Getting to next level (by Otis [IL]) Jan 18, 2023 11:17 PM|
Getting to next level (by Allym [NJ]) Jan 19, 2023 8:10 AM
Getting to next level (by Deanna [TX]) Jan 19, 2023 10:05 AM
Getting to next level (by S i d [MO]) Jan 19, 2023 11:20 AM
Getting to next level (by S i d [MO]) Jan 19, 2023 11:27 AM
Getting to next level (by Otis [IL]) Jan 19, 2023 1:47 PM
Getting to next level (by Otis [IL]) Jan 19, 2023 1:52 PM
Getting to next level (by S i d [MO]) Jan 19, 2023 3:17 PM
Getting to next level (by Chris [CT]) Jan 19, 2023 3:50 PM
Getting to next level (by Chris [CT]) Jan 19, 2023 3:54 PM
Getting to next level (by GKARL [PA]) Jan 19, 2023 6:18 PM
Getting to next level (by T [IN]) Jan 19, 2023 6:54 PM
Getting to next level (by Robert J [CA]) Jan 19, 2023 6:58 PM
Getting to next level (by Ray-N-Pa [PA]) Jan 20, 2023 7:19 AM
Getting to next level (by Ray-N-Pa [PA]) Jan 20, 2023 10:32 AM
Getting to next level (by BRAD 20,000 [IN]) Jan 20, 2023 2:02 PM
Getting to next level (by Otis [IL]) Jan 20, 2023 11:46 PM
Getting to next level (by Otis [IL]) Jan 21, 2023 7:55 AM
Getting to next level (by Ned [AL]) Jan 21, 2023 3:12 PM
Getting to next level (by Ray-N-Pa [PA]) Jan 21, 2023 5:10 PM
Getting to next level (by Ray-N-Pa [PA]) Jan 21, 2023 5:13 PM
Getting to next level (by T [IN]) Jan 21, 2023 9:27 PM
Getting to next level (by Otis [IL]) Jan 22, 2023 4:25 PM
Getting to next level (by Ray-N-Pa [PA]) Jan 22, 2023 6:47 PM
Getting to next level (by Ray-N-Pa [PA]) Jan 22, 2023 6:49 PM
Getting to next level (by Otis [IL]) Posted on: Jan 18, 2023 11:17 PM
So reading about S i dís ďbraggingĒ post (just kidding i know you were not bragging) got me thinking. Little background on me, 27 units total, all class C $50,000 houses plus 3 duplexes. I find that I cannot pass up these smaller little atm machines when a good one comes by. At the same time though I feel like I want to jump up to the next level with apartment complexes or even as S i d is doing with his commercial spaces. The thing holding me back is fear (of failure) and the ďhowĒ of getting there.
With these little class C houses I buy them for $30-$35k and put $5k-$10k in them, then rent them for $900/month. Since I have the 20% equity the bank doesnít require a down payment.
Those that have done similar and then jumped to apartment complexes or commercial, what was your next step? Did you save the 20% for a down payment? Use a paid off property as collateral for the down payment? Did you buy distressed and build the equity like I do with the little houses? Do you regret jumping to the bigger deals and wish you stuck with picking up the little ones?
Guess Iím looking for a little guidance from people that are up on that next level and donít mind sharing how you got there. Thanks --24.245.xx.xxx
Getting to next level (by Allym [NJ]) Posted on: Jan 19, 2023 8:10 AM
I have duplexes and dad left two four plexes which I sold as I was becoming ill and knew it. Really big buildings would seem like potential for a big loss. I like your style with the fifty K houses. You are doing very well. I am doing OK with the duplexes except I have one non payer left from the covid lockdown. I am going to have a chat with them as soon as the husband recovers from his hip replacement. Right now they are keeping it heated over winter. Is there really a need for you to go into big multi unit buildings? Is that ego or a sign of success for you? I have five figures of money that I only use for the buildings in case a big heater would break down. Do you have a big account that would support a heat problem at a big multi unit building? --71.188.xx.xxx
Getting to next level (by Deanna [TX]) Posted on: Jan 19, 2023 10:05 AM
I'm in the same bucket as you are.
While I was growing, I kept looking at mfh for its efficiency. I'd rather have five units and one roof and one set of property taxes, etc. Mfh in my area had a bad reputation, though, so I'd be looking at a more urban market--- but those urban markets had their own sets of rules, regulations, oversight, and requirements. (ie, mandatory recycling, there needs to be a property manager/authority figure on call within 30 minutes of the site 24/7, mandatory crime prevention classes taken each year, etc.)
