All Forum Posts by: Venkat P.

@Venkat P. Welcome! I have many cleints that invest in the Bay Area. I definitely would consult with a CPA to ensure you are maximizing your tax savings. Do you plan to invest in more properties?

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Quote from @Nick Maugeri:

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My wife and I are just starting in the rental RE. We have purchased a SFR (cash negative) in Sacramento, CA area few months ago. We know that it is currently cash negative but given our income from W2, we are able to cover that for now . The goal then was to build some equity on it long term and refi when the rates go down.

Looking for the next investment suggestions. We do not want to take another cash negative property, so looking for cash positive options. We have reserves to do 20% down on ~500k properties. The goal for us is to scale our investments so we can get around 2k/month in the next 2-3 years

Hi Venkat, I am anxious to help build this out with you. I help a lot of investors in this situation and am fortunate enough to be in a market with good appreciation and rents. I help a lot of investors that get into similar situations get out of them. I have references I am happy to share that are from the Bay Area and surrounding areas. The most recent deal I helped someone purchase will generate around 12K annually for them - duplex. 

What you are desiring requires much more underwriting and planning than buying a cashflowing property - especially with that timeline. You need to purchase and build with a 1031 exchange scenario unless you have continued capital to expand. Ensure that you are buying something in a market that is not stale. Happy to connect and will send a DM!  

 Interesting. Would like to know more about the approach you took with others

It's the 1031 exchange or BRRRR amplified - depends on the market you go in and strategy you want. MTR in Modesto provides good cashflow but a diminished COC because of the capital required. I sent you a DM, feel free to schedule a time for a call and see how I can help

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Quote from @Chris Seveney:

@Venkat P.

Looking for cash flow go with a debt fund

Many pay monthly dividends and is truly passive

Returns may not be as high but neither is risk (depending on sponsor)

 Thanks. I will have to take a look at debt funding. But would your answer change if my timeframe changes from 2-3 years to 5 years? I also do not want to lose the appreciation factor which drew me to rental RE

If you said 20 years, then you can go with appreciation, 5 years, way to short a time frame. If a $500k property dropped to $450k (10%) and then stabilized and went back to traditional 3% you would be back  at even, and will lose money since you will pay 10% in closing costs etc. 

Hey Venkat, I'm a local real estate broker and investor, and we manage over 100 properties (mostly STR as well as some LTR).

There is a sweet spot in Sacramento for B-class multifamily for STR/MTR, and some LTR, where the numbers can make a lot of sense from a Cash-on-Cash standpoint, while also enjoying equity appreciation and meaningful tax benefits.

@Venkat P.

Even in a 5 year timeline...  You can still lose money in real estate.  Just like the public markets, you have no idea which way your market will go.  Lots of people still lose money.

Also, landlording still has tax liabilities.  If you aren't ready to face them, you may box yourself into a corner.  the big one is depreciation.  it may be nice year over year as it helps cover your excess rents, but when you go to sell you have to pay that all back at 25%.  You either die or keep 1031'ing until you die...  That's fine if that's what you want, but there is always that liability, and the unpredictable liability of being a landlord.

This issue just keeps coming up over and over again..

good luck.

@Venkat P., as others noted, is cash flow your only true goal.  I debt fund is great and generates cash flow, typically, and the tradeoff is equity growth.  As Chris noted, you really need to vet your sponsor of debt funds and understand who they are lending to.  At the end of the day, while you are in first lien position (hopefully, and I would confirm the sponsor is not taking second lien positions or understand the risks in doing such), the underlying borrower and their deal is ultimately what is supporting your return.  So, in a way, you need to underwrite the debt fund sponsor that you are actually investing with, and either the borrower, or in the case of a fund, I would want to see very clear underwriting standards for how they underwrite the actual borrower and borrowing entity.

There are equity positions that are legitimately creating cash flow, albeit typically much less on the front end, with the chance for appreciation.  This is higher risk, but also higher potential upside.  Things to look out for on these equity investments primarily comes down to what generates the cash flow, and is it actual present day 1 or does the sponsor need to improve operations just to be cash flow positive.  And then, understand how the business plan is underwritten and deal is structured that allows you to actually be able to grow your cash flow and overall asset value.

@Venkat P.

Looking for cash flow go with a debt fund

Many pay monthly dividends and is truly passive

Returns may not be as high but neither is risk (depending on sponsor)

You don't want to buy hard assets if your desired goal is instant cash flow(sub 2 years). Go buy the note behind the property. 

Hard assets are the best investment overall, just not in that time frame.