All Forum Posts by: Tommy Nguyen

Originally posted by @Bradley De comarmond:

@Tommy Nguyen The 1% rule was quoted in The Rich Dad Poor Dad set of books (and perhaps far before those) as a way to quickly figure if your property would cashflow. Essentially, 1% of the purchase price needs to be the monthly income of the property for positive cashflow.

Example: A $500,000 property must generate $5000/month (or 1%) for it to be a worthy investment.

In some markets this is easy to reach, in others (most of California) it is closer to .5%

 Thanks. .5% is the number that I have seen in 99.99% of my analysis (exaggerated a bit) ;)

@Dan H. thanks for the quick reply. There's always something new to learn everyday. With current price in San Diego, the rent is at best around .75% of the purchase price. 

If you don't mind me asking, what is your plan in investing San Diego market today? Keep looking for deals that are at 70% of ARV to buy and hold? I know that you mentioned in your previous posts not trying to time the market, but at the current high price, how do you hedge against market correction?

Thanks for your insight.

Originally posted by @Bradley De comarmond:

Welcome to Bigger Pockets @Tommy Nguyen

Like you, I am living in California (Los Angeles), but I focus on investing out of state for the 3x cash flow and reasonable cost of real estate. Good luck finding a small multifamily that is around the 1% rule and not in a war zone. Hope it's out there for you.

If you have any questions about out of state investing and in Florida specifically,  connect with me and good luck on your journey!

- Brad

 As I'm starting to look at listings through my agent, finding a good deal is really difficult at the moment, even though we know it's out there. I'm trying to be patient and using BP calculator on these listings to familiarize myself with numbers. That way i can recognize a deal down the road.

Btw, what's the 1% rule you just mentioned?

@James Wise thanks for the welcome, James

@Shaun Weekes thanks for the advice, Shaun. I don't plan to quit the job just yet, unless RE cashflow can replace and exceed that, which probably takes at least 5 years or so.

@Michael Swan a very nice and detail background story, Swanny. There're many things i can learn just from reading it

@Randy Castle thanks for the warm welcome. Good luck to you in Long Beach as well ;)

Originally posted by @Michael Swan:

Four rules @Tommy Nguyen,

1. It must cash flow.

2. It can't lose money.

3. Utilize dead equity to get more cash flow that can't lose money.

4. Replace all w2 earned income with cash flow that can't lose money and you are financially free!!!

 Thanks Michael.

#4 is actually the goal of every RE investors, I believe. The question is how to get there. It seems that your strategy is working very well for you.

#1 is my concern at the moment in picking a market to invest it. It seems that it's depending on the risk tolerance of each investor. Many would say that it must cashflow from day 1. Matt seems to tolerate a little bit more but not much.

#3 is right on that one must utilize as much resources as possible. and equity/appreciation is just on paper until you can actually UTILIZE it.

I'd love to have a chat with you over coffee, if possible.

Thanks for the in-depth insight, Matt. And from your opinion above, it sounds like you're okay with initial negative cashflow at the beginning but you can turn it around with rent raise and forced appreciation in the buy-and-hold strategy. What would be your limit to that negative cashflow and for how long?

It's all speculative about when such hot markets will make a correction, but it seems that price is at all time high in LA, SF, SD (even higher than 2006-2007 peak). How do you weigh the risk vs. reward with your strategy that initial negative cashflow is acceptable?

Thanks for all the warm welcome, fellas.

@Dan H. what's your strategy in getting cashflow in San Diego? Do you need large capital to start? I'd love to hear your trick in knowing where to look. Please PM me.

@Ali Boone from all the podcasts that featuring "how to invest in hot RE markets" - ie, Bay Area, SoCal, NYC - i've heard on BP, most investors would suggest to invests in out of state market. I'd love to hear more on that.

Nick Kravchuk Thanks. i'll get you the criteria tonight Bruce M. BPis just a place with overwhelming resources. I mostly listen to the podcast. Will surf the forum for information though Brian Kostrinsky from my searches and using the BP calculators to work on the number, i can't figure out a way to cashflow in San Diego county market, even in Lemon Grove, Chula Vista, or National City. Maybe i'm not looking hard enough. Love to hear opinions from fellow investors, agent, lender operating in SD. A general question here, if there's no cashflow in a very hot market, what do most investors look for in such markets?

Erica Marston thanks for the website. Will definitely check it out.