patrick.net

GNL says

How about this, for Eman and Bitcoiner...a ghetto rat gets first dibs on a sweet real estate deal with taxpayer money. AND, if the investment turns sour, the taxpayer bails them out. This, in turn, requires the city to increase taxes on real estate investors.

Only the city of Berkeley and SF lunatic politicians would think of this stuff IMO. No one in their right mind would.

Bitcoiner says

You should ask EMAN this, he’s the pro.
I haven’t done flips.

My rentals: that’s pretty straightforward. There’s a lot of fancy metrics you may apply but bottom line for me is:

I focus on detached SFH. Decent to good area. If it’s not an established known good area then it needs to have up and coming potential. PITI + safety cushion + hoa + property manager needs to be covered by rent with a 25% downpayment. It’s a long term play for me. I don’t mind (some text omitted to shorten quote...) nd your equity in the house and your rental income increases yearly. I asked a realtor friend who also owns the PM company to show me how his clients are doing. Most investors he works with put down significantly more than 25%. Instead of buying two rentals and stretching yourself you could just buy one and be on the conservative side. Slow and steady wins the race is my philosophy in real estate. Always have cash on the sidelines for a rainy day. Time and inflation is on your side.

Buying SFH with 25% down at break even or slightly negative cash flow was preached by the veterans in the Bay Area and SoCal. Rent and asset value increase with time. Time will do all the heavy lifting. When you’re retired, you’d have $1M in equity on each property.

I cashed out my IRA, paid the taxes and penalty, and used the money to buy real estate between 2009-2012. 😬

GNL says

It is an assumption because you do not KNOW. Some people become quite arrogant when they achieve success. I would not doubt you many be one of them since you spend so much time here boasting about how successful you are. Why are you doing that? No friends to spend time with?

Success is relative. My biz partner is worth $24M, and he thinks he’s middle class. He made his millions by selling his startup company at the age of 30. He’s 53 now.

My neighbor household income is well north of $500k/year. They own 20 rentals and they think they’re middle class. It’s like WTF?

Share knowledge and pay it forward is how we do it in real estate. The most amazing thing I’ve witnessed is that real estate billionaires are some of the nicest people I’ve ever met. The assholes are the ones who think they’re rich.

Eman says

I cashed out my IRA, paid the taxes and penalty, and used the money to buy real estate between 2009-2012. 😬

Have been thinking about this so often, I was able to get a 3 year 0% covid loan which was great, but really the idea of having to keep the money in by force or threat of penalty doesn't sit well with me, a free society shouldn't need this crap. It's just for people who can't manage their money, but in the end it makes everyone poorer. I'd abolish any such 401k "plans" that have penalties and restriction, everything should work like a roth at the minimum and be acessible.

Just got this in my inbox. Existing 5.7 cap with 7% stabilized. It’s not in my farm so I don’t bother to look into it.

Eman says

Buying SFH with 25% down at break even or slightly negative cash flow was preached by the veterans in the Bay Area and SoCal. Rent and asset value increase with time. Time will do all the heavy lifting. When you’re retired, you’d have $1M in equity on each property.

I cashed out my IRA, paid the taxes and penalty, and used the money to buy real estate between 2009-2012. 😬

Thank you sir! Nice to hear that.

And congrats on taking the risk to buy RE with IRA money. best move.

Eman says

I cashed out my IRA, paid the taxes and penalty, and used the money to buy real estate between 2009-2012. 😬

Tread lightly with this advice. Government, banks, etc. can't touch those assets. I wouldn't liquidate them ever unless you needed that cash to live. Risky move. Glad it worked out, but I wouldn't put this out as advice to get into RE. Which I understand the emoji. It was a stupid move and you lucked out and you know it. Keep assets protected and you can do what you want.

