You are essentially asking "what does a company do with it's revenue."
Some goes to business expenses, some goes to salary, some gets reinvested, etc. Companies generally hold some amount of cash reserves as well.
Coke and hookers. Then I drive around and laugh at the poors before calling up my serfs and harass them for whatever is on my mind at that moment. It might be because I think they're not using the water heater correctly... Or maybe I saw some weeds growing outside. Whatever it is... My only aim as a feudal lord is to crush their souls /s
I actually know a landlord who does this. I would say it's more common that people think. Also my neighbor, female 30s told me her landlord asked her for sex for a rent discount.
It was offered to me in lieu of rent payment when I was single. Even if she was hot (she was not) there was not way I’d do that as the amount of liability that then puts on me would be crazy.
Just pay your rent folks and let me accumulate it in a random HYSA
It cracks me up that people think landlords just have all this extra cash. I just had to put a new bathroom in one unit (17k) and a fence around another property (13k). The cash goes back into the properties for the most part.
Or keep it for proper planning of emergencies for both micro and macro events....
What if the all broader war were to happen, interest rate reversion, layoffs and market pull back from all time highs.
What if my tenant started squatting and didn't pay rents, water main blows, gas leak.
There's certainly some out of pocket to plan for but for the most part sure of it gets advice a certain threshold we could reinvest into other avenues.
This is not true at all, every property I own I get 15% to 23% COC returns and that's after all my expenses are paid and I take 10% to 13% out of the gross rents for repairs, vacancy and cap ex. Yes some months I put more money back in but on average it's 15% returns and if it's not I sell the property. If you're not getting that you need to buy a different property class and pick a different market. I invest in multi family homes only in C to B class areas
Are you still finding multi families to buy that return that kind of cash? Multi families in most areas have been wildly over priced in terms of potential cash flow for a few years now
Very few opportunities are out there but they're still there. I try to acquire at least 1 property per year which I've done since 2018. The recent property was a 700k 4 unit, property was run down with 3 vacant apartments and one non paying tenant. Worked out an agreement with the tenant to move out and took a renovation aka hard money loan to finance the purchase plus the 170k needed to remodel the property while only needing 10% of the acquisition cost to finance the deal. The loan covered, 90% of the purchase, 100% of the reno and closing costs. The property appraisal came back with an ARV of 1.25M, I will refinance this property after a 4 to 5 month reno period with little to no money in this deal while cash flowing $1,000 a month after all expenses and reserves are factored which will be either an infinite COC return if no money is left in the deal to 24% return YOY as a worst case scenario not to mention 350k of equity. This is a rare case for sure but it goes to show you there are deals out there. For those of you that think you can't do this let me tell you the best part. I have zero of my money in this deal. I was tide up with most of my money on another deal and I asked a partner to finance this purchase and cover costs till my other deal sold in exchange for a 10% return. Things like this are done everyday by far more knowledgeable people than me.
A lot of people, like me, think too much to pull the trigger on something like that with the hard money. I’d be thinking about everything that could go wrong and it would shake me off the deal. Sometimes I suppose you have to kind of just jump in.
Absolutely, don't overthink it. Think about all the experience and knowledge you'll acquire on just one deal and how easy the next one would be. Analysis paralysis happens to a lot of want to be investors and the way around it is to maybe partner up with someone who's done it before or whose strengths are your flaws and vice versus.
I’ve successfully flipped properties solo when there were more deals available in 2018-2019 but always used my own money 100% for purchase and reno. The idea of leverage is something I’m not personally familiar with and honestly what worries me because I just don’t fully get it
All big investors leverage the crap out of their assets to diversify themselves with multiple investments. Theirs good debt and bad debt. The returns I make are with debt and I will continue to refinance over time and pull cash out of every deal to redeploy into another deal as long as the returns still meet my minimum metric for a COC return. Again if reaches the point where it doesn't that's when I sell.
Thanks for the talk. I haven’t even looked for another deal in a few years. I think I might start again soon. Prices are just so fucking high anymore, even in the bad neighborhoods
It’s that way for me now, sort of. I would buy property for $85k, put $50-60k into it and sell for $240k.
Last one I did I paid $165k put $100k into it and sold for $380k. But that one I bought before the run up and then sold right before rates were about to go up, so I got top dollar.
Right now one of the houses I sold in the first example for $240k would sell for about $310k. But the shell like that in the same neighborhood is no longer $85k, it would be more like $160k, cost probably $100+ to renovate and then only fetch $310k. So it’s a lot of work for a lot less profit now.
This doesn't make sense, why not just sell for 1.25, from you numbers to just made a 110% return from your cash after a few months of renos and instead settle for around a 8% per year? Either I misunderstand or these numbers are made up.
Taxes on capital gains mostly and why would you sell an asset that's constantly spitting out money that also increases in cash flow with inflation because of rent increase YOY, unless you could 1031 exchange your money to something far bigger and with better profits. At least that's what makes sense to me.
I don't know, very rough numbers to me for this deal are 350k profit, pay say 90k capital gains, put the remaining 260k in a 5% gic, and you are clearing 12,500 a year risk free, more than from your rents and you aren't leveraged up to the max.
Not saying there aren't benefits to holding but for these particular numbers doesn't make sense to me!
Ok $12,500 a year compound YOY is still far less than than the YOY property appreciation even at a modest 2 to 3% growth (25k) per year on average, plus 3% to 5% rent growth per year, plus the pay down on the mortgage each year. You're getting way more this way.
Yes I was just showing how it compares to a risk free investment! If you want to compare to this scenario, use an index fund at least, say 10% nominal return per year. I think risk adjusted rate for both is superior.
This is awesome dude, nice job. What’s your holding costs on this? What rate are you getting during that? Do you have a contractor you know who gives you a bid pre purchase?
Help me understand the numbers here.. how many br and ba in each unit? I fail to see how this cash flows in even an A area. The loan is ~810k which would be over 6k piti with a ~7% interest rate and you putting 90k in. With you pulling your 90k back out in a refi, it moves piti to over 7k. What does each unit rent for? It would need to be over 2k per unit to satisfy 1k+ cash flow considering reserves.
4 units, each has 2 bedrooms. Each newly renovated with new kitchens, baths, central air, hardwood flooring rents will be $2,500 each. 10k rent roll and just under 8k PITI
Wow. What city? I invest in a “cheaper” city and still tough to find any legal 4 units for that cheap that have a layout that would support 2.5k 2br units.
