All Forum Posts by: Jenning Y.

Well, the loan amount(or LTV) itself can not tell the whole story of risk. Another more important factor is liquidity. It is safer, let's say you borrow 100% while hold 20% as cash reserve, than just borrow 80% with no reserve at all. In fact, I am heavily leveraged but I just pulled out about 25% of my equity as reserve. Though I borrowed more but I feel much safer now. So sometime borrowing more is more safer than borrowing less...

@Heather B. 

You are already ahead of lots of people because you have the courage to take the actions NOW! 

Started from 43 and turned the initial $100k cash to a $4m portfolio.

It’s never late to make your life better!

City/location with great appreciation potential( good population growth, economic growth, income growth, low unemployment rate and low vacancy), break even cash flow, low property tax (less than 1.5%). 

For remote rental property, if there's no appreciation potential, just sell it. As a remote landlord, you can ignore cash flow a bit (as long as can break even), but you can not make much if you  ignore appreciation.  As a remote landlord for almost 9 years myself, I found the cash flow numbers are not reliable  AT ALL -  repairs costed far more than I expected.   Sell it and buy in your local area should fare much better. 

Some of what you have said is true.

I am not saying cash flow can not build wealth.  What I mean is: 1) it is very slow to build wealth if ONLY on cash flow. 2) It is very hard to get cash flow if you are a REMOTE investor.

There are many ways ( or strategies)  to make money. When I said my cash flow is 0, that does not mean I do not have cash on hand. In fact, I tapped(mainly cash out refinanced) close to about $1m  equity from my properties and invested into new properties.  Even in the past one year, I amassed( cash out refinance or sold some not performing properties) about $300k cash on hand as reserve.

In your second case, you can always cash out refinance and tap the appreciation in your property.  So the two cases are the same.  

@Todd Pultz  seem like you found excellent business model for yourself, congrats on that.

As mostly an out-of-state investor living in a ok-cash-flow but not-ok-appreciation state, and not a handyman myself, I made up my mind to invest mainly on appreciation and loan paydown on condition that cash flow can break even.  So far so good, in less than 9 years, every $1 cash I invested, appreciated about $11, loan paydown about $2, and with 0 cash flow.  I absolutely have no regret by increasing my wealth by almost 14 times but with 0 cash flow. Some people like to say  "cash flow is king", but I like to say " Wealth is King".

Yes, cash flow can build wealth, but probably not as great  as appreciation.  Most importantly, it is very HARD to get cash flow for a REMOTE investor if we outsource everything like PM and contractor etc.  All kind of fees  eaten almost all my projected cash flow.   Have you ever thought about if you were an out of state investor and if you outsourced everything, can you still get that good cash flow? Can you still find deals as good as you can find now if you were an OOS investor?

If you are a slumlord and you  invest locally, you may still have chance to make decent profit. But if you are a REMOTE slumlord there's little chance you can make any profit.

Now maybe not a good time to invest in LA, but if given 20~30 years time horizon and force me to make a choice,  I will choose to invest LA other than other non-appreciation area, and there are high probability that I will be right!

Let's me repeat my main point again: If you are OUT-OF-STATE investor and your main focus is cash flow, you get the wrong idea.  (Some exceptions: large apartment buildings, or large scale investors have their own boots on the ground). 

@Jon Schwartz   @Etienne Dubois

I agree with Jon, appreciation should be first priority on condition that the cash flow can at least break even - this is even more TRUE for OOS investors.  Cash flow play is for local guys or large scale investors with boots on the ground.

Buy for appreciation  - you are an investor

Buy for cash flow - you are either finding yourself a new job or earn nothing

Use $20k own money, $80k from cashout of primary home, bought a $100k property with cash in 2012, sold it in 2019 for over $300k. During the holding period, cashout refinanced twice and used the proceeds bought other properties. Eventually, the original $20k own money is growing to a $1.8m portfolio, with $0.6m equity. All deals are remote and I never see any of them personally so far.  

@Mike S.   @Thomas Rutkowski   So usually what's the  spread between policy return rate and borrow interest rate?  Thanks!

Hi Mike,  I am wrong to say previously that the WL will never catch up.

Give a simple example,  if we can use 85% of the money and we can borrow 100% of the 85%, for 

WL return :  0.85*(1+R+S)^N

Non WL :    (1+R)^N

give time the WL will catch up.

R is the outside return

S is the spread between policy return rate and borrow rate.