All Forum Posts by: Paul Shannon

1% rules aren't hard to find, but that doesn't mean they are good deals.  Just a back of the napkin way to determine if you should investigate further.  

2% deals are out there too. Usually to find them, you need to have relationships in the markets you're looking. Then you have to accept 1 of 2 things......they will be in C-D class neighborhoods and/or they will need a significant rehab and favorable refinance (hitting your ARV) to make 2%.

There's not really a right or wrong answer to this question. I agree with others who've mentioned that you can't pass up putting as much as you can (up to the limit) into tax deferred accounts. At a minimum, if you receive a company match, contribute at least the amount that allows you to receive ALL that free money. You can do a self-directed IRA and invest in almost anything with this money, but a traditional 401K will be stocks/bonds. That's what I have, so that's what I do.

With taxable accounts (what's left over), it comes down to risk tolerance and having a plan that you can stick to no matter what's going on with the markets.  Diversification is good.  Stocks, bonds, real estate, different asset classes even within real estate, precious metals, and cash.  

I think of these assets as separate buckets of water.  When a bucket's water gets poured out, ie the stock markets most recent dip, I'm filling it back up.  Buying low.  If real estate starts feeling the pain in 6-12 mo due to COVID via foreclosures, etc, I'll be filling that bucket.  Right now I'm filling the cash bucket.    

I would check eviction laws of the state the property in as a start.  I would not threaten the tenant.  Stay neutral and don't get emotional at all.  Contact a real estate attorney to handle the formalities and dirty work.  

It really depends on the bank you refinance with. Most will look at market comps like a retail single family valuation, because a 4 unit is considered a residential property. 5+ you'll get an income valuation. However, you could opt for a commercial loan to get the income valuation if you put your property in an LLC and don't mind a little interest rate risk. A community bank or credit union may do that, but expect to be on something like a 5/1 adjustable rate loan with a 20-25 year amortization.

You're expense ratio of 30% seems low.  Are you hiring property management? If you are, I'd budget for closer to a 50-60% expense ratio, to include cap-ex, maintenance, insurance, taxes, vacancy, legal, etc.  If you manage, you can save ~10% of that estimate.  

Where is the duplex?  Shoot me a PM with address.  I may be able to help. 

I definitely have benefitted from BP in my business.  Gained invaluable information, Found a mentor, found opportunity I wouldn't have found to invest, sold a property, quit my job, and hopefully helped a few others.  I'm pretty sure that without BP it wouldn't have happened.  Not sure what your goal is, but value can be found here.  

You're right, the number of "doors" doesn't matter. NOI does matter, but if the purpose of real estate is to attain financial freedom as you state, the real metric is cash flow. NOI doesn't take into account debt payments, tax write-offs, or cap ex. Cash flow.

Its not the worst area, but its not the best either.  C class properties. 3/1's in that area rent for $675-750, so I'd be surprised if $700 is what you'd get.  With a duplex 2/1, I think you'd be closer to $600 a side.  

Does anyone have a  bank or credit union they've used for a business line of credit?  I've got some paid off properties that I don't want to cash-out-refi, as I don't have an immediate need for capital.  However, would like the option to draw on the equity for potential acquisition down the line.  Much appreciated.  

I agree with the others posts that once you reach as certain amount of rentals, you either have to outsource property management or you might as well start a property management company.  Its a very time consuming endeavor to take tenant requests, coordinate maintenance, handle showings and leases, etc.  A job that I'm happy to farm out so I have more time to focus on acquisition, relationship building, growth.  

However, I think if you have 5-10 properties its great to self-manage if they are local to you.  Once you do switch to a PM, there's no better way to know if your property manager is doing a good job than to have done the job yourself.