WookieMan says

Eman says

I cashed out my IRA, paid the taxes and penalty, and used the money to buy real estate between 2009-2012. 😬

Tread lightly with this advice. Government, banks, etc. can't touch those assets. I wouldn't liquidate them ever unless you needed that cash to live. Risky move. Glad it worked out, but I wouldn't put this out as advice to get into RE. Which I understand the emoji. It was a stupid move and you lucked out and you know it. Keep assets protected and you can do what you want.

Not advice. I made a bet, and it worked out for me. I encountered a few individuals on BiggerPockets who did the same move. None regretted it. In fact, they all were happy they did it.

You and I likely don’t agree on this, but I’ve viewed IRA as live less now so we can live less later. I’d rather live more now so I can live more later. Put enough money in 401k to get the max company match and not a penny more. Other than that, I don’t give a damn about retirement account/plan. I think it was designed so money manager can charge fees for doing nothing. It’s like a lifetime annuity for them.

We don’t have a 529 plan for our daughter. I’d rather put that money in real estate, use the cash flow to pay for her college tuition. Once she’s done with college, we still have the cash flow for decades to come.

Eman says

Just got this in my inbox. Existing 5.7 cap with 7% stabilized. It’s not in my farm so I don’t bother to look into it.

Looks like one needs an AK-47 if he wants to go collect past due rent there...

https://www.redfin.com/CA/Hayward/26485-Gading-Rd-94544/home/1752162

mell says

Eman says

I cashed out my IRA, paid the taxes and penalty, and used the money to buy real estate between 2009-2012. 😬

Have been thinking about this so often, I was able to get a 3 year 0% covid loan which was great, but really the idea of having to keep the money in by force or threat of penalty doesn't sit well with me, a free society shouldn't need this crap. It's just for people who can't manage their money, but in the end it makes everyone poorer. I'd abolish any such 401k "plans" that have penalties and restriction, everything should work like a roth at the minimum and be acessible.

Yeah.

Now that I'm retired and living off those types of accounts, it made me feel stupid. Because nearly all the growth of those was long term capital gains, and dividends, which on the federal return are taxed at a lower rate than ordinary income. But the retirement account withdrawals are taxed as ordinary income.

Makes me feel stupid.

Looks like one needs an AK-47 if he wants to go collect past due rent there...

https://www.redfin.com/CA/Hayward/26485-Gading-Rd-94544/home/1752162

Don't exaggerate, is not bad location. Glock 9 mm will be sufficient for surely.
5 unit is step up in expense to finance than 4 unit.

The type of person who would want to be a tenant there is not the type of person who I'd want to know I'm the landlord.

Eric Holder says

Eman says

Just got this in my inbox. Existing 5.7 cap with 7% stabilized. It’s not in my farm so I don’t bother to look into it.

Looks like one needs an AK-47 if he wants to go collect past due rent there...

https://www.redfin.com/CA/Hayward/26485-Gading-Rd-94544/home/1752162

Not my farm so I can’t comment on its location. Just like anything in life, have to kiss a lot of frogs before I find my princess. Good deals rarely make it to the market.

One thing I’ve learned is that there are more wear and tear on lower end properties. Everything in life has a price. There’s a reason why something is cheap and not selling.

Eman says

I cashed out my IRA, paid the taxes and penalty, and used the money to buy real estate between 2009-2012.

Yeah, seems like a big risk...at the time. What convinced you to throw all your chips on the table at that time?

Eman says

The assholes are the ones who think they’re rich.

I have no problem with you or Bitcoiner. However, I do stand by my comment about adding to the economy. Rent seeking (no just in RE) is an extraction moreso than an addition imo.

B.A.C.A.H. says

But the retirement account withdrawals are taxed as ordinary income.

yeah, that is why i try to get my family and friends to maximize their roth ira contributions

GNL says

Eman says

I cashed out my IRA, paid the taxes and penalty, and used the money to buy real estate between 2009-2012.

Yeah, seems like a big risk...at the time. What convinced you to throw all your chips on the table at that time?

