All Forum Posts by: Michael Win

I have a duplex.  How often should I do pests treatment?  It costs $85 /quarterly treatment so about $340/yr.  

It seems alittle excessive.  I would think twice a year is plenty.  My house, we treat only when we see any signs of pests which is once a year or once every two  years.

Morris green properties is the best. U will thank me

25% return in 6 month being a reasonable goal? This alone tells me you will have no chance of making it. Putting 2500 on red and doubling down if you lose would give you a better chance at 25% return than in RE. If I could confidently get a 15% yearly return, i and most would quit our job now.

Originally posted by @Nayeem Khan:

All things being equal, I would install the tile especially in and around the wet areas = much more durable (at least in my opinion). Laminate in a working lower class areas is not going to bring in the ‘premium’ rents.

 I agree, I think ceramic tile is the way to go.  I don't think tenants in the 800-1200 range would care about laminate

I know people purchase properties with all cash.  Can someone explain to me why anyone purchase a property with all cash rather than finance it.  I just bought 6 duplexes  and here are the numbers for the two options.

Total price 1 mil.

If I purchased it for 1 mil, the free cash flow would be $85k (these are hard numbers from 2014). ROI would be 8.5%

I financed it with 30% down. so for 300k, the free cash flow for 2014 would be $85k-42K (P&I) = $43k. So my ROI would be 14.3%. If you account only the interest portion (30K), my free cash flow would be $85k-30k = $55k or a ROI of 18.3%. I consider the principal payment portion income which makes complete sense to me.

So paying cash, my ROI is 8.5%. I would also deplete my cash that could be used for other investments, security, rainy day fund, etc.

By financing, my ROI is 14.3% but effectively $18.3%. I would have more cash on the sideline to finance other non real estate ventures (which I am looking at), buy more properties, etc.

What am i missing?  What are the advantages of buying a property outright other than the peace of mind?

BP,

Thoughts on what to put down for flooring.  Just closed on 6 duplexes this past Friday.  Each  of the 12 units rent for about $800 on avg.  There are 2 vacant ones that should rent very quickly.  The previous management/owner cared for these places slum lord like.  

Without any advertisement, there is already an interested party that want to rent one of the units that is pretty trashed.  I will be putting about 6-8k to replaced the carpet, fix all wall holes, new appliances, paint cabinets, redo counter, redo the bathroom.

I am trying to decide between putting tile (18x18) throughout vs tile in wet area + Laminate.  The cost difference is minimal.  

Renters here are working lower class.  Avg rent is $800/unit right now but that is below market.  I have a unit that will be out of contract at the end of the month and the renter already want to relet for 2 yrs from the current $750 to $875.  This is without any repairs done and looks pretty worn down.   I believe $875 will be the minimum rate when all leases expire.

Would you do tile throughout that will last forever and repair simple.  Or do you think putting in laminate in dry areas would would allow me to rent the places at a higher price to justify the cost of repair/maintenance?  I am not even sure if laminate would even bring a premium.

I am leaning towards the tile.

I understand cap rates and understand that it is a good tool to compare properties.  But I think Cap rate is very misleading.

I just bought a property for 1 mil, owner last year brought in 80K so his cap rate is 8%.  Pretty good but IMO, nothing great.

I purchased it with financing at 20%, rate 4% and have NOI of 35K. SO, I am getting 35k/yr on a 200k investment which is a 17.5% which is GREAT. If I can push the rent up 200/door in 5 yrs, I would pull in 60K/yr and a return of 30% which is amazing. This is on top of the appreciation which the duplex sales price has doubled in 5 yrs.

From my point of view, Cap rate is good to compare two properties.  Investment return % gives me a better idea if the investment is worth it.

Originally posted by @Account Closed:

Your accountant may be smart but he's dead wrong on RE investing. Want to become wealthy in America? By that I mean 400-500k+ per year in free and clear passive income? Here are your options - 

1. Be a trust fund baby. 

2. Start your own company (and be really successful).

3. Invest in real estate. 

There are SO many ways to invest in RE without a lot of cash that is safe. Find an expert to guide you, as I have, and then get to work. I've done flips that made me 20k and I only put in under 10k of my own money. My first buy and hold makes me 16% per year, year in and out. Try to do that in the stock market.

 I never understood/grasps this when I was younger (read late 20's) and wish I did.  I make in the 1% of Income and paid off all of my med school loans in 1 yr.  The only debt I ever carried after that was home loans.  I always put money in the stock market thinking that eventually I would get to the point where I can live off the dividends.  Well....... this hasn't worked out very well given the crash.

Fast forward to now (read early 40's) and Last year I decided that I would go into real estate.  I just closed on 6 duplexes and now have 13 rentals.  They are all financed so eventhough I will not make a great deal of money yearly, I should still be able to pull in 30-40K a year in FCF.  No bad, not great, and definitely not able to retire.

But it is a start.  And If I can raise rent by $200/door in 3-5 yrs, my FCF would jump to 60-70K.  Better, still not great, still not able to retire.

Now, if I can use that cash flow and in 5 yrs, pick up another 5 duplexes.  I could potentially have FCF of 100K with 23 rentals.  Better, good, but still not definitely not able to retire (Read I want to spend as much I do now and I live off much more than 100k/yr).

But now in 10 yrs, and I pick up 10 duplexes my FCF would be 150K.  So in my early 50's I will consider retiring without every touching my retirement accounts, cash accounts.  I would just live off the rentals.

I always thought that once I get a certain $$ in retirement, I would retire but this would mean I have to reach into my retirement accounts.  Its so much better to not touch my retirement and just live off the rentals.  I essentially will have a paying job forever while doing no work.  

Originally posted by @Joe Fairless:

@michael win 

@Michael Wincongrats on the new acquisition! I personally would let the dust settle on this one and while for 6 months before jumping into my next one. I suspect there will be a couple things that you didn't expect with the property that will require your attention. 

That said, I'd continue to buy large multifamily properties because they tend to be the best long-term investment in my opinion. Single family homes are great too if you have a system that helps you scale it properly. It really depends on what YOU enjoy most - sounds like it should be more passive due to your full-time job therefore perhaps looking into investing in other people's flips, deals, etc or even note buying. 

Again, all depends on your goals, time commitment and thing you enjoy most. 

 I will definitely be taking a break as this process alone was very time consuming.

So how do people with money get involved with other's flips, deals?  What is buying a note?  Is this a networking situation where you just have to get out and meet people?

I have also heard about buying apartment complexes.   Is this even realistic at my stage or somewhere in 5 yrs.  If I have 1 mil in equity, could I do a 1031 into an apt complex?  Is there alot of money in the apt complex?