All Forum Posts by: Einar Mykletun

Thank you all for your replies, advice and suggestions. 

I'm also getting in touch with a few companies re the possibility of selling off my entire portfolio (7 properties) in bulk. Will at least want to compare their bids with what I'm estimating if I were to sell them individually.

Have a nice upcoming weekend.

Hello BP,

I am looking at selling off some of my SFHs in Las Vegas (price range $145K-$210K). I wanted to hear from others whether you think it will make a big difference (number of buyers) whether the homes are tenant occupied or not.

I'm asking well aware of that there were many more investors looking at Las Vegas some 4 years ago than there are today. However, perhaps some of you (real estate agents, investors) in Las Vegas have intimate knowledge about whether it will hurt me a lot (smaller buyer pool) if some of my homes are tenant occupied at the time of sale.

Thanks,

Einar

@Sunny D. - It was refreshing to read your post, as I feel similar about my California investments as how you described them. I also value the monthly principle reduction on my larger properties, and that combined with the cash flow (whether negative $100 or positive $100) gives me a better monthly yield than some of my Vegas properties that have higher positive cash flows (but much less monthly principle reduction). The potential appreciation is a bonus so far, and I am lucky in that I would be sitting on a fair amount of equity if I were to sell my first California home.

Thank you for providing numbers to give a comparison of your returns (Folsom, CA vs. duplex in Cleveland).

I will be patient with the cash I have ready for investments. I’d like to learn more about crowd funding opportunities, as 12% is an attractive return and I’d like to evaluate placing some funds into such an investment.

@Jack B. - Thank you for your analysis and advice, and for explaining your own thinking. I feel a bit conflicted about the advice about selling the Vegas rentals, as they are cash flowing nicely and they can withstand market corrections, both in terms of cash flow and in that I have large amounts of equity in them (could sell if needed). However, I do see the value in gaining more equity in my California homes too. Food for thought. Thank you.

@Dan D. - Thank you for multiple replies and for reaffirming that we all have different investment goals. I would prefer to not have any negative cash flowing properties of course. I’m also happy about the monthly principal reduction I’m realizing across all my properties, and do feel that I’m in a solid position with regards to the amount of equity I have at this point. Could my returns be better? Of course – but my potential for appreciation may then take a back seat as well.

Thank you for taking the time to put together the sample spreadsheet! One question I still have, and I apologize if I'm missing something that's very obvious… Regarding the possibility of refinancing at 75% LTV should the big property get to $1M: you mentioned that the mortgage would increase from $3,025 to $3,690 (about $700 increase). However, when I plug $500K and $750K as the loans (30 year loan at 4%), I see a difference of about $1,200. I'm not so concerned about the numbers matching up, but I still see it as a wash, if I increase my mortgage one property (by $250K) and pay off two smaller ones (each $125K).

However, the concept of paying off some of my small Vegas mortgages, in general, certainly would open up more cash flow, and I would actually be getting close to my passive income goal of $6K if I paid them all of.

Thanks again for taking the time it took you to reply in such detail.

@Dan D. - I like your suggestions for reducing debts via "juggling". However, I am not sure I quite follow the logic in your example. Can you please help clarify?

Say I were to refinance the quoted $1,000,000 property for $750K and use the spare $250K to pay off two small mortgages. I would basically be taking on $250K more in debt (replacing the $500K mortgage with a $750K mortgage), while also removing the same $250K in debt (by paying off two smaller properties). To me it seems like a wash in terms of cash flow, as I’ll still have the same amount of financed debt (monthly mortgage numbers) before and after. Am I missing something?

@Bob E. – Yes, I ultimately want to grow my portfolio, but only taking on reasonable risk via well thought out future investment decisions. The compounding effect is very attractive. One of my tasks right now is to find another market in which I can find properties that cash flow along with a trusted setup (vetted property management). I will try to reach out to you directly to learn more about the properties you are investing in, in the Midwest. Thank you again for taking the time to reply.

@Tim Ball – Thank for your feedback and for pointing out other aspects to consider. And just to be clear, money is very much an issue to me. I have diversified my financial life in several aspects, and real estate investing is one of them, with a goal being of not running into financial hardship should terrible circumstances come about. Thanks again and best of luck to you too!

@Ronald Perich – Thank you for replying (just after waking up ). I do appreciate you taking the time to provide the feedback you did! Let me chime in a bit.

What I meant by “10% appreciation” was 10% total appreciation after 5 years (not 10% every year). I like both options 3 and 4 (with conservative appreciation numbers). One area I have no exposure to and know very little about is Multi Family homes. Over the coming days, I’m going to read up and learn more about this area, and hope to then be able to identify markets in which I could potentially find such investment opportunities (e.g. 16 unit).

Thanks everyone! All your comments and feedback are though provoking and I’m learning and realizing several things along the way.