Historical data. I did a ton of research and was convinced it was a once in a lifetime opportunity for real estate. Everything was on 🔥 sale. I quit my W2 and plowed into real estate full-time. On deals I couldn’t close b/c I ran out of cash, which wasn’t much, I brought on partners. 50% of something is better than 100% of nothing. Or passed them to family members.

Ironically, I only saw upside and didn’t see much downside (risk) based on the numbers. Turned out, my estimated numbers were way too conservative.

My buddy bought this building in my farm 1.5 years ago. His rent roll has gone up 15%. He works for the Federal Reserve and has a pension. Rent seeking or not, he also gets a pension. Is pension also a form of rent seeking? 🤑

https://redf.in/ckKM1z

GNL says

Eman says

The assholes are the ones who think they’re rich.

I have no problem with you or Bitcoiner. However, I do stand by my comment about adding to the economy. Rent seeking (no just in RE) is an extraction moreso than an addition imo.

Real estate is a means to an end. We’re all only on this earth for a short amount of time. I want my stay here as enjoyable as possible. I want to have control of my time so I can spend it however I want. Since HS, I knew I didn’t want to work for others. Working for others is also a means to an end. This was why I didn’t last very long in my W2 career.

Rent seeking or not, this is only a start. My goal is a lot bigger, but I’m doing it at my own time. No deadline and no one tells me what to do. If/when I die and I haven’t reach my goal, it is what it is. No need to work myself to death to get there sooner. I want the journey to my destination as enjoyable as possible so I don’t mind if others disagree with the way I make my money. It’s all good. We can agree to disagree.

My other friend bought this building in our other farm. This is by San Jose Japantown. We offered the seller $2.7M in 2017, but he insisted on getting $3M for it. So I passed it to my friend, who bought it for $2.95M.

Last year, they refinanced and got 50% of their money back. Husband works for GOOG for 17 years. Wife for for FTNT. High income earners.

My partner and I own 24 units in this neighborhood. Paid $5.04M. Appraised for $7.5M last year when we refinanced.

https://www.zillow.com/homedetails/589-N-3rd-St-APT-04-San-Jose-CA-95112/2092967938_zpid/

Eric Holder says

Looks like one needs an AK-47 if he wants to go collect past due rent there...

Belt fed or dead! You have to outgun the locals to get street cred.

Eman says

Rent seeking or not, he also gets a pension. Is pension also a form of rent seeking?

Yes, especially when it is paid by people that never had a vote or choice in said pension. The grifting is aplenty. The government has had to cover how many pension funds? I think they even have a federal pension guarantee fund or something? Haha, did I hear uncle Sam (you and I) are paying Ukraine's pensions?

GNL says

Haha, did I hear uncle Sam (you and I) are paying Ukraine's pensions?

Nope, just you are paying. Everyone else is on their own government pension. (If you researched how many people are collecting gov pension/disability/grants you may find this joke closer to the truth than you like).

HeadSet says

GNL says

Haha, did I hear uncle Sam (you and I) are paying Ukraine's pensions?

Nope, just you are paying. Everyone else is on their own government pension. (If you researched how many people are collecting gov pension/disability/grants you may find this joke closer to the truth than you like).

You're not paying through inflation?

@Eman, I would agree with anyone who would suggest I spend too much time being unhappy about the current American system(?). I'll live my life trying to add and/or improve what I see around me. The financial system and incentives are, imo, exploitive but, I would imagine that's with any system. I pride myself in making money while improving other people's lives.

What is anyone's opinion, here, on how Soros has achieved his financial position? We are financializing everything. Carbon credits anyone? If a thing can be done, it should be done?

Just some thoughts.

Some unsolicited advice: be careful how you "think" you are helping your family. I'm sure almost everyone can attest to the horrible results $$ has had on friends and loved ones. My son in law is part of a family that owns about a billion dollars worth of real estate. My 2 grandkids already own part of the family REIT. I am quite worried how they will end up. Seriously.

