All Forum Posts by: Schuyler G.

I did the same thing for 3 years. It’s been great! Renting out my former higher end residence. It’s a good way to learn. We saved our cash flow while we learned- then used that as the down payment on a researched rental.

At some point we will sell and have the down payment for an apartment complex. We r learning about that right now.

That's my goal as well! What part of the country are you investing in?

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Originally posted by @Jay Hinrichs:

its a long game there is Nothing wrong with a tenant paying off your mortgage in a VERY stable and potentially appreciating market or community.. and like others said you bought it to live in..

you will find two camps on BP..

One CASH flow is everything and the only reason to own rentals is to get the max amount of cash flow possible and appreciation is gambling luck or whatever. this tends to be a mid west rust belt sentiment since those areas dont appreciate much or if they do % wise they are starting at such a low dollar amount its really nothing.. like if you buying a rental for 30k and it appreciated 10% in one year thats 3k big deal right. So for those investors its all about COC return and not IRR becasue they dont expect to sell the homes down the road for much more than they paid for them if that.. and frankly could take loss's on them if they dont 1031 and have to pay recapture and sales load. So these investors its all about doors and scale. and keep in mind where those folks are coming from they can buy 10 rentals for what you paid for that house and rent them for say 600 to 800 a month.. so that is their baseline and its the cards they are dealt you play the cards your market deals you.

Then you have the west coast/east coast and say Denver and other higher priced markets and their mind set. Where cash flow out of the gate with minimum down is generally break even to a little negative but with rents rising in these areas it usually catchs up.. also exit if needed you are not doomed to only sell to another investor who wants a great deal. You can actually sell to a home owner who could care less what the rent is.. they want to live there.. and for me personally being more west coast bia's cash flow means a place setter so i can then sell for big gains. and we create big gains a few ways value add re gentrification of neighborhoods IE path of progress.. Land in the path of progress carefully chosen Timber or AG tracts etc etc.. so there is many ways to slice the real estate orange up.. end of the day though the true measure is IRR not COC .. that is if your ever going to stop being a landlord..

My personality type would lead me towards the cash flow camp of investing. I like to mitigate unknowns as much as possible, if appreciation happens then that's a bonus. It's definitely hard to find opportunities for good cashflow on the coast it seems. It still exists in parts of Phoenix where gentrification is still happening, but even in Scottsdale you're starting to see home prices come up quite a bit over the last 2-3 years.

I'll be looking for a multi-family unit or a small apt complex for the next one. I'd like to find something I can live in while the other units pay my mortgage and I live for free. Not happening anywhere near the coast in SD for less than $1M-$1.5M and that's a fixer upper.

@Jay Hinrichs what is your favorite resource for more on this type of info: "..and we create big gains a few ways value add re gentrification of neighborhoods IE path of progress.. Land in the path of progress carefully chosen Timber or AG tracts etc etc.."

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Originally posted by @Dan H.:

Originally posted by @Dennis M.:

You paid 417k and get only 3k in rent and you have an HOA involved . Glad it's been an easy fun experience for you but that sounds like a horrible use of money

I am not as adamant as Dennis about this being a horrible use of money. I do agree with his implied sentiment on cash flow. Research the 50% rule (40% rule if self managed) for an estimated long term cash flow projection. In high rent areas, I typically believe the 50% rule is too conservative but not when there is an HOA.

As for @Kevin Whisler and his projected cash flow estimate, I suspect he has done this as long as Dennis or me.

The reason I am not as convinced as Denis about it being a horrible use of money is that due to long term historic appreciation (market and rent) there is a chance this out performs some other investment opportunities. You would need to be able to weather the initial negative cash flow until rent appreciation results in positive cash flow. i do agree with Dennis that you could have purchased a better investment property, but this was not purchased as an investment property but as your home. I started in this exact way. Guess what is my lowest return RE for its equity? It is my ex-home because it was bought to be a good home for me and not necessarily to be a good investment property.

HOpefully there are some positive take away in this response for the OP.

Good luck.

Thanks for this. For anyone curious on the 50% rule it basically says that whatever property you find should have total expenses (taxes, insurance, repairs, property management, administrative, legal, turn-over costs, eviction costs, etc) should be 50% of the total rents.

You can read more here: http://www.123flip.com/education/the-50-rule/

I appreciate your input!

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Originally posted by @Henry Paul Trinidad:

Looks like you're good! Nice to see people starting up here also. I'm 24 and just recently joined the industry, let's connect!

Request sent!

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@Fred Cannon the mortgage insurance if I only put $40k down would take out much of the cash flow I have currently. I put 20% down. What's your take on the coastal market in CA? Nothing cash flows and over the last 2-3 years prices have nearly doubled in some instances, from what i'm seeing. Seems a bit frothy but I guess the argument is it will always be in demand and if you hold for the long term you would see appreciation.

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@Tyler Weaver Hopefully with a bit of paint and new carpet it will be good as new when the time comes. Good thing about homes is anything can be fixed but that's the risk I took when I rented it out. Thanks for the
comment!

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@Vic Oyedeji believe them! I would try my best to find a contractor through referrals. Talk to agents, lenders, other home owners in your area.

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Originally posted by @Kevin Whisler:

@Dennis M.

He’s cashflowing 900 a month and the property seems to be in really good shape. He also purchased it as his primary residence and turned it into a rental. Seems like a win to me. Read the whole post and don’t be negative.

Haha I appreciate this. Frankly I was happy with the way things worked out just so I could move. Now that I know $900/mo is **** ;) I'll make more on the next one.

Cheers!

1 Vote

@Dennis M. lol I wouldn't say this has been a fun experience. I would say it's been a learning experience. I ran the numbers and at that return over 20 years I think its between a 5%-6% cap rate. I agree that's not great, and when compared to my business for example (it's actually terrible), but from what I've seen from real estate it's about mid-range ROI.

Because the property is in a good location I'll hopefully see less of a hit when/if the market corrects and some decent appreciation over time. I'll hold this for the long term with the goal of it being 1 of 10+.

I'm not here to claim I know everything, actually exactly the opposite! Reason I'm here is to learn how to increase my ROI in these types of investments.

What typical returns do you see in your properties?

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Originally posted by @Jonathan Bombaci:

Congrats it sounds like a solid start!

What’s your #1 lesson learned? What will you do differently with property #2?

I think the biggest lesson I learned was how much cash a property can take to properly maintain it. For the next one I'll work in a larger budget for this. Also educating myself on what to look for and what to stay away from in a property will pay dividends in the future.

Appreciate your support!

1 Vote

All Forum Posts by: Schuyler G.

Schuyler G. has started 3 posts and replied 22 times.

Post: My first property - what happened

Post: My first property - what happened

Post: My first property - what happened

Post: My first property - what happened

Post: My first property - what happened

Post: My first property - what happened

Post: My first property - what happened

Post: My first property - what happened

Post: My first property - what happened

Post: My first property - what happened