All Forum Posts by: Jacob St. Martin

Hello Samantha, 

There is good news and bad news. The good news is that real estate can provide you with the lifestyle that you are describing: No 9-5, cars, travel, financial freedom, etc. 

The bad news is that many influencers make it look much easier and give some false promises to get you to buy a course. 

Let's just address the first lie, a couple of properties is not going to make you rich and let you quit your job. $500 a month cashflow from a single family home is really solid but it isn't going to drastically change your life. The reality is that cash flow can be very unreliable. Tenants sometimes don't pay, roofs need to be repaired etc. A couple of maintenance requests can knock out an entire year of cash flow for you. This means that in order to live off of cash flow you need to have A LOT of properties/cash flow so that if a couple of properties underperform or need repairs you still have something to live off of. 

The real benefit of getting started with these kind of properties is the equity you build. The way people quit their jobs is by hustling extremely hard, building a few million in sweat equity through flips/BRRRR/value add, and then dumping it in cash flowing assets that are lower maintenance.

If you are okay with your job, the best thing to do is keep it and use that hard earned money to start building equity. If you hate your job like I did then there is one way to quit your job faster, extreme defense. Offense is making money, defense is saving money. I was able to quit my job to focus on real estate full time but this is only because my wife and I have a strict budget and keep our expenses very low. I have house hacked so we have no housing expense, we cook most of our meals, hardly drink, bought our cars in cash, and have no debt. My wife makes less than $3,000 a month but we are able to live off of that and still be saving $1,000 of that a month (so keeping our combined expenses under $2,000 a month). Meanwhile I am working hard in value add deals, partnering with investors who have capital but not time/expertise. She pays the bills, I build us long term wealth. 

If you want to discuss these concepts in more depth feel free to reach out to me in a message. I would be glad to help you find some direction for how to start investing. 

Hello David, 

I am an investor based in Charlottesville VA. I would say that my advice will greatly depend on your goals and what resources you have to invest with (time, money, skills).

Do you have any prior experience with real estate investing? Do you have a lot of capital but not a lot of time, or a lor of time but not capital? What does your w-2 income look like? These are all things I would need to know to give you the best advice. 

However, generally I think that high cashflow/low appreciation markets only make sense when you are working with really large quantities of capital. If you are trying to build a portfolio, your growth will accelerate much faster if you can build and grow equity through highly appreciating markets and value add investing. Above and beyond the best first option would be to house hack, especially if you can do a house hack/STR in the DC area.

There are also options like investing in a syndication or partnering with investors like me who have deal flow but need capital partners, especially if you are busy or have not developed the skills for the types of deals you want to be doing. 

If you are interested in discussing in more detail I would love to meet up with you, feel free to message me. 

 There is already a line item for both your agent's commission and the selling agents commission on the right side of the page. This looks like an independent 3% credit. 

Hello Sabrina, 

With the things like this there are two things that should drive your decision: your goals, and the numbers. 

Let's talk about the numbers first. The metric that is going to be the most helpful here is return on equity. Take your monthly cash flow and rather then dividing it by your initial investment (which gives you ROI), divide it by your current equity. If your return on equity is lower than the return on investment you could get by redeploying that equity into other properties or other investment vehicles then it is probably time to sell. If your return on equity is still higher than what you would get in other properties you should hold on to it until that changes. Another important factor here is your deal flow. How confident are you that you could get deals to put your money into? In a 1031 you are time constrained and a lot of people have low deal flow right now because inventory is very low in most places. If you are not confident that you can find decent deals maybe hold onto your property. Lastly, when you are running your ROI calculations be sure to also consider market appreciation. One benefit of redeploying your capital into more or larger assets is that normally your appreciation will now be calculated off of a much larger total home value. For instance if you have one $500,000 property with % equity and the market goes up 3% you have gained $15,000 in equity. If you sell and use that $250,000 to buy $1,000,000 of real estate you now get $30,000 in equity when the market goes up 3%. This is especially important in highly appreciating markets.