GNL says

Some unsolicited advice: be careful how you "think" you are helping your family. I'm sure almost everyone can attest to the horrible results $$ has had on friends and loved ones. My son in law is part of a family that owns about a billion dollars worth of real estate. My 2 grandkids already own part of the family REIT. I am quite worried how they will end up. Seriously.

Wealth can be destroyed in a generation or less. Assets that produce cash flow can be sold by people who don't know what they are doing but just inherited the estate.

GNL says

Eman says

Rent seeking or not, he also gets a pension. Is pension also a form of rent seeking?

Haha, did I hear uncle Sam (you and I) are paying Ukraine's pensions?

No, they are being paid from the $350B in Soviet assets.

Bitcoiner says

Yeah, starting a new account and using “Bitcoiner” instead of my previous name “bitcoin” is pretending to be someone else. I even used the same profile pic. LOL, thank you for the laugh.

That account only goes back a few more years. Interesting that when I search Logan and try to click on his user name, I'm not directed to his account page. I guess it's been wiped? Would like to correlate Logan's last known account with yours, I still think it's you Logan. But no matter which version, we still see through you.

You know who else is on TV, Biden. Fauci too. You wanna impress me, start an independent news site. TV is for entertainment and brainwashing, guess which one is Logan...

RWSGFY says

GNL says

Eman says

Rent seeking or not, he also gets a pension. Is pension also a form of rent seeking?

Haha, did I hear uncle Sam (you and I) are paying Ukraine's pensions?

No, they are being paid from the $350B in Soviet assets.

Yeah, ok.

EMAN, question for you. I am a small time investor. SFH’s only. If you were in my shoes would you recommend looking into multi family investments or should I stick with SFH’s. SFH’s seem relatively easy to manage/handle with my PM. They are all in AZ. I live in North county SD. Multi family seems like a much bigger time effort and headache. In general, I suppose apartments mean lower quality of renters (more issues/complaints/dumb mistakes by renters etc). For my SFH’s I was lucky so far. Great renters, barely complain, pay on time, clean etc.
I guess my question is, from your experience is it worth the time/nerves to get into multi family? I thought of getting into multi family with a partner. But not easy to find the right one and that could cause other issues down the road. I am far from going full time into RE and quitting my W2 job. So I prob can’t handle another FT side job by managing rentals. Any advice would be much appreciated.

GNL says

RWSGFY says

GNL says

Eman says

Rent seeking or not, he also gets a pension. Is pension also a form of rent seeking?

Haha, did I hear uncle Sam (you and I) are paying Ukraine's pensions?

No, they are being paid from the $350B in Soviet assets.

Yeah, ok.

Glad I relieved your worries on the matter.

Eman says

Not my farm so I can’t comment on its location. Just like anything in life, have to kiss a lot of frogs before I find my princess. Good deals rarely make it to the market.

One thing I’ve learned is that there are more wear and tear on lower end properties. Everything in life has a price. There’s a reason why something is cheap and not selling.

I'm no expert but looking at the numbers provided on the Redfin site this does not look like "cash your IRA and quit your W2" kinda deal. With estimated monthly payment of $10,424 and annual gross income of $130,056 what's left at the end of the day - $5K per year? How many of $300Ks your average under-40 tech worker can cash out of their IRA? Maybe 2. Maybe. So $10K per year and dealing with tenants, toilets and all that jazz...

1337irr says

GNL says

Some unsolicited advice: be careful how you "think" you are helping your family. I'm sure almost everyone can attest to the horrible results $$ has had on friends and loved ones. My son in law is part of a family that owns about a billion dollars worth of real estate. My 2 grandkids already own part of the family REIT. I am quite worried how they will end up. Seriously.

Wealth can be destroyed in a generation or less. Assets that produce cash flow can be sold by people who don't know what they are doing but just inherited the estate.

