All Forum Posts by: Dustin Beam

And minimizing risk does make sense for some like you for sure. Return on equity is really an opportunity cost calculation. And that needs to be weighed heavily against risk. Risk is much harder to quantify as a number, but if goals are being met and your risk is low, who cares if you're sacrificing opportunity? 

Reaching your goals are all that really matter. Exceeding them may not do anything to change your life

 I'm settling into my latest purchase. They were purchased with a 1031, so down payment was about 30%, and were less than half full. I'm expecting something around $300/door with my current terms after capx, vacancy, etc. That would be around 12- 14% cocr. Just got to 100% occupancy, so time will tell. 

BTW, Brandon has said he shoots for 100 per door if fully financed and after all expenses and vacancy (if I recall correctly). I think my current properties would be similar to that with no down payment. 

I have townhouses, but the HOA had been defunct for a while prior to my purchase. Personally, I'd rather one not exist.

But if you're wanting a healthy HOA, I'd start by judging the community. Are the roofs, lawns, exteriors all well maintained? I think that would be a good starting point anyway.

Then hope they don't raise the HOA fees on you.

 At some point return on equity should be used if substantial appreciation or debt pay down has occurred. But of course, what a person does with that depends on how comfortable they are with leverage, risk, etc. 

The funny thing with REI, each asset typically will perform worse over time as far as percentages go, even if cashflow continues to go up. To me, those percentages are important when in growth mode (where I'm at) but much less so if you've reached your goals.

I think cash on cash return is more important.

Right now at age 38? Leverage. Ask me again in 15 or 20 years and my answer is likely different. It's not that different than other investments IMO. People tend to be more aggressive (more risk with higher upside) when you've got time to make up for some mistakes and more conservative when you're older. I'm no exception. 

I'm not too fond of someone trying to strong arm me, so my first impulse is to tell the guy that you're happy to do business with him under the terms you already discussed or he can move on if he prefers it that way. I've never partnered BTW, so this is just general relationship thoughts. 

What are your reasons for multiple partners? I know you said you'd have less cash to go around, but if the splits are based on invested amount, will it matter? I see where you could get some diversification by having a smaller slice of many more pies than 1/2 of one pie. Is there another reason? 

I have a spreadsheet available, I think on page 5 of the spreadsheets in File place here, that IMO does a much better job of estimating Cap-X. Feel free to download it. 

Or download someone else's. I'm really not pimping my spreadsheet, there may be others that are much better, but it's what I know. But in either case, I agree that using percentages of rent or purchase price are silly since that varies greatly on a location but the water heater/roof/etc costs are nearly the same. 

If you own outright, you might be able to get a HELOC and pay cash for your new purchase (depending on the HELOC LTV and final price on new purchase) . Then sell your old house. Obviously you'll have some costs associated with the HELOC, and you want to be very sure you can sell your existing house quickly (if cash on hand is tight).

But if you're confident your value on your current house is right and it will sell, you should be ok. But run those numbers to make sure it all works! 

IMO, ultimately the metric that is most important is IRR, but that requires more speculation (essentially it's COCR, plus debt pay down, appreciation, etc). I only have a few years under my belt, but I currently use COCR as my primary deciding factor for evaluating a property.

OH, and if you truly have 0% down, then COCR is essentially infinite if you are cashflow positive. That's the dream IMO, property with none of your own money that safely cashflow after cap-x, vacancy, etc.

There are several spreadsheets available here in the tools>file place area (including one I made). Try a bunch of them out and see if any of them work for you.