All Forum Posts by: Joe Villeneuve

In my opinion, the best strategy is to do BOTH!

I love finding deals below market.  If I sold them quickly, I would get a nice short-term profit.  However, I don't do that because then I would get killed on taxes.   

By holding you can take advantage of significant tax benefits.  (My tax returns are squeaky clean and I haven't had to pay Federal income tax in a number of years!)

But, hold too long and the equity gets lazy.  At that point, you need to refi or sell to keep the money working hard for you.

Quote from @Joe Villeneuve:

Quote from @Jay Hinrichs:

Quote from @Joe Villeneuve:

Where did you get this "84%" number from?

I personally do not believe this ..  Or maybe folks think it but sales are not down 84% :)

I'm right there with you, that's why I asked where he got that number from.  Here in Plymouth (MI), if a house goes up for sale, it's gone like lightning.  We're still doing demo old small houses and building bigger newer period ones.  These are gone before they are finished.

Love infill like that we have one going in Charleston SC right now.. I did about 30 of them there but could not find any lots last 18 months until one popped up last fall.. Cant tear down houses in Charleston very easy.. I will have to check Plymouth out I am looking for a new infill market.

Quote from @Joe Villeneuve:

Where did you get this "84%" number from?

I personally do not believe this ..  Or maybe folks think it but sales are not down 84% :)

It has been difficult finding deals to cash flow LTR's especially if you are not creative. Currently, I only invest in my backyard in Oklahoma City buying on the market for easy and low risk investments. So far, I am two single-family properties in since last year. They cash flow truly just $200 Per month each. I'm looking for my third but having trouble with finding one that will can flow like the other two. I manage my own properties and I need to find one near my primary residence for ease of repair and maintenance. 

So I have an idea to help increase rent to cash flow a bit more. What if I add appliances such as refrigerator, washer and dryer to attract renters and increase rent by $100 per month? A refrigerator costs about $1000 and a set of washer dryer cost about $1000 as well. After two years, I would recoup the money spent on the appliances. What do you guys think? Is it worth trying to do this for a small increase cash flow? 

Quote from @Joe Villeneuve:

Quote from @James Hamling:

Quote from @John Underwood:

Quote from @James Hamling:

@John Underwood to take what @Joe Villeneuve is explaining a step further: 

Say you buy a property for $100k all in, and you pay all cash so it's "free & clear". 

Say that grosses $1k per month. 

No, $1k is NOT your cash-flow. Gross, yes, but not NET. 

Let's say your awesome on keeping all the assorted expenses down so end of day all operational expenses are at or under 20%. 

PM, cap-x, maintenance, tenant placements, system, prop tax's, all these things add up fast and 20% is low compared to many. Many are at or over 10% on just PM alone after factoring in tenant placement, not to mention vacancy. 

So that revenue is now $9,600. 

But what about Uncle Sam???? 

Now we are at say $6,720 net per year. 

BUT AGAIN that isn't your NET...... This is your investment recapture. 

You put $100k into it, and now got back $6,720 or 6.72%

At that rate it will be 15 years to have the $100k back and finally be into net profit. Until that point it's all just capitol pay-back. 

Now say gross rents go down 10, 15, 20%. And all of a sudden that 15 years turns into 20, 25. 

So the all-cash person IS being hit by it, it's just more hidden. Because as Joe said, you pre-paid it. 

Now, if a person wants to be really accurate they will factor in inflation because spending $10k today and getting $10k back in 10 years is NOT the same thing, it's less $ as the purchasing power has declined. So a person should use an inflation adjustment and with that will quickly see that 15 years turn into 23. 

All-cash never beats proper leverage use, NEVER. The math is clear on this. 

But all-cash is a lot easier to operate, a lot easier to feel as though one is doing good, a lot easier to keep going while making nothing because that's exactly what it is until you have your invested capitol back, 0 profit. 

If a person has a giant pile of cash to start with, sure it has a beautiful simplicity to it. But don't fool self into thinking it's more profitable because it isn't, it's just simpler. 

If each of us have $1m in cash and do same investing of same properties in same market just you all cash and me with leverage, I will do a multiple of your returns within 36 months. And from there the multiple just get's bigger and bigger. 

Again, PROPER use of leverage. Those who think over-leveraging is "proper" are wrong if not a lot more wrong because they risk loosing everything and then some. All-cash only risks lower returns over longer time. 

 I buy $150k to 200k houses all the time for 30k.

I can get my principal back in a few years. I could also do a cash out refi and pull out more than I put in on the property.

I also don't loose deals like you might waiting on a closing to happen. I can buy a property and own it in hours.

So if you still think you can do better than me on growing your Net worth and cash flow then I just can't explain finances to you.

"I buy $150k to 200k houses all the time for 30k."

There is nothing, absolutely nothing realistic, consistent or scalable about that what-so-ever. 

99.9% of people are operating in a space I like to call "reality", where there not able to obtain, on demand, properties for pennies on the dollar. 

Is he leaving out the cost of rehab, or other added costs?  Where and how?  How about examples?

Giving the benefit of the doubt, I think he's talking in hyperbolic terms of the best deals and leaving out lots and lot's of details. 

