All Forum Posts by: Matthew Irish-Jones

 You are correct in thinking Cash is King when it comes to making all cash offers on Real Estate.  However, I needed a catchy title for my post :) 

 You can definitely eat Equity when you sell.  Banks and lenders also love equity, seeing someone who has millions in equity.  Another thing I almost never see on this platform is people talking about agency debt vs debt from banks and lenders.  If you have enough equity you can start exploring agency debt that can be 1-3 points lower than market rate debt.   

 My advice is to buy good properties in good locations even if you have to forgo cash flow.  Low risk properties have predictable returns, predictable returns are better than high risk high returns.  Make a plan to build equity over time and avoid chasing cash flow. 

 Why do you need to record anything?  Your should be getting a monthly P+L statement from your property management company and a year end statement at the end of the year.

Give your accountant your bank statement where the money is deposited and the P+L from your property manager and you are all set. 

6% CoC is good, don't do anything. You are making money on appreciation and debt paydown by doing nothing. If you refinance you are going to lose a % of your money in refinance cost to the bank and (I assume), get a higher interest rate.

The way to get rich is to get more properties like this, not pay a bunch of fee's to tap into your equity.  Refinancing an investment is a good strategy to buy more homes and continue the snowball, but if you have a low fixed interest rate you would be crazy to refinance. 

Let the equity build!  Equity is King!

 Thank you for your service.  I have been at it for 15 years and have seen it all.  Stick to buying good properties in good areas that are in good condition.  Don't fall for the cash flow trap. 
If ever you need a second set of eyes on an investment let me know, it would be my honor to help a US Marine. 

I have two major issues with Bigger Pockets.  Before I get to the issues I want to point out Bigger Pockets is a great website for networking, free information, investing strategies and many other things.  Overall I think BP is a very well run company and one of my favorite platforms.

#1 - Cash Flow Investing - is for novice investors.  Sorry I know this one is going to be painful for many rookie investors just getting started who want to live on the beach with their mail order cash, but this is not they way investing works.  The real wealth is in equity.  Equity and debt paydown are king.  I have been investing for 15 years, own over 60 units, manage 700, and have data and analytics on everything.  The data is clear:  Stable, B class investing of quality assets, professionally managed makes investors rich through equity. 

High risk, C class or lower investments that chase cash flow makes people poor.  Even if everything goes great on your C class investment, the cash flow generated is normally not enough to make you rich.   Most people making good money on cash flow are self managing and are not really cash flowing, they are just saving on maintenance cost due to not having to pay a market rate.  

I have made FAR more money in equity over time, with great properties, than I ever have from cash flow on my entire portfolio.  Play the long game, buy good properties with low cash returns and stable tenancy.

#2 - BRRRR is a Good Strategy -  The BRRR is a great strategy, but not for you. The BRRR is one of the most complex investing strategies that exist. It takes market knowledge, construction knowledge, proper analysis, financial relationships, rent projections, property management knowledge, and a whole list of other things that are only gained through experience. You can try to outsource that experience to general contractors, property managers, agents, and others (I highly suggest you do), but all of those services will eat into the last "R" of repeat. You will not get to the repeat part, because you have to pay and pay well to get highly trained professionals on your side.

If you are a first time BRRR investor I suggest you outsource to trusted professionals and temper your expectations of infinite returns. If you get a property that has all new mechanicals, fully updated units, get it all done in a timely fashion, and still leave 25% in the deal you are WAY ahead of the game, due to the fact that you have front loaded risk and updated your mechanicals. That will save you big dollars in the future.

When I tell new investors that they should plan to leave 15-25% in the deal they look at me like I have a third eye and normally find another agent. However, the joke is on them, I am a BRRRR investor, have over 30 employees and do all of the work in house on my investments. We use my construction team and my property management team, and I DO NOT charge myself agency fee's. I still normally leave 15-25% in the deal. I am happy to do so because I have fully updated units and have beat the market by a few % points if I leave less than 25% in.

The path to wealth is not Cash... in this business cash is not King... Equity is.  

As a new investor focus on Equity growth over time and you will be rich.  Chase cash flow so that you can get infinite returns and you will be poor. 

 I live in Buffalo NY and have not seen much going on at this location.  We are also temporary heat providers for most large construction projects in and around Buffalo NY, neither I nor anyone in the industry that I know if has been contacted about setting up temporary heat for this project which is normally one of the first steps before a project gets into winter.

 Can you qualify your experience?  How many units do you own that are section 8?

I own 60 units, very few of which are section 8 and we manage around 700.  We deal with A LOT of section 8 housing in Buffalo NY.

My experience has been a mixed bag.  

Pros:

- Semi guaranteed payments 

- Can off set some risk 

- Property has to be kept to a certain standard to pass annual inspections

Cons:

- Our data shows higher maintenance and CapEx costs on a per unit basis for section 8 or other assistance programs

- People can fall off of payments 

-Inspectors can at times be over the top zealous 

-Higher % of tenant issues not related to payment of rent in these units.  Smoking in units, people not on the lease staying there, police called for various reasons, etc...

- Almost impossible to get any kind of unit damage paid for beyond what you have in a security deposit 

The rest of your statements about the homes needing a ton of work, contractors costing the same, and dealing with properties that are very tough to force appreciate are spot on.

I personally do not invest in Section 8 housing anymore because they are normally cash flow purchases.  Cash flow purchases usually produce more headaches than cash, have no exit strategy and are a poor investment strategy.

I make WAY more money off of debt paydown and appreciation than I ever have from cash flow.  When it comes to Real Estate investing.. Equity is king

 Hey Ryan,

We have a team of agents that do almost 100% investment sales.  We have a property management division, and a construction division all fully staffed with in house employees on our payroll.

When we work with clients we are pulling CapEx comps, repair costs, and rental comps from our portfolio of almost 700 units. We also provide detailed pro forma's on every property we analyze.

Let me know if we can help.