However, as time went on, I realized that sfh and mfh are two different products. When I have a problem with a sfh--- fleas, a fire, uncooperative tenants, under-market rents--- those issues are limited to that property. I only have one vacancy, rather than the problem spreading and suddenly affecting other units. Having my stuff spread out is how my risk is isolated.
One of the other things that I learned was that a lot of people get into mfh not because they want to buy-and-hold and have, say, 30 units that each bring in $x/month, in the same way that I do with my houses. Instead, they use the complexes as a way to ladder their money. You put $100k into a development, and then you flip it to another investor five years later for $250k. You put that $250k into a development, and then five years later, you flip it to someone else for $450k. Rinse and repeat.
So-- I know that others are able to answer the actual question that was asked, but I thought I'd make the point that owning apartment complexes and owning sfh's are not necessarily driven by the same motives, with the same goals in play. But understanding that the motivations and goals were different helped me be more comfortable with appreciating the path I was on, because it was the path I had chosen on purpose, rather than by accident. I had my spot in the ecosystem because it made sense for me to be there. In the future, I might experiment with other niches, but the people who were competing with me for acquiring those assets had a good chance of being players in a different kind of game than the game I was playing, if that makes sense? --137.118.xx.xxx
Getting to next level (by S i d [MO]) Posted on: Jan 19, 2023 11:20 AM
I think the first thing you have to do is ask yourself what kind of a portfolio do you want 5 years from now...10 years from now... 20 years from now.
I've been to the seminars and conventions where people say they have 200 doors. Okay, great. But what does it look like to run 200 doors of residential housing?
To start off with, you need office help. No way an individual is going to be able to handle screening, ads responses, work orders, tracking rents, etc. Even the best spreadsheets and software still need someone to monitor all that stuff and follow up.
Too, you're going to need at least one full time maintenance man and probably 2 or several part-timers.
The above means you're going to be an employer with W-2s, workman's comp, etc. You might, if you get lucky, find some folks on Fivvr or some other VA system (virtual assistance) to help with office stuff, but not with maintenance. And you have to spend time writing out processes and procedures for the VA or office help, etc.
Another option is Commercial real estate, and by that I am specifically EXCLUDING apartment complexes because those end you up in the same boat as other residential units. With Commercial, tenants are much more self-reliant, especially if you can do Modified Gross or NNN (triple net) leases where some or all of the expenses become tenant responsibility. Due to the higher price and rent points, you can often achieve the same results as a huge residential portfolio, but with way fewer doors.
As I recently mentioned I did a multi-million $ commercial deal. 16 doors for a cost and a rent roll that roughly equate to about 2x the number of residential doors. Had I bought 32 more residential units, I would've been caught in a massive expansion that required all of the above details systems, processes, and helpers/employees mentioned earlier. But with commercial, tenants are responsible for most of their own maintenance. I take care of the exterior of the building (a large, metal box with concrete floors) and the HVAC, although each tenant also has a yearly deductible and incentive to do their own small fixes.
So step one is decide what you want your portfolio to look like and begin building toward that today. As for me, I don't like being the guy with 200 residential doors and leading a "team". I kinda like keeping my finger on the pulse of the day to day, and I can do that and still achieve my financial goals with fewer commercial units that are easier to manage, bring in more rent per unit, and cause me less day in/day out hassle.
Getting to next level (by S i d [MO]) Posted on: Jan 19, 2023 11:27 AM
Btw, I'll add that if you have a descent amount of equity lying around in your residential portfolio and would like to dip your toes into commercial, now is a GREAT time to do it. I have almost exclusively Class C rentals that were purchased for between $15,000 - $30,000, but with the recent run up in prices I was able to sell 3 of them and lock in a considerable profit.
Using a 1031 tax free exchange, I wrapped those profits into my new commercial property, along with proceeds from two cash partner investors to fill out the rest of the funding. This is a great way to "level up" to more expensive properties while telling the tax man, "Not today!"
Getting to next level (by Otis [IL]) Posted on: Jan 19, 2023 1:47 PM
I appreciate all the feedback so far. To help clarify, I guess Iím not so much as interested in growing into large apartment complexes as I would be more to commercial. As several pointed out, I donít want to have 200 residential tenants wether that be single family homes or larger complexes.
Grinding it out dealing with residential can wear you down. Iím 42 years old now and wanting to use what I have as a springboard to move into commercial where hopefully in another 10 years or so I can be out of residential completely.
