All Forum Posts by: Stephen E.

I can never find the category forum I'm looking for. Should be more intuitive I think.

I would like to attend.

Thanks @Maxwell Lee and @Toshia Moss !

Greater profit is the best reason. You can often get a little more for the property by doing seller financing. It can be a real win for both sides. 

@Bret Maryon If you're looking for $20k in passive income then the easiest way to do that is to have $2 million to invest. So I think the question is phrased wrong, depending on your circumstance. Maybe the question is, how do you get to $2 million?

If you have that much then purchasing real estate that you don't have to manage that generates that kind of cash flow immediately is not hard. Even after taxes, insurance, misc. costs, and 10% to a property manager netting 12% annual profit/cash flow on real estate holdings is very easy in many areas of the country.

My personal example is I put $84,000 into real estate in Mississippi. In my most conservative estimate I'm immediately cash flowing $1,400 each month. That's being really conservative, putting aside $250 a month for unplanned maintenance/vacancy. This is property I don't engage with at all in a city hours away from where I live. Though I plan to visit and make sure everything is running OK every few months at least. Extrapolating from that, if I had invested $840,000 (outright, not a loan) then I'd be making $14,000 a month.

What I'm doing now is refinancing the properties which I own outright. Because of the type of properties, low priced, I have to do it as a portfolio commercial loan. Depending on appraisals, which are looking good so far, I might be able to get my full $84,000 back at 4.6% amortized over 20 years.

Adding loan expenses I'll be paying $450 a month, roughly. So with all the properties I'm making $950 a month (again, being conservative) and it didn't cost me anything after I get my capital back. In addition, that doesn't count the money I'm paying back into principle.

Now as long as I can find houses that appraise well I can repeat this process pretty much endlessly. And if the properties don't appraise well, then it takes a little longer. When I buy the properties they don't always have tenants in them, so I think 3 to 6 months between buying a property and taking out a loan against tha property.

I think you get the gist of what I'm saying here. This is one way to do it. But I've made much more money so far on the other properties I own, the ones that didn't cash flow as well in the beginning but appreciated quite a bit.

So I think figure out the question your asking, which, I think, is how do I get $2million dollars and, at that point, what do I do with it? Cash flow properties are very conservative, boring, safe investments. But they don't make as much money as fast as buying property that is appreciating quickly using a bank's money.

Would really need a lot more information to know if it was too good to be true or not.

@Bobby Pagliarini you might want to look at out of state properties. It's not hard to find places in Indiana, Mississippi, and Alabama that rent for 2% of the home price. The difficulty is then not finding a place so much as finding a good property manager. But that might fit your strategy better. That's what I've been doing recently, so I speak from experience.

@Russell Payne you really need more information to answer this question. @Terry Johnson had great advice, but as they say, all advice is autobiographical :)

I did it the exact opposite way. I did STR first, and then got into long term rentals. I now have 6 properties, 9 doors (units). 2 of the units are STR. It has almost everything to do with the location of the property. There are some places, like Austin and Nashville, where an STR will rent for 5 times the monthly rent. And other places where an STR is only twice, or less. An STR has to rent for a lot more to be worth it. But sometimes they do.

A big consideration is if you're managing them yourself. Again, to be the opposite of Terry, I manage my STRs and have a property manager for 3 of my long term rentals which are out of state. I have not found it worthwhile to have a property manager on short term rentals. Most property managers can't handle it. To do it right you need to run it like a hotel. Running an STR is infinitely easier when you live close by, and progressively harder with distance. LTR is almost the opposite of that.

To do a STR you have to know the neighborhood, and also the neighbors. If you think the neighbors are going to have a problem then don't do it, because it won't be worth it. The best way to do it is when you actually live on the property, ie. a double/duplex, or just renting rooms in your home.

It's an entirely different set of skills from long term rentals, but I disagree that it's significantly more complicated. And the returns can be amazing. And it can also be your own vacation home, which is an amazing plus, just put yourself on the calendar.

Now, the most important thing when you're buying a house, is if it's a good deal. Another aphorism: the best deal is a good deal. And the criteria, again just an opinion, should really be no different for a STR or LTR. Nowadays if I buy a property for STR I would still want the property to cashflow well if the STR doesn't turn out to be a good option on that property, or I'd want it to be priced low enough that I could turn it around for a profit.

In other words, I would put your effort into finding a good deal. You can decide to STR or LTR based on the property and the particular pluses and minuses, but I wouldn't let either strategy guide your choice of home, really the other way around, let the home guide your strategy. Find the deal.

Just to underline this point, if something goes wrong, and you are unable to STR because of neighbors, changes in laws, etc. Will you be OK converting to a LTR? If the answer is no don't do it, if the answer is yes, you've probably found a pretty good deal.

Good luck!

My first home was a double, with a 1600 sq foot two bedroom next to a 450 sq foot one bedroom. It worked great for  me to live in the small unit and have everything paid for entirely by the larger unit. You said you don't want to househack so does that rule out a multi-family. Sometimes I think the terms are used interchangeably. Anyway, it's just absurdly easy to manage a property when you live right next door. I own a bunch of rentals now and proximity is a key consideration for me. 

There are also levels of rehabs. You can move into a pretty nice place and still make it a lot nicer, which is what I  did on my home. I bought it 5 years ago and I'm about to refinance it and get almost all of my equity out, in no small part because of the improvements I made. My point being that the word "rehab" sometimes sounds scarier than it actually is.

I'm considering starting an S-Corp so I can pay myself a salary and generate W-2 income so it's cleaner when I go to refinance property. Does anybody have any experience with this? I'd love to know your thoughts. What do lenders think?