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All Forum Posts by: Eric James

Eric James has started 22 posts and replied 2192 times.

Quote from @V.G Jason:

Quote from @Alan F.:
Quote from @V.G Jason:
Quote from @Scott Trench:

One more thing to consider. What are you going to do when your sellers begin declaring bankruptcy? 

Some huge percentage of sellers who are willing to sell subject-to are willing to do so because they are irresponsible and bad with money... that's why they are being foreclosed on. 

I am sure that every once in a while, someone selling their home Subject-To will magically transform into a responsible person, intelligently capable of forecasting their long-term financial future, and turning over a new page. 

But... that is likely to be a tiny minority. The majority of these deals are likely going to see the sellers go on to make terrible financial decisions, rack up debt, and some huge percentage of them WILL declare BK in the coming years. 

What's the plan to handle up to 30-50+ bankruptcies from your sellers all at once in the middle of a bad market? 

 Same logic with people who sell their house seller-finance to someone a bank won't approve? The logic just defies itself.

As for what will  happen, I'm thinking the fed is just going to hang tight until something breaks. Only pause with this view is the election.

And when things break, the chickens will come home to roost for all SF/subto/no cash in players or folks who bought into the FOMO without reserves. It doesn't need to be a 30-40% correction, but what usually happens is all those chickens come home to roost at the same time.


 Just spit balling but.....what if; % rates don't go down, inflation doesn't go down & unemployment ticks up, all over many years. Interested in your and others thoughts.


 So pretty much where we are except for the technical unemployment numbers? Continued stagflation and something will undeniably break. Likely the S&P companies that are just too levered. 

And I think the Fed will push it this way and the only doubt I have is the influence of the election. That doubt is strong though. 

I also have a very different view on if rates do come down. I think real estate has a lot more seasonality than folks given attention to. If rates come down end of Q1, any Q1, you'll see prices rip for the prompt 1-12 weeks then dip and in Q4 really correct of that year. If rates go down at any other point, you'll see prices go up quickly in the 4-6 week span then come down. I really feel the rates are the reason inventory is low and once rates come down, we'll see inventory change.

Look at the same cities previously mentioned

Arlington, Savannah, and Boston

Once rates go down, inventory will increase in the long(er) term. Prices may rip in the shorter term, but I think inventory will go up. And buying power will change.


 And when rates go down significantly it will be in response to rising unemployment, which will also affect the real estate market.

Quote from @Andrew McGuire:
Quote from @Eric James:
Quote from @Andrew McGuire:
Quote from @Eric James:

I too want to continue accumulating rental real estate. But to continue getting financing that means my properties need to cover 30% above expenses. That means positive cash flow.is a must if I want to keep growing. I can't break even and just pay down the debt to increase my equity.


 Yeah that's the tough thing wanting to invest right now, properties were lucky to cashflow a few years ago when rates were 3-4%, now that they are 7+ that has added an additional 30% or so expenses assuming your not putting 30% or more down. Deals don't make sense unless you do something crazy like put 8 students in a single family :) 


 Yes I spoke with my local bak loan officer the other day and he said they are doing zero loans to finance purchase of rentals right now because the numbers don't work. 

I'm doing my own version of BRRR. Build (for 65% of value), Rent, Refinance and Repeat.


 Man if you can build for 65% that seems like a deal to me. Congrats, lets do a deal. 


 I build outside of city limits in TX. No permitting (other than septic) or inspections. Employ and supervise my own construction crew. Building small apartment buildings for $80/square foot.

Post: GENERATIONAL WEALTH: Do you worry about your kids?

Eric JamesPosted
  • Malakoff, TX
  • Posts 2,237
  • Votes 2,450
Quote from @James Sebastian:
Quote from @Peter W.:
Quote from @Steve Vaughan:
Quote from @Peter W.:

I don’t really worry about it. If no disasters happens I will end up with a large chunk of money to pass on, but the reality is they won’t see it until they are in their 40s or 50s at which point they will have already learned most of their lessons about money and work ethic.

