All Forum Posts by: Eric James

My view of wealth.is that it isn't for conspicuous consumption or to give one the freedom to do "what you really want to do". Wealth is for protection from unforseen events and emergencies. Fiscal self defense.

My hope.is that my children, especially my son, will become involved in the business of real estate that I'm involved in. That if I can pass on a sizeable net worth that he will be able to multiply it. As my children age I expect to put them to work in the family RAe business. My 12 year old soon is about to start part.time.summer work helping with the apartment construction I'll be doing this summer. Hopefully over the years they'll learn lessons about spending wisely and navigating the risks of investing.

2 Votes

Pittsburgh, Pennsylvania

Quote from @Jay Hinrichs:

Quote from @Brian Kloft:

@Nathan Frost First I did not read every response but I am going to give you my answers since I tend to be of a different philosophy than most on here when it comes to debt. We have a very low debt level on our properties so we have a high cash flow and don't lose sleep over making payments or if a tenant is going to pay or not. We just had to pay $60k for 3 renovations at the end of the year and a roof is coming up next month. It drained our reserves for the property but it has been growing fast again. Your problem is what all of the people that keep saying to refi and buy more, refi and buy more, don't talk about. They think it is low risk because they have zero equity, but they never factor in the risk or the stress of having it all collapse on you; which you are starting to realize.

First, stop buying. You need to build up a much much bigger reserve for your properties. With that high of debt, $60k is not enough let alone the $25k that you have. You have 12 properties. You need to focus on stabilization and optimization now. Every penny you make from the properties needs to go into reserves to build it up. If you have any extra money from your W2 job at the end of the month, set that aside for a secondary reserve as well. Build up that war chest. If you wanted to sell a property because you don't like it, that is fine, just put all you make into your reserves. However from what I saw it looked like all you are going to get from all but one property is $10k per property or less. If you can go a year without any issues then that will add another $24k to your reserves, bringing it up to $49k. That should give you a little breathing room, even though it should be higher.

I challenge you to look at your investments in a different way. Imagine how it would be if you owned all of your properties free and clear. No Loans. In current dollars, how much would you be making. Would you be very happy with that? It is a lot easier to deal with 12 properties that are paid for than to deal with 48 or more properties that have heavy debt on them. Also how much are they worth and what would that look like if they were all paid off? If you want to have more income and more net worth than what the 12 can provide you, even if paid off, that is fine. Just take a break from buying and get yourself on solid ground. Get your debt paid down so that you have some cushion if you need it. You don't want to have to sell 4 or 5 properties just to pay for some big problem when having $60k+ in the bank would do that and you would still have your properties. Build up your reserves to $140k+ and if you are in a better place then you can take $40k and buy another property, but you will have that $100k reserve to help you weather any storms.

Like I said, my approach is just about the opposite of everyone on here, but I can tell you that two of my paid for renovated units cash flow more than your 12 units do and I don't worry about making any of our payments and managing 2 units is way easier than 12. Even my "high" debt property I could sell for cheap and fast and still come away with a lot of money to cover any huge issue because it is not leveraged at 70%+ of the value. I am not against debt, just high debt to value ratios.

I have been making this same point on BP for the 10 years I have been here. However pretty much get shouted down by the refi till you die crowd max leveage get as many doors etc etc.
With low value assets.. ( to me thats 150 or so and under) paying those off as soon as possible for long term hold I think is a smart play..

It isn't just on BP. From what I gather those who purchase large multifamily complexes and commercial properties rely on cash flow. They generally don't look to break even and count on appreciation.

1 Vote

Lubbock, Texas

Quote from @Nathan Frost:

Quote from @Eric James:

If your "cash flow" estimate doesn't include vacancy, repairs, and cap ex then it isn't cash flow. Ignore the fantasy advice you're getting from some who don't know what they're talking about. Also ignore the cash flow claims of your friends with STRs.

In East TX right now a lot of properties won't have positive cash flow if financed, which means they don't make good rentals. It sounds like that includes most of your properties. I was talking to my local loan officer the other day who said they are making zero loans on small rental properties right now because the numbers don't work on any of them.

After all is considered it sounds like you have negative cash flow. If that's really the case you need to sell whatever is necessary to get to somewhat positive cash flow before you burn through your nest egg and start losing properties to foreclosure.

Agree. But whats your thoughts of a business line of credit or All In One Heloc loan? Use that as necessary. Long term building equity.

Unless it gets you to significantly positive cash flow you're eventually going to bleed cash until you fold. I focus more on building long term equity myself, but you need significant cash flow just to survive problems that will arise. It can also help you qualify for future financing (debt:income, coverage ratio).

1 Vote

Lubbock, Texas

0 Votes

Lubbock, Texas

Quote from @Henry Clark:

2. Your in Texas, use that to your advantage..

3. If in Wichita Falls start a trailer park. Rent the lots and not the homes. No zoning in Texas counties.

4. Texas property tax sales. Buy the unlisted properties. Pick nasty or strategic and flip. Land only and not houses. This is to get more cash around you.

