All Forum Posts by: Alan Brown

@Shiloh Lundahl, THANK YOU!  exactly... I agree with you:  Keith Weinhold, as well as Kiyosaki, are not big fans of equity sitting around not being used either.  you have to be smart, and make sure you have plenty of margins, but the argument that the bank is taking the larger risk when your equity is smaller floats my boat...I have no problem borrowing against properties flush with equity to grab something else that creates a solid cash flow after ALL true expenses..., including equity interest charges; if it's OPM, its an INFINITE RETURN ON MY MONEY, which to me is Zero, if its not coming out of my pocket. 

@Aaron Mazzrillo, how in the world do you build an empire if you don't use equity?  I'm glad your mentor had the luxury of waiting to build up down payments before he moved on property, but I sure don't!  I think a better rule is knowing your market, keeping safe margins and not making dumb purchases.

That downturn did nothing to my tenants but make them settle in and weather the storm.  

@Thomas Lorini, good on ya buddy!  excellent deal, I say, and good job weathering a lot of harsh responses.  I don't remember you saying that first time buyers with no money and no equity can do the same thing as you FOR FREEE!    Perhaps they could if they found a good partner like you to help them with their deals and learn how not to make dumb purchases.  And it looks to me like the equity you bought into on that deal, as well as growing rents, easily justifies the tiny payment on the equity you used to make it happen.

But I love leverage (except car payments!!) and hope to share a mai-tai with you in the islands when all is said and done!

hey, @Brendan Johnson!  Welcome!  I like your style too!  I went to school in Missoula many years ago, when thousands of houses were $30k!  God I wish I had bought some then... had no idea how creative I could have gotten.

Just keep rolling the way you are, and you’ll have more deals than you can handle, especially with a good full time job’s income to work with.

As always, if you’re unsure of your skill at negotiating, etc, find a good partner you trust, preferably with some good experience, like a (good) realtor or contractor, who have value to add and learn from them.  You can also greatly expand your empire faster with the right partner and leverage like crazy.  Be choosy, because you have a lot of value as a solid w2 earner, especially to self employed people like contractors or realtors.

Also some great books out there on negotiation, etc, but I would listen to ever single podcast of 250 that BP has put out.  It’s lIterally like a PhD for free.  Don’t wait!

Cheers 

Wow @Dave Foster, fantastic!  That's exactly what I need.  Is this written in any 1031 lore anywhere? 

I asked my qualified intermediary for ideas, but they didn't mention this.  

So when do those checks get cut to vendors?  I wouldn't think the work would happen before closing, so is the check cut to the vendor at closing and I have to hope they will follow through?  Or would it be escrowed?  Doesn't seem like the 1031 likes things to drag on after closing, so I'm guessing I've got to trust the vendors.  

Also, does this only apply to concessions from Seller?  I ask, because I may have a few thousand more cash in my 1031 that I have to spend, which I'm sure I can find a home for in closing costs, but it would be better used for fix up... Could I use some of my1031 cash for that, or no?

Thanks a bunch!

Alan

ps I'll watch for the colleague thing.  otherwise I'll buy you a beer when i get to St Pete's

Closing on a 3 plex in December;  one of the units is a bit thrashed, needs probably $8k to replace carpet, vinyle, kitchen and bath.  Owner has agreed to credit me $5k at closing, but it's got to go for 1031 approved closing costs.  

Anyone got a good idea on how to do some cleanup using 1031 funds?  The 1031 company said they have a construction version of the 1031, but its a $5000 fee just for them instead of the usual $500 for a replacement property, and meant for much larger construction projects that make the $5k fee worth it. 

I've thought about hiring a contractor to do the work, raising the sales price to cover it (appraisal should be fine), having the seller pay the contractor out of closing.  Risks there: Seller bails from the contract and I'm stuck holding the bill for the contractor who sharpened up seller's property for him!!   Not enough trust there to try that, and I'd have to sue him for my costs of contractor.

Any ideas?  

Excellent response, @Dave Foster, that's a great strategy!  USE that tax code!  

And @Jason Clark, you've got an enviable Problem... Myself, I'd choose montana any day, but you have to love winter as much as summer for that.   Also I'm not crazy about humidity...

