All Forum Posts by: Jason Striker

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Quote from @Jason Striker:

Quote from @JD Martin:

Quote from @Jason Striker:

Hi All,

I am posting this in hopes of getting some advice on what other investors would do to grow if they were in my shoes.

I started investing in real estate in 2009. We grew rapidly at first, but for the last few years have been a bit stagnant and are not sure what the best next steps are to continue growing.

Here is our current portfolio:

-8-plex in HCL area. Currently paid off. Purchased for 625K, current value 1.25M. NOI = 68k annually.

-Tri-Plex in HCL area. Loan of 325K at 2.85%. Purchased for 725K. Current value 950K. NOI (pre-loan payment) 59K.

-Duplex in HCL area. Currently paid off. Purchased for 435K. Current value 625K. NOI 35K

-Duplex in HCL area. Currently paid off. Purchased for 450K. Current value 650K. NOI 36K.

We have an additional 300K liquid and available to invest at this time and are looking to grow. We also expect to generate an additional 300K from outside investments to dedicate to real estate, but that could be a year out. We could use the 300K we have now, then invest the other 300K when it's liquid, or wait and have 600K to dedicate to real estate in another year-ish.

As you can see I have been risk and debt adverse over the years. It has worked out well, but with this base we are willing to take on more risk/leverage in order to find more opportunity.

I am open to any and all advice, and would love to hear how others would grow from this position. We have considered doing what we have always done, finding a nice multi-unit building and purchasing it with a small amount of leverage. That said I know there is a lot I do not know, and I am wonder if I am leaving some value on the table not exploring other avenues for growth. I have considered 1031 exchanging, but as our buildings cash flow and are appreciating well so I have not seen much value in doing so.

Thanks in advance for any insight and advice.

 What is your why? Why do you want to keep growing? Do you need more money? Do you just want more bragging rights? Are you bored? 

We are simply trying to grow our business. 

 But why? There's no good strategy without an objective. 

 We are looking to generate more cash flow, while continuing to build equity. I would say at this post generating more cash flow to live and invest with is the primary goal.

OK, so right now cash flow and equity growth are probably on opposite trajectories. The things that cash flow are going to be lower quality SFH/MFH housing in sketchier areas, which is going to put a cap on how much your properties are going to appreciate. Anything that has better appreciation quality that is a rental, or would make a good rental, is already priced pretty high. So you will probably have to pick your poison. Considering the fact that you already have a lot of equity locked into MFH that's essentially sitting at ~5 caps, I would think about diversifying a little bit and try to pick up some decent quality C SF housing that is a gamble on appreciation but can have some stronger cash flow. You don't really need any more dead money if you want to continue investing in RE.

@Jason Striker Unless you’re an otherwise high wage earner leveraging one property will help get you where you want to go.

If you like having your property paid off then I would start by paying off the new one. One extra principal payment every month. Depending on the size of the loan you can easily shave off 10-20 years from the balance while still cash flowing more with a new property.

Putting off another year to save up and then purchase another will likely only guarantee that the new property will cost more then than it does now.

A $300,000 down payment should be able to get you in a decent new property. You’ll get depreciation (which I wouldn’t recommend just for the sake of getting depreciation but because you have the goal in mind of growing your portfolio), appreciation, and other tax benefits.

Whether you self-manage or have a PM, either way adding another 4-12ish units won’t take up significantly more of your time if you buy right and don’t just buy pieces of crud.

You got the portfolio most BPers would strive for. So you're asking the wrong people. 

As one from a different position, I would keep the $300k in a high yield account and continue to shop for distressed properties in the same HCL areas and the utilize the $300k as a downpayment, rehab cost, etc for one deal. Ideally re-finance out to no less than 1 DSCR, but ideally 1.25 for income purposes to show on DTI, tax returns, etc. If nothing comes in a year, you can then re-purpose this same objective for $600k and spread it to 2 properties or 1 better one.

It sounds simple, and it is. But prioritize quality here, I'd also tell you to no more MFs & to go get a SFR. The debt adverse angle is going to pay off in a higher rate perma-environment.

Quote from @Jason Striker:

Quote from @John Morgan:

@Jason Striker

I would do a cash out refi on at least one property. Harvest that equity that is doing absolutely nothing for you. That’s what I did and more than quadrupled my cash flow with no out of pocket money in less than 6 years. I scaled up and bought 14 more properties just from cash out refis. I’m still less than 50% leveraged so I feel comfortable if the economy crashes and I have to reduce rent or have a lot of vacancies. If you have plenty of money to live off of now, then stay put. But if you would like to generate a ton more cash flow, then leverage your way to generational wealth with all that equity you have sitting there doing nothing for you.

Hi John,

I appreciate you taking the time to answer. Your reply inspired me to spent some time this morning running the number on a cash-out refi. I am certainly open to 50% leverage on my existing property if it can increase my cash flow. I could start with one property and slowly move on to doing the others.

Unfortunately, it seems I am not understanding something though, because no matter how I run the numbers my cash flow seems to decrease if I add leverage. Here is an example of what I am seeing:

-I have a duplex valued at 650,000. It has an NOI of 40,800 a year, or about 3,400 a month.

-If I pull 325k out of the property I will now have 50% leverage on this property, and a loan of 325K. This loan would have an approximate payment of $2,162 a month. I would now cash flow $1,238 a month on this duplex.

-Now if I invest this 325K in capitol into another duplex, and assume the same NOI and loan rates I would have a second duplex making 1,238. This would make my total cash flow $2,476 a month, which would be $924 less then I currently cash flow. I understand that I would have increased my equity overtime, and that in 30 years I would own two property's instead of one, but it seems to significantly lower my cash flow today.

