All Forum Posts by: Mark Ferguson

Hey @Mark Ferguson,

I lump Brooksville down to Ft. Myers as one big zone. Good deals, and bad deals abound, but the people are for the most part of the same mindset, and you have A to C properties, you're hard pressed to find many D neighborhoods. Central Florida (the 98 & 27 corridors, Ft. Meade, Lake Wales, Avon Park, Sebring, etc.) have excellent cash flow, but are more C & D communities with C & D tenants. Jacksonville has come up over the years, but you have to either live there, or have someone you trust implicitly to invest there. Orlando goes from high end to garbage in the blink of an eye, and you have HOAs with restrictive covenants everywhere you look (Sarasota, our home base, is not much better), see Jacksonville. If you're referring to the Panhandle as "North Coast" (St. George Island, Santa Rosa Beach, Carrabelle, etc.) it's a great area for vacation rentals, but I personally wouldn't park my money there.

Unfortunately, I don't know enough about the dynamics of Pensacola to give an opinion, but the folks I've known over the years refer to Pensacola as eastern Alabama, not as a piece of Florida.

-Ben

Mark,

I'm an advocate of not getting tied to any properties. Period. From the basic numbers you've thrown out Greater Tampa & Central Florida would give you a much better ROI for the equity you have in play. My advice would be to buy one here and see if you like the dynamics here in Florida, then and only then would I take the plunge and move everything over. Otherwise, you run the risk of 1031 exchanging your full portfolio and hating the management style of your PM (not that you can't change PM companies), you don't like the towns and the people you get from them, or just plain hate long distance investing!

All that being said, the clients that I'm placing are doing 20/25% down, and seeing Cash on Cash ROI of 18-35%, the ones I'm finding after they purchase are seeing a CoC ROI of anywhere from 12-40%.

Call or PM me if you'd like my thoughts on my market. 

-Ben

@Mervin Peachey you should connect with @Mark Ferguson as you both are in the same area. 

I am all about the debt!  Nowhere else can we borrow money so cheaply as in real estate.

If I had $100k cash I could buy one property free and clear that (for example) brings in $1500 gross rental income - using the 50% rule I will cash flow $750

Using the same numbers as above, If I have $100k cash and buy 5 properties at a 80% LTV that would be $500k in property. Giving me $7500 a month gross rents, using the 50% rule that gives me $3750 a month cash flow before my mortgage. A $400k loan at 4.5% will be a $2,025 payment giving me $1,725 a month cash flow. Plus I never pay the mortgage, my tenants do.

 I very much look at it like a business (which is the only reason I use debt at all. I have none in my personal life.) But if we're talking business, I want to be the type of business other people will invest in. Since I have no clue what to invest in (just like I have no clue about real estate) I try to learn from the folks who are way better at it than me. 

So if I want to be the type of company smart investors (like, say, Warren Buffet) invest in, what does that mean? One of the things Berkshire Hathaway weighs most heavily when evaluating business is their level of debt to equity. Why? Because if you have a really high debt to equity ratio, and start having trouble with those all important profit margins, things go south, fast. 

Not to beat a dead horse, but I have mortgages, and will continue to have mortgages. But I'll do so conservatively for the sake of the long term stability of my business. Everyone's level of comfort is different with this, and I can understand and appreciate the positions of folks who feel differently than I do. And I've learned a lot from this discussion, so thanks to all who contributed :-)

@Chase Gochnauer I get what you're saying, but there's another way to think about it: Would you rather pay $300,000 for something worth $300,000, or pay $4.5 million for something worth $1.5 million? 

And the answer isn't "But your tenant is paying for it" because their rent would be the same either way - you're just paying more to the bank in interest if you have a loan, rather than it going into your pocket, or towards loan paydown in the event of a shorter term loan. It might take longer, but who says you can only pay cash for one property? Maybe you wind up with 3 you paid cash for instead of 5 you mortgaged. I don't know.

This is where it gets complication to me - because I'm not against having mortgages on properties. I have mortgages on both the properties I currently own, and plan on having mortgages on the next several. But I think it is something that requires some thought, and that's why I'm interested in figuring out how to calculate the potential savings (if any) of shorter term loans versus the time value of money. 

Many people do not even occupy HUD homes that were sold as owner occupant. I have seen for rent signs in yards before the properties were even close on.

If I did that, I would be fined the $200,000 plus, they would keep my money, plus they would take the house, plus put me in jail... but basically none of that ever really happens to people.