All Forum Posts by: Sam Booth

Quote from @Sam Booth:

Quote from @Alecia Loveless:

@Sam Booth An advisor suggested to me I think long and hard about my plan to accelerate the payoff of my mortgages. He told me that he had found it much more useful to save the extra money for repairs, emergencies, or future investment.

Depending on your interest rates you may be able to get a better return on your excess money than by paying off the mortgages.

However only you know your current financial situation to determine this factor.

I think there's definitely a better return not paying mortgages off, but it's also nice to be free of debt. Hard to choose!

You grow wide, before you grow deep. 

Your income is a function of your portfolio size in dollars (more important than number of doors!). When you do the math debt-free is not all that attractive. It saves you maybe 5% on maybe half to 3/4 of the property value, which is also a tax write-off. In the end it's a quite low ROI.

And then you have tax considerations. Take a free an clear property, pull half of the equity out (tax free) and invest that for example in the stock market.

5k-10k in monthly income after everything sounds like 20-30 units.

@Sam Booth An advisor suggested to me I think long and hard about my plan to accelerate the payoff of my mortgages. He told me that he had found it much more useful to save the extra money for repairs, emergencies, or future investment.

Depending on your interest rates you may be able to get a better return on your excess money than by paying off the mortgages.

However only you know your current financial situation to determine this factor.

I wouldn't ask how many doors, but instead, how much cash flow is needed? And this will depend on what type of lifestyle you're looking to have. 

Quote from @Sam Booth:

Thanks everyone for replies!

It sounds like I am over thinking it possibly but what I will do is just use a spreadsheet with Capex items on it, year it needs to be done and then maybe account for 3% inflation a year to get a relatively close cost of cap ex items.

Appreciate the input!

You are still overthinking it a little: no need to incorporate inflation, because it is just a devaluation of the currency, so it effects income and expenses alike.

The fact that you are planning for capex items already puts you ahead of at least 50% of new investors, who just think about PM and repairs.

One major realization is that you need equity growth to pay for capex. So the much more important question is: are you buying in a neighborhood where you have the best possible expectations for future appreciation?  

The reality is this is not simply a real estate investment decision it also involves personal lifestyle, life changes, and other factors.  A good financial advisor that understands your situation and a good estimate of future cash flows would help greatly.

Calculating cash flows is actually the easier part of this endeavor.  Your lifestyle, life events, and other income all come into play.  Building reserves for emergencies and creating other contingency arrangements is also a good idea.

When I retired I already knew that I had more than enough to retire because I had already been living more than 10 years exclusively on my rental cash flows and building reserves for retirement.

Quote from @Sam Booth:

Quote from @James Hamling:

Quote from @Sam Booth:

Thanks everyone for replies!

It sounds like I am over thinking it possibly but what I will do is just use a spreadsheet with Capex items on it, year it needs to be done and then maybe account for 3% inflation a year to get a relatively close cost of cap ex items.

Appreciate the input!

Stop using guesstimates. 

You have the start of a cap-x schedule but that's it, a start. 

You list out all components. Than have a line for rated life expectancy. Next, current age. Next, todays cost of replacement. Next, annual inflation rate. 

I like to have inflation rate on a line item but it's auto filled from top of sheet where I input my annual inflation rate. Reason being, I like to manually adjust a few things, items where i see more or less LT inflation. 

Now, all the auto calculations. 

This should kick out a total for the field of expected end of life date, and replacement dollar at end of life. 

Now, you can simply reverse engineer that #, or better yet have auto-calc that does that. Takes that expected of of life replacement total, and divides it by the time left. Because different things have different dates. 

Now you get an actual accurate allocation for cap-x. 

AND to boot, you have a schedule of what-when. So say something goes out, a water heater, you can look it up and see it's gone out 2yrs early. maybe look into that, see if have a reason why. Maybe find out you didn't replace cathodes, and the water is harder there. So now you know it may be worth it to consider a better grade cathode, or water filter/ treatment. 

Maintenance and cap-x does not, in large part, have to be a mystery game of wait n see what happens. Most of it CAN be put on a schedule, weighed and measured, so mathematical decisions can be made. 

Now, does it take time to make this excel program, dang right. But, once it's made it's made, and your going to get repetitive use out of it, use that will help identify when something that shouldn't happen happened, or when things went better than planned. 