I would love to hear any ideas and suggestions you have. I feel like I must be looking at this incorrectly, and in theory it makes sense I would increase cash flow with the addition of some leverage, but when I run the numbers I just don’t see how to get these.

I would hold off unless you find a deal that cash flows well. I’ve bought 14 SFR that all cash flower well from my cash outs. My last one was a year ago. I did a cash out refi on my paid off SFR and the lender gave me back 168k cash after closing. I used all that cash to buy 3 more houses. So my original cash flow was only $1200/month with my paid off house. After the cash out refi and mortgages on the original house and 3 houses I picked up with the cash, my cash flow went to $3600/month. So I basically got 3 houses for free and my monthly cash flow went from $1200 to $3600/month. And now I have 5% appreciation on 4 houses vs just one. And my tenants are paying these off for me while I collect much more cash flow. I’ve done 5 cash out refis like this to scale up. I get the new houses for free and my cash flow goes up quite a bit. Maybe look at more profitable properties to buy. I target working class hoods. C+ class homes that are always in higher demand in good economic times and bad. These homes also appreciate much more due to higher demand and lower inventory with affordable homes. Maybe take a look at more profitable properties. 

Quote from @Jason Striker:

Quote from @JD Martin:

Quote from @Jason Striker:

Hi All,

I am posting this in hopes of getting some advice on what other investors would do to grow if they were in my shoes.

I started investing in real estate in 2009. We grew rapidly at first, but for the last few years have been a bit stagnant and are not sure what the best next steps are to continue growing.

Here is our current portfolio:

-8-plex in HCL area. Currently paid off. Purchased for 625K, current value 1.25M. NOI = 68k annually.

-Tri-Plex in HCL area. Loan of 325K at 2.85%. Purchased for 725K. Current value 950K. NOI (pre-loan payment) 59K.

-Duplex in HCL area. Currently paid off. Purchased for 435K. Current value 625K. NOI 35K

-Duplex in HCL area. Currently paid off. Purchased for 450K. Current value 650K. NOI 36K.

We have an additional 300K liquid and available to invest at this time and are looking to grow. We also expect to generate an additional 300K from outside investments to dedicate to real estate, but that could be a year out. We could use the 300K we have now, then invest the other 300K when it's liquid, or wait and have 600K to dedicate to real estate in another year-ish.

As you can see I have been risk and debt adverse over the years. It has worked out well, but with this base we are willing to take on more risk/leverage in order to find more opportunity.

I am open to any and all advice, and would love to hear how others would grow from this position. We have considered doing what we have always done, finding a nice multi-unit building and purchasing it with a small amount of leverage. That said I know there is a lot I do not know, and I am wonder if I am leaving some value on the table not exploring other avenues for growth. I have considered 1031 exchanging, but as our buildings cash flow and are appreciating well so I have not seen much value in doing so.

Thanks in advance for any insight and advice.

 What is your why? Why do you want to keep growing? Do you need more money? Do you just want more bragging rights? Are you bored? 

We are simply trying to grow our business. 

 But why? There's no good strategy without an objective. 

@Jason Striker

I would do a cash out refi on at least one property. Harvest that equity that is doing absolutely nothing for you. That’s what I did and more than quadrupled my cash flow with no out of pocket money in less than 6 years. I scaled up and bought 14 more properties just from cash out refis. I’m still less than 50% leveraged so I feel comfortable if the economy crashes and I have to reduce rent or have a lot of vacancies. If you have plenty of money to live off of now, then stay put. But if you would like to generate a ton more cash flow, then leverage your way to generational wealth with all that equity you have sitting there doing nothing for you.

@Jason Striker   Got it thanks.  I have reviewed your properties above--of that list when was the first property purchased and when was the last property purchased?  Also of the those properties, ballpark, what percentage were listed and what percentage were distressed (i.e. foreclosure, short sale, off market from a wholesaler, etc...)?

@Jason Striker  What does HCL stand for?

Quote from @Jason Striker:

Hi All,

I am posting this in hopes of getting some advice on what other investors would do to grow if they were in my shoes.

I started investing in real estate in 2009. We grew rapidly at first, but for the last few years have been a bit stagnant and are not sure what the best next steps are to continue growing.

Here is our current portfolio:

-8-plex in HCL area. Currently paid off. Purchased for 625K, current value 1.25M. NOI = 68k annually.

-Tri-Plex in HCL area. Loan of 325K at 2.85%. Purchased for 725K. Current value 950K. NOI (pre-loan payment) 59K.

-Duplex in HCL area. Currently paid off. Purchased for 435K. Current value 625K. NOI 35K

-Duplex in HCL area. Currently paid off. Purchased for 450K. Current value 650K. NOI 36K.

We have an additional 300K liquid and available to invest at this time and are looking to grow. We also expect to generate an additional 300K from outside investments to dedicate to real estate, but that could be a year out. We could use the 300K we have now, then invest the other 300K when it's liquid, or wait and have 600K to dedicate to real estate in another year-ish.

As you can see I have been risk and debt adverse over the years. It has worked out well, but with this base we are willing to take on more risk/leverage in order to find more opportunity.

I am open to any and all advice, and would love to hear how others would grow from this position. We have considered doing what we have always done, finding a nice multi-unit building and purchasing it with a small amount of leverage. That said I know there is a lot I do not know, and I am wonder if I am leaving some value on the table not exploring other avenues for growth. I have considered 1031 exchanging, but as our buildings cash flow and are appreciating well so I have not seen much value in doing so.

Thanks in advance for any insight and advice.

 What is your why? Why do you want to keep growing? Do you need more money? Do you just want more bragging rights? Are you bored?