All Forum Posts by: Ray Lai

Thanks Daniel. They didn't include a line item for CapEx so I assumed Maintenance Fee included CapEx. Didn't know everyone broke it out separately, thank you. I'll go read up on CapEx estimates.

Good luck to you too! Will keep ya'll in the loop.

Roger that, thank you Brandon!

Does anyone have experience with the maintenance cost on a turn-key property bought through American Real Estate Investments? 

The spreadsheet they sent me for the portfolio of properties uses

$312 in annual maintenance for properties that cost $144k (Fort Worth) and $134k (Houston), and $162 for a $145.5k property. Because of these low maintenance numbers, they were able to show a COCR of around 10%, but when I use the general 1% rule of thumb that people recommend, then the COCR drops down to below 6.77%

As a newbie about to purchase my first deal. This seems like a pretty big difference and does anyone have any recommendation on how to proceed? The company explained that the units are 'fully rehabbed' and shouldn't incur much maintenance cost but holding for a long period of time does entail costly repairs like roofs, termites, etc and those numbers seem awfully low for a SFH right?

I read that 10% COCR on a turn-key is solid, but 6.77% is pretty low in a market that I'm not as comfortable with due to oil prices sliding (been following oil for awhile now) and the economic articles I've read about the areas' economies (feel free to correct me if I'm wrong). I do know that in 2016 (looking in the rear view mirror) that Dallas was #1 and Houston #9 according to the BP blog post.

Here's just an example:

http://www.businessinsider.com/houston-economy-com...

Was really excited when I got contacted by someone from the company when I did my newbie introduction, but now while doing due diligence I'm wondering if it was a mistake to put in the loan application today and ding my credit score when the COCR is so low and Houston is somewhere that according the literature I follow is in the final phase of decline:

http://www.businessinsider.com/phases-of-the-housi...

Thank you for your time and advice in advance.

Great job!!! The kitchen and bathroom are hugeeeee improvements :)

Thanks Rami, I literally read that right after this post. *facepalm

Forgot to mention in the OP that my credit score is in the highest range.

Thanks Rosston and Mark :)

Will check out the blog.

It's funny, right after I wrote my post I saw the posting from yesterday saying how Midwest and Indy are no bueno haha

Greetings everyone,

TL;DR Newbie from San Diego with 50k liquid, 50k potential 401k loan saved up looking for a cap rate 10%+ property in Indianopolis/Grand Rapids. Looking for a turn-key to start out. Do not want to invest in SD due to horrible numbers.

I'm Ray and I'm a newbie from San Diego but grew up in the Midwest (which is where I'd like to invest); I've joined and attended my first meeting last night at our local REIC which was fantastic – Kathy Fettke was here (she rocks!). I want to focus on cash-flow and not speculate, so I'm avoiding my home market because the numbers don't make sense (unless you want a low cap rate class D property in this California frenzy). I've read a lot of books, posts, and listened to a large number of the BP podcasts and regularly speak with my mentors. I'm currently trying to figure out my first step – cheap SFH with cap rate of 10% in the Midwest, or going big with a commercial 16+ unit Grand Cardone style.

I'm an honest person. I squandered my cash in the stock market (to the tune of 250k…) but I've stopped gambling in stocks, and now have a bit built up in my war chest for real estate investing and money from my 401k available for investing. I currently have 50k liquid available in cash and another 50k potential 401k (TSP) loan so I have about 100 liquid. I don't want to touch the remaining stocks I have, they serve as a reminder of never gambling and I'm leaving those there as an emergency fund if I truly have to liquidate and take all the losses.

I learned from stock investing that I'm not risk averse enough; I will be conservative and prudent with real estate investing. I have already started my business plan, formed a mastermind group, and gotten a lot of friends/family interested. I plan on showing them a successful track record with 4 of my own cash-flowing properties first before accepting outside funds. I come from a business background and have a personal network that has cash available for investing.

I started drafting my business plan and I’m going to purchase my first 10 units with my own funds; first 6 should be easy with only 20% down, I like that the rule changed for only 25% on the last 4 for Fannie and Freddie. I have a decent salary with no debt and will focus on cash flow for out of state properties, my personal cash flow is about $2300 a month – I can increase it if I cut out things (travel or stop maxing my 401k's 18k yearly contribution cap. I'm particularly interested in Indianapolis or Grand Rapids, and I’m currently working on building a team there so I can invest remotely for cash flow in "C" areas. I'm considering a turn-key just to get my feet wet because I don’t like sitting on cash and not having it work.

I’m really interested in commercial units 16+ units but believe I need to buy some smaller units to provide a track record so that I can tap into my personal network that has the funds available to partner with for the bigger deals that truly excite me. They have bigger pockets of cash saved up due to going to a good b-school and going into more lucrative fields than myself.

I have a BBA from the University of Michigan's Ross School of Business, and a Masters in Engineering Systems from the Naval Postgraduate School. I'm a program manager by profession. I have 7 years of PM experience, and 3 years of experience prior to that as a Enterprise Resource Planning (ERP) Consultant focused on supply chain and financial module implementations for corporate enterprises. I like systems and efficiency.

I write my goals down in the morning and before bed and reflect everyday on how to get closer to achieving my goals. I find many of the podcasts here very helpful, and my two BP heros are Sharad Mehta and Grant Cardone.

What I struggle with now is that I learned all this great information from BP by my local market is in a bubble and I want to avoid it but I don’t know how to apply the techniques to build an out-of-state system. It’s hard not being able to physically visit properties or people. I know Sharad does it with technology but he built his systems in place before moving to California from IL.

Am I forced to pay retail with turn-keys as a starting investor if I’m looking in lower cost, non-bubble areas?

I follow macro trends and noticed that in the last few months, the Bay Area, Manhattan, Vancouver and other high price areas are starting to soften significantly but there are still deals to be had in other parts of the country.

Favorite Podcasts:

BP Podcast 155: From Zero to 200+ Deals in Five Years with Sharad Mehta

BP Podcast 108: Building a $350 Million Real Estate Empire Using the 10X Rule with Grant Cardone

I had "analysis/paralysis" and was about to pull the trigger on $135k condo 4 years ago in a great location in San Diego. Unfortunately I listened to colleagues telling me that it was too small 800sq ft 2br / 1ba and decided to wait and see because I was worried about all the "shadow inventory" from the housing market crash that ultimately never hit the market, and was sold to investors.

I've been throwing rent away for the last 4 years and now, and that condo is selling for $300k. Supply and demand in San Diego has been a complete seller's market. Now I'm stuck renting and investing out of state and I'm a renter at the old of 32. Very embarrassing indeed.