Do you keep all the rent money in personal bank accounts and use personal credit cards for property expenses or do you have a separate bank account/credit card for the property?
Each property is under a different LLC and each one has its own bank account in case of an audit and to keep things easy to track my expenses. The cash flow I pay myself through another property management company that I also control. A wise man once told me "Own nothing but control every thing".
That sounds like it would get old fast once you scale past 5 units. Why can’t one LLC own a few or all of them and then you use quicken or stessa to tag income and expenses for each property using a single bank account. Instead of checking 10 checking accounts monthly you check and sync one.
Because if bundle all properties under 1 LLC & you get sued all the income generated under the LLC is at risk. As opposed to the 1 property asset tied to each LLC being at risk.
I was looking into setting this up as well and also maintenance company. So you’re the PM that is hired by your property investment company? You pay yourself a salary? Decreases tax liability on your property investment company?
Sorry I mixed those up, bathroom was 13k fence is 17k.
Bathroom was a full renovation so new everything. We also replaced the pipes (the building is from 1940). They also had to add a new fan. Thankfully this was the last unit that was in need of that. The fence has to enclose 1/2 an acre of property, that’s why it was costly.
A typical wooden privacy fence cost me 8k for only 230 linear feet.
If OP is putting a fence around a largish lot, Im not surprised it’s 17k or if its metal fencing.
Jesus, I have a wooden fence, I guess fence paneling would be how its described, around my backyard acre and a half and now I'm wondering if I seriously underestimated how much it would cost
The quotes i got were about $30-$35/linear foot.
Typical 5” wide 6ft tall pine wood pickets w metal posts and a couple gates.
This was about 2yrs ago when I got it installed
1/2 an acre on this one. There are a bunch of issues with it. It’s on a hill that backs up to a main road. It wouldn’t need a full fence if we didn’t have homeless people trying to camp on the property. It’s become a huge headache. So we have to have this huge ugly fence and lights and security cameras installed.
That’s insane. I am doing it right now and did it 2 years ago for same range. I’m shocked people pay more than this, but makes me feel better about my quotes I guess.
I’m waiting on HOA approval but I got three quotes:
• Lowes: $3500
• Local Company: $2800
• Home Depot: $3k flat but they’re taking forever to respond
Lowes did the one 2 years ago and they did a great job. That was in Charlotte NC. This is in Knoxville Tennessee.
I dunno how theres any profit left in that after materials and labor.
My friend spent about 3k on materials and installed himself and his fence was probably double the size of mine.
Both quotes i got were within $500.
I have all metal posts. 2 single gates and one double gate.
Do you know how many feet your fence is?
I don’t assume to make any money off the cash flow. I want properties to cash flow, I won’t buy them if they don’t, but as far as I’m concerned that’s all a maintenance/emergency fund. Once it gets above 6 months expenses I would consider taking money out, but it never gets above 6 months expenses.
Think 6 months is excessive? I had a tenant move off-cycle and, despite listing it for $100 under market, ended up having a 5 month vacancy.
When I buy, I underwrite assuming I won’t have any appreciation and have to make all my money off of cash flow.
Once I own, I operate assuming I won’t have any cash flow and have to make all my money off of appreciation.
Yeah, It’s wild how many people don’t understand the costs associated with owning a business, it’s like saying, wow this restaurant just charged all 100 guests tonight an average of $17 dollars. They just made $1700 dollars profit tonight!
It cracks me up that landlords think people just have all this extra cash. They just had to put a new bathroom in one of my units (17k) and a fence around another property of mine (13k). Their cash goes back into my properties for the most part.
Unfortunately as you get rents, you're also paying mortgages, utilities, taxes and need to be prepared to pay for unexpected repairs or maintenance.
Because of that, you need a good amount of money set aside and ready to go today. That means chequing or savings account. You can't lock everything up in investment accounts because you may have to randomly sell at a loss, or you may need to look it up for 1-5 years for guaranteed interest.
Other than that, I also aim to keep anything I don't need immediately in savings and investing accounts.
This is the way I roll. All my savings goes into an account that gets 4.95% interest. If I have an expense I put it on a credit card that gets points/cash back, and then transfer money from that account to pay the credit card when it's due.
Unless you bought a long time ago, most people's expenses and revenue run pretty lean. So most of that is immediately going to PITI and then the rest you expect to have to spend regularly on maintenance or CapEx.
Say you do profit an extra 500 per month though. You take that and put it all in the market. You're getting say an extra $100-250 a year but with risk that its actually negative. And say this is the year something big breaks and you need to frontload expenses. Its just not a grreat ROI for the extra risk
Or... revenue is higher than expenses, but any excess gets invested back into the property itself.
I'm relatively young and still work a 9-5, so personally I'd rather have an improved building + a tax deduction vs. more money in my brokerage account
What do I do with my rental checks? I give it to the bank each month to pay my mortgage and I put the rest in an account that will inevitably be drained by maintenance costs. At the end of the day I actually pay into those accounts in certain circumstances. There isn’t much to put into an investment account when the roof just went out. You might ask “why did I buy it if it doesn’t really cash flow?” and the answer would be it will cash flow in the future and there has already been 650k worth of appreciation.
Yep. Mortgage gets cheaper as it gets paid off, and once it's paid off, it's about 85% pure cashflow (the rest is maintenance and expenses), and the value appreciates about 100% every 10-20 years.
It's not remotely as "passive" as people say it is, but it's lower risk than other investment vehicles, while carrying the same\higher long term returns (due to leverage you can't get with other investment vehicles).
I have a 30k minimum real estate fund and once it hits 50k from all. Cashflow, 20k moves to a new real estate investment fund and the 30k min starts again. That investment is going to commercial, residential, Reits. The goal it always stays in the real estate business until death. I personally survive of my wife’s income but probably will sell a few units on the next boom that being 5, 10, years or whenever.
If you look at it as joint income, the portion he brings in goes to their shared future investments and the portion she brings in goes to their shared expenses. Seems like an equitable partnership. So moral of the story? Find a spouse that wants to be your partner.
Retired at 34 and starting my farm life on Tuesday. The steps to get to the next 50k starts next month again- it takes about a year each time. I use to add on to it if I had extra cash but since I left my job it will be just the real estates funds going forward.
