All Forum Posts by: Joe Scaparra

@Richard Caldwell, just starting out with REI. In the long run it will serve you well as long as you mentally prepare for this journey. Austin will be a great place as long as our Nation's economy can hold up! I don't know much about you, yet! If you would like to do some coffee, i would be happy to impart some of my grey hair wisdom on you!

Check out my profile to have some idea who you are meeting for coffee.  Message me if what to take the chance!  Cheers.

Why concern yourself with which suburb is going to do better.  It really is a guess and even if correct does it matter?  This year Cedar Park, next year Leander, the following year Round Rock.  Who really cares, it is a crap shoot picking number 1.  

Instead focus on the specific deal!  Go where you are most comfortable.  Go where the property has the best investment numbers as in price, available rent, taxes, repairs anticipated ect.  You get my drift.  

People ask me, what parts of Austin should I avoid?  NONE!  All areas are blowing up! Same with the Burbs!  Find the best deal and go with it!!  This is NOT ROCKET SCIENCE! 

Cheers!

Let's talk or define what is really meant by PASSIVE INCOME!  It is not meant by what most people think.  Passive Income is an Accounting Term used in conjunction with our FEDERAL INCOME TAX!  Passive income is used to tell you how that income is TAXED!  Passive Income is not subjected to Pay Roll TAX (Social Security Tax) and IS subjected to your ORDINARY INCOME Bracket.  

Because of the word Passive, most people think you don't have to do any work for that income.  Something like interest from your savings account or dividends from your stocks.  Depending on how you have your real estate management set up using a property manager ect you may have a truly passive work load or not.  

For me I manage my own real estate, including my children's too.  A total of 25 units.  To me, I am 66 years old, I consider it passive work because I handle things when I want to.  But it does require some attention!  My phone is full of handymen, plumbers, electricians, painters, and HAVC contacts!  I manage property from Ft. Worth, Round Rock, Georgetown, Taylor, Elgin, Austin and Bryan TX.  I am really just a coordinator.  When I get a request for repair, I dial up the phone.  

Yes I consider my real estate passive but in a true sense it is not! By I don't hold office hours and I don't change my activities because I manage my properties.  Also at 66 years old I need something to say to my wife I am busy!    Passive income, whether truly passive or semi-passive is STILL A VERY GOOD THING!  Cheers!

@Andrew Syrios, you must hate it when people say CASH FLOW IS KING!  But I will stick a stake in the ground and say it, CASH FLOW IS KING.    You say it is nice and EVENTUALLY replace your income with it......WHAT?    OK, you can work for 35 years and sock away in your 401k and EVENTUALLY replace your income......probably not,  but with the help of Social Security and your 401k you might replace 75% of your income.  

Tell me what investment strategy other than Positive CASH FLOWING REAL ESTATE is better at EVENTUALLY replacing your income?

A good cash flow strategy aids in your PEACE OF MIND and actually provides a paycheck each month, and in many cases before you retire but certainly during retirement!  

You say the other advantages  (appreciation, tax write off and principal pay down) are MORE IMPORTANT?   What!  Hey, let me give you a clue, ALL THOSE THINGS CONTRIBUTE TO a CASH FLOW STRATEGY and they ALL INCREASE CASH FLOW.

Positive CASH FLOW enables someone to get through tough times.  You know what, Generally real estate is at it's highest across the country RIGHT NOW!  So how has anyone ever lost money in real estate, they should have just held on and sold it now and NO ONE WOULD HAVE EVER LOST MONEY IN REAL ESTATE.  People did because their investments were not cash flow positive and / or felt PRESSURE TO SALE OR GET FORECLOSED.  

Now in some markets positive cash flow is hard to find and appreciation strategy can work but with it comes with more risk.  Not saying one is better than the other, but if someone gives you lemons then you make lemonade, but if I have peaches I might instead make a sweet peach cobbler!  I much prefer a Positive Cash Flow investment over a speculative appreciation play.  But that is me and by no means am I saying a Good Appreciation Strategy can't work, because it can.  But Cash Flow is King!   Cheers.

