All Forum Posts by: Zac Boelkow

So I understand how to evaluate investment properties at the time of purchase. What I am confused about is how to evaluate the property down the road after you have purchased it. For example say you buy a property for 140,000 all in. Say after expenses you net 10% every year ($14,000). Now lets say its three years down the road ($42,000 in net returns). Also because you bought the property below market value and it has appreciated (either way) and it is now sell-able at $175,000. So if I paid all cash for the property would I do the calculation like this:

$140,000-$42,000 = $98,000 and I am still earning $14,000 so do I run my new numbers at $14,000 / $98,000 = 14.29% ? or do I use the actual sell-able value because that is the actual dollar value? so then the calculation would be $14,000 / $175,000 = 8% ??

This calculation really does not matter if the property is financed or bought with cash. The same scenario happens. Cash comes in and you ultimately have less cash in. Value goes up, etc. etc.. etc..

I am thinking the correct way to calculate is the actual value of the property at the time? It kinda matters the amount you have invested but it feels like the the actual sell-able value should be the basis of your calculations?  

@Wade Kulesa this is a hot debate. Seems like there isn’t much middle ground from either stance. I also like Dave’s Philosophy. He preaches that “the best way for the average American to get wealthy is through mutual funds.” I agree with that statement. It works 100% of the time. I’ve been investing, as a side hustle, for the last 8 years. I always first used my cash on hand as that was most comfortable for me. I currently have one property financed with owner financing that was too good to pass up. Also one property paid in cash. Dave Ramsey sells a recipe for “most people” it is a good recipe and works. I’m a little more aggressive and risk tolerant with my investing because I earn a high salary, have a lot of cash on hand, live beneath my means, and am conservative. So I have index funds, rentals, and my primary. I owe very little. Basically investing is very unique to each individual that requires you to do the calculations, determine what you’re investing for, and when is your end date. Then it becomes a lot clearer as to if you use leverage, cash, or just stick with mutual funds. There is really no right/wrong way to it. IMO if I could afford too I’d hold all, income producing, properties as cash with zero leverage. To me that feels better. Good luck!!

I dropped out of college to help run a friends business and set it up. I started researching "how to" invest, online, and through books. Found real estate and index funds. If you are intelligent, have common sense, and are business oriented you really do not need school. Investing is really simple with simple math. I know I would be more focused if I went to a school for real estate and any schooling/knowledge is worth having. If it moves/motivates you then its a go. My motivation came from being broke and wanting to retire. to each their own. Good Luck!!

I'd re-balance my over-all portfolio. Which would dictate the purchase of 1-2 more multi-family property with cash, hold a small cash reserve, and the remainder would go in to Vanguard stock index fund for long term... 

@Austin Smith if he is your partner and you are going to stay partners then this scenario does not make sense. Together you and your partner need to come to a solution. I would go back to your partner and talk/negotiate your way through this.

Also, a fun statistic to keep in the back of your mind. 100% of all foreclosed properties had mortgages on them. 

Jus Sayin'

I agree that cash flow is the only point to own "buy/hold" property. For me personally I want at least 400/500 dollars a month profit. I keep hearing $100/door. To me earning $100/month is just a waste of my time and energy. I would much rather "own" way less, earn way more, and work way less. 

The old debate "cash or leverage"... I think you hit the nail on the head when you said "investors figure out what is personally "right" for them." I think in most cases "yes" is the answer to your question lol. Depending where you are financially in life, your risk tolerance, your eagerness, and ability to stay the course and dedicated to your investing would ultimately determine how leveraged you are. Savvy investors, with great work ethic and long running track records, will probably fair better with leverage than "Jane and Jon" married couple going in on a thought that real estate is going to somehow be their answer. For most people the best and easiest way to gain wealth in America has been and will continue to be buying index funds inside tax sheltered accounts for the long run. That provides no debt and little risk and massive gains over a 20-30 year run.

What I personally did was pay off all my debt including my house. Investing did not make sense to me if I was paying 3, 5, 12% on loans and getting the same returns on my investments. I thought "is this not a 0% net gain?" After I paid everything off including my house my money grew so fast that I was able to buy lots of different types of investments including properties. In the beginning I used my money and leverage to acquire my properties. I just did not get too far ahead of myself. I wanted lots of houses but I did not want debt so I just kept on keeping on until I bought a great duplex and paid cash. I made so much money from paying cash and not having any debt. When another property came up I did not have enough to pay cash. I was close but I did not have it all. I leveraged that one. I have the cash now to pay it off but I got great financing on it with a three year term. When the note comes due I will pay it off and probably finance another property  using my two paid for in full properties to pay off the third asap. Then keep repeating until the math tells me to stop.

What I think when I use debt... Say its $100,000 property and you need 20% down payment. Essentially I am paying $20,000 to put myself in debt $80,000. Say that out loud  and it even makes less sense... I have a high paying 9-5 job, one paid off duplex, and another duplex that is about 40% paid off. I can afford a little leverage and want to buy more properties and I will after I pay off my last duplex. At the end of the day I enjoy working for myself being debt free. It gives me such a feeling of independence and freedom....

Remove the window. Block it in and stucco or side the exterior to match. I use caulk-less all in one tub/showers because they install easily, don't cost much, and look clean when done. Also the all in one is less expensive then tiling... 

my accountant and lawyer told me to purchase my properties in a LLC. That was based on my own unique circumstances. It is difficult acquiring loans for a LLC. Also it should be discussed with attorney and accountant to verify if it benefits your unique situation