All Forum Posts by: David Grabiner

If you are investing out of state why did you choose Phoenix? Why not the mid west where you can get some serious cash flow?

@Joe Villeneuve

Thanks for your response, you said a lot there but I would like to look at the numbers of how it would actually work. So lets stick with the example we had 45K ARV, 825 Cashflow, and lets assume the owner has had it for a year and that there are an unlimited amount of other deals exactly like it ready to be purchased. In your system you say you can reuse the 36K (80% of ARV) an unlimited amount of times, which is true but you are limited to how quickly that can be done in a year, because you have to purchase, rehab, rent and then find investors lets assume that whole process can be done in 3 months. So you can in practicality do 4 deals a year from that 36K. And lets assume you were able to find someone to loan at 80% ARV for 8% interested over 20 years for a mortgage of 300 per month. Disclaimer this loan probably wouldn't be given for only 1 property and would have to be part of a package but lets assume that OP as a package and he is debating between the two options but lets just look at 1 property to make the numbers simple. Ok now the numbers.

Option 1 your way- Present- 825 cash flow. 

After split: (825*.20 )= 165 Cash flow

End year 1: (165*5 the orginal property plus the 4 more done through the year) = 825 Cash flow. After 1 year you have 5 properties giving you a total of 825 per month.

End year 2: 825+ (4*165)= 1485 Cash flow

End year 5: 1485+ (12*165) = 3465 Cash flow

Option 2 Loan- Present- 825 cash flow

After refinance: (825-300) = 525 Cash flow

End year 1: (525+825 new property)= 1350 Cash flow

End year 2: 525+525+825 = 1875 Cash flow

End year 5: 1875+1575 = 3450 Cash flow

So after 5 years option one you have 21 properties making 3465 month cash flow. With option 2 you have 6 properties making 3450 month cash flow, not even including the equity pay down from the loan, or the time value of money, and the fact that you get 100% of the appreciation instead of 20% like with option 1. So lets say all properties appreciated 1000 at the end of year 5. Appreciation for Option 1: 1000*21*.2 = 4200. Appreciation option 2: 1000*6 = 6000. 

Personally I would choose option 2, but to each his own.

@Joe Villeneuve So current ARV is 45K then you sell 80% for 36K in doing so you give up 80% of Cash flow and future appreciation. If current Cash flow is 825 then you gave up 660 per month to get 36K not including what was given up in future appreciation. 660 per month seems like an expensive way to get 36K.

Now I like the creative way to solve many different challenges but it seems like the owner gives up a lot in this solution. The beauty of leverage is that you also leverage your appreciation but in this instance you are giving away your appreciation as well.  The original owner would be better of getting a 20 year loan at 12% interest then giving up that much cash flow. The loan would have a lower monthly payment and in 20 years you would have all the equity back. I see why this is good for the Cali investor as they get a good return but why is it better for the original investor than packaging properties together and getting a bank loan?

@James Rodgers The area you like staying when you are on vacation.

Graduating with an MBA without any work experience unless it is from a top school won't help you get a better job.  You need the experience more than you need the MBA, also you get more out of an MBA program if you can relate your course work to your real work experiences. 

My advice would be to get 2 years of work experience then decide whether you want to go for the MBA or not. 

I got mine after having work experience and I really enjoyed interacting and networking with other classmates who had more work experience than me. Honestly the school work taught me less then I learned from interacting with other professionals. 

When an expert writes a blog post and people ask follow up questions about the deal and he doesn't come back to answer them. It's obvious he has seen the questions and has had plenty of activity on BP but he just doesn't come back to address them. Instead he is off commenting on other posts. If someone is going to write a blog post they should take ownership of it and not just drop it like a hot potato when the questions get tough.

Ok rant over. 

@Jay Hinrichs 

That is interesting I never thought of that. So a savvy seller could use the wholesaler to find a buyer than opt out of the contract because it wasn't legal in the first place.

It seems you don't have a good relationship with your old tenants. As you have stated that You will NOT REFUND your old tenants. If you aren't even viewing it as an option then you are not going to be receptive to the good advice that many people have already given you. Why does it irk you so much if the new tenants pay you for the 8 days then you give the old tenants the money back for those 8 days? After all it was the new tenants that caused this mess by needing to move in early, it isn't your old tenants fault so it seems fair that they recoup the 8 days that they didn't use your rental. If it was me I would happily accept the 8 days from the new tenant and reimburse the old tenants but as I stated it seems you have made up your mind so......

Also why do you feel like the old tenants are con artists, nothing you have mentioned in this post would suggest to me that they are con artists?

@Tristan S. I think it would be wise if you got an umbrella policy to go along with those properties that are in your name.

@Chris Reynolds How about an update on this?