All Forum Posts by: Jer Yeung

@Joe P. If this JUST happened, I'd give it some time to let everything settle down. The mom was understandably upset based on her thought that something was stolen, which she has every right to be. Follow up with the adult son in a few days to check to see how they are doing and if they found the watch. Who knows, maybe they did and it was a mistake. No need to make a decision to terminate the lease in the heat of the moment. Let things settle down and communicate with the tenant. If that's the ultimate resolution, that option will still be there in a week.

I think the mindset matters more than anything else.  Regardless of whether it actually ends up happening at 35 or not depends on a ton of variables, but if the right mindset is taken, they are going to be on the best path possible towards financial freedom!

Try to think of cash flow as a percentage rather than a dollar amount.  Positive cash flow is great, but that doesn't give you an actual metric of what your money or investment is doing.

Positive means nothing without a metric, and the dollar amount of cash flow means nothing as a raw dollar amount.  

$5k/mo cash flow sounds great - unless your investment is $10mm.   $100/mo cash flow sounds terrible... unless your investment is $10k.  

think of cash flow as a percentage, and it will put things in the proper perspective.  

side note - if it's turn key that you're looking for, why tie yourself to the midwest?  The goal will be to be hands off either way, no?

Originally posted by @Andrew B.:

Or, here's a novel idea. Invest in the vehicles that fit your comfort, risk and knowledge level. Talking about a single company is the same as looking at a single rental property. Local real estate markets can experience volatility as well. What if you own one rental in Ohio and a major employer leaves town, and 20% of the workforce there gets laid off?

I agree that real estate can be an amazing investment vehicle when used properly, and I love it because its something you can personally influence by forcing appreciation and using sweat equity to save money, however, to state that real estate is the reason you should NEVER do anything is pure ignorance. Diversification is an amazing tool.

My personal motto: Blanket statements are NEVER good.

HAH.  I like what you did there.

agree 100%.  comfort, risk and knowledge level should be key drivers.  

Regardless of if you're investing in the stock market, real estate, precious metals, foreign currencies, etc, etc - if you're only expecting it to go up, you're missing part of the picture.  I can't think of anything worth investing in that isn't cyclical or doesn't have any downside...

to play the other side of the coin - why prioritize the content provider's gender rather than the content itself?  Shouldn't the content be the primary goal?  While I understand wanting diversity and the need for different voices, do we want to hear diversity on the podcasts? or do we want to hear the best available content?  

I think diversity is great, and I work with a female real estate agent - but I work with her because she knows what she is doing, and because we have a great working relationship, not because she is female.  It may sound insensitive (and if so, I apologize, as that is not my intent), but I don't prioritize equality over quality.

I haven't seen it as a topic on the podast (and it may have already been done), but perhaps a good topic (or topics) would circle around women and/or minorities and having a discussion about what their biggest challenges were in getting established and how they overcame those challenges (regardless of whether the challenge was actually gender or ethnicity)?

Agree with @Jason Bott and @Cody L.

The key is understanding the risk and managing it.  retaining the risk (not purchasing insurance coverage) is absolutely an option - but someone will want to make an active decision doing that if that's the case.  If the portfolio is just a single or just a few properties, as others said, losing one could be devastating.  In that case, one would probably not have the risk tolerance for that.  However, once you diversify geographically and build a portfolio, losing one property has a much smaller overall effect.

I haven't been on BP long enough to get a gauge on the average portfolio, but for those without a number of properties or to those starting out, this isn't something I'd recommend doing, though understanding the reasoning is something I'd recommend. 

Originally posted by @Jack Inman:

@Jer Yeung Yes, quite a few California investors are cashing out of their local properties and buying properties in higher cash flowing areas using 1031 exchanges. Like you mentioned, appreciation in Memphis is relatively mild; usually it is pretty close to the rate of inflation, 2-3% / year. So, cash flow will be the primary investment driver in a market such as ours. 

You could buy a few investment properties in Memphis at 60-65k and rent for $800-850/month and cash flow enough to offset the lower appreciation rate. 

Right now the market is doing well, so it's important to make sure that your investment would still cash flow in a recessed market. Play around with the numbers; double the vacancy rates, make sure you have adequate cap-ex cash set aside etc. If you do the proper due diligence you'll be good to go.