This happens often in real estate. These are some of the best purchases. Parents buy income producing assets in their prime age, around 40’s. Once they’re retired, they either sell and 1031 exchange it into a NNN for income, or they’ll keep it until they die. The kids inherit the assets, get a stepped up in basis, sell and walk away with money tax-free. This is the reason why multifamily tends to get sold every generation.

https://redf.in/ckKM1z, my buddy bought this building 1.5 years ago. The listing agent helped the buyer buy this building 35 years ago for $650k. Now that the seller is ready to 1031 exchange into a NNN, he got to list it.

Eric Holder says

Eman says

Not my farm so I can’t comment on its location. Just like anything in life, have to kiss a lot of frogs before I find my princess. Good deals rarely make it to the market.

One thing I’ve learned is that there are more wear and tear on lower end properties. Everything in life has a price. There’s a reason why something is cheap and not selling.

I'm no expert but looking at the numbers provided on the Redfin site this does not look like "cash your IRA and quit your W2" kinda deal. With estimated monthly payment of $10,424 and annual gross income of $130,056 what's left at the end of the day - $5K per year? How many of $300Ks your average under-40 tech worker can cash out of their IRA? Maybe 2. Maybe. So $10K per year and dealing with tenants, toilets and all that jazz...

Not my cup of tea so I won’t spend time on it.

OTOH, a quick glance on this 6-unit property in Santa Rosa looks very interesting. A 3/1 SFH, a 1-bed cottage and a 4-plex for $1.8M. 🤔

But then again, not my market and not in a vacation rental area I’m looking for.

It’s our job to figure out and polish the diamond in the rough. No one is going to sell us a prime piece of asset at a big discounted price.

Bitcoiner says

EMAN, question for you. I am a small time investor. SFH’s only. If you were in my shoes would you recommend looking into multi family investments or should I stick with SFH’s. SFH’s seem relatively easy to manage/handle with my PM. They are all in AZ. I live in North county SD. Multi family seems like a much bigger time effort and headache. In general, I suppose apartments mean lower quality of renters (more issues/complaints/dumb mistakes by renters etc). For my SFH’s I was lucky so far. Great renters, barely complain, pay on time, clean etc.
I guess my question is, from your experience is it worth the time/nerves to get into multi family? I thought of getting into multi family with a partner. But not easy to find the right one and that could cause other issues down the road. I am far from going full time into RE and quitting my W2 job. So I prob can’t handle another FT side job by managing rentals. Any advice would be much appreciated.

1) you must have a property manager for all your rentals. You want to be an investor, not a landlord.

2) it depends on your goal. If you want to keep your W2, slowly accumulating SFH is a good approach.

3) Owning and running multifamily is a business. Treat it like one. I help my friends with repairs, whenever I can, as they’re still holding down their W2, and these buildings are in my farm.

4) my partner and I don’t have a job so real estate investing is our full-time gig. Multifamily buildings are our babies. On average, we get $250-$400k/year distribution each. It took us 6-7 years to get to this point. It’s definitely better than working a W2 for me. My partner also gets $180-$200k/year in dividends from his stock portfolio alone so he’s not hurting for money.

5) If you could come up with a plan and could execute it, it wouldn’t be a bad idea to quit your W2 and give it a shot. Have your wife bring home the bacon while you’re building the family empire. This was my approach, and fortunately it worked out.

6) not bragging, but my friends were complaining about getting raises below the rate of inflation. This is the beauty of real estate. Low tax rates. I didn’t come up with the IRS tax codes. Don’t hate the players. Hate the game.

B.A.C.A.H. says

Now that I'm retired and living off those types of accounts, it made me feel stupid. Because nearly all the growth of those was long term capital gains, and dividends, which on the federal return are taxed at a lower rate than ordinary income. But the retirement account withdrawals are taxed as ordinary income.

