All Forum Posts by: Jacob Pereira

@Henry Clark

I love it! Not enough people get called out for posting nonsense on this site. 

Still, for someone else who may actually be in this predicament, I'll bring up the obvious answer no one has mentioned yet: 1031 exchange.

Yes, in this case the OP is making up the details, but let's pretend they're legitimate to help out others; if she were to convert the property into a rental as @Jordan Moorhead suggests, she could at least avoid the short-term capital gains that are the real killer in this situation and move to long-term. After converting it to an investment property and waiting the required time, she can sell and buy a new investment property in a place where she would like to eventually live. Waiting even longer, she can eventually turn it back into a primary residence if she so chooses. The details in something like this are more than can easily be discussed in this format, but that should give someone a starting point to at least get some research going.

Sorry, I can get a little acronym-heavy and jargon-y when I'm trying to explain something via the written word. I also definitely don't want to suggest that the interest paid on the loan is truly immaterial, just that you can probably get better returns elsewhere.

Basically I was saying that you can buy a $100k house for $100k, or you can borrow and buy it for $20k and a 30-year note. If you do the latter, you can use the extra $80k to invest in something else (more real estate, stocks, etc). If in the scenario your house appreciates by $10k, you either made 10% (10k/100k) or 50% (10k/20k). And yes, there is a small amount of debt service as well, but it's not that much.

I occasionally run into a response on BP from @Joe Villeneuve and I pretty much always agree with him. I would word it a bit differently, and my focus is on a different aspect, but the philosophy is the same. 

After being an investor for many years I became an agent, and very often my broker says that I say certain truths that make me less effective as an agent than some others; one of the primary ones is that real estate investing is generally a poor investment if it's not leveraged. What you paid and what your interest was is immaterial. Those are all sunk costs. Think of it in an extreme form. If you bought the property for $1 would you sell it for $10 a year later? I can tell you that I've never made a 1000% profit in one year on a property, so in theory that would be amazing. In practice that's a terrible choice.

I always suggest benchmarking to the S&P 500. Their annual returns as of today are 34.7%, which would've blown my real estate returns out of the water, except I'm highly leveraged. It gets a bit murky here, but for easy math let's pretend I bought one of my fourplexes exactly a year ago and it appreciated 10% over the year. Pretty good, right? Terrible compared to the S&P if I bought cash, but if I financed it at 20% down, my true CoC return would be 50%, which is quite a bit better than the S&P. Obviously oversimplified, but it should be a starting point to you calculating the true numbers on your investment.

Austin agent/investor here coming to Louisville to hang out with some old war buddies for the weekend in September. My primary purpose is to see old friends, but me being me, I see a few opportunities here:

1. I'm a landlord in Austin Texas who owns 16 units that I personally manage, including 1 Airbnb. I would love to find another STR opportunity in a secondary market to diversify my RE portfolio

2. I'm an agent who regularly has clients who are selling and moving out of state; I've only ever had one client move specifically to Louisville, but I would love to personally know an agent there to recommend in the future. The guy I found my client was decent, but I'd prefer someone I have rapport with in the future. Ideally, that agent could also recommend me in Austin, but that's not necessary.

Anyway, like I said, my primary focus will be to see the people with whom I spent time in Iraq, but if any agents or investors have some time on Sept 4-6, I'd love to buy you a beer. Please PM me if you're at all interested in meeting, or even have good suggestions of places to go, RE-focused or not.

@Allen Wu, I have to disagree somewhat with how @Ryan Kelly answered the question you posed, although we're usually in total agreement on things. In fact, about 15 years ago I interned for the US Treasury in South Austin and there was a group of five who carpooled from San Antonio to work every day. I also lived in the DC area before Austin, and it's quite common for people to have a 1.5-2 hour commute.

That said, the price difference between Austin and SA isn't really high enough to justify that kind of commute for most people. I think if you're looking for areas that are going to soak up Austin demand you're better off looking at the suburbs between Austin and SA, such as Buda, Kyle, or San Marcos, or to the North or East, towards Round Rock, Leander, Cedar Park, and Manor.

@Aaron Gordy, good to actually hear your voice today when you called about the Elgin duplex I've got for sale. I just thought I'd throw an extra note out there so you could put a face to the voice on the other end of the line. I hope we can make a deal happen on this one.

@Di Lyu

Like I said, I believe the Austin market still has a lot of appreciation potential. If I didn't, I'd sell all my properties and look somewhere else. It's also the only market that I'm an expert on, so it would be tough for me to speculate on others. My guess is that most secondary urban markets will continue to see outsized appreciation for the next few years, though.

Semper Fi, Marine! 

When I got out of the Corps I made a similar move, bought my first duplex with the VA loan and never looked back. Things were a little easier back then, though, and I think a lot of the advice you find on BP hearkens back to the good ol' days. I can't speak to the national or global market, but for the Austin market it's no longer possible to just buy something with built-in cashflow. At the bare minimum you'll have to do some kind of value add, and in most situations you'll have to even factor in appreciation. The good news is that nobody who knows the market expects it to go anywhere but up, but of course appreciation is always speculative. I just want to add a quick note to say I disagree with those who are suggesting buying a single-family to do rent by the room; Not that there's anything wrong with that strategy, it's just that you can still do that in a 2-4 unit building with outsized returns.

@Jordan Ray,

thanks for the shout out. As my colleague, @Ryan Kelly implied, 1M for 10-15 units would get nowhere near the OP's requirements in Austin or surrounding markets like Cedar Park. As an example, I own 16 units (not commercial to be fair) that are c-class, and I've estimated their total value to be just under 3M, and I think it's a fairly conservative estimate. Not very familiar with those other options, but I'd be surprised if any major urban area is selling for under 100k per door these days. That said, there's money to be made in any market, so @Alex Grullon probably just needs to adjust his parameters in such a way that can still meet his goals monetarily, even if the actual number of doors might be fewer. 

@Di Lyu, 

I'll second what @Ryan Kelly said, with a slight adjustment; he said that this is a lower cashflow market, but relative to where you are it's a higher cashflow market (in general) and the examples he gave demonstrated that. I also believe it will continue to be a higher appreciation market as well, but time will tell on that one.

Provided you're willing to deal with the added difficulties of remote management, I think there are few places in the country that are a better investment at the moment. Of course, I'm biased, but I truly believe it too.