All Forum Posts by: Lane Kawaoka

In 2015 , I've had 11 rental properties, properties worth about a hundred grand, renting for a grand a month. I was paying 10% plus the first month's rent as costs.

Now, if you're banking on the occasional vacancy or eviction, say every couple of years (three if you're lucky with good renters), that 15% cost doesn't seem too far out there. And if you're dealing with the tougher, less lucrative properties, hitting that 15% is pretty standard because its less revenue, think 700 dollars a month than 1000 top line rents.

We play in the class B asset arena, 100-200+ units, we're looking at costs around 3-4%. But keep in mind, we're also covering salaries, which is part of the dance when you step into commercial territory.

You're looking at a potential 12-15% return, and maybe an extra point or two if it's a first or second lien. It's all about how long you're willing to let your cash play the field—could be half a year, could stretch to a few years.

But you've gotta watch out for the risks, right? Especially the counterparty meaning if the guy steals your money - that's why I would be careful to lend to anyone with a net worth under 1-2M. 

You'll be paying the bank around 6-8% on the home equity line of credit (HELOC) side, so you've gotta know eyes wide open about the arbitrage.

Some folks reckon it's too risky. That's investing for you—it's not everyone's cup of tea. It's definitely not a game for the faint of heart. Financial independence is not on the cards for some people.

The following is all good but all the best documentation or PPMs does not protect again shady people. Best to know other passive investors who can verify track record.

For what its worth MAGI impacts your eligibility for free health care. I see investors using the massive amounts of PALs or depreciation from their real estate to lower their MAGI to the needed levels.

I followed a similar path after having 11 rentals (1 in indy) back in 2015. Syndications are more scalable.

Stick with groups that have done at least 1B in AUM for starters.

You know, the MFH value add deal with new appliances, a fresh coat of paint, playground equipment and so on—for about six grand a unit. The goal? Bump that net operating income by a measly 20% over four or five years (to then double our principal investment).

But here's the kicker: you pour in all that cash, maybe even double your capital. And what happens? All it takes is a shift in the cap rates—no one's fault (or Jerome Powell throwing salt on the situation lol recently saw a meme of him like Saltbaw)—and suddenly, you could see 30% of your property value vanish. 

So, what's the move? We're seeing a pivot towards development plays. They're about crafting real value from the ground up. It's more than slapping lipstick on a pig and hoping the NOI boost sticks.

But, you've gotta partner with folks who know the ropes. Lenders aren't handing out loans for this kind of work unless you've got a solid track record. Many new operators might score a loan for a value-add on a 100 or 200 unit complex after a weekend boot camp, but when it comes to ground-up development? That's a whole different league.

@Justin Brin

Hey Justin, Coolest sheet here. Yeah, I've been down this road before myself doing these types of data analysis. But—lots of that data you're crunching? It's outdated - even though its up to data if you know what I mean where the trend has might have moved. Remember how Boise, Idaho looked like a gold mine where now it bounced back 180 degrees.

 I usually hone in on column F for population change. 

So, diving into the list: Oklahoma City. Not as vibrant (I have two Class C apartments there) as, say, Dallas or Houston. And Memphis, St. Louis, Kentucky... well, they're not exactly hotspots. Now, Indianapolis has some buzz about it in the north, but it's not booming like the southern cities.

And Ohio—Cincinnati, Columbus—doesn't seem to bounce back it will always be the Rustbelt... still, I've got some investments in Cleveland. Houston's a mosaic of markets, a behemoth really 4-5 of those other markets in one. It's about the submarkets there, dozens of them, not just the MSA-level view. 

California? I steer clear. 

Jacksonville and Dallas are on my good list—robust markets, even if they're oddly low on your list. Sorting criteria might need a tweak.

Atlanta's solid but pricey. Tampa, Florida? Watch out for those hurricanes, higher risk than Jacksonville. I get what you're doing with the data, but sometimes you've gotta step back. Pick a market not just by the numbers but by the people you're in it with.

Be careful we are seeing some softness with tech workers in Tempe. We do apartments in Tempe and Phoenix so can see the difference.

@Asim G. Sounds like you've got a handle on one of real estate's sweet spots! Back in 2017, I sold off my turnkey rentals and was looking at capital gains and depreciation recapture.

I had some losses carried over from my previous years in syndications (majority of which was from the bonus portion). So, I used those losses from the past and the ones from that year to balance out my gains. I ended up paying zero in taxes, which was a massive win compared to the headache of a 1031 exchange. Seriously, once you've seen the light of syndications, 1031s seem like a puzzle with too many pieces.

If you're ever stuck or just want to swap stories, give me a shout. Always happy to help a fellow investor out!