I am with you in that I don't see a decline, but I think I am a little more bullish than you and here is why.

I think the Austin MSA Real Estate Market still has long legs left. 2022 may not exceed 2021 in terms of 30% appreciation, but I see absolutely no threat of decline in price movement. Prices will not go up at the rate of 2021 but it will be another stellar climb in prices and here is why. Let me address your detractors concerning demand: Rising Prices, Inflation and Rising Interest rates. You talk supply and demand. Supply is low and you think it could increase but reality is it may increase but not fast enough to make a material difference in the market. Why, because as you pointed out that builders and developer are not operating at full strength because of material and labor shortages which I continue to see as headwinds in 2022. What about prices and rising interest rates? Those will be offset by increase demand caused by population increasing in the Austin MSA due to JOB GROWTH, WAGE GROWTH, and GOOD WEATHER! Why good weather, that has always been here why is it a factor today! Well, the Baby Boomers are retiring at record pace and those in the cold climates are moving SOUTH and TEXAS is getting more than it's fair share. HIGH TECH is here and multiplying, bringing MORE WORKERS (not homeless desperate souls) and those jobs are higher paying jobs than the average pay now!!!! More people, more jobs, higher pay is offsetting rising prices and rising interest rates. The higher forecasted interest rate are not significant to have much effect on buyers decisions!

Significant shift has occurred, where a few years ago, you might of had the investors arguing that the Austin market a cash flow market, NOT NOW! Prices have accelerated to the point that cash flow is taking a back seat at the moment. Yes rental rates have started to pop but has a long ways to go to get back to being the priority over appreciation.

Summary, 2022 will continue to be a Significant Sellers Market due to population, job, and wage growth!  Cheers!

@Shiloh Lundahl, Wow great post this thread has gone bonkers from your initial post.  You hit a nerve and that is great!  

Here is my take:  Your question is more like a football team starting first practice of the season and telling everyone their goal is to win the Super Bowl that year.  For all but one team, they are going to fail.  

I am one that has easily replaced well over 10k a month investing in real estate and it took about 15 years to get there.  However, I never started out with that in mind.  It was an evolving journey and had several re-evals a long the way.  

But to put your question 10k a month is proper perspective let me help you.  I am a duplex guy so let me use duplexes as my example.  To get 10k a month, which is 120k a year, you will need 5 duplexes owned free and clear.  So each duplex once owned out right will produce about 20k a year net of taxes, maintenance and insurance.  

As a general rule, I put down 20% on each duplex I bought and then used tenants money to cover everything else.  I bought with the 1% in mind, which gave me about 500=700 positive cash flow.  I used every bit of cash flow to pay down the note quicker.  On average it took about 8-10 years to pay off a note.  I would take all profits  on all properties and pay down one note quickly.    

So if someone decided to replace 10k of income they could do it but realistically it will take about 10-15 years.  Real Estate won't get your rich over night but it will get you wealthy over time. 

If anyone in the Austin area wants to buy me lunch, I will spill my guts!  Not a realtor or lender, just an old grey hair who loves to talk real estate.  Cheers!

@Jessy Milner Nice to meet you.  I have lived in Austin since 1998.  I currently own 19 units and mange another 6 for my kids.  My primary areas of investment are the Austin MSA and Bryan College Station.  

I would be happy to have lunch with you but I need to disclose that most of my property types are duplexes.  I can talk your ear off on duplex investing in Texas.  If that sounds like something you would be interested in just send me a private message and we can exchange contact info and set up a lunch.   I am neither a real estate agent or lender.  Just an experienced 66 year retired grey hair old fart!

Cheers!

@Raphael Schwartz, when discussing real estate investing strategies, it can evolve into what is better cash flow or appreciation.  But in context to your question I think the debate doesn't apply here.  

