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EXECUTION My Real Estate Progress Thread

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RayAndré

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Ok here we go.

The Goal
Short term: Buy, rehab, and cash flow two multi family properties by the end of 2018, ideally one being a four-plex to add another $1000/month to my income.
Long term: Accumulate cash flow and reinvest it along with my paycheck savings to reach financial freedom.

Its going to be tricky since I’m a digital nomad and traveling. This means I need to build a team on the ground while abroad.

Yet because I’m not local to any place...

Step One is choose where to invest.
This means choose the state, city, neighborhood, street, etc.
I want to buy somewhere...
  • …with landlord friendly laws (already got list of ~10 states)
  • …I would consider living, and maybe house-hack the first year. Which means…
  • …with good public transportation and closish to an airport (I’m a digital nomad remember)
  • …I can afford two properties.
  • …there is a great property management company. (They say this makes a huge the difference.)

Finding a “sweet spot” with all/most of these will take research! But I’m traveling so no huge rush.

I’ll post again when I’ve narrowed it down to a few states and cities.
 

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RayAndré

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Ok I'm still searching.

A big part of me wanted to buy in Miami because I want to live there. Though Miami isn't the best spot for cash flow, so I had to not get emotional about investment decisions and started looking elsewhere.
The two biggest US areas mentioned are the midwest and the south. My goal is cash flow so I'll be researching a few cities in both areas with good price-to-rent ratios that also, hopefully, have good potential for growth.

But there is so much data and so many opinions that its hard to determine what's actually real or true. Though I'm coming to find that deals are 1) made not found and 2) can be made in most places if you put in the work.

I'm starting a spreadsheet to organize the data I'm seeing to easily compare cities and pick a good place for long-term investing for me.
 

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Looking forward to seeing your progress man!
 
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How much capital are you looking to invest in the 4-plex that will add $1000/month to your income?
This got me thinking though that instead of blindly researching cities for which might be "the best" market...let me work my numbers backwards from $1000/month to find the purchase price and rent I'd expect to pay and receive. Then find markets where these prices / rents match.
 

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Would this be a cash purchase? If so...if you're looking to generate $1000/month from a cash purchase generating 10% cash-on-cash, and assuming about 50% expense ratio, that's about $24K in annual gross income. Across 4 units, that's $6000 per unit per year. Which is $500/month per unit in gross rents.

If you're looking at $500/unit per month, there aren't a lot of cities where you're going to find these types of units without them being very low-income. That would both narrow location and property type considerably.

Now, if you're looking to leverage that $100K, that changes the equation and opens up a lot more territory and property types...
 

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What? You're going to do this while you're on the other side of the world?

Your numbers don't work for me. $1,000 N.O.I. per month on a $100,000 investment is NOT a 10% cash-on-cash return. And how much do you plan to spend on doing up-front repairs on the property, setting up sinking fund accounts, and setting up your property management? How about your closing costs?

You might want to review some real estate investment basics before you jump in with your cash.
 
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RayAndré

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Would this be a cash purchase?
Haha, if only there were $100k 4-plexes pumping out $2k/month. Leveraged for sure. Though if I can spend less than $100k, great.
Though I came across a couple properties that seemed close last night that peaked my curiosity. I need to research them more but yea they're likely in D/C undesirable neighborhoods.

Now, if you're looking to leverage that $100K, that changes the equation and opens up a lot more territory and property types...
It does! That's exactly what I'm researching and working to determine. Where can my money go the farthest? (Intelligently).
And maybe a 4-plex isn't the answer...but its my current target.
 
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What? You're going to do this while you're on the other side of the world?

Your numbers don't work for me. $1,000 N.O.I. per month on a $100,000 investment is NOT a 10% cash-on-cash return. And how much do you plan to spend on doing up-front repairs on the property, setting up sinking fund accounts, and setting up your property management? How about your closing costs?

You might want to review some real estate investment basics before you jump in with your cash.
@WJK Thanks for your concern, but please don't jump in assuming I'm naively going to jump in with my cash. My personality type and DiSC profile won't allow that ;)

Also, I mentioned 10% COC not a 10% NOI. But you're right, with a 10% NO the numbers wouldn't work.


As far as being on the other side of the world...I can be anywhere, which also means in the city I choose to invest, even if just to get things started :thumbsup:
 

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Haha, if only there were $100k 4-plexes pumping out $2k/month.
You'd be surprised...in certain parts of the country, it's not hard to find units for $25K that generate $500/month. They probably aren't the types of properties you want to be investing in, but they most certainly exist. That's why I asked...

