All Forum Posts by: Joseph Walsh

Well, I am a complete noob, but I would sell and, unless you are tied to the exact area you are in, relocate to a more affordable area. and buy a house with the minimum down for and a mortgage.  Then the rest would go into an index fund, and I would retire.  

OR, if you want, invest some of the rest in more income properties, but ones that make sense.  You the luxury of time at that point to look for "great" investments.

1.) Not screening properly.

this was a case where we rented to existing neighbor, since his rental was being sold.  He's not a  "bad" tenant, but "frustrating" at times.

2.)  Allowing tenant to have a dog, or more aptly not have a stronger provision, the dog has dug up the whole back yard.  I'll have to sod when I sell.

3.) doing to much of the work myself, it's not my "house" anymore, it's my "investment".

4.) Oh, and this one.  not keeping the water/garbage in my name.  Turns out that particular city will happily allow the tenant to not pay all year long, and just add it to my tax bill, with interest!  (yay).  Now the rent includes additional for water, and it's in my name.

In my case though, it all boils down to not hiring a property management company from the beginning, which I have now.  I just don't have the right makeup to be a hands on landlord.  then again, had I not gone through that for 3 years, I wouldn't know what I want from a management company.

Thank you Michael.  For some reason, earlier today when I started this thread, that was missing, along with a few other things.  I knew there were some web site changes and...well, I suspect a firewall issue, since everything is golden now.

Jay

Hi all.  I seem to not have a way to search the forums like I have in the past.  Any ideas?  I am logged in.  Using Chrome Browser, if that matters.  Also the icon on top right (where you navigate to profile, or log out) is a broken image link.  I'd hate to post a "new topic" on something I am sure is covered in many posts, only because search is seemingly missing.

Thanks, 

Jay

Hi all, 

It's been a while. I'm a newbie that joined about a year ago, started with a flurry of questions over a few months, than realized, thanks to help from the community, I needed to take care of several things prior to giving this a more realistic go. I'm still not ready to buy another property yet and truly move toward being an active REI, but I am close. I am glad to be back, and thanks for all the feedback in the past that help me realize I needed to step back, and why. Look forward to being active over the next several months leading up to potentially pulling the trigger on a deal.

Jay

Hey Mr. Thomas, pretty cool of you to dedicate your time to answering these questions.  I am planning to go for my Master Certification sometime soon here.  I also plan to continue to do Residential Investment.  I have a couple of questions related to this.  Do you find any issues with pulling your own permit for work on your properties from a liability issue?  Second, any tips on what topic in the exam you didn't expect to see emphasized so heavily?

Thanks.

Sure, this particular example had a bit higher taxes, so that throws it off a bit, and it was a theoretical, I have no idea if the house would be for sale. I just took a house bought >10 years ago figured out the payoff amount based on original sale price/mortgage paydown (assuming 97% FHA loan) and a rough discount of condition after a drive by for a nearby house. anyway:

I assumed $120k all in, with 5k in reno, it would be plausible to "discover" another $5k issue, otherwise I normally assume +20%, which would only be $1k here...anyway:

[email protected]% for 30 years: $625 a month (after refi)

taxes: 300 a month

Insurance $60/month

Vacancy (1400@8%) = 112

repair contingency $60 a month (4%) 

Capex $60 a month (4%)

management fee $100

=$1317

the repair contingency is accounting for an update/refresh of something in 5 years to max resale (floors, kitchen/bath, whatever) and backs up capex if something goes to hell early.

anyway, it was just an exercise of a representative home. I have to get all my other ducks in a row before I look in earnest at houses. Still, the question remains. In this case, it's not a cash flow property, but when sold off, it nets $60k+.....which brings back the question, with BRRR are people finding it ok to downplay cashflow if the deal is right as a whole?

