All Forum Posts by: Roochita P.

Long shot, but did you end up finding one? Thanks!

@Brian B. Simmons - Just looking for a lender and stumbled upon your reply. I tried clicking on the link, but it doesn't go anywhere. 

@Account Closed - Do you also end up sending notices via text message, too? (e.g. I sent some COVID-related notices required by the state via text message (images) and asked them to acknowledge with a response). Was thinking if I could also use it for getting digital signatures.

@Account Closed thanks for the thoughts! I just think it'd be easier to type long things out or to send a text to all the tenants in one building if I could quickly copy/paste from a computer. I'll check out Google Voice. 

And, LOL, about dreading the noise - I know exactly what you mean. I have a separate phone for my apartments and every time I hear it ring, it sends a shiver up my spine. 

Do you find all your tenants prefer text, too? I find that most of mine don't have or regularly use email addresses. 

I constantly am texting with my tenants. It seems like they prefer it over phone calls or emails. How do you handle managing all the texts??? And, then if there's an issue, I'm constantly texting back and forth between the vendors and the tenants. Doing it all on my phone is painful. What tips do y'all have? 

First, it's always great to recognize that you have a good problem :) Owning a rental that cash flows well and having generated equity along the way is a great achievement. Congrats! As for what to do with your property, there's really no easy answer. It depends on your goals. You'll likely get a 100 different opinions that point you in 100 different directions. That being said, here's my opinion:

I wouldn't try to time the market. While it may go down in the short term, housing is generally in limited supply and most macro trends point towards a growing population of renters. If you're feeling conservative, I'd continue to rent it and generate the cash flow. Once you get to a point where you can refinance the house, you can pull out some of the equity and use to invest in your next property.

If you're feeling like you're ready for some risk, then you can try the route of selling and doing a 1031 exchange to trade up into into a larger property that generates more income (and, more work) for you. There are a lot of little details to iron out when it comes to an exchange, so do your homework and engage with an accountant/tax professional/1031 specialist to know what you're getting into. 

Personally, I think if you've already got a good cash flowing property on your hands AND you've got equity to put into another property, then there shouldn't be any rush to sell. Take your other equity and put it to use in finding your next property. 

Good luck and keep us updated!

@Giovanni Isaksen - When doing long-term IRR analysis on an investment that includes a refi, do you include the value of the cash out as a positive cash flow in your IRR calculation? Let's say you conduct 50k in rehab, get the property reappraised, do a refi and now pull money out of the property. That money you've pulled out of the property is liquid capital that you can use to re-invest, etc. - which makes me think it should be considered a positive cash flow. At the same, time it isn't really free-and-clear. It's leveraged, so you'll eventually have to pay that money back. Only when you dispose of the asset will you be able to walk away with some portion of that money.

@Bill Jacobsen - Agreed on MIRR. A much more realistic measure of return depending on how you invest. 

I'm curious about this as well. Any other seasoned investors have perspectives on DP2 vs DP3. We just moved forward with DP2 on one of  our properties that's in a tertiary market, but planning to go DP3 on one in a nicer, metro area. The cost difference between the 2 and 3 was ~1K at the same deductible amount. 

@Joseph Cacciapaglia - That's really reassuring to hear. I generally do the same - IRR and total return. It just seems like everyone and their mother (90% of blogs, friends, etc.) are all seeking only strong cash flow. You're exactly right when you say that approach generally leads you to tertiary markets (with pretty much zero appreciation). This strategy makes complete sense for folks just starting out with limited capital and looking to replace W2 income with rental income (but it will take a lot of properties to get there).

We end up more willing to purchase buy-and-hold properties that have low cash return but where we believe strongly in appreciation - great school districts, close to hospitals, etc. I know there's much more risk with this approach, but it just seems like such a huge lever that you can't ignore. Also, the nice thing is that there tends to be less competition for this class of property. 

Of course, in a perfect world you'd get high cash-flow and high appreciation, but that's just not reasonable to expect. In reality, we're looking to construct a portfolio that's a blend of high cash-on-cash + low appreciation potential and low cash-on-cash + high appreciation potential. 

Out of curiosity, what sites/resources do your clients use to monitor rent trends? 

So many calculators I've seen ignore equity build up. Why is that? Is it because that equity is locked in the property and not available to you? 

I just think it's crazy to ignore the fact that somebody else's money is paying down your mortgage (interest AND principal). When you sell the property those principal payments become money in your pocket. Why wouldn't you factor that in? Most people use pure cash flow analysis for calculating after-tax returns, but in my opinion it ignores a huge part of the value of leveraged real estate investing. 

What am I missing? The practical implication for me is that I will look not only at traditional cash flow numbers (cash-on-cash, before tax, after tax) but I will also then factor in equity build up when generating a "complete" or "comprehensive" return. Maybe there's an actual word for that.