I recently purchased 38 units at $18K/unit, generating an average of $500/unit...it's a cash cow. But, not fun to manage...
 

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RayAndré

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You'd be surprised...in certain parts of the country, it's not hard to find units for $25K that generate $500/month. They probably aren't the types of properties you want to be investing in, but they most certainly exist. That's why I asked...
Maybe some of those are what came up on my search yesterday :rofl:
Still more research & learning to be done :thumbsup:


Also from what I've learned, though those may show those numbers on paper, they won't produce them in reality.
 
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That's another thing I've heard, that a good PM company makes ALL the difference.

As soon as I decide on a location, finding good/great PM will be on the top of my list. In fact, I've heard that it may make sense to find the good PM company first and then invest in their location.
 

WJK

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@WJK Thanks for your concern, but please don't jump in assuming I'm naively going to jump in with my cash. My personality type and DiSC profile won't allow that ;)

Also, I mentioned 10% COC not a 10% NOI. But you're right, with a 10% NO the numbers wouldn't work.


As far as being on the other side of the world...I can be anywhere, which also means in the city I choose to invest, even if just to get things started :thumbsup:
I wish you amazing success! Let us know how you do. May you have the luck of the Irish.
I haven't been successful with residential rentals, unless I'm close at hand. I have LOST big bucks when I'm not front and center to make sure that things are done right.
Commercial rentals tend to be less management intensive. You might look at them. Nationally, that is a contracting market that would take some study to find the right deal.
My trust deed business makes a solid 10% return combined in both interest and inputted interest. Collecting the payments & doing the paperwork is all set up through a bank escrow. The trick there is to find the deals, know what to buy, at what price and then get the note holders to sell their interest.
Real estate has many facets.
 
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I wish you amazing success! Let us know how you do. May you have the luck of the Irish.
I haven't been successful with residential rentals, unless I'm close at hand. I have LOST big bucks when I'm not front and center to make sure that things are done right.
Commercial rentals tend to be less management intensive. You might look at them. Nationally, that is a contracting market that would take some study to find the right deal.
My trust deed business makes a solid 10% return combined in both interest and inputted interest. Collecting the payments & doing the paperwork is all set up through a bank escrow. The trick there is to find the deals, know what to buy, at what price and then get the note holders to sell their interest.
Real estate has many facets.
Thanks! :) I will do what I can to prevent myself from losing big. And commercial is interesting to me, and where I want to go. Though residential sounds easier to get into as a first investment regarding learning curve / capital / risk / etc. However, a recent phone call with an investor in Florida made me consider partnering could be a good way to get my foot in the door, learn from someone more experienced, and go bigger, all at once, while not taking on all the risk.
 

WJK

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Thanks! :) I will do what I can to prevent myself from losing big. And commercial is interesting to me, and where I want to go. Though residential sounds easier to get into as a first investment regarding learning curve / capital / risk / etc. However, a recent phone call with an investor in Florida made me consider partnering could be a good way to get my foot in the door, learn from someone more experienced, and go bigger, all at once, while not taking on all the risk.
If I was you, I'd go in (maybe with partner) on a multi-family building that is big enough to have a good PM firm take care of the day to day details. If you do a partner, vet the partner carefully. (I've lost at times on those deals too.) Make sure the $ is keep separate and not easily accessed by sticky fingers -- double signature accounts help. You might even consider a LLC or other corporate vehicle so everyone understands their part in the deal.
You plan to go small is OK if you're there to watch over things. Most good PM firms won't touch you. You'd be a one trick pony and not worth the bother...
Commercial and light industrial can be a very good, reliable income stream. The problem is that when you have a vacancy, it can take forever to get rented up again. Also, a lot of the anchor store chains are on life support right now. If you had a neighborhood strip mall and lost your anchor store, the whole mall goes upside down.
Light industrial should be making a come back with the tax cuts. The danger in that market is hazardous material activities. A whole bunch of new EPA and control rules just kicked into that picture.
There are some blended use complexes that have done OK.
Good luck. You have a lot of things to consider.
 
