All Forum Posts by: Justin B.

Carlos,
I live in MD, but I do all my investing in MS (Where I grew up and my father still is).  I don't currently invest in MD, so wouldn't make sense for me to recommend a bank but I'm sure if you post here others will have recommendations.

We did for a couple of tenants and no payments yet.  We applied and tenants completed their part within a couple of days of it coming out and still no payments.

That sucks.  I agree, I don't play games with anyone, much less the federal govt.

I think he meant that they are retiring at that rate (or needing that type of housing going forward), not more of them being created :).

I want to reiterate what Russell said. I prefer to say "out of area" vs "out of state". Out of state could be 30 minutes away and in the same state could be 6 hours away depending on where you live. I always recommend when starting out to invest locally. My first 6 properties were local (think less than an hour away). After that, I did some out of state investing (although it was only 3 hours by car away). Of course, I had good knowledge of the area I was going to, had good trusted contacts there, and felt comfortable doing it. Because of all that, and this is the biggest piece of all, my risk was minimal financially. I started with one SFR and had it failed miserably, it wasn't going to be a financial drain or derail my goals by any large amount. I was ready to tackle the learning experience of investing out of my area. I wound up having great success and got more later (all successful thus far), but I first ticked off all those boxes that without them make it a bad idea. If you're thinking about investing far away just because you've heard it was a good market to invest in, and that's all you've got, it's most likely a bad idea. You might get lucky, by why risk it. There is already enough learning experiences you are going to have starting out. Why add an unknown area that's not easy to visit to that list?

I think it depends on your financial situation and goals.  First, never buy a bad deal.  If you are talking about 20% down and you think you need to go higher on the down payment just to get a positive cash flow, that's almost never a good idea (or a good deal).  That being said, if your financial situation says that cash is hard to come by, and the cash flow is decent at 20% down, I wouldn't put any additional down.  An assumption I'm making here is that you're investing for cash flow.  If your goal is to own properties outright, my response might be different.  If the cash on cash return is decent, I'd say go with the 20%.  That means it will be sooner you can find the cash to get your next property.

The caveat here is that if you can recoup the extra money down because the interest rate is MUCH lower (like 12-24 months), it might be worthwhile to go higher, but that's rarely the case.  At least it never has been with me thus far. An extra 10% down to get a quarter-point lower interest doesn't make much sense if cash flow and building your portfolio as fast as possible is the goal.

I didn't read all the replies in detail but I have a general rule of thumb that I use for myself.  It's actually pretty simple (and somewhat flexible depending on factors).

The basics are this.  When I look to sell a property I look at what I expect to make over the next 5-7 years.  I try my best to factor in things like future repairs (if I think a big expense is coming soon, like a roof, HVAC replacement, etc is coming, that factors in too), future rent increases, etc.  If the money I can make after taxes (let's ignore the possibility of a 1031 exchange for now since that's a whole other conversation, but of course is a consideration) when selling exceeds what I can expect to make in a 5-7 year period, I usually sell.  I had one property that I could make ~$50k after taxes if I sold and it was only making me about $300/month in cash flow ($18k - $25k over 5-7 years).  So roughly a 14 year period overall if I didn't sell.  Even factoring in future appreciation and rent increases, maybe 10 years at best.  So I sold.  I can turn that profit into more than $300/month cash flow with new properties, hence increasing my overall cash flow.

I do think about other items like future appreciation (if it's potentially huge, I may hold off and sell later), the area where I am in (If it's an area I don't plan on being in the future or at present, that factors into the "sell now" column), etc.  Bottom line is I try and take it all into consideration and barring anything gregarious, I can take the cash and use it to increase my cash flow now (which is my goal - highest cash flow possible as soon as possible).

So with my goal of creating the highest possible cash flow as soon as possible, that process usually works well for me.  Also, to be clear, I've been doing this a while and thus far, this decision has only even been thought about for properties I've own for 5+ years.  It usually takes mortgage paydown + good appreciation before I even think about selling a property (because of my goal of cash flow above all else).

And most of the time, I actually consider taking the cash-out refinance option for more properties vs selling.   I usually sell when those factors like big expenses coming, getting out of an area I no longer want to be in are more prevalent.  When it comes to cash-out refinancing vs selling, if I like the property and it's in an area where I'm happy, cash-out refinancing is usually the way I go (being tax-deferred and all).

So, this is the perfect situation to get into loan sharking.  Take that money and start lending it out to people at extremely high interest rates.  The shadier the borrower, the high the interest rate and return.  Forget real estate.  With that much cash and loan sharking you'd be a multi-millionaire in an instant.  Don't forget to set aside about 10% to hire some "leg breakers" as you are definitely going to have some people try and cheat you and we just can't have that.  This also means the IRS never has to know (no taxes, not even on your gains), since loan sharking isn't regulated by them so you're in the clear!

and just to be clear, this is not a serious reply, just trying to create some laughter.  Never know with the Internet these days...

Just so you know, this is the Jackson, MS forum :).  No big deal, just might want to post elsewhere too if you want good responses.

12 units. We bought it 2-3 years back and have put some decent money into it to get it nice. Now we're focusing on renting it up so we can list it. We've just learned that trying to manage an MFR from afar is too much work. We have a presence in Brandon, so a quick trip out there is half a day at least. We've decided to put our focus locally in the Jackson/Brandon area. My Father is the one in Jackson, and I'm 1,000 miles away in Maryland. I don't want to violate any rules of BP so if you want to hear more, just send me a PM.