All Forum Posts by: Mike R.

Thanks for the posts @davidnolan. Very thought-provoking. I own one lower-end duplex and only have the resources right now to buy more lower-end properties ... but your post and some other reading I've done (including Seven Years to Seven Figure Wealth) makes me think I should sell them eventually and trade up.

Thanks, @Blair Knowles -- I definitely plan to use real numbers. I'm just using the 50 percent rule to quickly separate out-of-the-question properties from ones that merit a closer look.

Fascinating discussion. Thanks to all for weighing in. Each of you has given me something to think about. Seems like it really does come down to each individual investor's risk tolerance and goals. I was struck by something @Ben Leybovich wrote:

"Understand - REI is all about safety first, and making money second."

I got a very expensive education on that point about 10 years ago, and it was enough to get me out of the REI game until now. I want to very conservative on my first couple deals back.

That said -- what about plowing all of your cash flow into the mortgage for the first few years, thereby quickly building equity? Wouldn't that give you an exit strategy? Of course, that assumes nothing goes wrong at the outset. 

Perhaps the thing to do on this property is simply submit an offer 20 percent below asking. If they accept, great, if not, on to the next deal.

Thanks for the input, all! Ned, that's exactly was I was trying to get at with my question -- it was not only about this deal in particular but also more generally whether it's ever appropriate to buy full retail in a market that doesn't appreciate if the goal is cash flow (which mine is). I'd be interested in hearing others' opinions on the matter.

@Brandon Turner and others often talk about making sure you have cash flow AND equity going into every buy-and-hold deal. But are there any circumstances where you'd pay full retail if the cash flow is good enough?

There's a triplex in my area listed at $85,000. Rents are $2,390. 

Using the 50 percent rule to ballpark expenses, and a P&I payment of $315 ($68K loan, 30-year mortgage, 3.75 percent interest), that's $880 per month cash flow, or $292 per door. 

This triplex is listed at full retail; it's an area where houses do not appreciate; and there is probably some deferred maintenance. So that's three strikes against it. 

But, still ... does the cash flow make this house warrant a closer look?

Thanks,

Mike

Thanks for the welcome, Mark. Donnell, I'm an hour and 45 from Philly, so it's not likely to be a focus for me -- but thanks for reaching out. Dani, definitely a very similar story, and good luck in your real estate ventures. I'm no expert, but when I buy my next small apartment building, I will buy it because it cash flows now, not because I think it's going to appreciate later.

Chaz, I'm in Schuylkill County. Sorry, Christian, I know nothing about Stewartstown. Thanks for the warm welcome, Shurrone!

Hello, Bigger Pockets! So happy to be here. I joined a few weeks ago and am really impressed with the site.

So, a little bit about me ... here’s why I’m a “kinda-sorta” newbie.

I first began investing in 2003-2004, around age 30. Read the books, joined the local investing club, attended a (way-too-expensive) bootcamp, even got a real estate license. I bought a duplex from a fellow investor, which I still have. Then I bought a vacant 5-unit building that I rehabbed, rented to college students for a couple years, and sold.

My third deal was a SFH that I rehabbed with the intention of flipping it. I made every. newbie. mistake. in the book, starting with the fact that I was way too anxious to do a deal and wound up paying far too much -- in a market I didn't know nearly enough about. Long story short, the house finally sold 18 months later, and I took a HUGE loss. That shook me to the core and I got out of the game.

Now I’m a decade older, a decade wiser (hopefully!), and I’m ready to start again. This time I intend to be far more conservative. With kids heading to college in a few years, I’m definitely at an age where I can’t afford to make the same mistakes twice.

I'm not that sophisticated. I like what I can understand. For me, that means flipping houses and plowing the profits into 2-4 unit apartment buildings.

That’s all for now!

Mike