All Forum Posts by: Axel Meierhoefer

Quote from @David M.:

@Axel Meierhoefer

so your plan is buy a cheap duplex in OH, with "special financing" that allows for 11% down, then hope/wait that rates will come down in a few years to refi to generate cash flow? Sure if you take a bet on rates... sure if you are only using "11%," the CoC return should/will look phenomially high. But, what is the actual cash flow? You don't say? If you can cash out all of the 11%, your CoC will be infinite, even if cash flow is $1.

I don't get it..

 You are right. Sorry about that. The initial cash flow is $70/month + net of rental increases until refi.

The goal is not to sell but to refi into a better rate but at the future value, so no additional cash will be needed but monthly mortgage payment will be much lower. It's basically delayed gratification that allows me to buy three duplexes instead of one with about $50K

Quote from @K S.:

Quote from @Axel Meierhoefer:

By the way, there is a way to get really impressive COC if you are willing to accept some delayed gratification and possibly tap into the equity you have in your CA properties.

If you are interested, feel free to DM me

Can you elaborate on your strategy for impressive COC from equity in CA properties without the secret messaging? 

Yes, I can KS.
The fundamental deal is the same as always, making sure that a traditional residential property meets our criteria, is well renovated, and has a great ratio of purchase price and rental income.

Just as an example: I was offered a duplex in Ohio last week for $135K, rental income of both units together is $1900/month and the down payment through a special financing vehicle is $15188.

Initial cash flow is minimal but still positive and with a planned refi in about 3-4 years when rates are back down, it will jump massively. At that point COC will be amazing, even if rents are not increased.

COC in Year 5 after purchase will be about 30% and slowly increase with modest expected rent increases.

Not all deals are as good as this, but if you think how many properties could be owned and managed professionally, this is the approach I am applying myself.

@Becca F.  had mentioned the stress with the management of OOS properties, I can only suggest using professional management. I really mean professional as in: proving that a PM has a sizable portfolio, documentation and forms that demonstrate processes that make life for tenants and owners easier, and software that keeps communication easy. 

I literally spend about 2 hours/month on calls with my PMs for the three clusters I have in my portfolio of 9 properties. There is really no stress. It’s a matter of developing these relationships and it becomes a business meeting with 3 PMs 1x/month.

Quote from @Becca F.:

Very insightful comments! I'm nowhere near the portfolio of the previous commenters. I plan to keep the Bay Area SFH (solely owned) and multi-family (co-owned with family) and pass it onto my kids and they also get my primary residence. With the Indiana SFHs, I may 1031 exchange all 3 properties to a California or Nevada SFH. Indy SFH#1 has a good amount of equity, Indy SFH#2 is currently losing money with all the repairs. This was supposed to be turnkey. @V.G Jason made a comment about flips in 2020-2022. I bought that house from a flipper who renovated it in 2022 and overpriced it (I got a good deal and some seller concessions at the time). Indy SFH#3 just closed on it less than a month ago (not rented out yet). Looking at my options but may sell the 2 recent Indy homes and invest in more liquid investments. 

Someone else made a comment about quality of life. I'm constantly stressed out with managing these OOS properties and my W2 job (the combination of doing both and taking out more mortgages). I was trying to achieve the "live off my rental income in 3 to 5 years" and there's no way mathematically I can do this unless I scale to commercial RE (apartment buildings, not retail or office space). Not sure where I would get the capital to buy apartment buildings. Scaling with Class C SFHs in the Midwest at these interest rates is going to be a slow painful process to achieve wealth. (Not hating on the Midwest. I don't think it's a good strategy for me but might be great for someone else).

 I would love to discuss your portfolio in more detail. I agree that my portfolio was not created in 3-5 years either, but having as many properties as it sounds in underperforming markets when focusing on cash flow is somewhat counter to your stated goals. I also wonder if you are not trying to build clusters i.e. in Indy and have those professionally managed? That's what I do and depending on how much cash flow you're looking for, you could do the same.

By the way, there is a way to get really impressive COC if you are willing to accept some delayed gratification and possibly tap into the equity you have in your CA properties.

If you are interested, feel free to DM me

Quote from @Jasmine Vida:

Quote from @Hamp Lee III:

I'm active duty Air Force and maxed my VA loan benefit with three properties. This is a great way to get started.

I wish you all the best.

Do you move every year and convert your loan? Or do you sell? I've heard you can use the VA loan multiple times, but I'm curious on the steps to do this.

I am not an expert but can respond based on what I was able to do when I was eligible as a military officer and what VA official sources provide.

When you say "use that VA loan multiple times", it is different than having and paying for multiple VA loans simultaneously.

Fundamentally, if you were a career military member, joining at 19 years old and staying till you're 60 and get transferred from duty station to duty station (PCS) or in some cases even after retirement, you can apply for a new VA loan each time. If you have a VA loan at your current station and you move to your new station you can apply and end up having two loans.
So, depending on how often you are transferred and remain eligible you could have used VA loans 20+ times in your life.

There are even circumstances where you could have three loans simultaneously. There are a few issues to consider as you can't have an unlimited amount of money as VA loans, so that creates a limit. Also, the program is not in place to allow you to get an investment portfolio with no down payment using VA loans.

When interest rates are relatively low as they used to be between 2018 - 2021, you could get a VA loan for your residence, get PCS'd, keep the loan, rent out the house, get a new loan at the new station and if you get PCS'd again a few years later, you would refi the original first loan, unless you still had enough eligibility versus the maximum loan amount the VA is giving. So in certain circumstances you could have a total of three loans. By that time, typically about 3 years after you started renting the property with your first loan, you should have been able to increase the value of the property and pay down some of the loan so a traditional loan with 20% down and 80% financed would work.