For example buying a tax lien, going through all the steps to get people out, take full possession and for whatever reason the people were just dumb as day is long n let it go vs, ya know, selling the thing themself to clear the lien. 

And then the reno, and then and then and then. 

I've had some big wins over the years but it sure as hell isn't the weekly norm, and it sure as heck isn't on demand. 

Nobody with half an ounce of intelligence is gonna give away a property for even a 30% discount just because you said it real nice or other BS, more or less 50% or 70% etc.. 

Getting a 25yr outdated place that needs $30k+ of reno and with that gain a nice 30% equity position after the fact because seller just wanted it done n gone as-is, sure THAT's realistic. 

But just a "oh hey, I'll give you $30k for your $175k property".... Nobody is buying that BS. 

And then question is, is he accounting for his time, labor etc etc or is it another "cooked books" accounting like where a guy says he "made" $50k on doing a flip buuuuut he did most of the work, didn't pay himself, had various parts at home and didn't factor paying for that and and and..... 

So many in this biz operate via "cooked books" accounting that it's just astonishing. 

I know one guy who does his own PM, about 20hrs a week. When looking at hiring a PM he said "Man, it's just hard for me to choke down that price when it's FREE right now". I asked if he'd come over n do some landscaping for me, maybe do an addition, and a few other things. That I'd be happy to match what he's getting paid now, $0.00. 

After it started to sink in and he gave himself a wage rate, he looked at that same Pm cost and said "dang, that's way less then what I'd be paying myself". And when took what he's willing to pay and time he's doing, less than minimum wage....... 

Some people just refuse to do the full math because the ignorance feels so much better. 

I think that there are many products that are "useful" in terms of filtering properties that may be good candidates. 

But, the beauty of this business, is that it comes down to you developing this skill in a given niche. 

At the end of the day, when I gear up to buy a property, I look at basically everything that has sold in the nearby area, I look at a lot of comparable rentals, I make a qualitative assessment of the condition and location of the property against everything else, and I peg a value on it. Most of the time, I don't bother lowballing people. I offer once, at what I believe to be a fair price, and almost always win the deal, as I don't chase hot properties in bidding wars. 

It's like taking a job offer - you'd know, within a few percentage points, what the maximum salary for a role you want is. Or you should. But, there's no real shortcut to figuring it out, and if you are patient and deliberate enough, you can find the golden opportunity.

Quote from @John Underwood:

Quote from @James Hamling:

@John Underwood to take what @Joe Villeneuve is explaining a step further: 

Say you buy a property for $100k all in, and you pay all cash so it's "free & clear". 

Say that grosses $1k per month. 

No, $1k is NOT your cash-flow. Gross, yes, but not NET. 

Let's say your awesome on keeping all the assorted expenses down so end of day all operational expenses are at or under 20%. 

PM, cap-x, maintenance, tenant placements, system, prop tax's, all these things add up fast and 20% is low compared to many. Many are at or over 10% on just PM alone after factoring in tenant placement, not to mention vacancy. 

So that revenue is now $9,600. 

But what about Uncle Sam???? 

Now we are at say $6,720 net per year. 

BUT AGAIN that isn't your NET...... This is your investment recapture. 

You put $100k into it, and now got back $6,720 or 6.72%

At that rate it will be 15 years to have the $100k back and finally be into net profit. Until that point it's all just capitol pay-back. 

Now say gross rents go down 10, 15, 20%. And all of a sudden that 15 years turns into 20, 25. 

So the all-cash person IS being hit by it, it's just more hidden. Because as Joe said, you pre-paid it. 

Now, if a person wants to be really accurate they will factor in inflation because spending $10k today and getting $10k back in 10 years is NOT the same thing, it's less $ as the purchasing power has declined. So a person should use an inflation adjustment and with that will quickly see that 15 years turn into 23. 

All-cash never beats proper leverage use, NEVER. The math is clear on this. 

But all-cash is a lot easier to operate, a lot easier to feel as though one is doing good, a lot easier to keep going while making nothing because that's exactly what it is until you have your invested capitol back, 0 profit. 

If a person has a giant pile of cash to start with, sure it has a beautiful simplicity to it. But don't fool self into thinking it's more profitable because it isn't, it's just simpler. 

If each of us have $1m in cash and do same investing of same properties in same market just you all cash and me with leverage, I will do a multiple of your returns within 36 months. And from there the multiple just get's bigger and bigger. 

Again, PROPER use of leverage. Those who think over-leveraging is "proper" are wrong if not a lot more wrong because they risk loosing everything and then some. All-cash only risks lower returns over longer time. 

 I buy $150k to 200k houses all the time for 30k.

I can get my principal back in a few years. I could also do a cash out refi and pull out more than I put in on the property.

I also don't loose deals like you might waiting on a closing to happen. I can buy a property and own it in hours.

So if you still think you can do better than me on growing your Net worth and cash flow then I just can't explain finances to you.

"I buy $150k to 200k houses all the time for 30k."

There is nothing, absolutely nothing realistic, consistent or scalable about that what-so-ever. 

99.9% of people are operating in a space I like to call "reality", where there not able to obtain, on demand, properties for pennies on the dollar.