S i d I like your idea of doing a 1031 exchange on several houses to put towards the commercial buildings. The one thing I see with commercial that scares me is it seems like the vacancies can be longer. Whereas one of my little class C houses I can usually have rented again in a matter of a week. --24.245.xx.xxx
Getting to next level (by Otis [IL]) Posted on: Jan 19, 2023 1:52 PM
S i d, with your commercial ďmetal boxesĒ are you picking them up in class C areas of town also or are you trying for better areas of town? The town I invest in (about 30 minutes away) has a population of about 110,000. So it has its real nice areas of town all the way to the areas of town that you get out of before the sun goes down.
I know I keep mentioning you S i d and appreciate your feedback so keep it coming :)
I also appreciate anyone elseís feedback, I just keep mentioning S i d as I have followed this board for several years and it just seems like him and I kind of have the same town make up and residential places. I look forward to hearing from everyone that has some knowledge on this subject. So glad I found this place. --24.245.xx.xxx
Getting to next level (by S i d [MO]) Posted on: Jan 19, 2023 3:17 PM
Hey Otis... yep, we share some stats. I'm 47, so I've got just a few years (and gray hairs) on ya.
The town I'm in (Springfield, MO) is around 165,000, but the metro area is 250,000. The place I just picked up is in the town of Nixa, which is 15 minutes south of where I am. I'd rate this property as a Class B+. It's nested between a Nice B+ residential hood and another strip of commercial properties right off the main highway.
All this to say, it's nicer condition wise, age-wise, and location-wise than all my residentials.
Regarding vacancy: I have an eclectic mix, but most are things related to automotive repair, customization, and sales. The retails units are things like insurance agency, coffee shop, a small church, counselors, and a financial planner. All stuff where the person provides a specific, skilled service.
Most of my autoshops get rented before they come vacant. I've got a list of people who know I have shops and say "Keep me in mind when the next one comes open." --184.4.xx.xx
Getting to next level (by Chris [CT]) Posted on: Jan 19, 2023 3:50 PM
When I jumped into larger projects I already had a construction business and a track record with the bank. The apartment complex's I build and lease are absolutely not no money down deals you need cash and assets.
You already have a start though, take a number of your 27 houses and do a 1031 into a larger property. The equity from the houses should be enough for your down payment and I bet if you ask your existing bank they would be interested in working with you.
Getting to next level (by Chris [CT]) Posted on: Jan 19, 2023 3:54 PM
Sid makes a great point above, you have to figure out what your goal is.
Some landlords want to own thousands of class c doors, some want fewer class a doors, some want commercial.
What worked for me is I figured out how much money I'd realistically like to make and worked backwards from their. --32.219.xxx.xx
Getting to next level (by GKARL [PA]) Posted on: Jan 19, 2023 6:18 PM
There's no one way IMO. I started with MFH mainly because I got started late and it was the best way for me to scale quickly. I have no grand designs to own 200 units however and I've owned mixed use buildings; one of which I'm converting to residential mainly because the mixed use part wouldn't have worked as well. For commercial, you're really reliant on the success of the business and some of the smaller mom and pop businesses are thinly capitalized thus present a bit more risk. That makes commercial very location sensitive and you have to be aware of any business on the wane. For example, many banks are reducing their footprint and there's less demand for office and retail space, so you have to be generally aware of economic trends and the types of businesses that will work given the circumstances. You can have extremely long vacancies as well but long tenancies too. It's a different kettle of fish and one has to prepare. I wouldn't mind a newer strip mall in a high traffic area depending on the business mix, but for now, I'm sticking with what I know which is MFH. BTW, I think the difference between MFH and SFH is very contingent on the type of SFH. Many here own small 2/1 SFH and I would consider those not unlike apartments given the size. --209.122.xx.xxx
Getting to next level (by T [IN]) Posted on: Jan 19, 2023 6:54 PM
I started with a SFH, moved to an 8 unit. Been doing multi's basically ever since. Got into commercial when my parents sold the home farm. Now office, retail, industrial. So...
My two cents to you....
.01: failure happens. you learn from it. to help avoid it, educate yourself. Read everything can on here, talk to them, there is a few other sites to gather info. Reach out to local commercial brokers. some are good, most are just a pretty face wanting to make a commission. You will find out after a few meetings/talks.
