All Forum Posts by: John Morgan

California blows in so many ways other than the weather and scenery. We got out of there as soon as we could and moved to Texas. I would ditch the LLCs. Any attorney can pierce them if they really wanted to. Just get extra liability with your insurance and call it good.

Yes, I've done 7 DSCR loans for properties that were vacant and needed some work. The lender will send an appraiser out to determine market rent. Side note- I always tell the appraisers the market rent and appraisal value I'm hoping for. And somehow my appraisals always come out at those numbers or higher. lol

@Kenny Tran

I'd definitely 1031 it into a du that ramps up your cash flow. I did a 1031 exchange one time for this exact reason. Cost me 1k for an intermediary for the exchange and it was simple to do. Then 3 or 4 years later, I did a cash out refi on the new property to tap into that equity (133k) to deploy and buy 3 more good cash flowing SFR with 20% down on each with the cash. It's all about your return on your equity. Your equity is house money because you got all your money back with your BRRRR, but you've got a chance to 1031 it into something that cash flows well. I wouldn't wait. I'd do it now.

Turbo tax walks you through everything. And you won’t be paying taxes on your mailbox money for over a decade. If you are, then you’re not doing something right. lol

You're in a great situation at only 49 years old with all that equity. Why not keep the course and do nothing? Sure you'll always have cap ex issues, but your cashflow is probably insane so who cares? I'm 54 years old with 29 SFR that are always breaking and costing me $. Or an occasional vacancy that is expensive. I've got 9 houses paid off and probably around 50% equity on average in the ones that I've got mortgages on. Could I maximize my cashflow if I sold some and did 1031 exchanges or cash out refis to tap into equity? Sure. But I'm happy with my cashflow now and keeping things simple. Are you happy with your cashflow overall now considering your cap ex issues and an occasional vacancy etc? If so, don't do a thing. You've created generational wealth already. Or do you need/want much more cashflow? If that's the case then put some of that equity to use and buy some more good cash flowing properties. Or 1031 a few and scale up a little. My wife always asks me "when is enough?" She doesn't like that I keep adding more to our life when I keep buying great cash flowing houses than fall in my lap. She thinks our cashflow is good enough now and wants me to stop, so I will. Do you have enough now? That's the big question. If not, you've got some great options ahead of you with all that equity! Good luck.

Quote from @Nicholas L.:

@John Morgan

you're probably a one in a million investor... even just having that many sets you apart.  would you agree that someone without your skill set is not likely to be successful?

Not really. I’ve helped mentor noobs recently to get started doing something similar to my strategy who are doing well. I think people over think this. Anyone can do this and self manage from afar. 

Quote from @Ivette Raygoza:

Quote from @John Morgan:

Good luck finding any cashflow these days in A or B class areas. lol. You'll be lucky to break even with 25% down. But you'll be fine with appreciation over time. If you have a good W2 and don't need any cashflow now, then you'll be fine. Just know that when the economy tanks every 8 years or so historically, class A and B rentals get hammered with higher vacancies. That's why I focus on working class C+ class hoods in areas with not so good school districts or crime a little higher etc, but close to downtowns and freeways. These rentals are always in highest demand in good times and bad. Times are good now, but you never know when the economy will fall out and people lose jobs etc. Make sure your rentals will be in high demand areas with a price point that will attract renters when the economy tanks. I'm investing in the Dallas area and Arkansas with 29 SFR. Appreciation in TX is good but low cashflow. And the cashflow in small towns in Arkansas is pretty good, but low appreciation.

 Thanks for the insight John. Have you had any issues with tenants in the C class neighborhoods? I have heard many mixed opinions.

Not really. These tenants seem to stay for many years so I rarely have vacancies. And when I do have a vacancy, I get them rented out right away due to a much higher demand for affordable rentals. 

@Becca F.

I found 9 out of 10 of these SFR in a small town in Arkansas from a wholesaler. They met the 2% rule with tenants in place so I thought I'd give it a try. lol. And I bought one off the MLS there for 75k with a tenant in place paying $1200/month for a 4-2. Some needed some work but expected them all needed some work. I'm lazy and buy almost all my properties with tenants in place. Then I slowly fix them up over time and raise rents. I have 18 properties In the Dallas area that have less cashflow but better appreciation. Most of them meet the 1% rule or better in TX bought I started buying them over the last 7 years so market rent has come up.

Quote from @Marcus Auerbach:

Quote from @John Morgan:

I'd put 3% down and get an FHA loan and live in it for a year while house hacking. Rent out rooms to others to make it affordable or profitable. Save up $ and repeat this every year and keep scaling.

I started with only 25k in savings exactly 10 years ago and now have 29 SFR with 3.2 million in equity cash flowing 19k/month profit. Give yourself a decade or so and you'll be set for life. Good luck!

John, while I agree with your advice to give yourself a decade, you are setting an unrealistic expectation for someone who wants to started in 2025. 

10 years ago was a VERY different market. We had 5 months of inventory, sellers were willing to negotiate, prices were just about half of where they are today (at least in Milwaukee). For me it was not about finding a deal, the biggest challenge was which one of the 17 deals I saw should I buy. The definition of a "deal" is very different today.

If I had to start over with 10k today I'd look for an easier path, probably online and find a way to make an AI make money for me. That's the frontier in 2025, not REI.

I disagree. People told me the same thing when I started investing in RE 10 years ago. Then again 3 or 4 years ago. Especially a year ago when I bought 10 houses over the last year out of state in an area I didn’t know anything about. The doomers told me that I wouldn’t be able to find deals in real estate in 2024 or it would crash. I’m still finding great deals today. I think someone can create generational wealth in 10-15 years in RE if they start today. And it’s definitely not rocket science. But most people don’t have 10 years to wait. Most people don’t have 3-5 years. They want to hit a grand slam today and to be driving a Lambo next month.  Maybe the impatient ones should try crypto or something that makes no sense but occasionally hits. lol. But I’m still finding deals all the time that cashflow and make sense.  

It all depends for me. I keep them all in below market rent if they are good tenants. Some are $200/month below market rent because they’ve been there for years and never bother me. I usually bump it up $50-$75 every year. My taxes and insurance go up at least that amount or more so I pass it onto them. And if I’ve had a lot of maintenance or cap ex at a rental, I pass that off to them with rent hikes to pay for it. We’re not running charities, so we need to keep raising the rent to cover our expenses. And sometimes I tell my tenants my expenses between insurance and taxes went up $100 this year so I need to raise your rent $75 or whatever.