All Forum Posts by: Jeshua Patrick

@Alex Kovalenko I recently bought a property from a little old lady who rented her property to someone who seemed like a nice person. Things went well for a while but then he tried to convince her to sell him the property at a discount. When she refused he locked her out and quit paying rent claiming that “she’d made plenty off of him already and didn’t deserve to make any more off him”. I ended up paying her less than he offered her because I couldn’t see inside and I am on my way to eviction court. A simple background check on my part revealed that he had a prior eviction and her whole problem could have been avoided with a little basic screening.

I’m sure this has all been covered in one way or another. Honestly I stopped reading replies after the 2nd page. To answer your cash vs leverage question I think it depends on the property, the location, your goals, and your situation.

This may sound crazy but IMHO the person who uses all of his/her cash to buy 1 property all cash is in just as much trouble if something happens requiring major repairs as the person who over-leverages themselves and then tenants stop paying rent.

I think it's wise to do the math on a property as if you intended to leverage at 80%. This way, even if you pay cash or use less leverage, you have available equity should the need arise without turning your cash flow negative. An easy way to see how much an all cash model will hinder your growth is to divide the cash you would retain with financing by the P/I portion of your payment. For example, let's say you have $100k in capital and you finance a $100k house at 80% LTV and 6% interest (conservative investment based 30 yr note) the loan will cost you $400/month in principal and interest. If you divide the $80by $400 you will find that it would take you 16.67 years prior to inflation to recapture that $80k.

Assuming a $200/mo per property cash flow after PITI, PM, and 15% additional hold-backs you could hold back $20k for initial reserves and buy 3 more like properties tripling achieving the same cash flow as if you had paid cash for 1 property while cutting your risk of tenant default by 65%.

Additionally, if you only managed to negotiate a 20% discount on the properties you purchased you would have gained an additional equity value of $40k in the first year.

I'll second @Don Harris about Sonrisers meetup. It's a subgroup with the Metrolina REIA group in the Charlotte, NC market but consistently has investors in attendance online from all over the eastern seaboard if not more areas. Great group!

I am buying as I am able but also wholesaling and watching the market. What I know? At least 10% of all mortgages are either in default or forbearance with lenders on the hook for $5.5B/month+ in mortgages they aren’t getting paid for and can’t foreclose on with no relief from the Fed in sight. What I don’t know is whether the demand for housing will be enough to minimize the effects of a high rate of foreclosures being injected rapidly into the market. Buying but preparing for opportunity.

@Jai Reddy no disagreement here. I was just saying that shouldn’t be the OP’s only or primary approach. I would rather plan as if it won’t be there and be happy if it still is.

@Jai Reddy except to advise someone to plan as if the 1031X will still be there when the current administration has made it clear they want to eliminate it is foolish. If the OP were to make an investment on the basis of using depreciation to avoid a tax hit now with the expectation of being able to delay recapture later with a vehicle that has a strong chance of being eliminated before he gets there he will get burned badly.

@Damon J. it’s simple really. Let’s say you lend $100k out on a property at 12%. You are only making 12% on $100k at that point.

Now let’s say that instead of simply lending that $100k out and waiting for it to mature and then re-lending you marketed your interest in that note at 10% to other investors. You are only earning 2% on that note but now you have your $100k back to re-lend again. If you could rinse and repeat this every 30 days with only the same $100k you would have lent $1.2M in just 12 months.

Now, of course you won’t have 10x’d your return at that point, only doubled, but you certainly would quickly find you had no shortage of money to lend, or interested investors to help you recycle it and it wouldn’t be long till you 10x your returns.

@Brian Garrett I know a HML in Dayton, OH who lends at the same rates you could; however, the trick is to learn how to package your notes into a resealable format that appeals to more passive investors. He lends at 12% plus up to 4 points sells the notes back to passive investors at 10%, bundles partials into a single trust so all investors are in first position, then recycles that money into new loans. He also services the notes so his investors literally set it and forget it until the note pays off. You could potentially 10x your lending power this way if you build it right.

This is one of those questions that will generate a lot of answers. A CRM is a powerful time saving tool when coupled with the right automation sequences. It can be a useful lead organizing tool without automation but that can be done without a CRM tool.

We looked at some STR's, mostly condos, in MB but list prices seemed to be about 35% over break even if using financing. If you can pay cash you can there are properties that will net about 6-8% after expenses. Isaac Larrowe with Larrowe Properties seems very knowledgeable about what condos will generate good returns vs those that typically don't.