.01 Either sell a couple of those ATM duplexes and 1031 them into a commercial property or just flat refi them. Pull the equity out and put down on the property. Not sure of your age, but under 50 yrs old... I would refi. Over 50, 1031. Lighten the work load.
I'm like Sid, little industrial warehouse rock. Steel frame, insulation, concrete floors. Kind of hard to destroy. Next is multi units... Office buildings can suck. More maintenance... --170.203.xxx.xxx
Getting to next level (by Robert J [CA]) Posted on: Jan 19, 2023 6:58 PM
Depending on age, health and motivation, everyone's path is different. Remember we can't always have the time to deal with tenants, trash and toilets as we age. Taking care of family and enjoying ourselves before it's too late is important.
Instead of having 30 houses all over the place and having to be "hands on", one can consolidate into larger units and have a:
1. Live in Resident manager
2. Management company that supervises each property
3. Have retired handyman living in your larger apartment complex and have cellphone with walkies-talkie capable so once a problem in known, the property manager, Management Company and Handyman are on it!
While you enjoy the income. --47.149.xxx.x
Getting to next level (by Ray-N-Pa [PA]) Posted on: Jan 20, 2023 7:19 AM
First Off let me commend you. Your system is working for you and as long as you are happy with the results (and it is clear you understand the metrics) - you shouldn't change.
If though, you are looking at the business from different angles than just money - then maybe you should modify some aspects. If the amount of time management takes is a concern - address that specific part of the model. You could upgrade to class Bs or you could outsource the aspects of management you don't like the most.
If you want to hit another target you need to ID what you modify before anyone's help really matters though. For me, I love turn key investing. But that might not be right for the next person as you give up some of the returns for having a tenant signing upwards of 30 year leases. --24.101.xxx.xxx
Getting to next level (by Ray-N-Pa [PA]) Posted on: Jan 20, 2023 10:32 AM
I guess what I am asking - before trying to help you.....what is that next level?
Until what you want to do is established, it will be tough to reach it.
Maybe that goal is having 50 units. That is a bad goal as a Landlord, as 50 units don't tell you enough.
Maybe it is to have $15,000 positive cash flow monthly.
Maybe having your 27 units paid off by 2025
If that next level is doing a million dollar deal - go for it, as long as the numbers make sense.
It could also be reducing management burden
For Sid, it is making the jump to commercial and doing it with a nice seven figure deal.
These goals are relative to you - over in SoCal, most homes are seven figures. Here, $15,000 monthly cash flow is a nice retirement plan- in NYC not so much.
I can't recall where you are in Illinois Otis, but the value of money changes a great deal in your state too. Look at what a good job in Chicagoland pays vs say, Danville.
Getting to next level (by BRAD 20,000 [IN]) Posted on: Jan 20, 2023 2:02 PM
My suggestion: When SID says "portfolio" I interpret that as "Lifestyle". What do you want your LIFE to look like in 5 years.
My goal was to be FREE!!! to do the things I wanted to do - family, church, hobbies...so I set a dollar amount goal to replace the job. With that forefront in my mind ideas come, opportunities appear, and decisions are MUCH easier when I compared them to my LIFESTYLE goal.
I achieved that goal in just a few years because I had a focused purpose.
EDUCATION is vital to moving up.
MOTIVATION is even more important. I get motivation and inspiration for hanging with like minded folks at seminars, conventions...they can change your life!
Getting to next level (by Otis [IL]) Posted on: Jan 20, 2023 11:46 PM
Thank you all so much for the feedback. Iím in the Springfield Illinois area so a much lower cost of living compared to areas like Chicago etc.
My original goal was 10 units, then 20, well now we are at 27 because Iím sort of a real estate addict now :)
Over the years as Iíve ďmaturedĒ more as an investor I realize that number of units shouldnít be my goal. My goal is an actual true cashflow number a month. Wife and I both work full time jobs and contribute 20% of our income to our 401kís (mine regular, wifeís is Roth) both also have Roth IRAís we fund.
The way I have it figured now, in 10-15 years (only did 15 year loans) after selling off a few of our lower C almost D class houses and keeping just 20 of our solid Cís we would have a cashflow of $10-$12k a month in our pocket while still setting back 20% for expenses and setting back money for taxes and insurance.
