All Forum Posts by: John Morgan

@Jennifer Fernéz

I started investing about 9 years ago when I was 44 years old with only 25k in savings. I found a rental I liked and paid 130k cash for it. I had no idea what I was doing. lol. But I've turned that one rental into more and more SFR by recycling the equity to scale up without using much of my own money. My cashflow now is about 19k/month profit off the rentals and it all started with finding a way to come up with 130k cash when I made a drunk offer (over email) to the listing agent on that first house. I was able to do a HELOC on my primary and tap into some of my Roth IRA $ (tax free) to come up with the 130k since all I had to my name was 25k in savings. Since then I've done a cash out refi on that rental to buy several more. I've actually done 4 cash out refis to buy 14 more SFR with zero money out of pocket by harvesting the equity in my houses that appreciated over time. So my advice to you to is to find something in your budget you can pay cash for now. Then do a cash out refi on that property later on to maybe buy 2 or 3 more rentals with 20% down on each. Then keep repeating this every 3-5 years. I've bought 5 houses from 401k loans too. So there might be ways for you to find more money to combine with your 80k to pay cash for a decent cash flowing SFR. And I've bought 4 or 5 houses from 0% interest for a year credit card loans so don't rule out those offers to combine with your 80k to buy something. Good luck!

Quote from @Hector Espinosa:

Quote from @John Morgan:

I would invest every penny I had in SFR in growing areas if I started out today. I'd find a way to come up with the 20% downpayment and do whatever it took to go find the next deal. I waited til I was 44 years old to invest in RE and have been buying and holding SFR for almost 10 years now. My only regret was not doing this when I was younger. I could have found the money I bet, but I was scared to be a landlord. Now I own and self manage 29 SFR and find it to be easy. Lol

Any particular reason picking SFR over small multi-family (Duplex, Triplex, Quadruplex)?  I just turned 44 years old two days ago and I hope I can have at least 29 units in 10 years as you do now :) 

Do you have your properties in your local market or out-of-state? 

Regards,
Hector

I like single family vs multi for a few reasons. And I started investing about 9 years ago at your age (44). Single family is less drama compared to MF. Turnovers with MF average every 17 months. No thanks. Turnovers cost a lot of money. With my 29 SFR, I rarely ever have turnovers. People stay for years which saves me turnover costs and all the headaches. I can sell my single family easily to a buyer who’s an investor or regular home buyer. MF can only be sold to an investor and it’s based off its performance. I self manage my 29 single family homes which is easy since I don’t have many turnovers or deal with tenant drama like those who do with MF. And SF appreciates much better in my area which is a bonus too. I have 18 properties in my local area and 11 out of state. I don’t do any work on them so it doesn’t matter if they’re 20 min from my house our 15 hours away. I hire it all out. I don’t want RE to be a part time job so I text handymen to go fix things when they break. 

Quote from @Kyle Kline:

Quote from @John Morgan:

I got slammed with cap ex issues my first 3 years of investing. Luckily I had war fund saved up for the HVACs, roofs and foundation repairs I needed. Now with 29 SFR, I don't need much in emergency $ because the rentals generate 19k/month profit. So if an hvac or roof needs to be replaced tomorrow, it's not a big deal. I'll just use some of my monthly mailbox money to pay for the expense. But when your monthly profits are less than $2000, then I'd make sure to have some reserves, because Murphy will come when you're least expecting it.

Thank you! So you had saved your own personal money to prior to purchasing the property to use as your emergency fund?

At first, I would throw all my mailbox $ into savings for cap ex things. So that’s how I paid for a new hvac, roof or foundation repair. Then I got thin with money for a few years because I was using up all my savings to buy more and more houses. So I used 0% interest for a year credit cards to pay for cap ex things that popped up or a rehab etc. Then I’d pay those loans off within a year with my cashflow. Then I decided to use five 401k loans for up to 50k to buy five houses. Then would pay those loans off within 3 or 4 years and repeat. I’ve used lines of credits from banks to pay for cap ex things too when my savings was zero. After you get 5 or 6 properties, the cashflow adds up and makes it easier to deal with the unknowns that will happen. 

Quote from @Arn Cenedella:

@John Morgan

Nice approach. Good work,

Just curious, how much equity do you have in your 29 SFR rentals?

Arn

I have about 60% equity in my 29 rentals. Owe 2 million with 5 million in value combined. But I started 9 years ago and appreciation has been good to me in the Dallas area. 

I would invest every penny I had in SFR in growing areas if I started out today. I'd find a way to come up with the 20% downpayment and do whatever it took to go find the next deal. I waited til I was 44 years old to invest in RE and have been buying and holding SFR for almost 10 years now. My only regret was not doing this when I was younger. I could have found the money I bet, but I was scared to be a landlord. Now I own and self manage 29 SFR and find it to be easy. Lol

I got slammed with cap ex issues my first 3 years of investing. Luckily I had war fund saved up for the HVACs, roofs and foundation repairs I needed. Now with 29 SFR, I don't need much in emergency $ because the rentals generate 19k/month profit. So if an hvac or roof needs to be replaced tomorrow, it's not a big deal. I'll just use some of my monthly mailbox money to pay for the expense. But when your monthly profits are less than $2000, then I'd make sure to have some reserves, because Murphy will come when you're least expecting it.

I'm a fan of SFR. I have 29 of them and rarely have any turnovers which are a pain and eat up profits. These people seem to stay for years which makes it easy for me to self manage. With single family, you don't have any drama like MF. And SF is much easier to sell if necessary because you can sell to an investor or home owner. Appreciation is usually better over time with SF vs MF.

Yes, I'm a fan of harvesting the equity built up in properties. I've done 4 cash out refis to buy 14 houses basically for free, since I didn't have to come up with any out of pocket cash for my 20% down payments on the new houses. I've done a HELOC to help get me my first two rentals. I've bought 5 houses with 401k loans up to 50k. I've bought some houses with 0% interest for a year credit card loans. And a couple houses from random lines of credit from banks. If your DTI is bad (like mine was for several years) then you're stuck with DSCR loans with 20% down. That's ok, because I found ways to find that 20% down payments. Mostly from 401k loans and 0% interest for a year credit card loans from a few credit cards. This is how I acquired 29 rental houses in 9 years. Be creative and find ways to scale up. Tap into that equity sitting there doing absolutely nothing for you.

I'd buy as many cash flowing SFR with 20% down as you can. I've spent less than 150k total out of pocket investing in RE in the last 9 years and have been buying "base hits" in Dallas and Arkansas and now have 29 SFR. Once you get going, your appreciation will be great over time so you can recycle the equity to buy more and more properties. Give yourself 10 years with that 200k and you'll be set for life with real estate cash flow. Trust me.

I've only been investing in RE for 10 years and have 29 SFR. But from my limited time in the game, I've found that my complete lemons are cash cows a few years later as market rent comes up well and my cap ex fixes a few years ago have paid off. These old houses built 70-90 years ago seem to never break once I work out all the kinks. So I'm glad I didn't sell my 5-10 worst homes that seemed to have issues the first few years. They're now my best ones. So from my experience, I'm planning on keeping all the houses that I've had a lot of cap ex on. And maybe look into selling the ones that almost never break, because I know they are due to start falling apart. lol. But owning 29 houses seems to be an easy number to self manage so I think I'll hold off on buying anymore and keep it simple with what I have.