The Wealth Elevator Podcast: Real Estate, Taxes, Investing SPC080 - Moving from Single Family to Multifamily Investing
Hey guys I’m about to get naked here… I am personally making a shift in my portfolio to MFH syndications and wanted to see if you could help me find a buyer for my stabilized 10 property 1.2M portfolio.. 10 B Class properties in Birmingham/Atlanta/Indy (rents $900+/month)
I have selected a few potential turnkey rental sellers, however, I wanted to leverage my network and see if we can cut the broker commissions out of it. I’ll give you details on how you can get the P&L for the past few years on every property but first...A few PSAs.
- National Save for Retirement Week: October 15 – 21, 2017
- Scam emails to get information from more and more wholesalers
- Insurance want 5% deductible
My story - bought a couple of rentals in Seattle and 1031 exchange those to 10 SFH essentially turnkey rentals out of state in Atlanta, Birmingham, Indianapolis.
The other day I asked the question on BP… did not get much of a response since BP is a platform for newbies or active investors who flip or wholesale homes. SPC is a platform with secret Facebook groups of profession W2 employees with some cash and little time on their hands.
As I talked a few podcasts ago of a 10k repair, and multiple other headaches, my attitude for these SFHs are changing. Its kind of funny talking to the many of you that are setting up calls to get on the Hui Deal Pipeline Club to getting sent the deals I come across:
https://simplepassivecashflow.activehosted.com/f/3
Please go through the first 20 podcasts in early 2016 and love the story of this SFH buyer but then they are like WTF you are turning on us like a villain going to MFH.
"Find me an investor who has 50 SFHs and I will show you an investor who was invested under a rock and stoned himself to death with said rock" -Archimedes
After over a few hundred investor consultants over the past couple years here is what I tell W2 employees. For those who are able to save more than $30k a year or have substantial liquidity (over 200k), being a landlord and especially flipping is a lot of work. If you like it cool... but just remember why we got into this... To be free from a JOB. Directly investing in a turnkey rental or small MFH is a good way to start to learn and build up the war chest to go into my scaleable investments such as private placement syndications. Whatever you do, try to be as close to the investment as possible. This is the fundamental problem I have with Wall Street who takes too much fees off the hard working efforts of the middle class.
The straw that broke the camels back...
One of my Atlanta properties went over a changeover, tenant went MIA, went through process to evict - always start the time clock. Armed sheriff had to go and remove items on the street, dead cats were found, $5000 just to remove items, concern over the property could have been condemned. I got Proserve out of Atlanta to go in with radiation suits to clean it up, got a bill for $27K, wtf, some of the scope items were a little ridiculous like 500 dollars for gutters, 5000 for paint, and siding etc. I had them re-estimate it to give me the "dude I'm not a rich idiot price and got it lowered to 20K.
There is no such thing as turnkey. Check out these disaster photos… https://photos.app.goo.gl/R4PZLuOLGHONO5Rl2
Tony Robbins says “Things don't happen to you but for you.”
This was a sign from above which many of you guys hear from me that I sort of believe in. I was already mentally making the shift to making the move. Going down the quote from the repair company it was clear that a lot of the scope items were a bit excessive and the pricing was inflated. This was to be expected, for example paint on rooms that did not really need painting for $5000 or new gutters cleaning for $500.
If you want to see this document. Please leave me an iTunes review or send me an email referral to a friend and i'll send it over. Lane@SimplePassiveCashflow.com
Stages of trauma… denial, anger, sadness, motivation.
What I know now I am able to now only make a high yield but a fraction of the effort. None of this screwing around sending docs to my lender in the evenings for a couple months to get one dinky SFH to cash flow a couple hundred dollars a month then do it all over again 20-50 times… then to have it all taken away with a large capex or turnover repair.
Tony Robbins says “You destiny is shaped in your decisions.”
We waste so much time making decisions. A lot of people myself included get shiny object syndrome when really its an excuse.
This was my hero moment or burning of the boats moment to leave the security of a few thousand of passive cashflow a month to go liquid for a while. Hopefully Amazon will announce that Atlanta will be the new second HQ on their quest for world domination.
One drawback about selling is about repaying a lot of depreciation recapture and capital gains going back all the way from 2009. As you remember I traded my two Seattle properties for the majority of these rentals via a 1031 exchange. This is why I am not a fan of a 1031 exchange no matter what you hear on a surface level on other podcasts. Another reason to keep listening and please do me a favor and share it with friends because we go deep on this stuff because I’m learning everyday. I’ll repeat I don’t like 1031 exchanges because many of us are going to graduate in large syndications and that is not a like kind exchange. Executing a 1031 most likely means you are going into a lukewarm deal and lose all your negotiation power as a buyer. But i'll expand on this at a later date.
Picture of my back of envelope tax hit
I want to be very clear… If you are not an accredited investor, sophisticated, or have a large sum of liquify... single family homes is the starting point for you. Too many call me with lofty goals and have list of pro’s/con’s of MFH vs SFH, but you need to know the basics before you screw up the big stuff. You have to pay your dues. Set that barrier to entry lower because most people won’t do anything.
That said for a limited time I invite you listeners to make offers on my portfolio of SFHs “Lane’s Pac-10”. List price is 1.2M right about 1% Rent-to-Value Ratio (More info -http://simplepassivecashflow.com/podcast-3-rent-to-value-ratio/). Will need you to make sure you sign up for my Hui Deal Pipeline Club:
https://simplepassivecashflow.activehosted.com/f/3
I figure it was only fair if I showed you my naked photos… I mean P&Ls that you take a few minutes to complete a form with your investor profile on.
And if you are listening to this after 2017 and would like to see how frequency of rental checks, vacancy, late payments, repairs, cap ex across all my properties please leave me an iTunes review or send me an email referral to a friend and i'll send it over.Lane@SimplePassiveCashflow.com
Mastermind Club: If you or someone you refer invests at least $50K into one of my future deals you will be invited to my exclusive Ali'i Mastermind with other 12-20 other serious investors to discuss deals and our own portfolios.
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