All Forum Posts by: John Sonmez

Thanks everyone appreciate the advice. Here's kind of where I'm arriving at, basically 3 options:

1. DST. Looks like I could get about a 5.5-6% COC return with maybe 1-2% of additional upside if the conditions are just right and then perhaps 10% IRR.

Only issue here is that the return is a little low, money is tied up for a while (which I'm not that concerned about really), and starting in a negative equity position potentially of around 10% because of the frontloading of the deal.

No headaches. No management. Nothing. Just collect the check.

2. NNN Commercial building with national tenant. Perhaps 5.5-6% CAP with maybe a 7% COC return with the right financing situation. Due to the rent increases, it could slightly rise over time and maybe the IRR is around 12%+ if there is good appreciation.

But, the problem here is it's highly dependent on one single tenant and even big chains fail here and there and the return really isn't super great for that black swan type of risk. Also, the terms are not favorable to the landlord, especially against inflation. Options on the leases and long terms which in an inflation period could be really bad. And if it goes dark, seems like it'd be very difficult to get a replacement tenant on a very customized building.

3. NNN Mom and pop or NN commercial. Perhaps 7-8% CAP with maybe 10% COC return, IRR maybe 15%+ but... more of a headache. Have to have good tenants. Might require some actual management and maintenance. May have to release if tenants go dark, etc. So a few additional headaches and fees. I'm thinking this could work though if I find the right property that has solid tenants in the right location.

4. Apartment complex. Close to same profile as 3, but a potential for a higher COC since I can leverage more and if it's managed right, but in order to manage right I need to do a big enough deal to pay for management.

5. Partner deal. Some kind of better deal like 3 or 4, but go in with a partner who handles the management.

Right now I'm leaning towards 3 or 5 and thinking that 1 is a nice backup for if I start to run out of time.

Learning a lot.

Thanks everyone. Appreciate the great advice.

What I'm heavily considering right now is moving towards doing this first deal in a commercial retail deal around 1.5 million and selling a few other properties to raise the full cash for it.

Then, I could do another similar deal later and have everything split between just the two properties, which makes everything easier if I want to combine it all into one large leveraged apartment building or commercial building.

For those of you asking for my story, I'll try and give the condensed version.

Basically I started out investing in small residential real estate when I was 19. Bought my first house and lived in it then. I didn't really know what I was doing, but I had a plan to buy 1 property every year and figured at worse case I could retire in 15-20 years by selling a property each year and living off of the income and reinvesting a part.

Also, I figured I could just wait 30 years and pay off each property and have more and more cash flow.

Anyway. I was a software developer at the time and that was my long term plan.

So I followed the plan buying properties and holding them.

I did a few commercial office spaces and mostly bought single family, duplexes and fourplexes.

I ended up starting a blog (http://simpleprogrammer.com) and it quickly turned into a business. I also go an opportunity to make courses for a company called Pluralsight.

I hustled pretty hard on the courses and created 55 courses in a few years. There was royalty deal on the courses, so I started getting paid royalties and as the company grew, the royalties went up and up.

Eventually I was able to quit my regular job from a combination of the rental income, royalties and business income I was generating.

I decided I wanted to have passive income so I wouldn't have to work again, so I started dumping all my cash into paying off my loans on my properties.

I eventually paid them all off and that's basically where I am now.

So,  I had a combination of income I made from royalties on Pluralsight, the appreciation of the rental properties and business income that brought me to the current point.

There's more details, but that's the short short version.

I'm on day 2 of my 45 day period to identify a replacement property.

I've sold two residential properties in Boise, Idaho and I've got a 3rd that is under contract, for a total liquid cash amount of about $550k.

I've also got the capability to sell more of my portfolio (about 2.5 million all cash.)

Right now my overall goal is to reduce the headache and issues of dealing with property management companies who are constantly ripping me off and also just the hassle of having 13+ properties with pretty low cap rates.

My goal is to just produce cash flow as I'm already kind of retired and I just want to focus on my online business, not constantly dealing with real estate. (So hands off as much as possible.)

I'm looking to buy all cash deals (but I could be convinced to be leveraged if there is still ample cash flow.)

I'm open to location. I do live in San Diego, but I have property in Boise and Kansas City.

I'm open to DSTs.

Essentially, my long term plan is that I have about 3 million in debt free real estate, how can I turn that into the best cash flow with the least amount of long term maintenance and defer taxes indefinitely? (Or as long as I live.)

Right now I have to do something as the clock is ticking.

Open to advice, and suggestions on how best to achieve what my goals are.

Thanks,

John