All Forum Posts by: Mark H. Porter

Couple of rules I’ve lived by that conflict with your plans …

1. A property MUST cash flow, beyond debt, capex, everything, or don’t buy it.  That hot water heater doesn’t pay for itself.

2. Everything is for sale.  Don’t get too attached.  When things appreciate, and the property becomes asset-rich, don’t hesitate to sell it under a 1031 with the goal of always doubling your cash flow.

3. Right now, 80% LTV and positive cash flow don't exactly go hand in hand. These interest rates work against you. The more you borrow, the less cash flow. Exactly opposite from just 2 years ago.

Good luck, this can be a challenging time to get into this business.

I wouldn’t wait on interest rates coming down soon.  Everything points to banks being asset-poor including some requiring 10-20% of loan value being held in deposit accounts as a part of the deal.  This has created a scarcity of cash, selective deals, no pressure on rates.

Cash will be king 2-3 years from now when the 5-year mortgages mature that were written at 3-4% and they may be facing double that on refinancing.  Be prepared.

Right now there are so few opportunities because the prices haven't corrected for the cost of capital.  They will, they just haven't yet.  The time will come shortly when cash will be king.  We'll want to be the predator, not the prey.

Should we put everything on hold - no.  You certainly can find the very rare examples that have numbers that work.  I bought a vacant building last month that luckily recently signed national tenant to a decade lease.  You must admit this happens rarely and I was taking a huge risk.

Will we ever see rates in the sub-6% again, I doubt it.  As we've seen, it's just not needed to motivate purchasing.  The biggest risk I see, when combined with these things I've mentioned, is the inevitable income tax changes that will have to happen to pay down this nut that's grown over the last couple of years along with social security and medicare solvency.  This all puts the safest place for money, and luckily with a comparable return and less risk, in short-term securities.

You can get better returns, with less risk than a single-tenant NNN (everyone thought pharmacies were safe two years ago), just using termed financial instruments (bonds, cd's, money markets). Why not park your money there for a year or two until this market instability passes?

In my case, the studies cost between $7-10k and the thumbnail value is $2M.

Just use quickbooks and learn how to develop a Chart of Accounts.

Just stay with quickbooks.  That’s what I used when I had 55 apartments and now with 5 commercial properties.  Just develop your Chart of Accounts.

Heck, I used regular Quicken until I went over 22 units.

There really is no magic potion beyond willing to work harder than ever, lose sleep, and face stressful situations head on.

I started in 1997 using my VA loan to by a 3-unit that I then lived in one of them. This was during the dot com era so appreciation allowed me to cash out refinance a couple of times until I had 4 buildings and 14 apartments a few years later. Mind you I worked fill-time, was in the air guard, attended college part-time, and managed these places. myself. It sucked.

Long-story-short … bunch of 1031's later, and I own three multi-tenant retail shopping centers and an oceanfront STR here in Myrtle Beach. We retired early so it was worth it but it certainly wasn't painless.

Aristotle - as a retiree who started out in this business buying a multi-family using a VA loan why not go down that path? You can get up to a four unit and live in one unit. Move out when you PCS next time and you have a nice cash-flowing property.

Question for you.  You say you’ll live there for two to four years.  Don’t you have a duration on your PCS orders?

Maytal- you say you’re in the process already, have you already sold your downleg?  Do you already have a broker and QI working for you on this stuff?