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If I was you, I'd go in (maybe with partner) on a multi-family building that is big enough to have a good PM firm take care of the day to day details. If you do a partner, vet the partner carefully. (I've lost at times on those deals too.) Make sure the $ is keep separate and not easily accessed by sticky fingers -- double signature accounts help. You might even consider a LLC or other corporate vehicle so everyone understands their part in the deal.
Yea after that phone call, I'm going to research/think more about going in with a partnership for my first deal. Assuming I get all the same benefits of going at it alone, plus the wisdom & learning of partnering with someone more experienced.
This person did specify LLCs are the way to go in partnerships (and REI in general) so that was good :thumbsup:


You plan to go small is OK if you're there to watch over things. Most good PM firms won't touch you. You'd be a one trick pony and not worth the bother...
This is interesting, and partly answers a question I've been having of "How do I build a solid feet-on-the-ground team as a OOS newbie?" Another reason why a partnership might be the better move.
How big do good PM firms usually consider big enough to be worth the bother?
 

WJK

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Yea after that phone call, I'm going to research/think more about going in with a partnership for my first deal. Assuming I get all the same benefits of going at it alone, plus the wisdom & learning of partnering with someone more experienced.
This person did specify LLCs are the way to go in partnerships (and REI in general) so that was good :thumbsup:



This is interesting, and partly answers a question I've been having of "How do I build a solid feet-on-the-ground team as a OOS newbie?" Another reason why a partnership might be the better move.
How big do good PM firms usually consider big enough to be worth the bother?
On the partnership, find out what else they own and how they, and their partners, have made out on those investments. People can be judged by their histories, because they are bound to repeat the same behavior patterns.

As far as PM companies, it depends on their size and specialty. Think of like this -- what management fee do you expect to pay? How much management time will take the agent who is assigned to your property? Most take on only properties that have enough monthly fees to make it worth their while.

Here's another factor. How long has the person who is going to manage your property been with the management company? How many properties are they managing? The quality of the service you will receive almost completely depends on that one person... and that person staying with company and retaining your property as a personal service account. Most of the time, they split the management fee with the agency, on a commission basis, under their real estate license. Some states require that the collected rents and receipts be funneled through, and accounted for within their broker trust account. What is their system for handling rents and repairs?

Another way to go is to have a resident apartment manager on site, who acts as the property manager. Some states require an on-site manager when the size of the apartment building exceeds a threshold.
 
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Its been over a week, so here's an update:

Up until about a week ago, my focus has been on finding the best location to invest in a buy-and-hold property. I had chosen buy-and-hold as my approach because I already have some money saved up and just wanted to put it to work. Cash flow sounded great! My thought was: How can I get the best return on my savings?

During the process of researching locations, I realized the first choice I really needed to make was not where to invest, but how. Did buy-and-hold make the most sense for me? If so would I go with an FHA or with a Partner? Then @Get Right calmly suggested to me, why not try a flip?

Given that its only been a couple days since that suggestion, it already seems to make more sense.
  • Flipping is all about the value-play. (Not just putting money somewhere and expecting returns for doing nothing. Matches advice from @SteveO. Though "putting money somewhere and expecting returns for doing nothing" is the eventual goal, the market isn't right for it right now.)
  • I can get in and get out quickly, with no ties after the fact. (Sounds good for starting/learning.)
  • Could work great with location-independence since I can live in the area during the flip then move on (if desired) with zero commitments to that location.
  • I'll be learning about rehabbing which will be great experience for when I eventually start moving to MFH.
  • Sounds like COCR can be higher than buy-and-hold, and its over a shorter period of time (depending on the deal of course)
  • Flipping works in any market. Currently its not a good investing market.
  • I can start smaller, not just throwing down all my life savings as a newbie, and still expect a good return. Then I can do it again ;) As I go and gain confidence, I can start using more and more capital in a particular deal for more and more returns.

More updates to come as I keep thinking through this and learning
 

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Yea after that phone call, I'm going to research/think more about going in with a partnership for my first deal. Assuming I get all the same benefits of going at it alone, plus the wisdom & learning of partnering with someone more experienced.
This person did specify LLCs are the way to go in partnerships (and REI in general) so that was good :thumbsup:



This is interesting, and partly answers a question I've been having of "How do I build a solid feet-on-the-ground team as a OOS newbie?" Another reason why a partnership might be the better move.
How big do good PM firms usually consider big enough to be worth the bother?
Think it depends on how much gross you have and how hungry they are.

I had a few PMs bid on my biz. I did a bit of research on all the PMs in the area. Found out all the info I could.

Then I put a rent roll together with all the info on all my properties. Next step was to let them know I was talking to a few PM. One offered 7%. I let the rest know.

After speaking with them three came down to 7%. 10 is standard by me.
 

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One offered 7%. I let the rest know.