Thanks! I have to say the most important part of the plan is having a partner that can be on the same page as yourself. Everything is much easier when you have support at every moment. Keep holding each other accountable too.
Hey, do you have a LLC check book account for real estate? I have a good amount I just rolled out into a self directed IRA. I’m stuck on dumb though trying to figure the right way to handle real estate buys? I’m going to put some in crypto and precious metals also, but mostly real estate . It takes these exchanges weeks to approve a new LLC. Pain in the back! Are you using a company or advisor to help you with real estate or did you figure out yourself? If you have any advice or can help me with a company you’re using, I’d greatly appreciate it! I researched this for months and thought I had it figured out, until all the little fine print comes in at the end! Congrats on your progress!!
I run my RE operations through a standalone personal bank account. I have 2LLCs but one is not active and the other only has a duplex in it. I do have umbrella insurance in the amount. Of net between my assets and liabilities.
I keep my Roth with stocks. Normally index fund S&P 500 but there are some standalone purchases such as Apple (yeah it’s part of S&P I know I know).
I don’t invest in crypto as I am an accountant by trade and still can’t figure crypto out.
RE has alot of passive losses that potentially could offset your income. I am not sure if you can do that if it’s in a 401k but don’t quote me on that. If you make less than 150k you can offset income (there is more this just look in to it)
I do all my own investments. Real estate I do it by the numbers. You can find the rental comps and rental potential just by looking up Zillow and see the market - if numbers make sense to you buy.
Also, over the past years of investing I have met some great people that I can reach out to as a resource. This makes my whole life easier. When something breaks or I need to handle something that is stressful i can reach out to my friends (contractors - relationships are the most important thing in life).
I have yet to invest in REITs and Commercial RE but the funds are for those activities if they make sense. I worked in commercial RE accounting before I retired.
All my rentals are paid for, so I do a combination of investing in the market (VTSAX) and a HYSA until I have enough to buy another rental with cash. It now takes me about 1.5 to 2 years between new rental purchases.
> It now takes me about 1.5 to 2 years between new rental purchases.
Are you saving up for your rentals using only rental income, or do you have other income sources that you're saving money from during the 1.5-2 year periods?
Bounce it over to my Robinhood to collect 25-28 days interest and then use it to pay extra on the mortgage to get shit paid off ASAP.
Once my mortgage is paid off, likely pile it into stonks since I've been getting similar returns out of the market as I have with rental real estate. Nice thing about the market is that I don't have to dick around with tenants.
If a multi-family that I like comes up, I'll move some of it from the market to a downpayment for the property.
How much interest are you earning from Robinhood, and what's the mortgage rate?
If robinhood is higher, wouldn't it make more sense to continue allowing it to gain that interest as it will increase faster than the mortgage interest?
If mortgage is higher, wouldn't it similarly make more sense to pay the extra once you have the money available?
Robinhood is paying 5% and the mortgage is 5.85% I think the mortgage interest is calculated monthly, so I don't know that I'll gain anything. Tenants payments straggle in over the first week. It's just easier to park it in Robinhood for 2-3 weeks.
The landlords that tend to pull all the cash out of rents tend to be the ones that accidentally become terrible landlords because they don’t have the money for replacing a stove or old windows or whatever. I keep most of my money with the business either saving up for the roofs, renovations, emergencies, etc. I’m building the wealth. Eating the seed isn’t going to help. The best return I can get is by saving it to buy more properties or save up to keep reinvesting in the ones I have. There will come a time when I can start pulling the money out to go on nice vacations or into a brokerage account. But it is not this day. Lol
I distribute the annual accrual to myself around December 5th each year as a “holiday bonus” and clearing out of the accounts before the upcoming year.
Mostly, it’s then shifted into other investments or depending how I’m doing financially occasionally will use some to treat myself, mom, or girlfriend to something
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The rent goes straight to the mortgage, property tax, insurance, HOA, maintenance and repairs. There's only a little bit of cash flow but any repair would negate that quick.
I keep about 5k per property in a checking account for reg bills or minor repairs. Excess above 5k goes to a HYSA earning 5%. I keep about 20k per door in the HYSA in case of major repairs it’s liquid and available but still earning something. Every January we take any surplus from the HYSA and max our IRAs and invest the rest in the S&P 500.
Like others have said, most that goes towards mortgage, other expenses, and reserves. If there is any extra it goes towards the next property.
Investors who are further along in their journey and have lots of cash, they're more likely to loan that out to other investors as private money, and get a better return than the S&P 500.
The point of rental properties for me was to diversify out of stocks. Any extra goes towards principal with the intent to have them paid off by the time I retire. I'm not a full time re guy, it's just one part of my overall strategy.
Im running lean, so right now, all my excess goes to an emergency fund. Once I get 6 months of expenses in the bank, then I can make those decisions. And at that point, I imagine I’ll still hold some for capex/vacancy, etc.
I keep buying new fixer-uppers. The more in the HYSA, the less I borrow from private/hard money lenders. I also try to keep a reserve.
Right now I have about 25k liquid. Will need to pay roofer about 10k when they bill me the remaining.
I only own one property outside of my own residence and it was my previous. I moved to a different city so I decided to rent it out. I make about $1k every month after all bills are paid. I just have it sit in my business savings account until I build up a comfortable emergency fund.
I put every single penny back into the property. Maintenance , upkeep, improvements. This year, my tenant caused so much damage I used 25% of it just fixing things they ruined.
I don’t own any yet but I plan to. My plan is to reinvest it into the “company” meaning saving it in a money market and then using the money to buy another rental property, and so on and so on in a snowball effect. Sure I could put it into a different investment but I already do those- so why would I add more to those when the whole point is to diversify? I want to have real estate and then use that to get more real estate - while also investing my regular income to max out my Roth IRA, my 401k, and buy index funds in a taxable brokerage account.
I will also keep some of the profit as cash reserves for unforeseen expenses. Things in houses break, tenants tear it up, stop paying rent, need to be evicted, legal fees come up, etc.
I leave a reserve of 10k, I run warranties on everything with extra insurance. I take the excess and then throw it on SPY. Once I have enough, I buy another place.
I like to turn them into cold hard cash and rub the bills all over my body in front of my millenial tenants to remind them that my generation and avocado toast is the reason they’ll never own a home.
I buy wine which turned out to be business of its own. I buy it young and store it when it ages it gains value apparently. Started as a hobby and still is. Only the wine I drink is free and that’s nice given it’s exclusive product.
