All Forum Posts by: Jacob Trogan

I'll bite, opportunity to learn here, when I say risk I define it as a liquidity problem which is a common problem I see as a HML lender (cash is king).

I personally try to leverage as much as possible and not have any of my own money in a deal because of my personal goasl/risk tolerance. So what I mean specifically for him as a risk is if he were to buy a bunch of properties leveraged 99% somehow with his 3 million and then his monthly gross incomes were not able to support that debt service due to Capex or vacancies or whatever he would then be paying out of his own pocket to support holding onto the property. At the large dollar amounts he is talking about that would probably be unsustainable to support from his own pocket. What most people would then do in that case is sell the property (maybe even at a discount) to liquidate and have cash once again. So specifically the risk I had in mine was a lack of cash on hand. This lack would result from not having sufficient cash reserves.

The biggest risk I see when it comes to real estate is not having the cash on hand to support expenses of holding a property. If the person doesn't want to hold the property and instead sell, their lack of cash is not a risk but an opportunity. But usually people want to choose when they can sell a property and therefore want to have the cash to pay for any expenses for a property until they want to sell.

So anyways what are the three parts of risk?

Do whatever allows you to focus on buying a property and not worrying about all of these details. When it matters later on you will figure it out. As for an actual answer my personal opinion and that is the best anyone can give you on an online forum for free (an opinion that really doesn't matter... honestly just pay a lawyer for stuff like this) anyways my advice is open an LLC if you want to start a STR business. If it is not a business and rather investments you can buy under your name for now but will probably switch to making it a business anyways later on

Like Caleb said it depends on what you are going for - a hot area is simply where you see higher prices that inherently means more demand. I think the Northland is being ignored by many

Buying properties that are value add (aka FLIP or BRRRR) allow you to skip having to save up a certain amount but even then you would need some 5k-10k or probably more for closing costs and usually even more because you need a down payment of some sort buying these properties there are lenders including myself that do not require any down payment though! I just don't service California. Someone else may be able to help. Really saving up 15k for your first property is very doable even if you weren't to do what I described above and just house hacked. You can do it!

 As a lender surprisingly I agree with this you can always acquire with cash if you have the capital (which most people don't) and then get that cash back in the form of a cash-out refinance at an opportune time. For people like you Jeryll who have a high active income I believe this is ideal. Super insightful response

To me this makes more sense. It is the equivalent of rebalancing a portfolio in the stock market. Aka selling when sentiment is too high for one stock(selling your winners) and buying when overall sentiment is too low on another stock (dollar cost averaging a stock you believe in). For real estate selling off the equivalent of a bad performing stock that you no longer have belief in seems silly because you have much more control of the asset in real estate than in stocks. You could easily turn a non or low performing property into a well performing one by making some changes. I would only sell a losing property if the area truly took a turn for the worst. I hope that analogy makes sense. I also like the concept you mentioned at the end with notes. Working as a HML I see a lot a lot of room for opportunities in the note market going forward.

You are in a position where you should pay 100s or 1000s which is a drop in the bucket for yourself for professional tax advice. The tax benefits of real estate largely seem to be ignored here on BP because most people who need those benefits are high income earners or high net worth individuals which YOU are and 99% of people on this forum are not. Lots more to real estate than just cash flow at your level. If you could buy enough property without any leverage (so in cash) to create enough cashflow to pay for your living expenses that may be my advice. That would be super low headache and allow you to work full time in whatever is your passion which may be your current tech job. Really for anything of substance you need to elaborate more. 

As for your question there is not even a debate if you want to grow and expand your portfolio significantly. Leverage is always the option. Buy with 20-30% down to limit risk and don't leverage more than that. If whatever you buy cashflows with margin for repairs/capex saved up who cares if some call it risky to leverage.

If the whole market decided to lose 10% of its value (probably won't happen blahhh blah blah). IF this happened how good is your so called equity now? I would save your cash and use that to invest. I understand paying off your primary residence early can create mental peace but thats all it does. Having a lower mortgage balance will not help you in any way. You will still have the same monthly payment. If you paid off your house completely that is a different story and somewhat freeing. Use your cashflow to buy a deal that will then profit enough to pay off your primary residence if that is your desire. I personally would not pay off your house early. Also I see you are in KCK I may be interested in using you for a property to arbitrage on Airbnb.

 I started following Joe because when I first read his comments I had no clue what he was talking about. I figured either he was crazy or I was missing something. I now understand 70% of what Joe says. Listen to Joe, I would personally sell the house! Cash out while the going is good and reinvest that capital. As for the other 30% of what he says I still learning if he is crazy or if I just have more to learn.

Good luck! Maybe look at it this way too, what do you want in your life more? Does that $200 a month materially impact your life? How could the profit realized from selling impact your lifestyle? Which impact is more of what you want in life?

 Correction it is 3k not 4500. Also I know a flip is more of a job than anything but then you are not playing the mental gymnastics of saying your investing is “passive income”. You will reflect on if the time is really worth the investment. Which it can be!