So long story short if we didnít buy another property at all we would still have a very comfortable early retirement. I guess what eats at me is always wanting more when I see the money I can make. I love hearing everyoneís success stories and how they are growing but dang if it doesnít make me want to grow more. --24.245.xx.xxx
Getting to next level (by Otis [IL]) Posted on: Jan 21, 2023 7:55 AM
Ray-N-Pa the one bad part about keeping the residential rentals when Iím older is that there is not a property management company around here worth their salt. I see their listings that sit for weeks on end while Iím able to get a place rented fast. Iím also of the belief that no one else will ever take as good care of your property as yourself. Another thing is god forbid I leave the right side of this earth early I donít want my wife to have the stress of dealing with residential. This is my absolute biggest fear, I can run the residential fine but my wife although she is involved, I donít want that burden put on her.
So thatís why Iím looking more towards commercial. The thought of less returnís but more towards ďmailbox moneyĒ coming from NNN commercial is where I would like to be as I age. My plan is to keep paying down on the residential I have now (maybe picking up a smoking deal here and there also). Then try to move that equity over to NNN commercial. --24.245.xx.xxx
Getting to next level (by Ned [AL]) Posted on: Jan 21, 2023 3:12 PM
I share many of your stats, too. Age 49- Similar sized town/demographics...
I've got 25ish SFH in same price range (although my rents tend to be much lower for some reason...)
I've also got a handful of mixed use, a handful of MFH, and a couple of commercial.
~If you don't already have...focus on paying completely off at least a few SFH.
~I would def do commercial instead of MFH...unless you stumble over a great deal on MFH near you. If you want less instead of more hassle in your life, commercial beats SFH or MFH all day long.
~Recognize that your cash on commercial will prolly be less...but that's ok...cause it's WAAAAAAY easier from a management hassle standpoint.
~Recognize that your vacancies may be longer...but that's okay cause your tenancies will be longer, too.
~Def Use the equity in your paid off SFH as collateral toward commercial purchase. (my bank could care less either way...give 'em 20% cash down or 20% in form of collateral of a free and clear SFH
~Recognize that with commercial you need to be comfortable sitting on it for a bit if needed... and you may need to be creative with terms to make it fit for the tenant. There's no "standard" lease... it can be month to month...NN....NNN.... leasehold improvements built in, or not... etc, etc.
Getting to next level (by Ray-N-Pa [PA]) Posted on: Jan 21, 2023 5:10 PM
I love NNN in Illinois based on how your state reassesses - it allows you lower your NNN rental payments and ups the odds of renewal.
That said you seem to have your game in order so don't write off SFH out the window just because you don't have a professional property manager. You are wise enough to retire early - you are wise enough to train up the next generation of investor and sell them your places - with a life estate in them. Just a thought. --24.101.xxx.xxx
Getting to next level (by Ray-N-Pa [PA]) Posted on: Jan 21, 2023 5:13 PM
If you are willing to take the 2.5 HR drive up to Dixon next week, I'll be up there working on a NNN property that we just took back.
With no one there - there is absolutely no smoke and mirrors so you can see what these places look like in real life from the Landlord and investor perspective.
I can also outline with I love NNN in your state. --24.101.xxx.xxx
Getting to next level (by T [IN]) Posted on: Jan 21, 2023 9:27 PM
Natural progression to me is starting on properties that cash flow awesome but takes work/time. Mid career, you add commercial. Those cash flow positive properties help you carry the commercial when they come open. End of career, commercial is paid off... no low end stuff. You retire. You can find a good, commercial realtor to handle affairs quicker than a competent, residential manager
Otis, your ready for commercial based on what I'm reading in this post. Just need to decide which aspect of commercial to jump into. Office is more mgmt. intensive vs warehouse/industrial. Retail, somewhere in the middle... --170.203.xxx.xxx
Getting to next level (by Otis [IL]) Posted on: Jan 22, 2023 4:25 PM
Ray-N-Pa when is it you will be up in Dixon? I might be able to shift some of my day job work around to meet up with you. Would really appreciate being able to see first hand one of your properties. Depending on time of day you were going to be around, even buy you lunch or dinner to pick your brain on the subject a little. --24.245.xx.xxx
Getting to next level (by Ray-N-Pa [PA]) Posted on: Jan 22, 2023 6:47 PM
I'll be in town from 27th to the morning of the 30th.
Area code 724 --24.101.xxx.xxx
Getting to next level (by Ray-N-Pa [PA]) Posted on: Jan 22, 2023 6:49 PM
I am here to help any investor who wants to better themselves.
Brad is spot on when he says education is the key, but that is sometime difficult to know what to do without going down any rabbit hole.
I don't sell anything - I am here strictly to help....especially the leading contributors on this site --24.101.xxx.xxx