Thanks - makes sense, though at the $60-65k range, I'm concerned I don't have the time or expertise to handle a property like that.  From what I've dug into, that seems to be substantially on the lower end of the spectrum?  Figuring out the neighborhoods, contractors, etc is something I'm trying to rely on another party's expertise on - and it looks like the reliable turnkey and property managers have properties that are notably above that range. 

Good point on doubling the vacancy rates and making sure it makes sense in a sustained downturn!

Originally posted by @Wayne Brooks:

If you bought  and lived in the condo as your primary residence, for at least 2 years, you can sell it tax free (up to $250/500k profit filing single/married) as long as you sell it within 3 years after you moved out and starting renting it.

As for the return difference in appreciation on it verses the cash flow from a “turnkey provider”, that may be a toss up.....you’re unlikely to see any/much appreciation with the turkeys.

it's been tenant occupied for 5 or 6 years now, and moving back in isn't something that is going to happen.  I'm also fine with doing a 1031 exchange on it, as I'd be liquidating a real estate asset and would be looking to redeploy the capital into another real estate asset. 

If I factored in a plug for maintenance/repairs and vacancy, it's very clearly a negative cash flow proposition.  My family has always done the "so long as you're close to break even, when it's paid off in 30 years you'll be happy" thing... I'm ok with that, but I also realize there is a better way.  Just trying to make sure there's nothing glaringly obvious that I've missed.  

Hi - I am somewhat of a new investor; my only real estate "investment" up until a few weeks ago was a condo that I bought, moved out of, and rented out.  Since then, I've built out my stock portfolio and have been working on my primary business, which I have no intention of leaving, but have been looking at putting idle capital to use in real estate.  

Recently, I purchased my first property through Memphis Invest, and I'm making what I feel is a good return for being completely hands off, and I think it's great.  I don't have the expertise or understanding to build a team out of state, and locally in Los Angeles nothing makes sense from a cash flow perspective without doing a huge value add (again, that is a space where I lack expertise - without even considering that I don't have the time).

My thought process is this - my condo that I've had is break even from a cash flow perspective - this is without factoring in anything for vacancy, repairs, etc.  I've been fortunate to have great tenants, but not budgeting for those things is silly.  I could sell the place and double down with Memphis Invest on a few properties via 1031 exchange, and have each of them cash flow and get me what amounts to a good return cash on cash after factoring in depreciation and my current tax bracket - AND it would be hands free and actually passive. 

I'd lose some of the appreciation potential, but I'm not in it for the appreciation as much as I am in it for stable returns, so moving out of the LA marketplace doesn't bother me.  I'd go from a single property that I manage that doesn't cash flow in an appreciating market to multiple properties that are cash flowing positive (and passive) - both diversifying and reducing the amount of work put in on my part.

It seems like a stupid no brainer as I type it, but I am looking to touch base with the BP crowd to see what I'm missing, or if I'm on the right track...

Thanks in advance!

Marcus - 

I'm in a similar situation from the opposite coast, and was looking into different options.  What's your background and why real estate?

I just closed my first property with Memphis Invest, and the process was seamless.  There was a lot of skepticism on the back end being that this was also my first out of state property, however, their reputation here (and elsewhere), and the fact that they have had this business model through the last downturn helped to make me much more comfortable.

While lurking here and listening to the podcasts have been helpful in many ways, it also made it a little more difficult by constantly being reminded about the returns that I could get with real estate, or what cap rates everyone is looking at in different areas, who's making how much with a BRRRR, etc. At the end of the day, I had to tune out all the noise and figure out what worked for me. I'm not active in real estate. I'm successful at what I'm doing and not looking to get into real estate as a full time gig. I don't have the team, don't have the time nor want to do the legwork to build a real estate business and will gladly leave that to the expertise of others. However, I understand (my) finances and want a diversified (and passive) portfolio.

Take a look at the numbers, break it down and make sure it's providing a reasonable plug for vacancy and maintenance.  Ask a lot of questions to whoever you decide to reach out to.  Check out their history and future plans (buying turnkey w/ a property manager is an investment in them just as much as it is an investment in the property). Figure out what's important to you (cash flow, appreciation, stability) and don't JUST look at the numbers for what they are on the surface, tweak them as you deem necessary and be conservative in how you assess it.  

Good luck!