Most people do this.  'Kids' inherit in their 60s.

A book that resonated with me regarding wealth transfer was Die With Zero.  It does our kids the most good, placed strategically, especially if it helps reduce or eliminate debt, up until about age 34.    

Bill Perkins, the author, mentioned giving his 80 yo grandma $10k.  Go enjoy yourself he said.  All she wanted or needed was a sweater.   Extreme example of gifting to those that don't need it. 

I still remember $1000 given us when my wife's grandma died 22 years ago.  It lasted us for months and was so helpful. We were a young family of 3 kinda just starting over.  

My parents gifted me something for the 1st time when I was 34.  $5k to help with our home purchase.  It wasn't easy for them and meant so much to us.  We still have the house and paid it off a few years ago. A seed that grew and honestly meant more than $200k would today.  

The point is- if we have the means and the kids are humble and worthy, gifting a bit at their big younger milestones will have a 20x-40x+ the impact vs a pile in their 60s.


 My grandma left me 50k when I was in middle school, ended up being part of college, my wedding and honeymoon, downpayment on primary, down payment on my first and second rental properties, and I still have 50k left over. 

I’ll probably help them with down payments for their first houses, college, I will probably even find their retirement accounts in their early 20s.  I’ll have enough to retire when I am 50 but will likely work to 65 to give them more. But even then they will probably end up with the bulk of it when I pass.


 This is GOLD!  I've ruminiated on this topic a bit, we are 50 now and in good financial shape and stand to inherit in 10-20 years when we absolutely will have no need for more money.  But with 4 kids in their teens/twenties now, seems like that money would be far better used if one of them has entrepenurial ideas (and energy and time).  Could be a low-cost loan or seed money equity stake rather than a gift to be more "fair".  Otherwise I guess for me generational wealth just looks like passing it down too late to be useful until it either dilutes a bunch or ends up in the hands of a spendthrift who blows it all.  Anyone have experience with this dilemma? 


 I see a lot of problems coming from our culture in which children live their lives completely disconnected from their parents/grandparents economic and professional lives. People get "jobs" that make them wage slaves, instead of growing family businesses.

Post: GENERATIONAL WEALTH: Do you worry about your kids?

Eric JamesPosted
  • Malakoff, TX
  • Posts 2,237
  • Votes 2,450
Quote from @JD Martin:
Quote from @Steve Vaughan:

Ha @Jim K.. Nobody is supposed to know I stay up nights thinking about generational wealth.😎  

Interesting enough, my wife and I just did some basic estate planning for the first time recently.    

So our 2 young adults (now) grew up around landlording and have been members of our main commercial apts LLC since they were babes. 2%. We used to joke that 50-cent's got nothing on their 2%. They'd rap while they picked up the parking lots. Some things you just do as owners.

Yard work, cleaning, painting, mowing, etc though were paid.  They always knew where a dollar came from and they grew with us. 

I never use the term 'rich' and honestly don't feel we are.  We have had freedom from day jobs for a long time, but mostly because we have so few payments.  They don't have payments either and when their car or motorbike needs something,  their first action is to get out their own tools and pull up a YT video.  

So I think the answer to prevent large sums from wrecking kids is that they are grounded. They have worked for money and appreciate it. They understand money comes in 3 forms- labor, business equity/LLC membership and investment earnings.

One fuels the other, which fuels the other- but the source and foundation is work. 

We also enjoy playing 401 Uncle.  We seed Roths for our motivated nieces and nephews and plan to establish college and 1st home purchase funds for our future grandkids and grand nieces and nephews.   Won't be such a 'burden' on our kids. 

Another great source would be @Arlen Chou.  I know of him especially on other platforms and his young adult kids are actively buying RE and DiYing like you and I do so much. If anyone can mention him, he would be an awesome resource.  