You should also be considering what your goals are. Do you want more properties and the increased time spent managing that comes with that? Great, go for it. Are you busy and looking to get better returns more passively? Maybe you sell and invest in a syndication or partner with someone like me on some deals. Really think through what you want in life and what you can do with your current and future real estate to move you toward that. 

If you want to discuss in more detail feel free to reach out. 

Hello Cheza, 

I am sorry to hear that your first rental property didn't go well. Unfortunately these companies offering turn key rentals often over promise and do so in markets weak markets that are unlikely to see appreciation. Now to answer your question:

Based on what you sent it looks like your actual closing costs are $8,361. Everything looks correct here for me except for potentially one thing. On the right side under other costs I see the 3% commission for you agent which is fine, but then I see another 3% "seller credit" on the left side. Did you agree to pay a 3% credit to the buyer? If not then your agents commission may have been added in here twice by accident. 

If you need to talk through this in more detail feel free to reach out. I feel bad when people get sucked into sub-par turn key deals when there are much better options for investing in real estate more passively like investing in syndications or being a financial partner on smaller scale deals with another investor who wants to put in the work but needs the capital (I partner with people like this). 

He should not be required to have a contractor license so long as the work that you do is permitted and inspected properly. The benefit here of hiring someone with a contracting license vs hiring an unlicensed contractor would be that a licensed contractor is liable for the work being done properly, so if something is not done up to code they would be required to fix it. If you are doing it yourself this isn't a bit issue. 

Good luck on your real estate journey! I am based out of Charlottesville and am just starting to do flips here. Let me know if you have any questions!

Hello Oded, 

I think that this is a great idea! I would just recommend only partnering with people that you really trust and make sure that you have legal documents clearly explaining everyone's role, expectations, and contributions (both financial and work wise). 

Feel free to message me privately if you want to know more about partnerships. I partner with people a lot but typically they are in a more passive role. 

Hello Breanna,

Do you have any idea how the cost of building compares to the value in your area? If you are comfortable going through the building process and have a builder that you trust you would probably get the best return by building on the lot and then selling and deploying that equity that you have now built into another asset via a 1031 exchange. If I had to guess, the cost of building on the higher portion of the lot is most likely not worth the slight boost you might get in value from having a better view. You would likely get just as much value by just putting a fire pit or hammock or something up on the higher part of the property and that basically costs nothing. 

If the cost of building in your area vs the value of the house built would not net you a lot more than what you would get by selling the land then you should just sell the land and not have to deal with the work of building. I would probably want to build at least $120,000 in equity upon building for this to feel worth it but that number is up to you. 

If you want to talk more in depth feel free to reach out!

Hello Sharma, overall this looks like a solid deal but I do have a couple of thoughts!

1. You should run your numbers for at least a 6 month repair time. Of course your want to get it done sooner but things happen and you dont want a couple of extra months to break your deal. 

2. Your monthly HELOC payment is way, way, way too high. I am not sure if that was an error or they are trying to rip you off. Even if you borrowed $130,000 which is more than you need at 13% which is what BRRRR lenders would charge a newbie, that is a monthly payment of about $1,450 and you would probably pay 3 points up front which would be about $4,000. If you cant find cheaper than that with a heloc than just use hard money.

3. You should plan for a larger repairs/capex/vacancy budget. The unfortunate truth about cheap properties is that a hot water heater and a roof still cost about the same as a proprety in a more expensive areas so your repairs/vacancy/capex is going to eat up a larger % of the gross rent than a more expensive property even though the $ might be similar. For instance, a new roof is $10,000 or more in a lot of places right now. At this repair budget it is going to take you 6 years to save for a roof which is a long time. Unless you go into this deal with $15,000 or more in cash reserves you should expect to put away all cash flow into reserves until you reach this number

4. Talk to someone experienced in flipping in your area and maybe a good investor agent about the ARV. This is the #1 place that newbie investors lose. It is very easy to overestimate and suddenly need to come up with $30,000 out of pocket.

5. Verify your rehab budget with a contractor first. 

Let me know if you have any further questions!

Hello Jonathan, congrats on wanting to get started in real estate! There are a lot of ways to get into real estate depending on your skills, goals, and time. I would love to chat more about what makes the most sense for you.