All Forum Posts by: Eric James

My wife and I have decent jobs and are not in need of immediate cash flow from our rental properties. We formulated a strategy to start purchasing rental properties in 2022 with a goal of purchasing enough properties to retire in 10years.

With that strategy, we have purchased three condos in 2022. We have a goal to purchase three more in 2023. From the properties we purchased in 2022, we have a positive cash flow (NOI) of $425. I know it doesn't tick all the traditional calculations for rental properties but our strategy is to scale up our portfolio looking at the equity instead of huge cash flow. All the properties we are purchasing have 15yrs fixed rate loan terms.

My question: Is this a good strategy? I am looking to scale up as fast as we can within our means but not particularly looking for excessive cash flow.

Any thoughts from seasoned investors is much appreciated!

Regards

I'm doing something similar. I'm buying land, building apartments, and refinancing to pull my cash back out. I make enough cash flow to be worthwhile, but my real objective is getting these paid off in 20 years. They will be something to pass on to my children.

1 Vote

Quote from @Jay Hinrichs:

Quote from @Marcus Auerbach:

Quote from @Jordan Alexander:

Quote from @Simon Ashbaugh:

Quote from @Jordan Alexander:

Equity comes, equity goes, but the cash will always flow. - Pace Morby

Buy for cashflow! It will allow you to succeed in any market cycle.

Pace is a G

Pace is such an awesome guy! I'm currently listening to the rookie podcast he was on a couple of days ago, and this guy is just a wealth of knowledge!

Nice catch phrase, but an oversimplification at best, if not flat out wrong. Cash flow is never guaranteed: all you have to do is pick the wrong tenant. Or deal with some repairs.

In fact in low end properties with very little appreciation capex often exceeds cash flow over time, let that sink in for a moment. A well knows out-of-state-investor trap in Milwaukee.

I agree with the notion that investing for appreciation tends to be speculation. But you need appreciation to make money long term and pay for a full rehab every 30 or so years. Prices are also what we call downward sticky, especially in the residential space. Owners will just not sell, if they can't get the price they want and wait a year. And in the end inflations sees to it, that values go up every year as the dollar keeps loosing value.

Last thought: it's very difficult to generate wealth on cash flow. Wealth always comes from equity. So I think you need both and I suggest you find a good balance between cash flow and equity.

agreed without appreciation there are far better things to invest in than rental houses. Risk is just too great if they are not going to go up in value.. over the years the obsolescence will kill you

The way I see it, the big advantage of real estate is being able to use financing to purchase. A while ago you gave an example of a house you bought in CA for $185k and sold 36 years later for $3.5M. That comes out to 8.5% annual appreciation. However, if you purchased that property for $36k down the return would be 13.5% per year. Quite a bit better.

But take a lower appreciation market. Say someone purchased that $185k property with $36k down and over 20 years they paid off the loan and it only appreciated to a value of $370k. That's still a 12.4% annual return. Almost as good as in your CA example. This is why I see the real benefit is leverage.

3 Votes

Quote from @Han T.:

Not sure how the numbers on your end work. But here's an arbitary example:

Buy land: 400k

After permit/zoning/drawings/etc done: land value = 1m (cost of permit/zoning/etc only 200k)

Build Phase 1 (50 units), costs 5M, entire project appraise for 7M.

Build Phase 2 (50 units), costs 5M, project appraise & eventually sells for 15M.

At each stage, the value of the land./project increase more than the costs put in and that's how Developers, just like the BRRRR deals, add value and make money.

What makes the second 50 units worth twice as much as the first 50 units?

0 Votes

Quote from @Jon Q.:

Quote from @Eric James:

Quote from @Jon Q.:

Quote from @Eric James:

In the last year I have bought vacant land and built 10 apartments. Goal is to o build another dozen or so in the rest os 2023.

I never heard of Malakoff, but checked it out after I read your post. A cool little lakeside town. Is your development there or another area of DFW?

I have rentals in several towns in the area about 1 1/2 hour drive East of Dallas.

