All Forum Posts by: Jonathan Lyford

I’m in the DFW area. I try and cash flow $200/door with 15 year loans. That doesn’t count cap ex, vacancy or management fees. So I’m not doing great to most people’s standards. I self manage which saves me $1,100/month. It’s really easy to do. And most of my properties are rehabbed so not too many big things breaking down which keeps my maintenance costs down. Two are paid off so my cash flow is about $3,400/month net. I just bought a 4-2 yesterday for 125k that will cash flow $400-$500/month after rehab. But good deals are hard to find out here! You’re lucky to get 1% of purchase price in rent. And if it’s in a great area, I’m ok with the 1% rule..even though property taxes are so high in TX.

So, if I'm understanding this right, you are essentially buying non-cashflowing properties on 15 mortgages? I know you said 200 per door, but after cap-ex, vacancy, repairs etc... you are probably breaking even or possibly even slightly negative. So you are planning on the W-2 and your paid for properties for now, and then making bank once the properties are paid off. Am I following this right?

Yes, pretty much. My cash flow now is only 3k/month between all 10 of my properties which includes two that are paid off. I worked really hard to get two paid off so I can have immediate cash flow now in case something costly happens. This cash flow from all my rentals combined doesn’t count for cap ex or vacancies. So yes, some months I’m breaking even. Just spent $3,400 on a gas leak at a property this month so I’m in the red for Feb. Ouch! I’m ok with 15 year mortgages because I don’t need the cash flow now to survive. I love my W2 job and I’ll try and keep it for 15 more years until I retire. So when they’re all paid off, I’ll have about 12k/month net passive real estate income after taxes and insurance (not including cap ex and vacancies). I can survive off that. This is just to supplement my retirement In my 401k and Roth IRAs. I just hate to have 100% of my retirement in the stock market. And I know I’ll be able to slowly raise rent over time so maybe I’ll be making 4k/month in a year or two vs only 3k now. That’s enough for me at this point in my career. I go for base hits and a “get rich slowly” strategy. Seems like most people are swinging for the fences and trying to make the big bucks now. I’m ok waiting it out over 15 years, then enjoying the fruit later.

And if I ever need money for whatever reason, I can always do a cash out refi to pull out say 150k out of one of my rentals if needed.

Thanks! that's a really cool strategy. I like that you used the paid off ones to help supplement your investing on the others. Having those properties paid off and cash flowing for retirement will be sweet! Can I ask you how you paid the first two off to begin with? was that just saving from your job to "Prime the pump" so to speak?

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Originally posted by @John Morgan:

@Douglas Vogel

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Hi! I had about 70k saved for my first investment property (I made my old house a rental when I moved, so technically I already owned the rental and bought myself a new house). That dropped my savings down to about 18K after down payment and closing costs. My rule of thumb is to keep about 4-6 months of expenses saved in a mutual fund(vanguard S&P 500). That is total expense; my own expenses for my life plus cost of rental if it was vacant. I keep throwing money into that account every month. Once it grows big enough, I buy the next rental and start over again. Hoping to buy the next rental before the end of the year, and plan on just continuing to do this until I can buy an island somewhere :)

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Hi and welcome to BP! My advice would be to not do this deal. You need to take some time to learn more about real estate before you jump in to prevent yourself from having a mess on your hands. Brandon Turner has some good books that are easy to read and a good starting point. You need a better way to figure out how much rent you will get. You cant just say "rent is 1% of purchase price" as if that somehow makes it true. The rental price is whatever the market tells you it is; you don't get to decide that. You would need to figure out what similar rentals are actually going for. that would help you figure out if it is a good deal. What if you can only rent it for 700? what is you can rent it for 2,000? changes the equation quite a bit. Also, you aren't figuring out your expenses properly. it is not as simple as saying "mortgage is x, rent is y, so cash flow is Y minus X." what happens when the place sits empty for a month? what happens when you need a new roof? what happens when the HVAC system goes? You need to factor all of those expenses in to get a feel for what your true return will be. You can learn a lot on here and from books, and I would strongly suggest you do both, so you can go into your first property first confidence, which comes with knowledge. Good luck!

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I agree! I'm always kind of surprised when people invest with little money and also other kinds of debts hanging around, like car payments and credit cards and such. I think starting from a solid foundation is the best chance for long term success. I would be too stressed out anyway to tried and live that close to the edge. That being said, there are people who do the opposite and have a lot more money than I do, so maybe they know something I don't.

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In most states, an individual having a mental health crisis can be involuntarily committed to a hospital for treatment. If the other tenants are concerned, they can call the police and/or file for him to be committed to get some help. Maybe he has some family that could help him get well? for you, evict if the behaviors continue, as he is creating a safety threat for everyone.

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I hope this doesn't sound too harsh, but here goes. You need to learn to think for yourself. You shouldn't listen to your uncle, and you shouldn't listen to me. You should learn about real estate and develop a knowledge base from which you can discern good information from bad information. If I tell you to buy, and your uncle tells you not to, will you flip a coin to decide? Learn more and think critically and then you wont need to ask these kinds of questions. Good luck!

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You already got some good input from other, but I'll add my two sense as well. Your mortgage situation on the primary residence is awesome! I wouldn't do anything to mess around with that. You make a whole bunch of money, and have very low living costs, which is also great. If I were you, I would: - Pay off my outstanding debts -Save up and emergency fund - Save down payment That will take a little bit longer than so other, more creative, ways to finance things. But, since you make good money it shouldn't take that long, and I think having a solid foundation is a good way to start your investing career. Good luck!

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@John Morgan So, essentially you are saying worst case scenario you lower your rents and your cash flow goes from 3,400/month down to, lets say, 1,600/month, but you are still in the red? that makes sense to me. I better got my butt in gear! :) thanks for the response!

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Originally posted by @John Morgan:

@Michael Jackman

2018 and 2019 were rough years for me with my properties. Everything you can imagine broke and cost me a ton. My back up plan was to put expenses on credit cards. I was still able to buy a property in 2018 and a couple more in 2019. And just snagged another SFR this week. I racked up my no interest for a year credit cards a little. But paying them off aggressively has been working for me. I also did a few BRRRRs and was able to pay myself back a little with cash out refis. If I find a deal, I just go for it even it costs me a little in the short term. Most on here probably think this is a little reckless, but it's worked for me and I'm cash flowing over 3k/month with nine properties. I attribute that to just diving in and going for it. Once these 15 year mortgages are paid off I'll be cash flowing 12k/month. My goal was to cash flow 10k/month after 15 years of investing with paid off props. Dave Ramsey would go nuts on me for not having a huge emergency fund and for having 7 mortgages. But it's working for me and I haven't turned back. Good luck!

Honest question. I am genuinely curious. Do you ever worried that one of these days it won't work out the way it has so far? You have made incredible progress(way more than me, which if why I'd like to learn from you), but do you worry that something going wrong could start a domino effect that would end in bankruptcy? Do you have some sort of strategy to be so aggressive that also prevents some sort of catastrophe down the road?

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All Forum Posts by: Jonathan Lyford

Jonathan Lyford has started 5 posts and replied 55 times.

Post: 2020 will be a challenging year for the housing market.

Post: 2020 will be a challenging year for the housing market.

Post: How much money did you have before your first investment?

Post: what is my best option for down payment 20% 5% or 3%?

Post: If you have less then 20k, you shouldn’t invest in real estate

Post: Tenant Endangering Property and Roomates. NEED HELP

Post: Buying First Property

Post: What would you do if you were me right now?

Post: Save for a emergency fund or invest?

Post: Save for a emergency fund or invest?