All Forum Posts by: Ryan D.

@Dean Letfus - agreed, I think the community here is very supportive & wants people to succeed, and I'm very thankful for BP. Your "1 out of 100" comment is spot on.

The danger is when people become encouraged to engage in investments they are sorely under-prepared for. People are encouraged to think that "being motivated" is somehow a substitute for starting small, learning on low-risk investments close to home that you can see/manage yourself, & moving up incrementally as your capabilities & experience naturally grow.  

There is a reason that only 1 out of 10  small businesses survive their first 5 years, because running a business is hard. Most people fail to appreciate is that "investing" in real estate IS running a business. Too often people are encouraged to think that RE investing is somehow passive like stock market investing.

I love it when people ask questions that show they've put real thought into things & they are diving into the details, trying to understand how things work - I think THIS is the type of behavior that our community needs to encourage more.

Originally posted by @Marcus Auerbach:

I think people do learn, but it's almost worse than being uneducated: you might want to call it "selective learning" - very similar to "alternative facts". 

People "learn" what suits their believes - they will selectivley "learn" what supports their perceived truth. Usually has to do with quick success, huge growth and great returns on small money. They will selectivley pick content that makes them feel good, because it tells them they are right in what they want to believe. And who doesn't like to be right?

So, if they read that you can go from zero to 100 doors in 14 months and retire at 24 by pulling money out of 50k properties in "up and comming neighborhoods", they are selectivley looking for evidence to support that idea. They become increasingly convinced that it will actually work!

(A healthy read on that notion is Ray Dalio's Work and Life Principles - most of his life he has been looking to predict the future of markets, commodities and economies and he failed a few times on a massive scale; one of his key messages: being radically open minded and discussing a topic with someone who has polar opposite views and trying to understand their rational is the single best way to test your assumtions.)

Hate to say it but BP is contributing to this problem: it makes me almost angry every time I see a new blog with a catchy title, such as: "512% profit on my first deal!" Often times I get the impression that the author has little to no first hand experience and has just aggregated enough tertiary information to come up with another "5 ways to get rich quick" blog. And the worst part is by the time I want to write a comment there is already a long list of comments congratulating and thanking the author for his profound wisdom. Being an official BP blog gives the information much more credebility than the author might actually deserve. (Let me be clear: I am very grateful for BP as a plattform and there is a huge amount of great information here, so no intend to bash BP in general!!)

@Marcus Auerbach - I couldn't possibly agree with/underline your comment enough! Though BP is a great tool to increase the skill-set of experienced investors, it also contributes to lowing the barriers of entry to getting into RE. Having entry-barriers to anything forces the participant to be able to perform at a certain level of capability prior to entry, and is a form of protection for all participants, both new and seasoned. In many ways BP enables the "I read three articles this week & watch HGTV, so now I'm a RE investor!" mentality. 

Any tool, wielded improperly, is likely to get people hurt. 

I own several 4-plexes in the Jacksonville FL market. I'd like to get an idea of their market value (just for my own satisfaction), without paying the $X00 per building for a formal appraisal - again, the valuation is just for my own personal knowledge, not for any financing, sale, etc. 

I've called several places looking for a quick BPO or desktop appraisal, but all the places I called say they don't do this for multi-family. Does anyone have any resources they can recommend for this?

Originally posted by @Medi Sarwary:

@Bjorn Ahlblad @David Detweiler

What sort of funds are you guys investing in to stay relatively liquid for a deal? I have some of mine in vanguard ETF's but I'm wondering if I need it in a pinch for a deal how accessible it would be..

Sorry for hijacking your post Andrew :)

My "liquid" for future purchases generally comes from HELOC(s), & some money-market cash that I keep around for fast-access when unexpected opportunities arrise. Money that I have in stocks, funds, etc (Vanguard, etc.) while still being fairly liquid, is long-term investing, and I consider those to be "one way" accounts (money goes in, but doesn't come out).

I'm still in the growth stage of my RE career, but am conservative by nature. I've got apx 50% equity in my portfolio as a whole, and my loans (6 or 7 in total) are all at 3% to 5.2%. Its likely I'll never be able to borrow at rates that low again, so there is little financial incentive to pay them off any faster than I need to. If I owed at 7,8,9% as some of the other posters on the thread have mentioned, then I would likely move to pay those down faster, as that's no hassle investing & on par with what I could get with other no-hassle investments (i.e. stock market).

When acquiring new RE assets, I pay all cash (pulling from HELOC's against existing assets), then I refinance somewhere between 70-50% of the PP into long term debt, with the remaining 30-50% staying on the HELOC which I then pay off as fast as possible using all profits from the whole portfolio, & repeat the process typically buying 1 building a year.

Originally posted by @Anton Ivanov:

@Kristopher Gomez

Average purchase prices on the multi-family I've been buying have been around $50k-55k per door in KC. Rent is around $700 at market for units in good condition.

Thanks Anton, great post, but I'm having a hard time seeing how the numbers work out. You say you are buying 4-plexes for ~$200k ($50k/door as you mention), that rent for $700/unit, and making ~$300/m/door profit. Most of my buildings are identical to this, but make apx $160/m/door profit, so I'm having difficulty seeing how you are getting ~2x the profit from effectively the same buildings. 

Can you please help me understand this:

• +$2800/m income for the building ($700/m/unit)
• -$280 in management (10%)
• -$1200 for profit ($300/m/door on average)
• =$1320 leftover to cover all your operating expenses

I just don't see how $1320 can cover all your expenses: mortgage, taxes, insurance, maintenance, ground-keeping, CapEx, vacancy, placement fees, etc. Do you own these properties without any debt (mortgage) - I assume not since you stated a 15%CCR? Maybe I'm missing something, can you please shed some light on this, I'd really like to understand how your 4-plexes are that profitable (and what I'm doing wrong with mine)!

Thanks in advance Anton, and thanks for your service!

Originally posted by @Bill B.:

Any over valued housing article that doesn’t even talk about San Francisco, is obviously a joke. 

 This.

I think the main thing that most people "feel" that leads them to think we are in a speculation bubble, is that prices have nearly doubled over the last ~5 years (in the popular  coastal markets) while wages have barely moved over the same time. So the increase in housing costs is a mix of:

• driven by people NOT extracting a living from the local economy, & instead being driven by external forces (i.e. speculation, outside investors, stock market appreciation). This is strongly felt on the west coast with boat loads of money coming in from China, & grossly distorting markets (look at Vancouver for the clearest example).
• driven by people willing to pay a much larger percentage of their income to housing.

If the value of my house goes up by 2x during the same time my salary increased by only 6-8%, I'm going to think something very abnormal is happening. 

Ultimately, when a town's housing prices rise so drastically out of step with local wages, this is very very bad for that town. 

$200k will buy you absolutely zero here.

Assuming this is a long term buy/hold investment, then this is a simple math exercise. Example 1: you can pay $2000 worth of points to lower your monthly payment by $87. What is the ROI on this $2000 invested? ROI=$87*12months/$2000 = 52% This would be a very attractive use of your money. Example 2: You can pay $1800 worth of points to lower you monthly payment by $15. Use the same formula: ROI = $15*12/$1800 = 10% Is this a good use of your money? Do you think you can get a better than 10% return if you put that $1800 elsewhere? That’s up to you the investor to decide. This is made easier by the historically low interest rates we are enjoying now, where it is unlikely you will want to refinance that 30yr fixed any time soon (as you’ll likely pay a higher rate).