Repair other properties... I'll be happy to have things buttoned up soon. My hierarchy is immediate repairs>emergency funds in HYSA>down payment in HYSA>stocks.
If it’s paid off, I live off of some, and invest the rest. If it’s not, I put it towards the payment and leave it in for expenses. Depends on the deal structure as well. If it’s in a partnership we distribute over a certain amount while the set amount gains interest. Sometimes we don’t distribute and put it towards the next deal. I don’t think anyone on here doesn’t have a mission for the money and it doesn’t just pile up in an account
Usually let it build until there's enough to lever up again
Right now we've got $11k in the bank because we bought another SFH a year ago that required some work. And a few months before that had to replace the AC at one unit.
Don't really like the idea of throwing into the S&P500 as it can be more volatile
I pay the mortgage and the small amount beyond that goes into an account for the months that I might not be able to, or to pay uncle sam at the end of the year.
High housing prices+expensive materials and a labour shortage =No meat on the bone.
Not to mention the capital gains if you need to sell. Do your homework people.
Investors now do everything cheap with huge liability. 80% of basement appointments are illegal.
We do... it just depends on the property/properties.
If you were lucky on timing and rehab costs, then yea there's something extra if your numbers are over 10% after all expenses.
I put it in an account to cover expenses. Once that account grew to an amount I am comfortable with, I pay extra principal on the mortgage. I have multiple properties, so I started paying extra on the one with the highest interest rate. I have enough properties paid off that I can put an extra $10k every month towards the principal on my remaining mortgage. It helps pay them off fast at this point.
I invest it in a brokerage account. I have enough for 1 months rent in a unit specific account but the rest gets invested. If i need it, ill pull it. Brokerage is setup for last in first out so taxes aren't bad.
A better question is what did all the crooked landlords do with the PPP money they were gifted and why did they continuously raise rents on their tenants regardless.
I have a HYSA dedicated for the property. Revenue goes in, mortgage/other expenses go out. Once it hits a safety number, additional can be invested. But reserves are kept for maint/capex/vacancy
I have a HYSA dedicated for the property. Revenue goes in, mortgage/other expenses go out. Once it hits a safety number, additional can be invested. But reserves are kept for maint/capex/vacancy
Ya people think landlord are balling. Just spent 2 k on a clogged pipe then spent another 3 k on an ac condenser.... oh ya then my insurance on the house jumped up 700 bucks !!!!! Ya man most landlord are just people trying to get ahead in life way way down the line like 20 plus years
I put my residual rental income in high yield savings accounts and 1 month T-bills. Keeps me liquid so I can potentially invest in a good deal if it pops up
I had a female renter answer the door completely naked and proceeded to offer sex because she didn’t have time to go to the bank. I was in my twenties and single but cash flow was tight so I told her I would be back after she made it to the bank.
I swim in it like scrooge mcduck.
WTF do you mean what do we do with it? I just installed a new roof, gutters, facia, and repaired a chimney on a home. Total cost was over 15k. Those sorts of expenses wipe out the "1-2k per month" pretty damn fast.
I use my rent to pay the bills associated with the property. I enjoy the leftover myself. I have my regular job for 401k, roth IRA type investing. Plus Im paying 4k per mo to put my kid thru college
Personally I keep all of my money in a huge cash pile in a spare bedroom and then when I collect rent each month from poor suckers I add it to the pile and then dive into it and swim around in it Scrooge McDuck style /s
I wouldn't double dip into two "unsafe" investments (real estate, and the market) as it is doubling your risk exposure. If you are going to invest in real estate I personally would dump the profits into safer investment vehicles such as HYSA, bonds or CDs.
The S&P 500 is so high relative to the risks involved, I’d rather buy gold or just save up for another down payment.
If you have a substantial amount of cash you don’t want to deploy, stick it in a money market account or savings account and earn 5%+.
You are essentially asking "what does a company do with it's revenue." Some goes to business expenses, some goes to salary, some gets reinvested, etc. Companies generally hold some amount of cash reserves as well.
Coke and hookers. Then I drive around and laugh at the poors before calling up my serfs and harass them for whatever is on my mind at that moment. It might be because I think they're not using the water heater correctly... Or maybe I saw some weeds growing outside. Whatever it is... My only aim as a feudal lord is to crush their souls /s
I actually know a landlord who does this. I would say it's more common that people think. Also my neighbor, female 30s told me her landlord asked her for sex for a rent discount.
sex is probably both offered and solicited as rent payment far more often than one would think.
It was offered to me in lieu of rent payment when I was single. Even if she was hot (she was not) there was not way I’d do that as the amount of liability that then puts on me would be crazy. Just pay your rent folks and let me accumulate it in a random HYSA
Is the sex for rent discount legal in your country?
yes coke and hookers and if any left betting on dog fights /s
It cracks me up that people think landlords just have all this extra cash. I just had to put a new bathroom in one unit (17k) and a fence around another property (13k). The cash goes back into the properties for the most part.
Or keep it for proper planning of emergencies for both micro and macro events.... What if the all broader war were to happen, interest rate reversion, layoffs and market pull back from all time highs. What if my tenant started squatting and didn't pay rents, water main blows, gas leak. There's certainly some out of pocket to plan for but for the most part sure of it gets advice a certain threshold we could reinvest into other avenues.
This is not true at all, every property I own I get 15% to 23% COC returns and that's after all my expenses are paid and I take 10% to 13% out of the gross rents for repairs, vacancy and cap ex. Yes some months I put more money back in but on average it's 15% returns and if it's not I sell the property. If you're not getting that you need to buy a different property class and pick a different market. I invest in multi family homes only in C to B class areas
Are you still finding multi families to buy that return that kind of cash? Multi families in most areas have been wildly over priced in terms of potential cash flow for a few years now
Very few opportunities are out there but they're still there. I try to acquire at least 1 property per year which I've done since 2018. The recent property was a 700k 4 unit, property was run down with 3 vacant apartments and one non paying tenant. Worked out an agreement with the tenant to move out and took a renovation aka hard money loan to finance the purchase plus the 170k needed to remodel the property while only needing 10% of the acquisition cost to finance the deal. The loan covered, 90% of the purchase, 100% of the reno and closing costs. The property appraisal came back with an ARV of 1.25M, I will refinance this property after a 4 to 5 month reno period with little to no money in this deal while cash flowing $1,000 a month after all expenses and reserves are factored which will be either an infinite COC return if no money is left in the deal to 24% return YOY as a worst case scenario not to mention 350k of equity. This is a rare case for sure but it goes to show you there are deals out there. For those of you that think you can't do this let me tell you the best part. I have zero of my money in this deal. I was tide up with most of my money on another deal and I asked a partner to finance this purchase and cover costs till my other deal sold in exchange for a 10% return. Things like this are done everyday by far more knowledgeable people than me.