These days this is much harder because a VA loan you received say in 2019 with 3% interest would refi now to an investment loan with 8% interest. What might still work is the value increase. A lot of properties have increased by 50% in value and rents have gone up a bunch as well, so the math might still work but it has gotten harder to retain these properties.

What you could do is to sell the original property and take the equity to buy an investment property in a well-performing market. That's what I ended up doing. The places I bought using the equity were not where I was stationed and I did not get VA loans (obviously) but the program helped a lot to get started.

I know this is all a bit complex to describe in a post, so if you like to chat about it, send a DM. Happy to provide what I learned.

Quote from @Hamp Lee III:

I'm active duty Air Force and maxed my VA loan benefit with three properties. This is a great way to get started.

I wish you all the best.

 Depending on how long yu have been investing, you might be able to free up at least one

Quote from @James Wise:

Quote from @Axel Meierhoefer:

I have been investing in turnkey properties the last 10 years and have had great experiences. All my deals are out-of-state and they perform well. As I am getting older, I realize that some of my properties are even much older than me and I want to keep my portfolio pretty much forever, ultimately turn it over to my daughter and have her benefit form fully paid SFRs.

For my own portfolio growth I decided to add BTR because they, I assume, will last longer. I might even 1031 exchange into some if the interest rates come back down in the next few years. For right now, I am looking for help identifying the best BTR deals people on BP are aware of.

I assume that will also be of interest to make other investors here. My criteria is to find deals that re as close as possible tot eh 1% rule.

Thanks for your help

 This post sounds a lot like a thinly veiled advertisement for build to rent consulting services. I'd imagine you'd fare better if you just posted your ad in the BP Classifieds section. The BP readers would feel a lot better doing business with someone who is upfront with their intentions.

 Thanks for the feedback. Not sure which part makes you feel I am advertising for anything. I am actually trying to find the best available BTR deals. How is that an advertisement?

I have been investing in turnkey properties the last 10 years and have had great experiences. All my deals are out-of-state and they perform well. As I am getting older, I realize that some of my properties are even much older than me and I want to keep my portfolio pretty much forever, ultimately turn it over to my daughter and have her benefit form fully paid SFRs.

For my own portfolio growth I decided to add BTR because they, I assume, will last longer. I might even 1031 exchange into some if the interest rates come back down in the next few years. For right now, I am looking for help identifying the best BTR deals people on BP are aware of.

I assume that will also be of interest to make other investors here. My criteria is to find deals that re as close as possible tot eh 1% rule.

Thanks for your help

@Fatoumata Diallo Welcome to BP.

Your goals are great. I am focusing on the ultimate goal you also have. Long-term buy and hold. It's a great pleasure helping people to achieve that goal.

I am wondering how much time you have besides your regular work. All the people I know in that field tell me how busy they are.

If that is true, I would suggest one of the strategies my little "tribe" and I apply, where we get out-of-state properties managed by professional property management companies so we only have to spend very little time after the initial purchase is complete. The partner providers I work with also do the flipping work.

It's true that some potential profit might be lost by letting them do it, but on the flip side you can use your time for your main work or relax. Most flippers I know admit that it si a steep learning curve, especially these days as the margin of error is very slim and renovating for too much cost leads to non-performing properties.

With the long-term goal in mind, we have found that letting professionals do their thing and we do what we are good at, like in your case lab technicianing -:) seems the most efficient approach.

If you have questions, feel free to contact me and we can chat

Quote from @Sangam Baligar:

@Sateesh Kumar, I second what Alex mentioned about being careful of shady areas in Oakland. And there are OK to really good parts of Oakland that provide you with a good CoC and Cap rate. I own triplexes in Oakland and have been doing great. All you need is a good realtor(s) who knows the East Bay well and every ok/good pockets of East Bay. Off-market deals with a little TLC are the way to go to hit the higher CoC.
Selling your Triplex-- I would recommend doing an a1031 it's a bunch of money for you and I'm certain that you will be able to find a property in East Bay ( Hayward, Oakland, Berkley, etc) to match what you're looking in terms of returns/cashflow. Happy to connect offline. 

 I agree @Sateesh Kumar. Just can't imagine a 12-plex for 2.2 mil in a good area 

Quote from @Gayle Eisner:

Greetings fellow investors.

Climate Change is a topic that is not discussed enough on this forum.  I have been concerned about this issue for a number of years now.

I have a couple of rental properties in the Monterey area that are about a block from the beach. Great rental income, great location, great tenants. I have been increasingly anxious however, due to the proximity to the ocean. Last year was, in my opinion, not a once in 100 year occurrence. Power was down, homes and businesses damaged and closure of highways. This year, again, extreme damage to businesses has occurred in Santa Cruz, CA (near me) and winter has just begun. I was thinking of selling and doing a 1031 exchange to a "safer" location. Ideally, I would love to keep the rental properties but the possibility of losing these assets is of great concern. Both are paid off. Rumors in the area are that insurance companies will be pulling out and I will be stuck with the expensive, minimal government insurance.

Questions: Has anyone experienced this same situation or have any advice on new investments still in CA?

Thanks kindly!

 I used to own a property in Santa Barbara and did a great 1031 exchange. That got me in a much better-performing portfolio. I had to use leverage, but you could get away without it. I have access to great deals in case you are interested and want to 1031 exchange out of your situation before it is too late.

I realize that letting go of the area is hard. I have done the drive each time I was visiting and during my military time, I did classes at the electronic warfare school in town. Still, for your and your family's future you should get to saver, more profitable grounds