All Forum Posts by: Dustin Beam

 I get that and somewhat agree. However, not an apples to apples comparison. In shark tank, the entrepreneur probably doesn't have another "genius" idea. So what is given up, is given up forever. There's always more RE deals

Ignoring personal time involved, strictly financially, you're wrong about efficiency. Cash on Cash Return, ROI, etc are really efficiency calculations. You're dividing your yearly profit by money spent acquiring it. It's most likely that your profits will be higher w/ fully paid property, but you're doing "less" with it. Virtually without exception you get higher COCR when leveraged than you do when fully paid. It get even less efficient when you consider cash on equity, which is really an opportunity cost calculation.

This has nothing to do with risk tolerance, time involved, etc. Simple, by the numbers, efficiency. So for me personally, it has way more to do w/ where I am in my career. I'm very much in the growth cycle of mine, but eventually I'll be content where I am (I have no desire to be the next Cardone). When that day happens, I'll pay things down, and enjoy the lower stress levels knowing I have high equity stakes in my investments! 

Hello Beautiful People of BP,

I'm always attempting to think about the best way to keep progress moving forward, so I'm semi-planning out my next step(s). My current situation is not a bad one as I believe I have around 40-50% equity in my investments (put 30% down, increased rent, fixed damages), but I'm not real liquid. So although putting 20% down on a SFH or maybe a duplex or whatever would probably be feasible, I'd rather get a small portfolio or MF purchase. So I could not currently buy a whole lot with the normal 20% down financing without....

...cash out refinancing, taking a partner, or both. 

Refinancing would essentially allow me to take out all cash I have in it (assuming it appraises for what I think it would). I believe it should still cash flow, but obviously much less if I did that. Pros: Full owner of more property, full control of decisions.  Cons: Not only decision maker, "riskier" since more leverage

Taking a partner would be an ok idea too. I personally do not have a person that has agreed to such, and I haven't been the best about networking (my plan is to do better with that). Pros: Reduce overall risk, have help to shoulder inevitable burdens, keep more cashflow from current property.  Cons: Have to find a partner, probably still will need to cash out refinance some equity, share decision making which could be a problem.

I figure most people have to do one or both along their way, assuming substantial growth is their goal. It is mine, and saving 20% down is not going to cut it. My only real concern about doing cash out refinance is that I haven't been doing this long enough to go through a downturn in the market. I don't want to set myself up for failure.

Which method do you prefer?

(thanks for reading my book) 

As said, that's probably a tough question to ask. I can only speak from my perspective, but I want/like control and am always leary of people that control my money. But I also value my time....time is what I want anyway. Money made from REI just happens to be the way I intend to have more of it to do what I want.

So for me, if I can, it will go something like this:

1. Continue to accumulate property until I can semi-retire or fully retire from my cubical environment. 

2. Once I've done that, I have more time to manage so I continue to accumulate property until... 

3. Five percent of my gross rents are enough to pay my own employee that I train to manage all my apartments. Better yet, potentially hire two people so I have some redundancy should one of them quit. 

There are some potential pit falls with that plan (mainly there's a chance that 5% isn't enough to match the work involved w/ X number of doors. But that's my plan, only at 11 doors right now so managing them isn't always ideal but is doable with my current job. 

I'd guess he wants more money to play with right now, but doesn't need the whole thing to do whatever it is he is wanting to do. 

If that's true, it might be hard to get him to move off that, but doesn't mean you should give up. 

In my experience, it's in the ballpark of $1/sqft (of floor) for labor only. 

I could honestly probably make more as a painter as I could a mech engineer. The only difference is I currently don't have to hustle for my work and I get benefits. 

This is where renting in a college town would be nice. Cheap labor everywhere

I'm 10 miles in the air looking at your situation, so take it with a grain of salt. But your first $20k house, with $15k in improvements doesn't say "B- neighborhood" to me. 

I went up a "class" of neighborhood with my last, and only, 1031 exchange. I went from a C to a B. I love the difference. The buildings are newer and better maintained, which so far has reduced the calls about plumbing or whatever. I had decent tenants before, but the ones I have now I hear less from. All in all, I won't rule out having a C property... Not at all. But I'll strongly prefer B or higher for the reasons I stated. 

So if I were you, I'd sell all your property, reap the rewards of your hard work, and 1031 them into a nicer area. If you're risk averse, you can do a modest 33-50% down payment on your new property and still get in the ball park of $360-540k purchase price. 

If you're comfortable with "normal" leverage, you can be shopping for something in the $900k range. Does that sound fun to you? It does to me! haha good luck with whatever  you decide. 

Personally, I wouldn't. By my estimation, you'll cashflow around $5-700/mo over the long haul. I assumed 20% down at 5%, 20 year note. I also was optimistic at $800/unit/month. I made some other assumptions, but I'm seeing mid single digit cash on cash return and not enough cash flow. However, that's not IRR, so maybe you have other metric to reach your goals. You may also have the ability to add other money makers like laundry or cut expenses.

If you think my numbers are off, and frankly they very well may be, download my spreadsheet and enter your numbers in. See what you get by using numbers you're comfortable with. https://www.biggerpockets.com/files/user/DustinB17...

And for the record, I like to point out that you dont' have to use my spreadsheet, but use somebody's or build your own. I just suggest mine because I know it and don't know what other spreadsheets are like. The more you use one, the more easily identifiable a deal will be, even if your calculations are off a little.

 Fair enough, but I think "reasonable" is relative. If they truly are too high, it won't sell. If it does sell, then you can't blame them. Some sellers aren't very motivated, some are. 

 Maybe, maybe not. But my point is not that they are some evil seller trying to screw you. They are most likely just trying to get the best market value they can. It's up to you to decide if it works for you or not. 

Conversely, I don't make my rentals nice and cheap, I rent them for what the market decides they are worth.