All Forum Posts by: Scott R.

@Courtney M. - I use the 1% rule when first analyzing a property. If the property isn't even close (i.e., assumed monthly rents are way less than 1% of the list price, or more appropriately, to the assume value), I'll go to the next listing. However, if the #'s are somewhat close, I'll keep looking & likely run the #'s. Other than that, I don't really use the Rules of Thumb (ROT) too much when analyzing a deal. I do, however, use several calculators to analyze cash flow and estimate expenses.

My goal is to generate meaningful cash flow AND respectable ROI (cash on cash). I've definitely analyzed some deals with good CoC returns that would result in relatively low cash flow, and I've usually opted to pass on those so as to not tie up capital that I could deploy elsehwere.

I'm in the middle of a BRRRR on a 13-unit apartment building (eventually 17-unit) in SoCal. I believe the BRRRR strategy offers the best returns in most zip codes today. By increasing rents AND property value, I'll be able to have good cash flow AND a high CoC return (since I'll be able to pull most of my capital back out during the Refi step). After I pull my capital back out, I'll redeploy it to another property (hopefully another BRRRR...while existing properties continue to make $$), with the eventual goal of scaling into larger properties and replacing W2 income with passive REI income.

-Tom

I don't understand all the love behind the 1% rule. So many other metrics I would use first before even using that guideline. I found a gem of a property (6 units) that had no rents raises in about 9 yrs. It fell under the so called 1% rule by about a .25%. So I saw the upside potential immediately. Six months after I purchased the property, I have almost all the rents raised to market value with laundry income as well. By the end of the year, I'll be at 1.2%.

Had I just used the 1% rule to look for a property, I would have missed out on this. Because of my new higher AGI, I've added quite a bit now to the equity.

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Originally posted by @Thomas S.:

The property is a money pit as a rental. All you have is a appreciation gamble. Are you a investor or a gambler.

Between expenses and lost opportunity value on your equity you will lose about 4K per month on this property.

I would sell in a heart beat, take the money and make it earn it's keep.

How do you figure it's a money pit? Also, is it really gambling when long term appreciation always goes up?

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Originally posted by @Lawrence Ratliff:

So here’s my story, why I thinks a good one, and that you can do it to.

I like to buy SFR buy and hold rentals in Dallas TX. I need about $25k (20% down and about $5k rehab) to buy each one.

I have a full time sales job, so bills are paid. From that I have $200 per week go into a separate account. $5,200 per year, $10,400 every 2 years.

Then the hustle comes in. I am also a licensed Real Estate Agent. I do 1-2 real estate transactions per year. That’s right 1-2. If I sell 1 I get about $7,500 per year, $15,000 every 2 Years. $10,400 + $15,000 = $25,400.

I am married with 2 kids and love the family time, so 1-2 transactions per year is a small time commitment and just barely cuts into family time.

If I sell 2 transactions in a year then I buy another property that year as opposed to every 2 years.

I put all houses on a 15 year loan. They are all positive cash flow.

My goal is to have 10 properties with about $15k monthly income, $180k annual. Definitely enough for me and wife to retire on.

I like buy and hold because of the long term income for retirement and I’ll leave a cash flow machine to my 2 kids. Whatever life throws them money shouldn’t ever be a worry.

The best part of this is that anybody can do it. You need a few things, cash (see above), good credit, a little discipline, and some serious guts (I remember sending the first wire transfer 😮). But I did it, never regretted it, and so can you.

I hope this story encourages a few people. I would love to hear of others using my plan and finding success!!!

Cheers, Lawrence

Fantastic plan! Looking forward to hearing a follow up every year or so on how you're doing.

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I think Bakersfield can be a good place. Max can help you out with that. Have you looked at out of state like Cleveland or Las Vegas?

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Nice back of the napkin math @Andrew Johnson That really tells you everything you need to know. Also, the GRM seems high for the area just by looking at a few local comps.

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Aaron,

I think I know which building you are looking at. Are you representing a buyer as a RE or are you buying it for yourself? If it' s for you, I'd listen to Swanny here. The numbers dont make any sense compared to what you can find in the midwest or south.

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Originally posted by @Sal Serrano:

Hey Scott,

I'm sure there are great opportunitites out of state, but if you're just beginning your real estate portfolio you might be better off starting out in your local area.

Sure, but there are much better deals in state than this.

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Serious question to the folks here interested: Why? You can buy a 325k property in Vegas and make the same rents with better cash flow.

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It's too late. Sorry.

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@Karen Schimpf follow up question: Do commerical building owners usually refi after that initial rate lock expires?

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All Forum Posts by: Scott R.

Scott R. has started 6 posts and replied 71 times.

Post: $100 per door/cashflow

Post: Should I keep my house as a rental property?

Post: $200/week + a little hustle is really enough

Post: Stockton vs. Fresno vs. Bakersfield (or another city)

Post: 21 Unit in Fallbrook Ca

Post: 21 Unit in Fallbrook Ca

Post: 4 units Buy & Hold or Build in So. Cal, Torrance 90501

Post: 4 units Buy & Hold or Build in So. Cal, Torrance 90501

Post: Is it too late to start at 48 years old??

Post: Difference between 4 units or more