All Forum Posts by: Aaron Z.

I used your numbers as a basis.  Let's say the home is 150k with 3k rent.  That puts the price-rent ratio at 4.16.  I don't know of any area that would support that.  Michigan is close but you would never get 2500/3000k month in rent.  So that basically means you would have to buy gobs of 20-50k homes to get to your passive income goal.  Plus it's not an area that I would bet on either.  I'm fascinated with the numbers that you achieve.

@Aaron Z.

In the long run your strategy may have some flaws.  But for now it seems to be working for you.  A good example was buying homes or building homes in North Dakota during the oil boom just a few years ago.  Could of easily got 3-4k rent for small dinky homes.  However, that place is a ghost town now.  Same thing could happen in the area with your niche.  There are only few places with high rents in my opinion, however, those houses are on the expensive end north of 700k.   No where near your numbers.  

Another method that no one has mentioned, is buying homes in an area that has high tourism and then AirBnB some property.  You could get to those numbers but it may be a fad in the future as things change.  Just like a successful Youtube channel built of off ones youth.  What would happen to that Youtube channel when you grow up?   Sure tourism may slow down at times during the year or during a recession, but I'm talking about regulatory changes to AirBnB cities and stuff out of your control.  But having one now could be beneficial, but I wouldn't count on that in the long term.

@Aaron Z. @Jay Hinrichs But how much more do metal roofs cost. I dont have my first rental yet. But I feel like it would make alot of sense especially if while doing a rehab you had to fix / rehab the roof anyway. But isnt it ugly? Or am I thinking of something else

Do you have children?

I could quit my job I suppose, but I enjoy the mental challenge of being an engineer also, and the large salary that comes with it.  I'm going to see my kids thru their undergrads which is another 10 years for us.  By then I will definitely be able to retire, but I likely won't.  If someone is going to pay me a high salary for my brain and I can still grow my RE business that's a no brainer for me.  I'll likely scale back and just consult or something once the kids are thru their undergrads, but I can't imagine leaving the workforce entirely.

My strategy is very similar in that i put up most of my own cash and leave it in the rentals i have, but my returns are nothing like yours (20%+ cash on cash after expenses?!)   In my opinion (and As Brandon Turner would say), you're a rock star ... i may be missing something but i'd say what you're doing is any investors dream-   Are there many areas of the country where you can rent <1000 square feet for $2000+??  Nice work ! 

Appreciation is something that you can count on in the long run. Appreciation is not that hard to estimate if you are looking at 25-30 year spans.

My guess is that your current strategy is to buy cheap houses in bad areas, pay cash, and rent them out. 12k per year is possible in that situation. However, those types of homes do not appreciate. In fact they can lose value in the long run.

There are different strategies for different people. It depends on what your long term goals are. You do not need 500 properties to become wealthy with brrrr. If you use the positive cash flow to pay off your rentals faster you can have ten properties paid off, worth over 2 million, and cash flowing $15,000 per month in ten years or even less.

I don't know of a model where junk properties that require $50k-80k of your cash can out perform that. They are and always will be just junk properties that require a lot of your hard earned cash.

I try to do what REIT's do, they buy different kinds of properties to hedge against specific down markets. For example they'll buy cash flow houses, equity hold houses, location houses and several other types. My point is that if these are the highest cash flow properties they must assudly be class D properties. It sounds like your leveraged super high in lower social economic properties. I'm just trying to give you a different perspective about other philosophies. I've spent the last five years reorganizing all of my properties to use leverage correctly. Let me also premise this in saying that all of my properties are in Austin, TX, they strongest market in the country arguably.

Primary residence 650 K (Mortgaged)

SFR 350 K(Mortgaged)

Duplex 350 K (Mortgaged)

SFR 250 K (Own)

SFR 180 K (Mortgaged)

SFR 180 K (Mortgaged)

SFR 90 K (Same lot) Own

SFR 90 K (SAA) Own

(I might be missing a house or two I apologize I'm tired.)

The numbers above are just the home value not my equity or mortgage. This was a very big process I went from two little houses I owned free and clear, our market blow up and I continued to pull money out thru cash out refi's either buying with cash or mortgaging properties. It was painfully slow. But now I'm able to buy, rehab and BRRR my own houses with cash. My goal now is well over 100 houses. I'm moving away from Austin now into tertiary emerging markets within 55 minutes of my home. For some lenders capital is very important. Mortgages 5-10 needs a lot of liquidity and big down payments. Personally the goal for me was to get to where I'm almost at now to be a cash buyer and always have properties to pull money out of. IN EMERGING MARKETS!!! Haha

Anyways, I see where you state that you operate in an investing niche. Do you own multiple properties? Or is this philosophical? Either way is fine. My two cents is that I did this with the help of so many different lenders and banks, the procurement behind it was incredible. Personally I'm serious about creating familial wealth and helping provide homes to people. I proud to do both. 

There's a million ways to do real estate, pick what's right for you based on your income, personality, capital, age.... But yes the lending is super time consuming and one asset class can blow up in your face....

I find it very difficult to grasp the concept that after expenses a SFH can cash flow $1000/month. Can you show us the numbers. Property value, estimates on long term expenses, vacancies, evictions, mortgage etc.

Have you included the fact that the opportunity value of the cash in the form of equity is costing you $400 - $660/month of the top of your gross rental income.

My guess is that you are possibly using yesterdays numbers to calculate cash flow as opposed to the next 10-20 year estimates.

My opinion is any return on zero investment is always the best investment. I'll take 500 of those.

@Aaron Z.

For 390k'ish, you are saying you can pull down around 81k/yr net? That is insane. Which equates to about 6 doors (SFH) according to your numbers. Just comparing my SFH rentals, with similar value, I'd only get to about 28k net. I'd need about 1Mil to get to your 81k net. That is a huge difference. When you say, "niche", you're not kidding!