All Forum Posts by: Steve Stuart

A couple points I’d like to chime in on:

1 is whether or not your house is an asset. By definition, I don’t believe it to be. HOWEVER you can certainly make a substantial profit depending on at what point in the market you purchased. Obviously almost anyone who bought a primary residence in 2010-2014 and sold in early 2020 made a bundle.

I don’t think many of the people who bought their primary residence in 2007 fared as well.

Single family primary residences don’t usually cashflow outside your “starter” home setups; so if you don’t pick your house up for a steal or toward the bottom of a cycle you’re not going to make money.

The second thing I’d like to touch on is Robert Kiyosaki. When I first read Rich Dad Poor Dad around 2016 I only owned a few properties- all purchased simply to house people working for me in an unrelated business. That book, in one read, changed my way of thinking so drastically that it catapulted me to the 92 units I have today. I “retired” for a minute at 30 in to 2018 and hope to get back to traveling full time soon but I’m kind of addicted to real estate now.

Whether Kiyosaki made his money in real estate or from books and seminars doesn’t make any difference to me because Rich Dad Poor Dad had such a profound affect on my thought process and in turn, my life.

@Clint G.

I would definitely advertise... and since you have the luxury of not yet paying expenses I would list it at a rent price point higher than you think you can get- you may be pleasantly surprised.

If you get a lot of responses in the first week at the higher price, you’re golden but if you don’t, you can take it down for a bit and re-list lower without it appearing to be a “stale” listing.

Good Luck!

@Dustin Espinoza

A lot would depend on what’s common for your area. Out of my 62 units only about 30% have central air- the rest are window or through the wall units. A 32 unit building we close on next week also does not have central air. That’s common for the area so we don’t experience much of a drag on rent pricing.

Just received An offer on a fix n flip duplex I purchased in January. Listed $169,900, offer $155,000; will likely counter around $162,000 tomorrow.

Went under contract for a 32 (1-Bedroom) unit building in February and still plan on closing May 26th. Corona helped me to get an additional 5% off just last week.

I still have confidence in the market.

@Deniqua Antoine

I WISH I would have spent the money for proper accounting guidance and corporate structuring (C/S corp, LLC, etc) from the start.

Proper financial and legal advice would easily have saved me six figures after their fees.

My first three purchases were condos (in the $20-30k range... I miss those prices). After that it was a triplex, then quad, 6 plex and so on.

Nowadays I focus almost exclusively on multi-family but if the price and/or terms are right, I’m open. 

An example: in September I purchased a 7-plex from someone who was ready to retire and move to Florida. I purchased it on terms with $60,000 down. He mentioned he also had a townhouse that he wanted retail price for ($150k) and a C-class condo about 25% under market ($60k). I wasn’t interested in either so made an offer where it would make sense:  

Owner finance 

$210,000 total. $10,000 down. 30 year amortization, 10 year balloon @ 4%. 

He accepted. 

These numbers put my CoC return at almost 100% but I could never have done that deal if I hadn't purchased his multi family with $60k down (about a 30% CoC).

I wouldn’t have been able to purchase his Multi-family on terms if it hadn’t been within a couple blocks of several other properties that I own and extensively rehabbed -which he saw happen (even though we didn’t know each other). 

He could easily have sold everything to a retail buyer, but he the extra interest (5% and 4% respectively which is low for owner-finance) was enticing and really, I think he liked me.

In the end though, it was my experience/credibility which sealed the deal- where he was confident he could retire and the checks will come in every month without fail. 

That type of credibility you have to develop deal after deal, winners and losers. There’s no shortcut to it, even if you’re a great salesperson. 

@Erin Dorsey Robinson

A (very) brief description of how I did it:

In 2011 (I was 23) I started, with a partner, a marketing company where we brought in contract-workers from out of town/state and provided housing for them (someone else’s). It was an expensive endeavor, housing dozens of people every year, so as the business cash-flowed we put that money into buying our own properties cash.

Even though I thought of myself as a good businessman, and was running a successful company, the intent wasn’t to use real estate as an earnings vehicle. It was simply to reduce our housing cost.

Funny enough, after reading Rich Dad Poor Dad in late 2015, the power of Real Estate finally sunk in. By this time we had amassed a couple million dollars worth of property without leverage.

Almost the day I finished that book the decision was made to work on selling the very time consuming marketing company and focus directly on real estate.

So my path to $1M+ in real estate was a byproduct of building an unrelated business which required 80+ hours/week for 5 years (7 by the time it sold).

From my personal experience, I’d say active income is the fastest way to making a million dollars (cash, cash flow, net worth, whichever your goal is) in real estate.

Once you reach a certain level, you can use your real estate money to make more real estate money.

Thank you all for the responses... 

@Jay Hinrichs

Regarding the 1031- I'm not afraid of new debt- and if the right deal were to be had I would put down 25% on a $3-4M project. The trouble is qualifying for that loan. My (original) main source of income was a marketing company which I sold beginning of 2018- A large chunk down and owner finance the rest... Great income in 2018 and 2019 but classified as long-term cap gains on tax returns which is something the bank isn't going to like and I doubt lend against.

Yes, cash flow from the properties are good but likely not good enough for a $3M loan by themselves. 

I have great credit, good cash reserves, etc - so that wouldn't be holding me back.

@Dave Foster I hadn't thought about transferring the collateral. That's a great idea and I'll see if it's a possibility.

As far as not being able to do a 1031 because of deductions - I should've organized my thoughts more clearly. I meant that the loss of deductions (interest, depreciation) was a "pitfall" of selling, not that it has anything to do with the 1031.

Here's what I've got:

Decent size portfolio (60 units now) .... most MF buildings, all long term rentals but most zoned short term and less than a block to the beach. Intentions of growing it to 100 in the next 24 months... all in the same general area.

Most free and clear except two that I pulled equity out on for other purchases. They're not listed, I'm not really interested in selling, though if I did - I'd really want to sell the whole thing.

Fast forward: Recently I've had people pursue me to buy 2 of the properties on the same block - 24 units. The 2 I have the mortgage on. They keep upping their price and we're at a number that reflects about a $1M profit (bought and rehabbed both at the end of 2016). However, because of the mortgage (then taxes, recap dep, etc) I'll only walk away with about 3 years of what would be attained through cash flow. 

Benefit? No debt on a portfolio of 36 units. 

Pitfall - can't 1031 because of the note payoff, loss of deductions, etc 

- Not really enough cash left over to sink into a bigger project.

-These are the two best properties I have which could be used as leverage for a higher overall price for the portfolio. 

What would you do? 

- Lock in the $1M profit?

- Lease Option it? 

- Owner finance it (though they'd have to put down 60% to cover outstanding mortgage- which they will. That won't leave much extra interest income because of how "little" is being financed)?

- Don't sell it?

Thank you in advance for the advice!

In my area property taxes on non-owner occupied property is greater... It's a 6% ratio instead of 4%. The millage is .2415 (So if a property is $100,000 you'd multiply it by 6% for non-owner occupied then by .2415 to find the annual taxes will be $1,449. Owner occupied multiply by 4% first and the taxes will be $966)