All Forum Posts by: Don Aleshire

This is great feedback @John Warren ! Interesting stat on 3-5 years versus true long term, my assumption was 20+ years. 

These are great things to think about when looking at self manage versus selling. Thanks for this detailed response!

This is an EXCELLENT breakdown @Jarret Jarvis great ideas provided by you, thank you for this! 

Thank you for the kind words as well, you the man! 

Thanks for this @Mike Arias I will check them out tonight! 

Thanks again @Dan H. for the detailed breakdown and insights, this is exactly what I was looking for. I don't need confirmation bias, I like different opinions to help challenge what I (or can't) see.

The one challenge I'll have moving forward with real estate (rental, commercial or residential) is that I am 100% investment income (LTCG, Dividends and current Rental Income). I have used HELOC's and Stock Margin to purchase properties before since my wife and I no longer have a W2, DSCR loans will be the primary resource. It makes the math very tough on purchasing, at least from my perspective.

If I do purchase, I'll most likely do 100% cash and/or a small position via DSCR if the numbers work out. I do hope we move and stay in San Diego long term (20+ years) like I have with Chicago (40 years). I'll use these next 20+ years to not only evaluate Real Estate, but other income sources (businesses) to see if I can find something. Good problems to have :)

Either way, appreciate the context and this has me thinking, exactly what I was looking for.  

Very insightful and detailed, thank you @Krystyna Schexnayder ! These are all things that I will considered when looking at Property Management vs Self Management. Great points!

Thanks for all the detailed feedback all!

@Dan H. I truly appreciate your facts and your knowledge on all of this. I am adding a bit more context -- 

The $1k in expenses is coming from 10% of the total gross income ($11k) across all 6 units (3% vacancy + 3% repairs/maintenance + 3% cap ex + 1% misc). I have owned/house hacked these properties for 8+ years and all expenses totaled up (including rehab projects upon purchase, major cap expenses, CPA costs, etc.) comes out to $1,200 per month. So the assumption of $1k per month isn't far off. But to your point, this does not include Property Management. Thus I am trying to determine if managing these from a far makes sense as I know a PM would destroy cash flow. 

From an appreciation standpoint, Chicago as a whole is similar to other major cities, each neighborhood appreciates drastically different. The neighborhood I am in (Avondale) has changed drastically over the past 10 years. We typically value properties based on rent multipliers, in Avondale 11 is a good rent multipliers. Gross income/rents * 11 rent multiplier = Total value. In the 8 years of owning the properties, the rents have gone up dramatically + zero tenant turn over due to below market rates. Purchase price for both buildings were $440k + $660k and based on rent multipliers, current values are $600k + $900k ($1.5M total). Assuming a 11% cost to sell with $600k in equity, I would be left with roughly $400k in after sale cash to myself. 

Thanks for this perspective too @Aaron Zimmerman Based on this info above, I am starting to lean toward the $400k in cash versus the cash flow. Not including Property Management, the cash flow would be closer to $2.5k/$3k per month. Sounds like we are in the same boat with a handyman :) 

And to @Jonathan Klemm point, I have to weigh the mental capacity of handling issues remote versus spending time with family. This is a critical factor that I am weighing as the $400k invested with assumed market return is equivalent to $1,600 in cash flow (4% rule). The urgency varies of course (shower door pops off, sink clog, etc.) I typically can fix these myself the day of due to living on the property. Even when I travel, the tenants don't mind a bit of a delay. I am open to any names that you would be willing to share and putting together a list of repairs/tasks to run past them to gage their interest. 

Overall, I appreciate the conversation here everyone. The house hacks have worked out for me over the years to help lower my cost of living, while building new skills and equity. But based on this feedback above, it may be time to evaluate selling them. 

Please continue the convo and add any feedback or quesitons!

This is fair feedback @Dan H. and I appreciate the comparison of Stock Market vs Rental Real Estate. I am going to add a bit more context, please provide any extra thoughts or insights. 

I am heavily invested into the stock market at the moment (Index Funds). Enough so that my wife and I no longer need regular income to support my families life style via the 4% rule. This stock income (LTCG) along with the rental properties in Chicago, we have a life of abundance at the moment.

