All Forum Posts by: Jake Wiley

Now that I have kids, I often reflect on the advice I would give myself if I could go back in time and do something different to share as sage advice with my little ones.

I left school virtually debt-free, kept my initial expenses low, and would have been in a perfect position to get out of the rat race in practically no time.    Instead, I did what was expected for someone coming out of school with a great job.  I got married (this was a good thing and probably a good question for the forum about having a fantastic spouse and partner), bought a house, a new car, a house full of furniture, and your typical doo-dads that didn't do anything for me other than make me feel like I was keeping up with Jones'.

It wasn't till a couple of years later that I got my hands on "Rich Dad, Poor Dad" and found my way into Real Estate investing.   

If I could do it all over again, I'd force myself to read "Rich Dad, Poor Dad" my first year of college and then over and over again until all the concepts had sunk in, especially about getting out of the Rat Race.    I bet I could have been out of the "Rate Race" my first year out of school, if not before I graduated had I been focused on the right things.   College doesn't teach this.    

I have four kids and my eldest, 11 and 9; I've gotten to sit down with me and play the Cashflow board game, and then I take them out with me when we visit one of our properties and talk about the lessons and how it's not just a board game but real life.    We sit down as a family and now talk through our investment strategy and help bring them into the conversations to see how their mom and dad think through and deal with good news, bumps, and most importantly, keep moving.   If I can help them see and learn the lessons that took me years, then hopefully we can set all of our kids up to be financially free early in life and with that freedom, allow them to spend their time taking good and fun risks.  

To me, this is a moving target.   I remember when I was much younger having a newly built 3/2 in Charlotte, NC that my brand new wife and I could call our own was all I ever wanted.    We were crystal clear on what we wanted and made it happen!   Then we got into looking for our first investment property, and again we got crystal clear on what we wanted and made it happen.   

Fast forward nearly 20 years and we've been able to do it over and over again.    The moral of the story for me is that when you can see it clearly and have your eyes and ears open you will find a way to make it happen.  There is definitely a big difference between a daydream-type property, where you tell yourself it's not real, and the type of dream that lights a fire and brings you toward it.    

@Chris Hill - First you could use the equity to Diversify into several assets rather than one large multi, and yes there is a ton of info out there, and more likely than not a partnership to be had with someone on this site to head into a large single multi-fam deal.   However - Invest where you are competent or can bring in competency.   

The 100% passive strategy would be getting out of the active game of being the owner, manager, chief problem solver, and turning your money over to pros like in a syndication as you mentioned above with Ashcroft.  

In terms of what do you do when you sell your newly appraised $11M property that's up to you, but if your goal is to have steady and reliable passive cash flow kicking off your desired coupon, then investing in Limited Partnerships or syndications would be an option that has someone else doing all the lifting and you collect checks.     

In my mind, when you get to the point where you have gotten out of the Rat Race as Robert Kiyosaki would say, you've really got unlimited potential at that point.  It's like having a perpetual free play in football.   As long as you aren't jeopardizing your principal, which is providing your cash flow, you are free to step up and shoot for the end zone every single time.   The more reps you take the more often you score, and the score has the potential to be huge!   To me, that sounds like the way to live and it seems like you are knocking on the door!

Good luck, keep us posted on where your head is as this plays out.             
 

@Chris Hill - First of all, congrats - That's a story you should be proud of and one I am sure is foundational for your legacy.   

While I know you are asking for specifics based on numbers, I'd advise you to take a breath and think about what you really want or what you are hoping to accomplish.   I read two things that you are looking to get your goal is 30k in monthly cash flow and you'd like to move towards a more passive investing strategy.    

If you sold the properties and flipped them into a syndication you'd free up your management time.  What would you be able to do with that extra capacity that might be able to help you get to your monthly cash flow goals?  

FYI - for simplicities sake taking out taxes.  I know they are important, but let's assume you 1031 the properties.   (FYI - unless you sold them all at once it might be hard to manage the timing requirements but that's another topic.) 

Doing the math at 9% as mentioned above you'd need $4.0M in equity to get to the 30k per month.  (Or... you find an investment that returns closer to 11 and your $3.3 is all you need.)  

You're at $3.3M - so pretty close, but a gap of 700k.   

If you still have some life left in your personal investing career - another option would be to sell, take the equity and move into value-add property where you could reap the benefits of forced appreciation and cash flow.   Using your numbers above - $4.9 - 1.6 = $3.3 - Assuming you could flip that into a new property, even with leverage of 65% you'd be approaching $10M in a property.   Assuming you could add a little value, even 10% you'd close your gap and hit your objectives and then could flip into a 100% passive strategy and ride off into the sunset.    

You've definitely got some great options!

At the end of the day, what's your real goal and is your next move the fastest path to hit that goal?   
  

I'd come at this from a slightly different angle.    The biggest cost out there is opportunity cost.    Sometimes you have to get out of your own way to speed up.   For example, we recently made an investment and were looking at properties in several states.   Things were getting bogged down because we just couldn't quite get a feel for the out-of-state properties and as a result, there was a lot of talking and rationalizing, but the inability to pull the trigger.   Once we shelled out the money we were trying to save to jump on a plane and spend thousands of dollars to get in the market, we were able to make the right decision and actually find a deal, which turned out not to be anything we fancied online.   

I am not proposing that you should justify spending money on just anything, because that is easy to do.    

However, sometimes you have to take a big step back and look at where you are trying to pinch pennies and appreciate whether it's holding you back from being able to move forward.   Can't pull the trigger because you are afraid of making a bad decision, hire a mentor.   Can't see all the potential opportunities, because you are on a free subscription, pay for the subscription.   The opportunity costs in life are massive.  

@Brian Burke.

I am in the middle of your book and couldn't agree more with your sentiments about investing for a down cycle.

BiggerPockets just asked to share what has made the most difference between your first investment and current, and my thoughts are similar to yours. I started investing in a similar market to today, where things seemed to be going up so fast, competition for deals was fierce, and finding a deal that penciled was challenging to say the least. There is always pressure to do deals, and it's easy to make some outcome bias assessments in the diligence process to help you see what you want to see to make the deal work.
Like you, having lived through a cycle, all of my investors always received the returns they signed up for, but there are some long days and short months (days seem to take an eternity, but a month goes by in a flash from a bills are due perspective), but the lessons learned will never go away. I remember exactly how it felt to make uncomfortable calls needing more time with investors' money and working through plans B and C to make it happen.

At the end of the day - I learned that almost anything could be done when you communicate, have good plans and backup plans, and know to stick to your investment guidelines, especially if that means you won't get the deal.

I also learned how to pivot. In any market cycle, some strategies work, and you need to have the ability to adapt. For example, when the market was on the way down, I was able to identify properties that had something relatively minor wrong with them that didn't allow for traditional financing. The owners were unable to make any improvements. I would have that minor thing fixed and then be able to sell to a broader range of buyers for an excellent quick return. As the market started turning, actually completed the full the value add/renovation would result in nice little chunks in cash flow, and investors were happy to get their money in and out of the market in quicker turns.

I do believe finding partners that lived through the last cycle is vital because when the going gets tough, the flakey will bail, but those that have lived through it will be able to weather the cycle but also pick up on the opportunities left by those that throw up their hands and run.

Brian - great book and perspective!

Having patience to see investments through.    I jumped in to investing (2008) in a similar market to today's environment where everything was pointed up.    Having had to be very patient with some investments that were fundamentally sound but seeing them through a downturn was trying.  Patience paid off handsomely, not just economically but in experience and how to proceed now.