After speaking with them three came down to 7%.
haha, nice move. reminds me of similar tactics friends used with job offers out of college.
 

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haha, nice move. reminds me of similar tactics friends used with job offers out of college.
Yes it works well. But keep in mind you get what you pay for. I help them out as much as I can. I’m always looking to maximize gross, thereby increasing income for both of us.

One thing tho. I don’t use the cash flow for my own income. I work full time. I use that stream for me and my family.

Real estate has been forgiving to me in the long term. Whenever my horizon is longer than say 7-10 years I found it forgiving. But in the short term the opposite is true. So if I think I’ll do an easy quick Reno for 7k....say just paint and some new tile that hardly ever works. Once I start.....and I’m dealing with 150 year old houses it just gets deeper.

On a flip you can be more disciplined. But with me doing buy and hold I always go the extra bit. Just so I’m not redoing it 5-10 years from now.
 

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Its been over a week, so here's an update:

Up until about a week ago, my focus has been on finding the best location to invest in a buy-and-hold property. I had chosen buy-and-hold as my approach because I already have some money saved up and just wanted to put it to work. Cash flow sounded great! My thought was: How can I get the best return on my savings?

During the process of researching locations, I realized the first choice I really needed to make was not where to invest, but how. Did buy-and-hold make the most sense for me? If so would I go with an FHA or with a Partner? Then @Get Right calmly suggested to me, why not try a flip?

Given that its only been a couple days since that suggestion, it already seems to make more sense.
  • Flipping is all about the value-play. (Not just putting money somewhere and expecting returns for doing nothing. Matches advice from @SteveO. Though "putting money somewhere and expecting returns for doing nothing" is the eventual goal, the market isn't right for it right now.)
  • I can get in and get out quickly, with no ties after the fact. (Sounds good for starting/learning.)
  • Could work great with location-independence since I can live in the area during the flip then move on (if desired) with zero commitments to that location.
  • I'll be learning about rehabbing which will be great experience for when I eventually start moving to MFH.
  • Sounds like COCR can be higher than buy-and-hold, and its over a shorter period of time (depending on the deal of course)
  • Flipping works in any market. Currently its not a good investing market.
  • I can start smaller, not just throwing down all my life savings as a newbie, and still expect a good return. Then I can do it again ;) As I go and gain confidence, I can start using more and more capital in a particular deal for more and more returns.

More updates to come as I keep thinking through this and learning
Most of the best RE investors I've known vet the market before they even start looking for the property that they want to buy. They look for up and coming markets, where the economics are improving. A lot of this analysis is based on the statistics. Then they study the micro-factors within that chosen market -- especially features that earn higher rents and/or better occupancy rates. And they're in it for the long haul.

Yes, I've done what you call flips -- we called them Equity Purchases, before they became the darling of popular TV. But, those sure weren't my first RE purchases. They were part of a full time career, that included other RE investments and a brokerage practice.

My concern is that it is really easy to take a hit financially on a "flip". Be careful.
 
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Update: what I've really been up to.

Hi friends. Wow its been over two months since I last posted.
Since then I've been doing a lot of personal growth. (Reading lots of books, watching youtube videos, journaling often, etc) After reading TMF (last August), it completely turned my world upside down and I had a pretty low emotional crash of "I'm not good enough." fueled by limiting beliefs. Why that happened is a different story (one I'm still discovering).

But,
I've been traveling the world and have had trouble enjoying it since I beat myself up over "I should be building a business, not traveling."
I've was in "analysis paralysis" trying to find the best possible city and best possible strategy for me to get started in real estate. TONS of action flailing here.
Last month I was in Florence and basically said: "Enough stress! I'm just going to enjoy Italy." And I did. I needed that.

Now,
I've decided I'm moving to Miami to flip houses. Maybe I'll do a house hack...but the market is still really high.
I've reached out to an agent in Miami who said he could check out properties for me while I'm away (before I move there in August).
I've grabbed @JScott's books from BiggerPockets and will devour them over the next couple weeks/months.

But best of all: I've let go of the stress of expectation that I should build a business as fast as possible and do nothing fun until its done. I have an incredible above-average quality of life right now. Plus it will never be "done". I'm the type of person that always looks to improve things, make things more efficient, etc. That is how I enjoy this journey we call life. I realized I've already done that in so many areas of life. Building my real estate business is just the next project, not something that "omg freak out it needs to be done right now". The most important thing is to Just. Start. Then find the next step and do that.