What are your thoughts on DFW? Short term + long term?

I’ve got rentals in north Dallas… and as prices increased, I started looking and buying outside of DFW… ex. the stretch from Austin to Ft Worth.

A dislike… compared to other cities, the taxes are a killer, and have skyrocketed over past few years!

Lately, I’ve been preferring NC and TN which have much lower tax rates and similar growth.

Prices in DFW have been too high to yield enough cash flow for me. Plus, I self manage and that's farther away than I want to self manage. It's possible that in a few years I'll have an employee manage my properties where I am now and start building and self managing dow around Brownsville. Mostly because I like that area but I also think there will be continued growth there.

1 Vote

Quote from @Jon Q.:

Quote from @Eric James:

In the last year I have bought vacant land and built 10 apartments. Goal is to o build another dozen or so in the rest os 2023.

I never heard of Malakoff, but checked it out after I read your post. A cool little lakeside town. Is your development there or another area of DFW?

I have rentals in several towns in the area about 1 1/2 hour drive East of Dallas.

0 Votes

In the last year I have bought vacant land and built 10 apartments. Goal is to o build another dozen or so in the rest os 2023.

3 Votes

Quote from @Jay Hinrichs:

Quote from @Greg H.:

Quote from @Neil Patel:

Greg, from my understanding, they're charging a hefty price in order to give you all these facilities.

No doubt they are. I would still ask what they need you for as they are providing every piece of the puzzle?

Also, who pays if the flip loses money?

Armando Montalongo started the how to flip Guru programs and then Nick Vertucci followed suit.. there was a lot of pressure from the FTC as folks complained they lost money.. you can buy Montalongos and Vertucci's witten materials on E bay for 50 bucks.. flipping houses right now has died down a ton. so Uber caution.

I wouldn't do business with Montelongo, but he certainly was funny in TV.

0 Votes

Quote from @Nathan Gesner:

Quote from @Christopher J Woodland:

The first thing you have to do is identify the property, right? I would have a form at hand to fill out. Thank them for calling you, give them a 5-second pitch on who you are, then start asking questions:

"Thanks for calling! My name is Chris and I'm looking for . . . Can I start by asking some questions about you and the property?"

Then have a form ready to fill out. Seller contact information at the top, property details at the bottom. You may be bouncing around to collect information so it feels natural and not an interrogation. # of beds/baths, square feet, garage, any outbuildings, land size, ask about improvements, ask about deferred maintenance, etc.

You also need to collect information about seller: name, phone, email, best method of contacting them, anyone else listed on the deed that you need to know about, and their motivation for selling.

Make a list of what you need to collect, then practice with some others and find ways to make it sound natural and not just filling out a form. I have heard of investors really focusing on the personal questions, getting to know the Seller, trying to establish some rapport before diving into business talk. And it's very important to understand "why" they are selling. If they are desperate and just want out, you may get it for cheaper than you thought or get owner financing with some really sweet terms.

And determine if they even have enough equity in the property to be able to sell for what you might be able to offer.

0 Votes

Las Cruces, New Mexico

Yen years of low interest financing has driven the price of homes up. And, has brought a lot more people into real estate investing (and to BP). Now interest rates have gone up, but prices haven't adjusted yet. Perhaps a lot of newer investors will be driven out of real estate.

Personally, I've gone into building new apartments, which I can do for 30% equity and decent cash flow.

0 Votes

San Antonio, Texas

All Forum Posts by: Eric James

Eric James has started 22 posts and replied 2235 times.

Post: Seller occupied until she dies

Post: Cash Flow v/s equity

Post: Cash Flow v/s equity

Post: How do developers make money?

Post: Experienced Investors: Timing / Are you now doing deals?

Post: Experienced Investors: Timing / Are you now doing deals?

Post: Experienced Investors: Timing / Are you now doing deals?

Post: FlipSystem by Antoine Martel

Post: Tips on how to answer calls when your mailers actually work

Post: Cash flow vs. Appreciation