live off when work is tough. the rest right now is cash. Due to inflation, and my growing hunger for real estate, I would like to invest at least 300k into multi family properties this year. But I could go as high as 500k for the right deal. Multi units that I could force appreciation into would be awesome, as I love the idea of refinancing capital out.

I should also mention that I expect to make about 425 k, in installments, from another business deal over the next 3 years, at a minimum. I would like to add that money directly to real estate investments. This would total 725-925k thousand that I could invest over the next 4-5 years.

Lastly, before anyone says I should liquidate the stocks and use that too, my goal (currently) is to not touch my stock portfolio for 30 years, and to develop enough cash flow in real estate that I could live off of that and leave my dividends to reinvest. This would exponentially increase that portfolios value over time. Also, because I’m an artist and I have tough years, I’m concerned about losing that dividend safety net that currently nets me 80-100k. 

OK! So all that said, I’m debating between…

1. Going big. Trying to find 8-20 unit multi family deals (maybe with a partner to scale quickly) in hot markets like Miami, Tampa, Houston, etc. Sort of “Grant Cardone Style”.

2. Buying smaller single family’s and multi family’s in areas like Lakeland Florida or the Midwest. Where I can put 30 -45k down, net a little over a 1k a month, and get some thing like 15-20% cash on cash returns. Then, once I’ve acquired quite a few of them, let’s them appreciate until I can sell/refi/1031

3. I have an idea about finding a luxury home in Miami that I could short term rent. I’ve seen a lot of awesome cash flow on those deals and I’d be interested in having a “second home” that I could Airbnb when I’m gone. Of course, I would continue to diversify with other properties as I had cash coming in (not just short term rentals. More traditional multi families.)

* My first cash flow goal is 5000k a month, but ideally I’d like 10k.

Thank you everyone for reading. I really appreciate any advice or guidance as I begin this new financial journey for myself. 

God Bless,

D

Hi all!

So ive found a really interesting property for 600k in the Miami area. It needs a substantial amount of updating, but the property has a lot of options in terms of what I could do. For instance, a rehab could be as simple as kitchen /baths/ cosmetics. Buuuuut there’s also room for a pool in the back. And the potential to take some walls down. New modern fence. Etc. 

However, in theory, I really don’t have to do any major work to it and it’s still rentable. It would be pretty undeveloped compared to growing properties in the area. but it would cash flow.

From a Rehab perspective, I estimate 50-120k in costs depending on what I want to do. 

If I chose to make it a luxury home with a pool, rents could be as high as 8000 a month. I could also short term Airbnb it for crazy money. It’s only a short drive to Miami Beach from the property. Although not sure I’m ready for that. 

There’s also the potential to just flip it if I needed the cash. Sold comps in the area reflect an average between 900k to 1 million. 

What I want to do is purchase the property, rehab it, then rent the puppy out. if any of my various number crunching scenarios are correct, the property is a cash cow on the other side of the rehab.

OK - so what’s the problem?

Well, a few things…

1. they only want a cash offer. I’m about a 100k light at the moment. 
2. ive never rehabbed a property. This would be my first. Yikes. 

3. the property is out of state (but I could live there during a rehab or to set it up renting) 

4. I have a primary residence I'm closing on in March that I'm concerned this deal could somehow mess with. Like somehow this would screw up my DTI for a lender and I wouldn't qualify for the house. Or god knows what.

5. I’m generally a rookie investor… I only have one rental property thus far and I’m still learning. 

Rookie or not, I have a fair amount of cash for building my portfolio, and I really think the numbers on this property make sense, even if I do have a lack of experience. 

I guess I’m wondering if anyone in the community has tips for out of state investing? Also - will doing this deal somehow screw with my financing on the primary residence purchase (for 721k) I’m closing on in March?

My strategy for this property would be to 

A) buy it cash 

B) delay finance on the other side. 30-45 days after closing. Also a first for me… 

C) get a private loan for the rehab costs.

D) pay down the loan and have smoking high cash flow property on a mortgage that only costs me 2500ish a month. And have built a ton of equity in the home. 

I like this deal cuz it has a lot of options and ways to make money…. But you don’t know what you don’t know (as they say).

Open to any and all thoughts before I begin this adventure. Yes I’m a rookie, but I tend to think that fortune favors the bold and this property may justify a big move. 

I just don’t want it to also punish the foolish. Haha

Thanks everyone!