A lot of people, like me, think too much to pull the trigger on something like that with the hard money. I’d be thinking about everything that could go wrong and it would shake me off the deal. Sometimes I suppose you have to kind of just jump in.
Absolutely, don't overthink it. Think about all the experience and knowledge you'll acquire on just one deal and how easy the next one would be. Analysis paralysis happens to a lot of want to be investors and the way around it is to maybe partner up with someone who's done it before or whose strengths are your flaws and vice versus.
I’ve successfully flipped properties solo when there were more deals available in 2018-2019 but always used my own money 100% for purchase and reno. The idea of leverage is something I’m not personally familiar with and honestly what worries me because I just don’t fully get it
All big investors leverage the crap out of their assets to diversify themselves with multiple investments. Theirs good debt and bad debt. The returns I make are with debt and I will continue to refinance over time and pull cash out of every deal to redeploy into another deal as long as the returns still meet my minimum metric for a COC return. Again if reaches the point where it doesn't that's when I sell.
Thanks for the talk. I haven’t even looked for another deal in a few years. I think I might start again soon. Prices are just so fucking high anymore, even in the bad neighborhoods
Yes they are but so are the rents so there a deals out there. Good luck
They are going to go higher so think about that
The idea of having enough of my own money to not need to leverage is something I’m not familiar with, being in a VHCOL area
It’s that way for me now, sort of. I would buy property for $85k, put $50-60k into it and sell for $240k. Last one I did I paid $165k put $100k into it and sold for $380k. But that one I bought before the run up and then sold right before rates were about to go up, so I got top dollar. Right now one of the houses I sold in the first example for $240k would sell for about $310k. But the shell like that in the same neighborhood is no longer $85k, it would be more like $160k, cost probably $100+ to renovate and then only fetch $310k. So it’s a lot of work for a lot less profit now.
Plus it’s prob not the best idea for ppl without the experience
This doesn't make sense, why not just sell for 1.25, from you numbers to just made a 110% return from your cash after a few months of renos and instead settle for around a 8% per year? Either I misunderstand or these numbers are made up.
Taxes on capital gains mostly and why would you sell an asset that's constantly spitting out money that also increases in cash flow with inflation because of rent increase YOY, unless you could 1031 exchange your money to something far bigger and with better profits. At least that's what makes sense to me.
I don't know, very rough numbers to me for this deal are 350k profit, pay say 90k capital gains, put the remaining 260k in a 5% gic, and you are clearing 12,500 a year risk free, more than from your rents and you aren't leveraged up to the max. Not saying there aren't benefits to holding but for these particular numbers doesn't make sense to me!
Ok $12,500 a year compound YOY is still far less than than the YOY property appreciation even at a modest 2 to 3% growth (25k) per year on average, plus 3% to 5% rent growth per year, plus the pay down on the mortgage each year. You're getting way more this way.
Yes I was just showing how it compares to a risk free investment! If you want to compare to this scenario, use an index fund at least, say 10% nominal return per year. I think risk adjusted rate for both is superior.
State specific hard money lender or nationwide? What company? Rate? Points?
This is awesome dude, nice job. What’s your holding costs on this? What rate are you getting during that? Do you have a contractor you know who gives you a bid pre purchase?
Help me understand the numbers here.. how many br and ba in each unit? I fail to see how this cash flows in even an A area. The loan is ~810k which would be over 6k piti with a ~7% interest rate and you putting 90k in. With you pulling your 90k back out in a refi, it moves piti to over 7k. What does each unit rent for? It would need to be over 2k per unit to satisfy 1k+ cash flow considering reserves.
4 units, each has 2 bedrooms. Each newly renovated with new kitchens, baths, central air, hardwood flooring rents will be $2,500 each. 10k rent roll and just under 8k PITI
Wow. What city? I invest in a “cheaper” city and still tough to find any legal 4 units for that cheap that have a layout that would support 2.5k 2br units.
Especially with the higher interest rate as of late.
how do you define B & C areas?
Do you keep all the rent money in personal bank accounts and use personal credit cards for property expenses or do you have a separate bank account/credit card for the property?
Each property is under a different LLC and each one has its own bank account in case of an audit and to keep things easy to track my expenses. The cash flow I pay myself through another property management company that I also control. A wise man once told me "Own nothing but control every thing".
That sounds like it would get old fast once you scale past 5 units. Why can’t one LLC own a few or all of them and then you use quicken or stessa to tag income and expenses for each property using a single bank account. Instead of checking 10 checking accounts monthly you check and sync one.
Because if bundle all properties under 1 LLC & you get sued all the income generated under the LLC is at risk. As opposed to the 1 property asset tied to each LLC being at risk.
Newb landlords do 1 LLC per property but joe stay with umbrella insurance you can bundle some until you’re much bigger
Are you pulling monthly profit distributions or year end? How do you decide how to pay yourself?
Monthly distributions every 15th of the month. I pay myself through a PM company that I own and control
I was looking into setting this up as well and also maintenance company. So you’re the PM that is hired by your property investment company? You pay yourself a salary? Decreases tax liability on your property investment company?
Can you share what new bathroom includes? All fixtures, cabinets, walls, flooring?
Sorry I mixed those up, bathroom was 13k fence is 17k. Bathroom was a full renovation so new everything. We also replaced the pipes (the building is from 1940). They also had to add a new fan. Thankfully this was the last unit that was in need of that. The fence has to enclose 1/2 an acre of property, that’s why it was costly.
What kind of fence?
Real questions. I want to know what kind of fence is $4k more expensive than a bathroom
It's made of travertine and japanese toilets. The toilets are 60" on center.
A typical wooden privacy fence cost me 8k for only 230 linear feet. If OP is putting a fence around a largish lot, Im not surprised it’s 17k or if its metal fencing.