So...here's the plan.
I move to Miami in August. Until then I'll be:
  • Reading books/articles/podcasts specifically on real estate & flipping.
  • Watching auctions (my chosen niche), researching those properties, and asking my agent to physically check them out, sending me photos, videos, and any estimates he has. I can take it from there if I want to get serious about any of them. (Get a contractor's estimate, get a quiet title risk assessment, etc)
  • Keep an eye out for any good house-hack opportunities. Otherwise, just rent in Miami.
  • And enjoying the journey...Going to my sister's wedding in San Diego, attending an on-site for work in Utah, visiting friends in San Francisco, taking my dad out for Father's Day, and spending six weeks in Mexico City :)
There are many auctions before August, with persistence I might have a deal underway before I even move there. Time will tell.
 
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OK let me give an update here. I'm just over a week away from returning to the US and thus getting much closer to getting serious about where I'm going to live. And here's what I'm thinking:

Miami is expensive, *highly* competitive with foreign money, and possibly going to be underwater in the decades to come...so I've decided its not be the best place to get started.

Thinking back to advice from @Ungodly - "Go somewhere cheap and start F*cking up" and @Envision - "head to the midwest and build an empire" (because its cheap), there are two other markets that are at the top of my list. Pittsburgh and Tampa. While in Miami I'll be visiting these cities to 1) get a feel for the place / if I'd like living there, and 2) connect with local real estate agents / investors. I have a good opportunity for mentorship in Pittsburgh so its currently #1. Though I think I'll enjoy life in Tampa better...so we'll see.

But both are cheap markets with potential, and if the real estate market is going to go south soon (other threads on the forum are talking about this), then I should be in a decent spot to move there, start learning, and be prepared for to start my empire when we hit the bottom.
 

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OK let me give an update here. I'm just over a week away from returning to the US and thus getting much closer to getting serious about where I'm going to live. And here's what I'm thinking:

Miami is expensive, *highly* competitive with foreign money, and possibly going to be underwater in the decades to come...so I've decided its not be the best place to get started.

Thinking back to advice from @Ungodly - "Go somewhere cheap and start f*cking up" and @Envision - "head to the midwest and build an empire" (because its cheap), there are two other markets that are at the top of my list. Pittsburgh and Tampa. While in Miami I'll be visiting these cities to 1) get a feel for the place / if I'd like living there, and 2) connect with local real estate agents / investors. I have a good opportunity for mentorship in Pittsburgh so its currently #1. Though I think I'll enjoy life in Tampa better...so we'll see.

But both are cheap markets with potential, and if the real estate market is going to go south soon (other threads on the forum are talking about this), then I should be in a decent spot to move there, start learning, and be prepared for to start my empire when we hit the bottom.
We're going to have big shake-ups in the apartment markets and the single-family house markets over the next 4 or 5 years. This is all due to the tax changes. It's going to take a while to become a trend, but the rumbles are already starting. What segment of the RE market are you now thinking about plowing into?
 
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@WJK I haven't definitively solidified that. Growing into commercial multi unit is the long-term investment goal. The short term business goal is flipping SFH to build more cash to pipe into more investments. Flipping/rehabbing residential MFH could be interesting too, down the line.
If I'm able to get a flipping business running to a point where I don't have to be present, having a vacation rental somewhere I could live off-season, and rent out during high season, is also appealing. Essentially "house hacking" a vacation rental.
 
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WJK

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@WKJ I haven't definitively solidified that.

If I'm able to get a flipping business running to a point where I don't have to be present, having a vacation rental somewhere I could live off-season, and rent out during high season, is also appealing. Essentially "house hacking" a vacation rental.
That's interesting. I'm a hands-on person when it comes to spending my money. I make sure I'm always present. Stuff happens more often when I'm not front and center.
But, the vacation rental is possible in my thinking as long as you rent it during the peak season. Your success will depend on your management company and specifically the agent who handles it. Some are great. Some aren't worth having. I would spend all the income on paying down my mortgage nut -- if it isn't paid off. A few condos in the same complex would make a good base and they would be easier to manage.
 
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That's interesting. I'm a hands-on person when it comes to spending my money. I make sure I'm always present. Stuff happens more often when I'm not front and center.
Understandable, and I know I'll be that way too, at least to start. But, at least for me, the goal is to have something where I don't have to be present.

I would spend all the income on paying down my mortgage nut -- if it isn't paid off.
Why focus on paying down the mortgage instead of reinvesting the profits?
 

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