I'll also mention @Jerry W. @Bjorn Ahlblad  @Scott Price. and @Bill F.. @JD Martin  as excellent candidates for great kids and wealth advice👍

 Such esteemed company!

I like to think the best lesson we've taught the kids, and grandkids, is that hard work and a plan will get you further than any amount of money that lands in your lap. The other part of it is that no one should expect something for nothing. Case in point: daughter needed to replace her car, which she's had for 8 years. She had some money saved but nowhere near enough to buy a new car. I can afford to buy a new car and just give it to her but I'm not going to do that. Instead, I gave her a no-interest loan; she wanted to get a new car and never had one before, so I bought the car outright (a sensible Kia Forte) and essentially gave her a no-interest loan. She pays me $200 a month until it's paid off. I know she will pay it back because I've loaned her money plenty of times before which was always paid back. She can feel independent because she is independent - I didn't give her anything, she bought it herself. 

Same thing goes for the grandkids. Bought them each a car ($4k limit) when they graduated high school (getting ready to buy the last one), they have to pay for maintenance and insurance. If they wreck the car, well they'll have to figure it out. 

On principal, I am against "generational wealth". If I had my way in society, everyone would start out with the same amount of money when they hit 18 - maybe 100k, I don't know - and you make whatever you make of yourself until you're dead. Then all the money goes back into a pot and we do it again. But this of course is Utopia, which is never going to exist, so you end up taking care of your own and the issues and charities that are important to you. I expect to leave all of my money to the kids and charity when I step off into the cosmic unknown :)

Also: the question was do you worry about your kids? I don't, because if they manage to piss away the empire after I'm dead then they deserve to be poor!


 If everyone should start at zero and not inherit anything that would mean starting out living out in a cave and having to invent fire for themselves, lol. The advancement of humanity has included passing many things on to our children to helo them survive and make their lives better.

Post: GENERATIONAL WEALTH: Do you worry about your kids?

Eric JamesPosted
  • Malakoff, TX
  • Posts 2,237
  • Votes 2,450
Quote from @Dan Marriggi:
I'll be spending every cent I have on me and my SO - Happy to help out the kids while I'm alive, but they need to learn to be self sufficient, independent and productive members of the planet.

 There is being self sufficient, as in earn what one needs. But then there are "thousand year floods". Extreme calamities that may require significant resources to survive. Many people who are "self sufficient" don't survive those events.

Post: Why I Believe Striving to Build Passive Income is Overrated

Eric JamesPosted
  • Malakoff, TX
  • Posts 2,237
  • Votes 2,450

Yes. I started out focusing on rental income but after a few years I changed my main goal to be increasing net worth. 

Quote from @Andrew McGuire:
Quote from @Eric James:

I too want to continue accumulating rental real estate. But to continue getting financing that means my properties need to cover 30% above expenses. That means positive cash flow.is a must if I want to keep growing. I can't break even and just pay down the debt to increase my equity.


 Yeah that's the tough thing wanting to invest right now, properties were lucky to cashflow a few years ago when rates were 3-4%, now that they are 7+ that has added an additional 30% or so expenses assuming your not putting 30% or more down. Deals don't make sense unless you do something crazy like put 8 students in a single family :) 


 Yes I spoke with my local bak loan officer the other day and he said they are doing zero loans to finance purchase of rentals right now because the numbers don't work. 

I'm doing my own version of BRRR. Build (for 65% of value), Rent, Refinance and Repeat.

I too want to continue accumulating rental real estate. But to continue getting financing that means my properties need to cover 30% above expenses. That means positive cash flow.is a must if I want to keep growing. I can't break even and just pay down the debt to increase my equity.

Post: GENERATIONAL WEALTH: Do you worry about your kids?

Eric JamesPosted
  • Malakoff, TX
  • Posts 2,237
  • Votes 2,450

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.

Post: Overleveraged Advice Please Help

Eric JamesPosted
  • Malakoff, TX
  • Posts 2,237
  • Votes 2,450
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.