All Forum Posts by: Tyler D.

Nobody knows, and anyone who tells you they do is trying to sell you something.

I grappled with this for a long time. I was waiting for the perfect time to buy in. The truth is that there is no perfect time and it is possible that the market could crash tomorrow, or it could crash in 100 years.

Instead of trying to time a recession, evaluate whether or not something is a good price RIGHT NOW. If I find a property that cashflows well and is a good price, I don't care about the short-term fluctuations of the market. I'll buy it.

A good analogy would be going to the grocery store. If you want a steak, you're not going to wait and try and check the grocery store every day for the perfect price. You're going to buy a steak right now at a reasonable price, and if the steak goes on sale in the future, you buy as much as you can and stick it in the freezer. But you shouldn't wait forever for the perfect sale, because it may never come. 

I have to disagree with the people who say that cashflow is more important than appreciation.

My first property was a pure cashflow play, and while it will pay for itself in full after about 7 years from that cashflow, I don't expect it to increase in value.

The average home price in that market was 70k in the year 2000. The average home price is less than 70k today. Assuming the trend continues, the house will continue to lose value.

On the flipside, take a big city like Seattle.

A house in Seattle won't cashflow well in the beginning. You might even lose money. 

However, Seattle's home prices have gone from 250k to 670k in the past 20 years. The home bought at 250k was definitely cashflowing after some appreciation and rent increases, and now has an extra 420k of value. With leverage you could have put 20% down on 5 250k houses, and would now have 2.1million in profit just from the appreciation. That's a profit of 105k per year. 

The downside is that appreciation is less consistent and you could buy at a bad time, and may actually lose money if the market slides.

This is why I would stay away from both extremes and aim for something that has a healthy cashflow (enough to at least break even with, after all expenses), and a good potential for future appreciation.

I'm starting to head in this direction as well. I bought my first property in a high cashflow but basically 0 appreciation market. The cashflow is nice, but with that cashflow also comes much higher maintenance costs in comparison to the price. For example a new roof on my 50k cashflow property will cost the same as a new roof on a 150k property located elsewhere. 

Right now I'm looking for a good mix of the two. I'm not going full-on on the appreciation train, like the 2-cap negative cashflow buildings in San Francisco, but more like a healthy cashflow that also will have average or above average appreciation over time.

The math makes a lot of sense to me. If you were to leverage @ 20% down, and if we assume average appreciation to be 3%, you're getting 3x5 = 15% gains on average per year from appreciation alone. Plus rent increases down the line means this is my preferred long-term strategy. I see you're located in Texas, and there are a few markets out there that I've been looking at. Texas seems to be a bit of a sweet spot when it comes to healthy cashflow along with appreciation.

I'm looking at property in the state of Oregon, which has had amazing appreciation but poor (starting) cashflow. Basically the only properties I have found that break 1% are in rural areas, or dumps, or both.

I'm looking specifically at fourplexes to owner-occupy, and at best I've found something that hit 0.8% so far, but most hover between 0.6-0.7%. I'm wondering if it would be a poor investment to disregard the 1% rule in this case? I'd like to start accumulating properties in my area (by owner occupying, then moving out a year later), but only if it makes sense financially.

Basically, I want to know if:

1) Is it sound strategy to ignore the 1% rule in areas with high appreciation, and

2) Is it alright to ignore the 1% rule for fourplexes? (1 roof, lower costs, etc).

 Hey Brett, I would do house hacking if I could, but I live in the bay area. That probably explains itself.

I'm a 29 y/o student and veteran. Currently I'm sitting on a lot of dry powder. About 150k in liquid cash as well as an unused VA/ FHA loan. I own one small SFH that I bought with cash and want to continue growing my empire (with leverage at our historically low interest rates), but I'm finding it very difficult to get qualified for loans.

I have a solid monthly income through the GI BIll, which is enough to cover my monthly expenses and more, but lenders will not consider it because it is not taxable. 

Since I'm persistent, I've been ramming my head at the wall trying to find ways to finance properties, without a whole lot of luck. There is the rule where you can use 75% of rents to offset the mortgage, but that requires financing a property that is occupied, which seriously limits my options to find deals.

Add to that the uncertain short-term future of the real estate market, and I'm wondering if it may be best to sit it out for the next few years, and hit it hard once I'm finished with school and have a real W2 income to back me up.

My main concern is that my stack of dry powder will wither away due to inflation, and I'm not exactly eager to throw it into something else like the stock market to preserve it right now. I feel like real estate is the safest option. Add to that the fact that real estate is a slow process, and I want to start building sooner rather than later, to better set up my future.

Your thoughts?

 I'm going to check out the local banks, that might be a good option. The banks that I've talked to so far seemed hazy on their willingness to use 75% of rents to qualify for a mortgage. Some said tenants already need to be there and some said that they might be open to using future rents with an experienced landlord. That might be something to look into.

Because it's cheaper to build in my area than to buy existing properties, and it cashflows well. I wouldn't do it if the numbers didn't make sense.

Currently I am trying to finance either a duplex or a 4plex, which would be 350k or 700k respectively.

Of course, I want the 4plex for more units, but I'm struggling to see how I will qualify for the loan. It would be a new construction (units not occupied), so afaik I can't use the 75% of current rents to qualify.

I do have a decent income, and could easily make the payments, but the majority of it is not taxable (military benefits). I've spoken to lenders and they already said they would not consider it because it doesn't fit their guidelines.

So, what should I do? Obviously, I could ait and slowly build up to it, but I don't see a point when I can easily make the payments and the only thing stopping me are the banks' bureaucratic procedures. What can I do to qualify?

 It will be my first time building, yes. 

As for selling multifamily, I'm more concerned that with the price of houses in the area, buying multifamily wouldn't make sense numbers-wise for an investor. I could mitigate this buy selling individual townhomes or half-duplexes, though.