I have been buying real estate here in the Austin MSA since 1998. Since 1998 to now I would say the early half of that time the real estate investment market was a cash flow market. My strategy early on has been primarily one that put cash flow first. I bought my first of eight duplexes in Austin MSA beginning 2005. Duplexes were a dime a dozen and sat on the market forever. People told me not to buy duplexes because they would not appreciate as fast as SFH. I ignored that advice because I was in it ONLY FOR THE CASH FLOW. However, I have been pleasantly surprised by the crazy appreciation we are seeing in this market!

The market has changed from the early 2000s to now.  I would definitely classify this market as primarily an appreciation market.  But don't be deceived, many people are buying for cash flow!  They have adjusted their cash flow model from standard 1 year lease of entire property to rent by room, or rent by day or rent by 30 day minimum fully furnished.  So you can't disregard one strategy but you can make your focus one if you like.  For me it was cash flow but I am fully enjoying this property appreciation not because of the increase in property price but the increase in rental rates that have followed.  However, I would say that appreciation model is more viable today.  

Because i am an old grey hair investor who has lived in Austin since 1998 it is hard for me to pull the trigger on these crazy prices now but I do feel that those who are comfortable with the appreciation model could do very well in this environment. I think the duplex demand has accelerated because it provide one of the best real estate type properties in this market. ADU lots are in high demand because the dirt and ability to put more units on said dirt is highly desired. Austin government has relaxed zoning to allow more multi-family because population is SuRGING! Jobs and Population growth is the fuel that will keep property price climbing. I don't see a let up at all in the Austin MSA. Barring a nationwide severe recession, Austin real estate market has long legs for continued growth.

You won't go wrong with South or East Austin.  Tesla, Amazon, and Samsung among others will keep both areas going strong.  At the moment East Austin seems to have a slight edge in my opinion.  Lastly, don't over leverage yourself, stay within your means.  Confidence is the main ingredient to be successful.  Good luck and cheers!

@Amos Sivan, Hi.  I have a little suggestion.  If I was you, I would update my non-existing profile, so people would not even have to ask where are you located.  Include a paragraph about yourself, what you do for a living, how you got your interest in real estate. What are your goals and why?  Most people don't utilize their opportunity to sell themselves on BiggerPockets and that is a huge mistake. 

Look at my profile and it may give you a hint at what I mean. Secondly, you are asking a lot from people who know nothing about you. That can be fixed by putting some effort into your profile.  After you fix your profile, you should seek out local investors by attending some meetups in your area.  Go to meetup.com and search real estate investing.   

You don't want to come across as just a taker, so maybe offer your assistance to investors who would be willing to mentor you.  I mentor quite a few investors and usually ask very little of them in return.  But an offer will go a long way.  Lastly, emphasize the positives in your life.  By saying "I don't have the networking, capital, or experience necessary to start making deals" comes off negatively.  Instead say something like I am looking to improve my networking as I diligently strive to increase my capital and I am looking to gain experience from seasoned investors.  

In RE there is no success for the undisciplined. Be ready to show how you have overcome some obstacles in your life. Or talk about how you have overcome a struggle and you are using that to motivate you to tackle RE investing.  I love helping individuals but only those who are willing to work hard and put their efforts into their interest.  Nothing worse for me to try an help someone but I don't see the fire and desire in their heart.  Good luck!

@Aaron Gordy certainly understand where you are coming from.  I have 19 rental units and manage another 6 for my kids.  I am 66yrs old and someday I may outsource it too, but I really enjoy managing the units.  My decision to outsource will be an easy decision since I have a mature portfolio and everything is humming along fine.

The real reason I recommend managing when first starting out is usually money is tight and it is a way to save a few bucks.  More importantly, I think most people think the cost of using a property manager is 8-10% of income and that is no where near the truth.  Also, it is important to understand what it takes and what cost you incur doing it yourself.  Once you have that baseline and experience down then you can make a decision to outsource it or not.  You will then KNOW if the PM is doing a good job or not.  Without that experience you are in the dark.  My experience talking to those who have or do outsource the PM role usually have major complaints over time.  Cheers.