I think I want more cash flow, so some numbers would have to change on this example, but am unsure if I should be more flexible in a case like this.  Again, I have a lot of other things to worry about taking care of before I look at houses in earnest, so this is just for me to try and find my criteria.  that's my focus going forward, meet with my realtor, title company, find more money sources, talk to my contractor contacts, etc.

thanks.

thanks for the feedback. I just realized another follow up, and I am SURE this has been covered elsewhere, so if this is bad forum form, please let me know. But with Brrrr, do people here de-emphasize cash flow looking at the 5 year total return instead. For example. I found a hypothetical house today. ARV should be ~$190k, since I am conservative, let's assume ARV of $180k, lower than the recent comps sold by $5-10k. I think I can get the house for $110k, and actually needs little work, just updating/refreshing. paint, carpet, clean up etc, so lets say $5k. We're now in $115k, lets assume $120k. that meets >30% equity with a margin, and seems like a brrr slam dunk. However, it'll rent for $1400, and crunching the numbers, that cash flows just under 100 a month. Is $100 a month in a good area worth it for ~$60-70k in BRRRR profits in 5 years? Seems like some using BRRRR are ok with low cashflow, but in my mind <$200 a month isn't worth the work. Now sure, if no capex happens and there is low-no vacancy, great but you can't count on that. Given my ~10 year goal, it might just be worth it to build the portfolio, but it seems like there is enough opportunity to get both in our market, am I right in thinking that about the MKE market?

Thanks for the quick responses.  @Drew Markert: ~10 years from now, I hope to of transitioned to a full "hold" position and be able to retire a little early, or at the very least, afford my vacation/future retirement home with the profits/income, if things go well.  If not, at least be on the up side, and if need be start to sell off over a 5 year period and into traditional retirement, using the proceeds to pay off everything.  I expect that means to eventually roll into small apartments, or high end brrrr houses in areas like Elm Grove, River Hills, Mequon etc. and continue Brrrr  Where the "sell off" part of Brrrr would have higher yield (and of course, higher cost renos, etc.)  We'll see how it plays out.  

I will use a management company.  I am an accidental landlord now and have found I am not a landlord.  I can/will do a decent amount of the work eventually, as I like that and have some of the skills.  I know a few contractors/specialty trades I can hire out where expertise is needed.  It helps that I have a day job, from the money stand point.  I just am too easy on my tenant, and the house is in an area I don't want vacant for long.

I personally don't mind any area in Milwaukee, at first I looked at several duplexes in the $25-$40k cash buy range, which well, you know. I grew up just outside Detroit, so it's not as bad for me. However, given the up and downs of my current rental situation, and the opinion it has created with the wife, I can't have anything but quality tenants going forward, so I will probably stay toward the "better" areas, and west side suburbs, I guess you'd call those "b" or "b/c" area's around here. Maybe Tosa, West Allis, and similar pockets in the city, any gems I might find in the falls, etc. assuming i abandon Duplexes. Those SFH fit Brrrr vs pure cash flow better anyway. Ok, the more I talk this out, the more I think SFH's might be a better starting point. I'll do some digging on that front and see if something pops, and re-evaluate after a few months. Time for a little driving for dollars.

Jay

Hello BP, 

Sorry if this post seems redundant, I searched and there are many similar but none seemed to answer this one question I have in the back of my mind.

I would like to start down the road using the Brrrr strategy, but I am unclear on if multi-family can/will work as well in my market.  I am in the Milwaukee market, and there are quite a few duplexes.  Which is great for cash-flow and has been my focus when searching.  Unfortunately "most" of them are in less than great areas.  And the ones that are in the better areas will very be difficult to get a great "deal" on that meets the Brrrr criteria.  (but I will still be looking to dig those gems out).  So the question becomes, do I take my focus off of duplexes, and look at SF homes in better areas, which are a bit easier to find, particularly in the surrounding 'burbs, and look to transition to Multi-family farther down the road?  Or, am I better off grinding to find that gem in the form of a duplex that is also in a great area to get my start and get the extra cash flow plus rehab, even if it takes longer to get started? 

Thanks

Jay