All Forum Posts by: Jacob Phillips

@Joe Scaparra

Thank you for you input! I honestly believe what I tried to say is in line with most of the input I’ve received; I just didn’t articulate it very well and mixed up some terms I think.

My plan would be to put all cash flow back into the business for the sake of expanding and paying off. I would pay myself very little, if any, for several years. My only budge on that might be a management fee to myself but I work full time and don’t see a need to take any cash flow for the foreseeable future

@Eric Schultz

Thank you for your input! For the sake of rough estimate if that’s possible, how do property managers tend to charge for their services?

In summary, you’re saying have cash reserves in place for emergencies when you go into the deal. I assume you could borrow with that in mind? How do you calculate how much reserves you want to go into a deal with?

@Kris Wong

Awesome! Thanks so much! If I may, how do property managers tend to charge for their services? I would be self-managing at the onset, but I’d like to factor in that cost.

@Kris Wong

I think I'm just mixing up language. I'll use the new guy card. You've understood me correctly. Okay good to know. How do you generally calculate CapEx? I think I was going on a 10% of rental income rule. Am I correct there or another misunderstanding? Is that something a lender dictates?

@Barron Brittingham

To be honest, I didn't have a specific number. Not sure how to figure that, actually. I think I was just doing the 50% rule plus mortgage. Assuming the 50% included CapEx. I was figuring in a 10% rate, as well. As I said, this is all mostly hypothetical. I don't have a particular deal yet. There are a group of 4 duplexes in town being sold as a package, and as of now without doing much math at all I know it's a bad deal. But I've been playing with it trying to figure out at which point it would be a good deal, which is kind of why I brought the question to the forums.

My hometown market is not going to give me a homerun. But I do think there could be good deals. I guess I figure that time (I’m 26) is on my side, and as long as I’m prepared to settle in for the long haul, which is my plan—buy and hold— and cover all the bases as well as work on a cash reserve, then I don’t need a “cash flow” that would go to my wallet. I’d sacrifice that right now for the sake of getting into the next deal ASAP. The reward in the end would be what I went for. Not sure I’m articulating that very well, and admittedly, there’s still plenty of concepts I’m still getting a grasp on

@Tchaka Owen well that was my thoughts. Instead of pocketing them, I’m putting them back in my business for the sake of security. In the long run, it seems it would all pay off and things are kosher. Just wanted to see if that mindset was wrong or dangerous. Thank you for your input!

I will be looking at mostly plexes in my hometown market, for some context

Hello BP,

I’ve got a new guy question that I just want to check my mindset on.

Obviously the name of the game in buy and hold is cash flow. So, when I’m evaluating deals, especially my first few, how much emphasis do you put on cash flow? Let me expand.

If I've taken into account ALL the expenses—mortgage, taxes, CapEx, vacancy (I'm sure I'm forgetting some), and I've also accounted for 10% of monthly income for reserves—is the deal bad if there's no remaining cash flow? It seems like a silly question, and ideally for myself I'd want to take some of that income and save it not just for cash reserves but also towards a future deal. But if I've covered ALL my expenses including cap ex AND budgeted for cash reserves, my rookie sense just makes me think it can't be that bad a deal.

Obviously if I only cover expenses and start running out of income before I've covered CapEx then there's a problem.

I guess my mindset is if I don't pocket any money on the first few deals I'm okay as long as I cover all expenses, CapEx, and I build some cash reserves for the business. If there's no "take home" in it for me in the first several years that's totally fine because properties are being paid off and before long it will be cash flowing for me to reap the rewards a little more directly.

If it’s my first deal, and in my hometown rural market, what are your thoughts on that scenario? (There’s no such deal, this is hypothetical while I start to comb through deals)

Thank you @Jeremy Marek! It hasn't been presented to me like that. In a series LLC, each LLC is protected from the other, correct?

Hey BP!

I’m just starting out and really just asking lots of questions.

Today I wanna ask about entities. From my understanding, LLCs tend to be the favorite. Can you receive any income at all from an LLC? I've heard lots of different viewpoints on this topic, but my goal is to target small MF rentals for buy and hold, and probably some SF buy and hold.

I've heard to put no more than a couple properties into any one LLC, and then have a holding LLC which holds all those properties' LLCs. Does anyone contest that? Is there a right time to convert to that or do you start day 1 with that mentality to protect all your assets? But I've also heard BP guests who seem to have all their assets in one LLC.

So if I go get four duplexes in the next 2 years, do you have an LLC for each? For two? One that holds all four?

At point is it overkill and at one point is it absolutely necessary to do everything possible to protect your assets?

I appreciate the input on this and any other advice!

Jacob