That's not quite right. When you earn W2 money you have two ways to go:
(1) Pay income tax, then invest where you pay capital gains over and over again for each capital gain.
(2) Pay no income tax up front, invest with no taxes on capital gains, and then — finally — pay income tax at the end.

Situation (2) looks like a lower tax deal generally. Add to it that you can flee California and have lower income tax in retirement.

The problem with (2) is that you are a bit limited in use of the money until you hit retirement age.

The other problem with (2) is if you work your whole life in a no-tax state and then decide to move to California or New York for retirement. But if that is you, you have bigger problems then just taxes!

Eman says

1) you must have a property manager for all your rentals. You want to be an investor, not a landlord.

2) it depends on your goal. If you want to keep your W2, slowly accumulating SFH is a good approach.

3) Owning and running multifamily is a business. Treat it like one. I help my friends with repairs, whenever I can, as they’re still holding down their W2, and these buildings are in my farm.

3) my partner and I don’t have a job so real estate investing (some text omitted to shorten quote...) and give it a shot. Have your wife bring home the bacon while you’re building the family empire. This was my approach, and fortunately it worked out.

6) not bragging, but my friends were complaining about getting raises below the rate of inflation. This is the beauty of real estate. Low tax rates. I didn’t come up with the IRS tax codes. Don’t hate the players. Hate the game.

What's "distributions" in this context? Equity loans?

Eman says

1) you must have a property manager for all your rentals. You want to be an investor, not a landlord.

2) it depends on your goal. If you want to keep your W2, slowly accumulating SFH is a good approach.

3) Owning and running multifamily is a business. Treat it like one. I help my friends with repairs, whenever I can, as they’re still holding down their W2, and these buildings are in my farm.

3) my partner and I don’t have a job so real estate investing (some text omitted to shorten quote...) and give it a shot. Have your wife bring home the bacon while you’re building the family empire. This was my approach, and fortunately it worked out.

6) not bragging, but my friends were complaining about getting raises below the rate of inflation. This is the beauty of real estate. Low tax rates. I didn’t come up with the IRS tax codes. Don’t hate the players. Hate the game.

Thank you sir!

RWSGFY says

What's "distributions" in this context? Equity loans?

Distributions = cash flow + flip profits + cash out refinance.

Cash flow and cash out refinance are generally tax-free/deferred. Flip profits can be tax-free if I have enough phantom losses to offset. Taxes will be paid on what I can’t offset.

I had big phantom losses in 2019 so even my wife’s six figure salary and flip profits were completely being offset. Our AGI was just over $26k so we were in the 0% tax bracket. We got a full refund on the Fed and State tax withholdings on my wife’s salary. I love my CPA.

Formula is quite simple on the cash out refinance. 3% annual rent increase on $2M gross rent = $60k. Say 30% goes to pay for increase in expenses. Net $42k/year. That’s $21k/year increase in cash flow per guy. Which job offers $21k/year in salary increase year in and year out?

$42k/year = $3.5k/month. $3.5k/month can service $700k+ in mortgage payments when rates were 3.25-3.75%. Principal pay down is $250k/year on the mortgages. Rather than taking $42k/year in cash flow distribution increase, we do cash out refinance on a couple buildings each year. That’s $950k in equity that can be tapped each year. Our target is $500-$700k/year in cash out proceeds and use that money to buy another building. Rinse and repeat.

Each year, we set aside $150k for capital improvements/remodeling. This will allow us to increase rent significantly whenever we have a turnover. $500/month rent increase = $100k in equity. $1k/month = $200k. 3-4 turnovers can equate to $300-$600k increase in equity, not including the regular 3% annual rent increase on all other units. This is why we love buying underperforming assets. Don’t mind “overpaying” for them, polishing them up and reaping the rewards. We’re patient and let time do the heavy lifting.

Even with no natural turnovers, $50 annual rent increase per unit on a 10 unit building = $100k increase in equity. 5-7 years and we’re looking at $500-$700k, not including principal pay down. I love talking real estate.