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No. of Recommendations: 4
Trick:
Only with maximum leverage can I make these things work. I'll sometimes reduce my leverage and wait a year or two to generate positive cash flow, if I think the property has some appreciation coming.

I love leverage. Leverage is simply fabulous when things are going your way.

But if things turn...

I have a 6 unit building in Dayton OH that for years was always full. I had a waiting list, and several years I booked 100% occupancy for the property. Made a lot of money.

Then drugs moved into the neighborhood because another landlord stopped paying attention. Long story short; the building got down to 1 tenant and I couldn't give them away. Crack houses to the left, right, and across the street. I couldn't get the police to clean up the neighborhood, so I placed mercenaries in the neighborhood, started vigilante activity, and ultimately was in a gunfight with a dealer.

Then the police came. Then we were able to clean up the neighborhood. At this time, the building has 5 units occupied and I hope to fill the sixth in the next couple weeks. But that is what it took. And consider what it cost me to carry that building.

I could have sold it, but for what? The time to sell is when things are going well, not when they are in the toilet.

Another example. I purchased a 56 unit complex in Springfield OH - 100% financing. The first year I owned it I threw 34 people out. I refilled it and made money while making repairs. A couple years later, I decided to reposition the property in the marketplace. So I began to do so. But then, I got caught in a market downturn in this region, and vacancies shot up. I am still wrestling with that, and the leverage has worked against me, with consequence that I am now selling off some assets to raise cash.

It's coming around, but it has been a struggle.

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