That's not the way TX tax sales work.

Also, while there is no zoning in TX counties there are regulations on developing trailer parks.

1 Vote

Lubbock, Texas

Quote from @Jay Hinrichs:

Quote from @Eric James:

Keep in mind in TX you likely won't be able to get title insurance for 2-3 years on a tax sale property, so not a good idea to spend money until then.

can you do a quiet title to speed up the process ???

Even though there is only a 6 month redemption period, the previous owner could potentially contest that the tax sale never should have taken place. That's why title companies won't give title insurance for a few years. I don't know if they might give title insurance if the previous owner signed off that they wouldn't contest the sale.

0 Votes

San Angelo, Texas

Keep in mind in TX you likely won't be able to get title insurance for 2-3 years on a tax sale property, so not a good idea to spend money until then.

1 Vote

San Angelo, Texas

Quote from @Jay Hinrichs:

Quote from @Sarah Kensinger:

Quote from @Jay Hinrichs:

Quote from @Sarah Kensinger:

Quote from @Jay Hinrichs:

Quote from @Sarah Kensinger:

I feel your pain, very much so! It's great when a property cash-flows as a LTR as well as a STR, but it's a hard pill to shallow when you know the cash-flow could double or triple as a STR. But instead, a few people with their agenda pass policies that stand in the way.

to play devils advocate here.. What agenda ? folks that paid a lot of money for an owner occ house and a stable neighborhood might have an issue with the property being run as a hotel?
Seems to me those are pretty fair agendas to have.. also Seems to me STR should be in areas ZONED for it and permitted for it so homeowners if they want to buy there know going in that there will be transient use next to them. Seems to me its only an Agenda because your in the bizz and or you dont have to live next to it.. I would be Uber pissed off if one of my neighbors started to use their house as a STR. so other side of the coin.

I know in Charleston SC were i built quite few homes downtown its highly regulated as it should be and if your zoned and permitted then the price reflects it on the purchase side they are sold as income props.

Yes, but some of us deal with Karen and Karen so that changes everything. I'm surprised you're on this forum if that's how you feel about STR. Some of us are in vacation markets that only survive due to the visitors that frequent the area, and the STR that houses all the guests. If someone decides to live there, that is their choice. I would happily live next to the homes we and other similar operators host, much better than the guys that have the marshals show up and the house explodes! This is America with all the freedoms we are blessed to have, so that means some may do things to their properties that others don't appreciate.

like I said I was just playing devils advocate .. I have owned STR's myself. I dont particulary care to own them anymore i sold them.. too much work for me.. we moved to Mid term fully furnished I like that WAAAAY better. Perosnally.

I'm sure the MTR forum would appreciate your insights since STR are awful.

LOL too funny.. I think its somewhat irresponsible though to be touting this when folks take on such risks that we are seeing where they think they are going to make a bunch of money then they get their hands slapped.. which is my point about being correctly zoned and permitted .. do you think that is a bad thing ??

I understand owner occupants not wanting STR nearby. A third side of the coin is when owners bought houses for STR that was allowed at the time. Now, after the fact the regulations are being changed.

0 Votes

Jersey City, New Jersey

Quote from @Account Closed:

Quote from @Eric James:

Quote from @Account Closed:

@Dave Meyer it is hands down still the best asset class. As an investor and an agent I can put 5% down and get 3% (more or less) back in commission. If the property cash flows $0, gives me $0 in tax benefits and appreciates at 3% per year on pace with traditional inflation it’s still a massive winner. Let’s put some numbers to it.

$500k purchase price. $25k down. $15k in commissions on an 80/20 split yields a $12k commission. $13k net cash out of pocket (plus closing costs if you can’t get a seller credit to cover, I usually can).

3% appreciation is $15k per year on my original investment of $13k.

Show me another asset class where I can make 115% on my money. It simply does not exist. I did this 8 times in the last 8 years. It is simple and repeatable.

So you have a 0% interest rate, no property taxes, no insurance cost, and no maintenance/repairs?

Did I say that? I said cash flow was $0, so my rental income is equal to my PITI + vacancy & maintenance costs. That’s the basic definition of cash flow after all.

Yes. You wrote $15k appreciation on your $13k investment gives you a 115% return. That is only the case if there are no other expenses. And you're not getting 5% down on a rental property. That would be a primary residence.

0 Votes

Quote from @Account Closed:

3% appreciation is $15k per year on my original investment of $13k.

Show me another asset class where I can make 115% on my money. It simply does not exist. I did this 8 times in the last 8 years. It is simple and repeatable.

So you have a 0% interest rate, no property taxes, no insurance cost, and no maintenance/repairs?

1 Vote

All Forum Posts by: Eric James

Eric James has started 22 posts and replied 2235 times.

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