All Forum Posts by: Wade G.

All I have ever known to do is just save for down payments. Best to always buy properties that give you instant equity gains after repairs. Even by using hard money to purchase and then refinancing into a 30 year loan usually I'm out around 10k from what I started with (perhaps you can get zero out of pocket deals if they are discounted enough). Then there is the often unmentioned reserve capital. I think lenders have backed off a little since the last time I bought but with each property purchased you need even more money than you started out with since more reserves are needed. If you are getting your loans down to 75% LTV by putting 25% down then there is no equity to take out and use for another property.

I called the IRS with this question last year.  I'm going off my increasingly failing memory but as I recall it was determined that landlords did not have to send 1099 to contractors.  That was for my particular situation, cant recall if the number of rentals or something like that had something to do with the decision.  That was for 2016 tax year.

I would recommend you self manage your first property.  Its just too easy not to.  Before you rent out the property be sure and replace anything that may go out in the near future...water heater, HVAC, garbage disposal, faucets, toilet mechanisms, supply lines to toilets and faucets, dishwasher, etc.  That will cut out the bulk of your repair phone calls.  If its more than 10 years old replace it...except HVAC...it can last more than 10 years and if it breaks you just call a repair company to fix it. 

Next, screen your tenants and get quality tenants.  It is a little time consuming upfront but then it should be on autopilot for a few years.  Then in between tenants revaluate the age of everything and replace what needs replacing again.

People that buy a property, rent it out as is, and eek out the repairs along the way end up with the constant repair calls.

From what I have heard a good estimate is about $30 a square foot. 

I have found myself thinking about this often but I think its because we have been trained to think all debt is bad. In reality leverage is what makes REI worth it. If I was going to pay off a property it would be my primary residence since it is protected by the homestead exemption in Texas. My rentals are not protected and if I was sued for some reason then the paid off rental would be up for grabs possibly. In that situation losing a mortgaged property at 75% LTV would not sting near as much as losing the entire value of the property. Its an asset protection decision as much as it is a return on your money decision. I get the idea of feeling good about paying off a property though, but when I think about paying off a 3.7% interest rate on my primary residence I quickly come to my senses. If I was 65 or 70 perhaps, at my age now nope.

I tend to agree that home ownership for the typical person is nothing more than a forced savings account at a low interest rate when all expenses are considered (excluding hot locations in the path of progress or something).  Having said that, very often a home ends up being many peoples biggest investment when they are old and retiring, so at least they end up with some positive net worth. 

Personally for me every house I have ever lived in I purchased as an investment.  I have always bought houses way below retail value whether or not if I bought them as rentals or for my primary residence.

Personally I see nothing wrong with renting, if and only if, the renter is investing the money they would be spending on repairs, maintenance, etc.  If someone is renting and not investing as a lifestyle then they are definitely on the road to poverty.

In general the 401k seeks like a bad idea for most people. Reason why I say that is because most people are not high income wage earners and/or they don't have the discipline to invest. For the high income wage earner contributing the max amount in a 401k for 30 years or more they will have a comfortable retirement. Problem is most people are the 40k- 70k (relative to your area of the country) wage earners and most don't start until their late 20s or even sometime in their 30s. Then if they get lucky they may have around 1 million in the 401k at age 60 or 65. Then after all those years of saving it is generally recommended they take out 4% or so per year depending upon what year you plan to die...better hope you don't live longer and outlive your money. Also have to take into account for inflation. That 4% you plan to live on will not spend the same as it would today in 30 or more years from now. I have made a lot of generalizations here but having said all that it seems a combination of 401k investing and REI would be a good strategy. Maybe use the 401k as a safety net. It has always made more sense to me to create income streams. Who really wants to wait until 65 or 70 to start receiving income from all their investments.

So far I have not regretted buying SFHs.  I would not be in the position to enter a syndication had I not bought the SFHs.  I never bought properties in low income areas.  All mine have been solid homes in middle class working neighborhoods where I have had quality families as tenants.  Just had one move out after eight years.  Four to five years has been the average for tenant retention.  Seems like the syndication route may be a good next move.  Really want to speed things up, life is getting too short to keep messing around.

So if I invested 100k into a MF value play syndication deal it seems I would earn 8-10% passive income (that seems to be the average). If I took the same 100k and purchased four SFH I would (or should) earn about the same net cash flow or maybe even more.

In 2-5 years the MF would be sold or refinanced and I would then get 80- 100% of my 100k back plus a reduced cashflow if the property was kept. With the SFH I may have to wait a little longer, maybe 10 years or so in a normal inflationary market, to refinance the homes and pull out the 100K and take on reduced cashflow.

The above scenario is asuming a normal market, no big dips, no big highs. It seems MF is a faster way to build wealth with less hands on but more risk due to more people being involved (yes I typically don't trust people). With SFH I see less risk because its all on me and I care about my money more than anyone else will.

So, if I am thinking this through right it seems MF is a way to build bigger and faster. SFH seems to have a limited growth unless one is willing to bring a PM and it seems it would take longer. Along the way though one could sell a SFH every now and then to a retail buyer at retail price whereas a MF deal is sold to another investor at likley not full market value.

Perhaps another way to look at it is if one wants to earn 2k - 4k or so per month then maybe SFH is the way to go but if one wants to build to 5k, or 10k or above per month then maybe MF is the way to go.

I only own SFH and have not been involved in MF so I may be off on my thinking. I would like to discuss the scenarios because this is where I stand now...buy a few more SFH or put the money into a syndication.

I am not a believer in human induced global warming but I do believe in climate change as history has proven.  The earth has always had hurricanes, floods, fires, heated up, cooled down etc.  Houston was built in a bottom land hardwood forest...it floods naturally.  I have flood insurance on my properties because at this point it is still relatively cheap.  It does help me sleep at night.  I will admit though that during Harvey I found myself stressed waiting for the phone call from a tenant saying the house flooded.