As far as investments go, I'm kind of perverse when it comes to using leverage on everything. My favorite is anything like the BRRRR strategy where you use your cash to get the property, then do what it takes to refinance it so that you pull out all of your cash. Then, as long as it cash flows, your return is INFINITE, since you have none of your own money left in the deal. You take that cash and do it again, and you're realizing excellent 'velocity' on your money. And you still control all of your money!

I know the temptation to use all cash so you see really nice dividends every month, but you're only using a tiny percentage of the potential of your money.  From where you're sitting, you have the potential to have an empire using other people's money.  

When we start talking PM,  in my humble opinion, that's a terrible idea!!  So sorry all you awesome PM's out there who are happy as a PM... to me, that's the worst part of RE investing, and the first thing I put in my pro forma for properties is making sure I can FIND a good PM and of course that the property will support paying one well.  Because the only way you can make any money at property management, is by having a boatload (like 200 plus) properties.  (please tell me I'm full of BS, all you PM's, if this is not true)  That's the only way you can scale it up to hire all the people you need for Leasing, bookkeeping, etc, and to be able to have an after hours service to handle emergencies, so you can ride your harley on the weekends and sleep at night without being interrupted.

Instead of taking all the time and headache of building a PM business, I'd use your money to find and buy and sell investment properties.  It's SO much more fun and pays better too, I'd say, if you do it right.  It does take a little time (though not nearly as much as building a profitable PM company) to get good at it, but finding someone you like with great experience to help you should not be a problem.  Partner with them and learn the ropes... using a little caution, and spending time researching the markets you want to buy in, you can see some fantastic returns, and then it's amazing how fast your portfolio can exponentially grow.  I invest for cash flow, but I love the sneaky creep of bonus appreciation... as you've seen, if you pick your market well (as you did in SF), you might see appreciation (on single family up to 4 family) of a minimum 5% and sometimes 10% or better on the full value of your property... that means that if you have a million dollars worth of rental property, which you only have maybe $250k invested in, you might see $50k to $100k in growth per year ON TOP of all the cash flow and tax savings and mortgage paydown.  That's between 20% and 40% COMPLETELY passive income on your $250k investment.  I love that.  

Most people say don't buy for appreciation, but I've seen sharp folks with deep pockets buy in hot markets with negative cash flow because they have enough money to gamble and still survive if they lose, because they are banking on that appreciation.  And they win big in a couple years in the right markets.  Or not!

Anyway, good luck and think other people's money!

@Megan S., I have Kingston and Newburgh in my keyword list, and was just reading your post from 3 months ago and had seen my good friend @John Hickey's wonderful brokerage (Kelli is the multi family specialist there) but could not find a danged thing that worked!  John turned me on to a really good one in Newburgh, but the seller (and her agents) jerked me around so much I've had to walk away... 

I think the end result is you have to find the off market stuff in NY... And I think that will really work, but we have to be determined and patient, don't we?  I am determined to take that route in Kingston and Saugerties (I think the family vibe in Saugerties is not to be overlooked, and maybe Single Family is the way to go there, because if someone has kids and they move in, they may be there a long time!)  

So maybe if my lazy butt has some success with off market stuff, I'll have too much to work with and will wholesale them (cheep) to you!!  

Cheers

alan

Hey, @Nicholas Giordano, welcome to REI! I am up in Lakeville Ct, and am buying some multi families in Pittsfield. Have been researching it for a couple of years and the cash flow is strong. I also think Albany could be great, especially for BRRR's or flips. I'd be happy to meet w you and show you what I'm seeing. PM me if you want to chat.

But hurry!  I was taking my time on 3 great deals (on the market for 3-6 months), and every one of them got offers I had to compete with same day I offered!  Kicking myself!!

@Gayle Eisner, @Joshua D. is so right!  Having a rock solid team in place, especially property manager, is critical to long distance investing... do you have someone there that has experience with property managers?  I was going to use one of the larger ones in Livingston, but was turned off by the way she handled the business.  I've passed by great deals in a number of towns/cities because there was no evidence of any kind of decent management.  I did buy 12 units in KAnsas City, felt really good about the PM that was recommended to me, and they turned out to be pathetic.  I'm not even that picky, believe it or not:  I would just like them to get a unit rented in less than 4 months!!  

Best suggestion I could give would be to start listening to every BP podcast, especially those that relate to long distance investing.  I'm sure there's a book suggested somewhere in there!

Do I have to hit 'report' or something to let someone know I'm coming?

you betcha