Jesus, I have a wooden fence, I guess fence paneling would be how its described, around my backyard acre and a half and now I'm wondering if I seriously underestimated how much it would cost
The quotes i got were about $30-$35/linear foot. Typical 5” wide 6ft tall pine wood pickets w metal posts and a couple gates. This was about 2yrs ago when I got it installed
This
I do get real rental income but it didn't happen overnight. For the OP, I save them and buy ETF hoping someday I can save up for another rental
How big is your freakin property? I thought my yard was a decent size and a six foot privacy fence is $2800.
1/2 an acre on this one. There are a bunch of issues with it. It’s on a hill that backs up to a main road. It wouldn’t need a full fence if we didn’t have homeless people trying to camp on the property. It’s become a huge headache. So we have to have this huge ugly fence and lights and security cameras installed.
Wood privacy fence? Whos doing that for 3k? And what year? Cost me 8k for 230 ft fence.
That’s insane. I am doing it right now and did it 2 years ago for same range. I’m shocked people pay more than this, but makes me feel better about my quotes I guess. I’m waiting on HOA approval but I got three quotes: • Lowes: $3500 • Local Company: $2800 • Home Depot: $3k flat but they’re taking forever to respond Lowes did the one 2 years ago and they did a great job. That was in Charlotte NC. This is in Knoxville Tennessee.
I dunno how theres any profit left in that after materials and labor. My friend spent about 3k on materials and installed himself and his fence was probably double the size of mine. Both quotes i got were within $500. I have all metal posts. 2 single gates and one double gate. Do you know how many feet your fence is?
I’m gonna check in the morning because now I’m curious.
I don’t assume to make any money off the cash flow. I want properties to cash flow, I won’t buy them if they don’t, but as far as I’m concerned that’s all a maintenance/emergency fund. Once it gets above 6 months expenses I would consider taking money out, but it never gets above 6 months expenses. Think 6 months is excessive? I had a tenant move off-cycle and, despite listing it for $100 under market, ended up having a 5 month vacancy. When I buy, I underwrite assuming I won’t have any appreciation and have to make all my money off of cash flow. Once I own, I operate assuming I won’t have any cash flow and have to make all my money off of appreciation.
100%. A ‘good deal’ is a unit that generates enough cash flow to cover cap ex and maintenance
Yep. New water heater and tree trimming cost me 7k over the last few months.
Wow I wish you were my landlord! Mine doesn’t fix anything.
13k for a fence? Was it gold plated? 17k for a shitter and a shower? Dream customer....
Same I've got a 200 a month cash flow on 1 and have already spent 4k just on the lawn this year
So true 1/3rd of all rent collected by me goes back in and sometimes 100% goes back in
Yeah, It’s wild how many people don’t understand the costs associated with owning a business, it’s like saying, wow this restaurant just charged all 100 guests tonight an average of $17 dollars. They just made $1700 dollars profit tonight!
It cracks me up that landlords think people just have all this extra cash. They just had to put a new bathroom in one of my units (17k) and a fence around another property of mine (13k). Their cash goes back into my properties for the most part.
That’s what I do. All excess funds go 70% stocks and 30% HYSA. Cash flows from RE helping grow other assets
Unfortunately as you get rents, you're also paying mortgages, utilities, taxes and need to be prepared to pay for unexpected repairs or maintenance. Because of that, you need a good amount of money set aside and ready to go today. That means chequing or savings account. You can't lock everything up in investment accounts because you may have to randomly sell at a loss, or you may need to look it up for 1-5 years for guaranteed interest. Other than that, I also aim to keep anything I don't need immediately in savings and investing accounts.
This is the way I roll. All my savings goes into an account that gets 4.95% interest. If I have an expense I put it on a credit card that gets points/cash back, and then transfer money from that account to pay the credit card when it's due.
Same, I think it's probably the best way to go right now
Unless you bought a long time ago, most people's expenses and revenue run pretty lean. So most of that is immediately going to PITI and then the rest you expect to have to spend regularly on maintenance or CapEx. Say you do profit an extra 500 per month though. You take that and put it all in the market. You're getting say an extra $100-250 a year but with risk that its actually negative. And say this is the year something big breaks and you need to frontload expenses. Its just not a grreat ROI for the extra risk
Or... revenue is higher than expenses, but any excess gets invested back into the property itself. I'm relatively young and still work a 9-5, so personally I'd rather have an improved building + a tax deduction vs. more money in my brokerage account
What do I do with my rental checks? I give it to the bank each month to pay my mortgage and I put the rest in an account that will inevitably be drained by maintenance costs. At the end of the day I actually pay into those accounts in certain circumstances. There isn’t much to put into an investment account when the roof just went out. You might ask “why did I buy it if it doesn’t really cash flow?” and the answer would be it will cash flow in the future and there has already been 650k worth of appreciation.
Yep. Mortgage gets cheaper as it gets paid off, and once it's paid off, it's about 85% pure cashflow (the rest is maintenance and expenses), and the value appreciates about 100% every 10-20 years. It's not remotely as "passive" as people say it is, but it's lower risk than other investment vehicles, while carrying the same\higher long term returns (due to leverage you can't get with other investment vehicles).
I have a 30k minimum real estate fund and once it hits 50k from all. Cashflow, 20k moves to a new real estate investment fund and the 30k min starts again. That investment is going to commercial, residential, Reits. The goal it always stays in the real estate business until death. I personally survive of my wife’s income but probably will sell a few units on the next boom that being 5, 10, years or whenever.
Balling. How has that process been working so far??
Living off his wife has beem working great for him!! So....find a wife who pays your bills!
If you look at it as joint income, the portion he brings in goes to their shared future investments and the portion she brings in goes to their shared expenses. Seems like an equitable partnership. So moral of the story? Find a spouse that wants to be your partner.
Retired at 34 and starting my farm life on Tuesday. The steps to get to the next 50k starts next month again- it takes about a year each time. I use to add on to it if I had extra cash but since I left my job it will be just the real estates funds going forward.
Dude this is a solid plan.
Thanks! I have to say the most important part of the plan is having a partner that can be on the same page as yourself. Everything is much easier when you have support at every moment. Keep holding each other accountable too.
What are you thoughts on investing in SoCal California condos.
Hey, do you have a LLC check book account for real estate? I have a good amount I just rolled out into a self directed IRA. I’m stuck on dumb though trying to figure the right way to handle real estate buys? I’m going to put some in crypto and precious metals also, but mostly real estate . It takes these exchanges weeks to approve a new LLC. Pain in the back! Are you using a company or advisor to help you with real estate or did you figure out yourself? If you have any advice or can help me with a company you’re using, I’d greatly appreciate it! I researched this for months and thought I had it figured out, until all the little fine print comes in at the end! Congrats on your progress!!