With that being said, the rentals in Chicago do a portion of the heavy lifting by eliminating the housing costs completely while adding $1k extra each month to cover Cap Ex and other expenses. This is a huge value add and allows us flexibility if the market ever dips or issues arise.

I have been assuming that $1k per month in Cap Ex/Expenses, which is roughly 10% of the gross income across all units fully rented out. (PITI $7k Rental Income $11.5k).

With San Diego, we would plan to rent as I just don't see the value in owning a house as a primary residence, there are just too many expenses to justify the cost of home ownership, especially in San Diego. Like you mentioned, the money in the market is effortless. Unless I could find a rental property to house hack (Casita?) or some other form of cash flow investment, I think renting fits our needs. 

With all this being said, if I sell the rentals in Chicago, after selling costs + tax, I would be looking at $400k. ($600k Equity - 10% closing costs/Taxes). While the $400k isn't nothing, I view the roughly $3k per month in cash flow as stronger ($4k - $1k expenses). 

What might I not be seeing with this math/view I share above? Again, I am open to any and all feedback as I am trying to make the best investment approach. Thanks in advance!

Thanks for this feedback @Ty Coutts! 

For property management, I have concerns on them actually adding value for what I am paying them for. Maybe I am not seeing the full picture but any specifics you could share that they would bring to the table? 

Since I do all the management myself today and all the tenants are long term, it hasn't been that much of a hassle. 

Great call on Thumbtack, I will start to test out smaller jobs on there and see what I can find! 

I do have a HELOC on one of the properties already but I will keep you in mind for future financing needs. I am no longer employed (purely living off of rental income) so DSCR loans would be needed in the future.

Hello, wanted to get peoples thoughts on long distance rentals and how I should best prepare --

I have two 3 unit buildings in Chicago that I have owned for several years. We started house hacking back in 2018 and lived in one unit for 5 years. Prior to our first son being born, we purchased a second 3 unit building and currently house hacking that for the past 2 years. 6 units in total with us living in 1 of the units today. All long term tenants with 0 turn over (so far). My rents are a bit below market rate but no tenant turnover is nice.

My wife and I are looking to move out of Chicago to San Diego in the next 12-18 months. We are currently making roughly $1k per month house hacking all units and would earn a bit over $4k per month with all 6 units + garage spots rented out (Rental income - PITI). Total value of the 2 properties is roughly $1.5M and I have close to $600k in equity.

The buildings are both 100+ years old but I have done my best to do capital improvements over the past several years. Updating pipes, electrical boxes, roofs, appliances, etc. I also have a good network of people I trust (electricians, plumbers, painters, roofers, etc) but I do not have a reliable handy man. I typically do most small jobs myself or find random handymen who do a decent/poor job.

All leasing/property management is done by me today and I think it will remain that way in the future, even from afar. I would farm out my local friends/baby sisters to help do showings if a vacant unit arrises. I also thought about leveraging my Chicago network (friends + neighbors) to keep an eye out of the properties from time to time. All tenant issues would still come directly to me via text/email/call and I can be the middle man to broker the communication with handyman/repairs/etc.

I have handled issues remotely before in the past while on vacation for a few weeks (pipe burst, sink clogs, broken appliances, etc.) While not fun, I have managed to get through the issues and returned home to everything being solved.

My biggest challenge is finding a handyman I can trust for simple/small/medium jobs. How have you found handymen in the past? Where have you found success finding them? Any details you can provide would be helpful.

Since I have the next 12 months to plan for this, I am open to any additional feedback/suggestions on what else I should think about. Based on the cashflow, I think it makes sense to hold onto these versus sell but again, open to ideas. Thanks!

Thank you for this detailed explanation @Brie Schmidt , this was exactly what I was looking for. Much appreciated and yes, I am happy to chat with @Sam Sharp when the time is right. Feel free to reach out to me directly on here to chat. 

I think that is the way I will have to go @Julia Lyrberg . Good to know about investment purposes only and not owner-occupied. That is what I am currently doing now but things do change. 

Appreciate all the insights and info all, much much appreciated!