All Forum Posts by: Tanner Crawley

You have to have lived there for 2 years consecutively to get the exemption. Yes, PM fees are a cost of business but it is still better to turn a profit and have income and if the property is barely cash flowing anyways you likely will have a paper loss due to interest+depreciation anyways.

I would definitely want to keep my rental in the state I live in but it sounds like you don't have the income to cover any vacancy, unforeseen maintenance etc. 

I would also not pay a PM if the income is going to be tight. Managing one unit is not going to be that time-consuming, no need to give away money to a PM. 

I also wouldn't want to pay taxes on the sale but you would have to live there until Dec 2022 to get the primary home exclusion. Do you have any stocks or other investments that have negative returns that you could sell to offset the gain from your home sale?

Thank you. I think you are dead-on in that cash flow is much less sure than people make it out to be. All it takes is one bad tenant that you need to evict or one that causes damages to your property. We just had eviction moratoriums.

I would much rather buy a property with no cash flow that appreciates well with high rent growth than one with modest cash flow. Modeled out over time a property with 3.5% rent growth compared to 2.5% makes a huge difference. 

Instead of looking for some rent to price ratio or .5-1% rule people should actually model real returns.

I fully understand that cash flow is important to scale but if you are so levered and your DTI is stretched so thin that you can only buy cash flowing properties maybe it is time to diversify out of RE.

@Jonathan Beemer

Cash flow is definitely possible.

My first unit rents for $2,100 and the payment is $1,700. This is an older unit so after all expenses, this property doesn't cash flow much but is probably in the highest appreciating submarket.

My second property is a newly built luxury townhome. This payment is just $2,400 and it rents for $3,300. As a new build expenses are obviously low so this property cash flows really nicely. This property has appreciated really well but I imagine there will be some kind of trade-off over the long term as other submarkets appreciate faster. 

In 5 years' time property #1 will likely turn into a cash cow as rents are growing even faster than Denver as a whole. 

I would look for attached units, townhomes are at a pretty big discount compared to SFH and have pretty comparable rents.

This is not true. You can absolutely sell the appreciated asset. Feel free to dm me if you need any more questions answered.

@Connor Ryan

As Ben and Jeff have already said this is a great strategy. I would also add that tons of listings advertise the opportunity to build an ADU with the existing zoning. To save you some time going down this rabbit hole this almost never makes financial sense due to the cost of doing so. Finding a property with an existing ADU or suite is much better.

@Wade Mattingly

My Fiance and I just bought a new build. What I can tell you is that most of the smaller builders are building some of the worst product I have ever seen. I think it is due to a shortage of good subs so the workmanship is terrible. In our home they drywalled over the AC vents, cabinet pieces were falling off the wall, appliances were installed improperly, and many more problems. We are 6 months in and still have a huge list of warranty items they have yet to get to. 

This seems to be common unless you go with one of the mega-builders like Pulte, Lennar, etc.

@Ryan Baxley

OpZones would be your best bet. It can be tricky if you are trying to do it yourself as you need to double the basis of the property which means making significant improvements/developing. If you don't have the skills to do so you could always consider a passive Opportunity Zone fund. CADRE, Fundrise, and other platforms offer these with smaller minimums.

@Steven Thinnes

I have had luck finding cash flow in Denver but it is hard on the small multi-units. Mostly because the existing 4-unit inventory is largely terrible. I have seen strong cash flows from newly built townhomes or existing single-family homes.

This strategy may grow the portfolio value more slowly but single-family REITS have far outperformed multi-family REITS recently and large institutions are putting big money into the SFH game. I would bet this trend continues.

@Ashton Moore

If you are in Denver I would drop the quadplex dream. Especially with low money down. The Self-Sufficiency test makes it pretty much impossible to get a desirable property with less than 10% down.

Single Family REITS have also greatly outperformed multifamily in the last years and now institutional players are getting involved. If I was starting out I would focus on desirable SFH or maybe small-scale townhomes in key areas. There are also more favorable loan programs with low-money down, down payment assistance, and no PMI.

You can eventually scale into MF stuff but it is the most competitive product and might only be worth it if you are syndicating and have investors who require a lower yield.

My townhome units have a way better yield than any multi-family units I have seen.