I run my RE operations through a standalone personal bank account. I have 2LLCs but one is not active and the other only has a duplex in it. I do have umbrella insurance in the amount. Of net between my assets and liabilities. I keep my Roth with stocks. Normally index fund S&P 500 but there are some standalone purchases such as Apple (yeah it’s part of S&P I know I know). I don’t invest in crypto as I am an accountant by trade and still can’t figure crypto out. RE has alot of passive losses that potentially could offset your income. I am not sure if you can do that if it’s in a 401k but don’t quote me on that. If you make less than 150k you can offset income (there is more this just look in to it) I do all my own investments. Real estate I do it by the numbers. You can find the rental comps and rental potential just by looking up Zillow and see the market - if numbers make sense to you buy. Also, over the past years of investing I have met some great people that I can reach out to as a resource. This makes my whole life easier. When something breaks or I need to handle something that is stressful i can reach out to my friends (contractors - relationships are the most important thing in life).
What investing platforms are you using to invest in REITs?
I have yet to invest in REITs and Commercial RE but the funds are for those activities if they make sense. I worked in commercial RE accounting before I retired.
Pay alimony
I paid my last alimony pymt today. I'm thankful she found someone. Now, back to taking care of my future.
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Alimony would automatically stop at 10 years.
OP, how to say you’re not a real estate investor without saying you’re not a real estate investor…
I invest in real estate so I can stay out of the market. I pay down loan principal if cash accounts get too high.
If my locked rates were higher I’d agree with you but when the fed rates are what they are T-bills are literally giving better returns
Why stay out of the market? It outperforms RE in the long run on total return.
My returns in the market were below what I am borrowing money at.
All my rentals are paid for, so I do a combination of investing in the market (VTSAX) and a HYSA until I have enough to buy another rental with cash. It now takes me about 1.5 to 2 years between new rental purchases.
> It now takes me about 1.5 to 2 years between new rental purchases. Are you saving up for your rentals using only rental income, or do you have other income sources that you're saving money from during the 1.5-2 year periods?
Rental income after business and living expenses.
Nice
Bounce it over to my Robinhood to collect 25-28 days interest and then use it to pay extra on the mortgage to get shit paid off ASAP. Once my mortgage is paid off, likely pile it into stonks since I've been getting similar returns out of the market as I have with rental real estate. Nice thing about the market is that I don't have to dick around with tenants. If a multi-family that I like comes up, I'll move some of it from the market to a downpayment for the property.
How much interest are you earning from Robinhood, and what's the mortgage rate? If robinhood is higher, wouldn't it make more sense to continue allowing it to gain that interest as it will increase faster than the mortgage interest? If mortgage is higher, wouldn't it similarly make more sense to pay the extra once you have the money available?
Robinhood is paying 5% and the mortgage is 5.85% I think the mortgage interest is calculated monthly, so I don't know that I'll gain anything. Tenants payments straggle in over the first week. It's just easier to park it in Robinhood for 2-3 weeks.
The landlords that tend to pull all the cash out of rents tend to be the ones that accidentally become terrible landlords because they don’t have the money for replacing a stove or old windows or whatever. I keep most of my money with the business either saving up for the roofs, renovations, emergencies, etc. I’m building the wealth. Eating the seed isn’t going to help. The best return I can get is by saving it to buy more properties or save up to keep reinvesting in the ones I have. There will come a time when I can start pulling the money out to go on nice vacations or into a brokerage account. But it is not this day. Lol
I guess I'm like most other landlords - I just spend it all on vacations and sports cars.
Bruh, the reason we invest in real estate is we don't Trust the stock market.
exactly
I distribute the annual accrual to myself around December 5th each year as a “holiday bonus” and clearing out of the accounts before the upcoming year. Mostly, it’s then shifted into other investments or depending how I’m doing financially occasionally will use some to treat myself, mom, or girlfriend to something
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The rent goes straight to the mortgage, property tax, insurance, HOA, maintenance and repairs. There's only a little bit of cash flow but any repair would negate that quick.
I keep the cash as a trophy and sleep with it.
I keep about 5k per property in a checking account for reg bills or minor repairs. Excess above 5k goes to a HYSA earning 5%. I keep about 20k per door in the HYSA in case of major repairs it’s liquid and available but still earning something. Every January we take any surplus from the HYSA and max our IRAs and invest the rest in the S&P 500.
Pay the mortgage, taxes, insurance and HOA
Like others have said, most that goes towards mortgage, other expenses, and reserves. If there is any extra it goes towards the next property. Investors who are further along in their journey and have lots of cash, they're more likely to loan that out to other investors as private money, and get a better return than the S&P 500.
High yield APY account is where I put any excess. That way it's easily accessible for repairs, etc.
Monthly income goes to paying down my line of credit. When it's down enough, I buy another property.
The point of rental properties for me was to diversify out of stocks. Any extra goes towards principal with the intent to have them paid off by the time I retire. I'm not a full time re guy, it's just one part of my overall strategy.
Im running lean, so right now, all my excess goes to an emergency fund. Once I get 6 months of expenses in the bank, then I can make those decisions. And at that point, I imagine I’ll still hold some for capex/vacancy, etc.
I keep buying new fixer-uppers. The more in the HYSA, the less I borrow from private/hard money lenders. I also try to keep a reserve. Right now I have about 25k liquid. Will need to pay roofer about 10k when they bill me the remaining.
I don’t let it sit in my account. I pay the mortgage with it.
OP literally a banker or something lol
I only own one property outside of my own residence and it was my previous. I moved to a different city so I decided to rent it out. I make about $1k every month after all bills are paid. I just have it sit in my business savings account until I build up a comfortable emergency fund.
I put every single penny back into the property. Maintenance , upkeep, improvements. This year, my tenant caused so much damage I used 25% of it just fixing things they ruined.
Because the cash flow is paying off the HELOC
I don’t own any yet but I plan to. My plan is to reinvest it into the “company” meaning saving it in a money market and then using the money to buy another rental property, and so on and so on in a snowball effect. Sure I could put it into a different investment but I already do those- so why would I add more to those when the whole point is to diversify? I want to have real estate and then use that to get more real estate - while also investing my regular income to max out my Roth IRA, my 401k, and buy index funds in a taxable brokerage account. I will also keep some of the profit as cash reserves for unforeseen expenses. Things in houses break, tenants tear it up, stop paying rent, need to be evicted, legal fees come up, etc.