@Brent Coombs - I think I hear you loud and clear. I also see that I have not used the terminology correctly to describe my numbers (based on feedback). I have been quoting my income numbers after I remove mortgage expenses, etc, which of course then pencils in a horrible percentages. So let me try to clarify one aspect, as I still don't feel bad about my Vegas holdings, but again, I may be off:

Return based on initial purchase numbers
Initial purchase price of my 7 Vegas properties: $601K
Monthly income for all 7 properties: $7,400
Percentage return (per month): 1.23%

Return based on appreciated numbers

Initial purchase price of my 7 Vegas properties: $1.4M
Monthly income for all 7 properties: $7,400
Percentage return (per month): 0.53%

Should I be getting more than 0.53% return? Yes of course. But that's why I've joined these forums, to learn more and understand what I can possibly do now that I'm fortunate enough to have had my Vegas portfolio appreciated. Hope it helps clarify things now that I've laid out the numbers in line with how I think forum members typically discuss them.

Thanks again for the feedback.

@Dan D. - thank you for your reply.

Regarding my LTV across all properties:

Total Loans: $1.4M and Total Value: $2.8M, so 50% LTV across.

I do want to get to a point where I don't have to work if I don't want to. To sustain my current lifestyle, I'd need about $6K/month, but that would not be enough to let me build up additional funds to pay off more debt or acquire more properties (with my own funds), so I'd like to aim for higher.

At the same time, I do also want to build for potential of increasing net worth, which is why I started acquiring the Orange County properties (whether those were good or bad moves...). 

So, my thinking was: (1) build up cash flow with my Vegas properties and then (2) once I have enough cash flow to help buffer me a bit, while I'm still working, take on additional properties that can help grown my net worth.

I look forward to hearing back from you.

Thanks,

@Brent Coombs - thanks again for your continued replies. I won't take up more of your time but I'll answer some of your questions.

Yes, by 2008 the panic had set in. I had never purchased any real estate at that time, and wanted to get into a market. I evaluated Phoenix, Vegas, California, Minnesota and Rochester (NY), and ended up with Vegas. I did not believe I could time the market, and instead chose to try to buy (every 6 months) along a bell curve. My first two purchases were a bit too early while the others I was quite fortunate with. All the properties I purchased have at least doubled in value - but again, that was just dumb luck. Could one have done better? Of course one could have.

Did I go too cheap? Yes, with my first two properties I did, and I have since sold them. Those were the ones in bad neighborhoods with frequent tenant turnover.

Why didn't I look in CA at that time when I started? Because I was not comfortable looking outside of Orange County yet, and Orange County was too expensive for me. I did establish real estate contacts in Vegas which made it easier for me to get started there.

And yes, I need to re-evaluate and establish my goals for real estate investing. I have a fair amount of capital available to me at this time, and will get my goals straight before making any further moves (buying or selling).

Thanks again and all the best to you too.

Thank you @Brent Coombs.  I am realizing more and more that I have a ton to learn and that I have simply been taking a "go with the wind" approach so far. Thank you for your (and everyone's) honest feedback!

I agree with everything you are stating (Hoping, Should cash flow, Must rely on...). Can I provide you with some more details re my initial Vegas purchases, so you can provide any insight as I'm seeing that I should re-evaluate whether it is prudent to keep holding on to them.

Vegas properties
I made a goal for myself in late 2008 to purchase 1 SFH every 6 months. I ended up purchasing 9 homes and selling off two (class C/D with a lot of tenant turnover). Each property was purchased with 30 year financing between $64K-105K, and are renting out for between $950-$1,250. I managed them on my own until I had 6 of them, at which point I went through a couple property management companies until I found one that I was comfortable with. I have paid off 3 of the homes, by refinancing a few of the other ones (and using the money back to pay off the loans), and am in the process of doing my first pure cash-out refi of one of the 3 paid off properties (getting back 75% of the value). As mentioned above, those 7 properties I have left in Vegas are now valued between $140-$210K each, so I've simply been lucky in terms of the wind blowing my way (appreciation).

This cash-out refi is part of the reason that sparked me to write this initial forum post, as I am not sure what the best move is with the money I'm getting back (or if I should even make a move at this time). 

If there's additional info that I should be providing to give a more complete picture, then please let me know. I'm feeling like a newbie all over again and am trying to remove my preconceived notions.

Thanks again

@Brent Coombs - thanks for taking the time to reply. 

I'd like to ask a follow up question to better understand your suggested strategy of selling off a property that's risen in value, such as gather two more. I see the value in doing so, in terms generating more monthly cash flow, but are there any cases where you ride out come of these properties for a longer time, instead of selling? 

If we take the example of a $100K SFH, purchased 5 years ago, and rents for $1,200. Then it's value has risen to $200K and let's assume the rent is the same ($1,200). Obviously, relative to the higher value, the rent is now a smaller percentage per month, but are there any reasons why you would not want to sell it? I guess if you don't at all speculative about further asset appreciation, then it favors one to sell to try and purchase multiple more and potentially get two properties that each rent for $1,200.

I'm basically asking if there's value in holding onto a property that is in one's portfolio and performing, has solid tenants in it, as a longer term play. Guess it comes down to one's investment strategy.

Thanks - a lot to learn/figure out for me in terms of being more deliberate when making investment choices.

Meaning, if you purchased a SF for