Wouldn't you like to know what brand and model of washer lasted 1.5x it's rated life span? I would, that's a unit I'd want again. Or, if it went to hell in half it's rated lifespan just because it was junk and not worth the $. 

This will also help in doing better informed buy's. Heck, I run it and print it out for a seller and include it with my PA as justification to my #'s that I am not just low-balling em but here is the facts, I'm gonna have this n that price coming up. 

STOP guesstimating cap-x, put in the few hours to KNOW vs guesstimate. Best few hours spent. 

Only thing I am guessing on is inflation. I know Today's price for roofs and such and have calculated in this area a percentage of rent per month to be set aside for that. Do you have a spreadsheet that might be useful for this?

Take your pic, how do you want to calculate inflation? 

Inflation is not a singular static thing. So myself, personally, I say to use the LONGEST potential expected hold time, for a look-back threshold than take it X2 or X3. 

So let's say your like me, and say it's 7yrs. So I look back and I get the median inflation of 7yrs, 14yrs and 21yrs. Than I compare those, and I pick one. If I feel there is any "liar data" in there I throw out that piece. 

IMO now that we are on other side of "inflation shock" I throw out the last few years and I like to use preceding 15/20yrs inflation data. 

Quote from @Sam Booth:

Thanks everyone for replies!

It sounds like I am over thinking it possibly but what I will do is just use a spreadsheet with Capex items on it, year it needs to be done and then maybe account for 3% inflation a year to get a relatively close cost of cap ex items.

Appreciate the input!

Stop using guesstimates. 

You have the start of a cap-x schedule but that's it, a start. 

You list out all components. Than have a line for rated life expectancy. Next, current age. Next, todays cost of replacement. Next, annual inflation rate. 

I like to have inflation rate on a line item but it's auto filled from top of sheet where I input my annual inflation rate. Reason being, I like to manually adjust a few things, items where i see more or less LT inflation. 

Now, all the auto calculations. 

This should kick out a total for the field of expected end of life date, and replacement dollar at end of life. 

Now, you can simply reverse engineer that #, or better yet have auto-calc that does that. Takes that expected of of life replacement total, and divides it by the time left. Because different things have different dates. 

Now you get an actual accurate allocation for cap-x. 

AND to boot, you have a schedule of what-when. So say something goes out, a water heater, you can look it up and see it's gone out 2yrs early. maybe look into that, see if have a reason why. Maybe find out you didn't replace cathodes, and the water is harder there. So now you know it may be worth it to consider a better grade cathode, or water filter/ treatment. 

Maintenance and cap-x does not, in large part, have to be a mystery game of wait n see what happens. Most of it CAN be put on a schedule, weighed and measured, so mathematical decisions can be made. 

Now, does it take time to make this excel program, dang right. But, once it's made it's made, and your going to get repetitive use out of it, use that will help identify when something that shouldn't happen happened, or when things went better than planned. 

Wouldn't you like to know what brand and model of washer lasted 1.5x it's rated life span? I would, that's a unit I'd want again. Or, if it went to hell in half it's rated lifespan just because it was junk and not worth the $. 

This will also help in doing better informed buy's. Heck, I run it and print it out for a seller and include it with my PA as justification to my #'s that I am not just low-balling em but here is the facts, I'm gonna have this n that price coming up. 

STOP guesstimating cap-x, put in the few hours to KNOW vs guesstimate. Best few hours spent. 

Simple answer, get 10- 15k NET coming in, just do the math. If you need more than that, well get rid of the stupid toys LOL ,

Quote from @Sam Booth:

So I have been investing in real estate in the south since 2021 and now have 5 properties. How do you know how many properties you need to retire? It's hard for me to know how much cap ex and repairs will be in the future as the price of those things goes up. I have a spreadsheet of the rough timeline for when roofs and cap ex items will need to be done. Any help appreciated! Here's kinda what I have: (I usually really front load properties with alot of repairs and painting so that it pushes alot off into the future)

+ Gross rent

- property management 10%

- vacancy rate 5%

- cap ex savings (250/ month?)

- maintenance and repairs (50/month?)

- taxes

= Profit

 impossible for anyone to answer, it's up to you how much you need/want per month. I swear it's like BP is turning into FB, sadly  

Good luck