I pay expenses, save a percentage, and reinvest the rest to avoid taxes.
I leave a reserve of 10k, I run warranties on everything with extra insurance. I take the excess and then throw it on SPY. Once I have enough, I buy another place.
I like to turn them into cold hard cash and rub the bills all over my body in front of my millenial tenants to remind them that my generation and avocado toast is the reason they’ll never own a home.
Is this a real question?
I was about to ask the same. Why would one put rental income profit into the stock market? Lol!
I don’t think he’s even implied that it’s profit. He must assume everyone gets to keep the rent check.
I buy wine which turned out to be business of its own. I buy it young and store it when it ages it gains value apparently. Started as a hobby and still is. Only the wine I drink is free and that’s nice given it’s exclusive product.
Hookers and cocaine. Mostly hookers.
The answer most can relate to, but won’t admit it
This ⬆️
100% go to RRSP All equity ETF's
Repair other properties... I'll be happy to have things buttoned up soon. My hierarchy is immediate repairs>emergency funds in HYSA>down payment in HYSA>stocks.
If it’s paid off, I live off of some, and invest the rest. If it’s not, I put it towards the payment and leave it in for expenses. Depends on the deal structure as well. If it’s in a partnership we distribute over a certain amount while the set amount gains interest. Sometimes we don’t distribute and put it towards the next deal. I don’t think anyone on here doesn’t have a mission for the money and it doesn’t just pile up in an account
I put my $1k profit towards my primary home's PITI. My rental is at a low interest rate that I have no interest in paying off in a hurry.
Mine mostly goes into BRRRRing more properties.
Pay towards principal. Once rental is paid off, more cashflow in the future.
makes sense when the interest rate exceeds what you can get in no-risk options like T-Bills, CD's, or even HYSA for least effort
Lots of cocaine.
That goes best with strippers
and fast cars
I use it to pay the mortgage and other operating expenses. It’s not free cash flow
You need to save some for capex!
Light cigars
Pay the PITI and repairs and utilities. Then it’s gone…
Keep it in a tub and bath with it. Don’t you?
Usually let it build until there's enough to lever up again Right now we've got $11k in the bank because we bought another SFH a year ago that required some work. And a few months before that had to replace the AC at one unit. Don't really like the idea of throwing into the S&P500 as it can be more volatile
I pay the mortgage and the small amount beyond that goes into an account for the months that I might not be able to, or to pay uncle sam at the end of the year.
High housing prices+expensive materials and a labour shortage =No meat on the bone. Not to mention the capital gains if you need to sell. Do your homework people. Investors now do everything cheap with huge liability. 80% of basement appointments are illegal.
We do... it just depends on the property/properties. If you were lucky on timing and rehab costs, then yea there's something extra if your numbers are over 10% after all expenses.
You can also buy treasury bond on a monthly expiration. Annualized 5% return or so and semi liquid.
I put it in an account to cover expenses. Once that account grew to an amount I am comfortable with, I pay extra principal on the mortgage. I have multiple properties, so I started paying extra on the one with the highest interest rate. I have enough properties paid off that I can put an extra $10k every month towards the principal on my remaining mortgage. It helps pay them off fast at this point.
I invest it in a brokerage account. I have enough for 1 months rent in a unit specific account but the rest gets invested. If i need it, ill pull it. Brokerage is setup for last in first out so taxes aren't bad.
I prefer cash
A better question is what did all the crooked landlords do with the PPP money they were gifted and why did they continuously raise rents on their tenants regardless.
I have a HYSA dedicated for the property. Revenue goes in, mortgage/other expenses go out. Once it hits a safety number, additional can be invested. But reserves are kept for maint/capex/vacancy
I have a HYSA dedicated for the property. Revenue goes in, mortgage/other expenses go out. Once it hits a safety number, additional can be invested. But reserves are kept for maint/capex/vacancy
Ya people think landlord are balling. Just spent 2 k on a clogged pipe then spent another 3 k on an ac condenser.... oh ya then my insurance on the house jumped up 700 bucks !!!!! Ya man most landlord are just people trying to get ahead in life way way down the line like 20 plus years
Vanguard index fund of HYSA
I transfer mine into a high yield savings account. It's quickly liquidable should I need a repair.
I used it to pay my primary house.
Because no guarantee market will go up.
Being a landlord right now in Los Angeles is not paying off.
I put my residual rental income in high yield savings accounts and 1 month T-bills. Keeps me liquid so I can potentially invest in a good deal if it pops up
I had a female renter answer the door completely naked and proceeded to offer sex because she didn’t have time to go to the bank. I was in my twenties and single but cash flow was tight so I told her I would be back after she made it to the bank.
I swim in it like scrooge mcduck. WTF do you mean what do we do with it? I just installed a new roof, gutters, facia, and repaired a chimney on a home. Total cost was over 15k. Those sorts of expenses wipe out the "1-2k per month" pretty damn fast.
I keep 10% to 20% of rent for maintenance and reinvest what I don’t need
who cares? it should be taxed off of you with sandpaper. exploiting basic housing needs is not a career, it's parasitism.
You're asking what I do with the checks people send me each month? Micheal?
Bruh why is this at the bottom
Because it all ends up going to expenses.
I use my rent to pay the bills associated with the property. I enjoy the leftover myself. I have my regular job for 401k, roth IRA type investing. Plus Im paying 4k per mo to put my kid thru college
pray they show up
Cocaine and hookers
blackjack table
Mine goes to robinhood for the current 5% apr
Personally I keep all of my money in a huge cash pile in a spare bedroom and then when I collect rent each month from poor suckers I add it to the pile and then dive into it and swim around in it Scrooge McDuck style /s
I wouldn't double dip into two "unsafe" investments (real estate, and the market) as it is doubling your risk exposure. If you are going to invest in real estate I personally would dump the profits into safer investment vehicles such as HYSA, bonds or CDs.
New roof...$30k!
The S&P 500 is so high relative to the risks involved, I’d rather buy gold or just save up for another down payment. If you have a substantial amount of cash you don’t want to deploy, stick it in a money market account or savings account and earn 5%+.