What would you do? 50 year old starting the journey
Westfield, IN · Member since 2017 · 8 posts · 15 votes
What would you do? 50 year old starting the journey
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Zach LemasterBusiness Member
Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votesThanks for the mention about RTR! We are available to answer any questions you have at any point in time.
You are definitely in a good spot with having that much equity. I would take some time to really define your goals and strategy to see how you should apply that HELOC to scale. Do you want to continue down the development side & focus more on STRs? Why Indy? We are heavily investing in Indy, but we also like many other markets that perform excellent as well. Recently I've been focused personally on how to make my STR's perform in the top 1% of our market which is a 6 figure different from being in the middle 50% of where avg properties perform. It's all in the mngt! Anywho, our team is available to answer any questions you have at any point in time. Here are some threads that might be interesting to read as well from previous RTR clients:
https://www.biggerpockets.com/forums/92/topics/518583-feedback-on-renttoretirement-and-zach-lemaster
https://www.biggerpockets.com/users/ZacharyCole/references
https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review
37 Replies
- Investor · Miami, FL · Member since 2016 · 47 posts · 47 votes3y
Brian I will speak from personal experience and I am much younger than you but I started when I was 22 years old and I made every possible mistake. I would highly advise you to not use HELOC to finance a deal. Reasons are obvious, if you are borrowing against your primary residence.
If I could do it all over again, I would: find a hard money lender (most have kind of the same terms 90% of purchase, 100% of rehab) to fund your first deal and I would do a flip to start and get your feet wet. Nothing crazy, something in the $130-$140k range that needs $50-$60k rehab and you can sell for $250-$260k. You can find those all day specially in your area and you only need to put 10% down which seems doable given the description of your finances.
Flips are a great way to get you started. I would be heavily invested in the entire process from start to finish, including the renovation (from a management perspective and of course paying visits to the site and talking to all the contractors). That will help you build confidence and a nice understanding of the process.Do not follow the advice of all these instagram "gurus" telling you how they flip 50 houses a month from their couch is pure BS or how they do 10 BRRRRs all over the country. Not happening. I have been involved in many construction projects all over FL, OH, IN, NY and NC and not a single one I could have ever pulled off from my couch. It takes a lot of patience, strategic financial planning and most importantly a reliable and punctual team to finish on time.
After your first flip, you can then figure out your strategy for a BRRR or even see if that's the route you want to take. These type of deals usually require much more work because you have to take into consideration the 70% rule and other stipulations. If you are planning on BRRRR, you can always find a lender that will give you the funds for purchase, rehab and then month 3 -6 you can refinance the loan with the same lender with a product for rental purposes avoiding you using a HELOC.
As far as Airbnb, I owned and managed 27 units at one point, in South Florida. It was a mission to say the least, and you definitely don't want to get into the hospitality business unless you know what you are getting into (seems you have a busy schedule given your strong W2s). People will say oh just hire a property manager, sure, but they will send a handyman or contractor to resolve the tiniest problem and will end up cutting into your profits big time. Not to mention Airbnb has been declining over the past year tremendously, and user confidence has deteriorated and is continuing to do so. The Airbnb market is highly, highly saturated and will only get worse. I see condos that retail for $2M renting for $250/nt. That is absurd from a financial standpoint. I am afraid you will end up getting exhausted with all the problems guests bring, and the bills from the property management company will not make much financial sense at the end.
Also, one of the reasons I really like using hard money to do flips is because you have that extra peace of mind that you are not setting up yourself for failure since they are also doing their due diligence to make sure they minimize the risk on their end, which ultimately benefits you.
Connect with a good realtor that can find you a great flip and start there, use the lender's money, leverage your cash. Learn in the process. Rinse and repeat.
Good luck with your endeavors and reach out with any questions!
- Real Estate Agent · Hudson Valley and Catskills, NY · Member since 2020 · 27 posts · 26 votes3y
Hey Brian! If you're starting out, I would work on the Airbnb for a little while and get your feet wet. The returns can be huge, but in a remote location like the ADKs, the challenge is building that team that will be taking care of your property since you are managing remotely. You need solid cleaners, landscapers, SNOW PLOW, but I know you know all that since your wife is from the area.
If your HELOC is a 30 year with 10 year interest only, take a year and get that puppy up and running, and monitor your local markets. Things are weird right now.
- Investor · Spokane, WA · Member since 2015 · 238 posts · 133 votes3y
@Patrick Drury Can you elaborate on your mentor who started at 50? What did he start with? There's a big difference between starting with not much cash vs alot of cash.
@Brian Beck- pick a scenario and get pre approved for this scenario and go from there
- New to Real Estate · Shelbyville, KY · Member since 2022 · 14 posts · 1 vote3y
Quote from @Brian Beck:
I am 50 and have a goal to replace my income, or at least a lot of it by 60. My wife and I have strong W2s and are closing on a 300K HELOC this week. We are in process of building an Airbnb (Den Modern Cabin in Adirondack mountains) in her hometown in upstate NY where we already own 15 acres. I want something to get going here in Indianapolis as well and have a decent start and some solid contractors. My initial thought is BRRRR, but with rates where they are a bit nervous there. Duplex sounds interesting and cash flowable, but I am also thinking of turnkey (looked at rent to retirement) to get my feet wet and not get too buried in my first door. There are so many options, but having 300K HELOC available gets me excited. What would you do? Psyched to learn from you all.
Hey Brian, We are in a very similar situation and I have already learned a lot from the others here who have answered you !!Best of Luck !!
- Real Estate Agent · Indianapolis IN · Member since 2022 · 13 posts · 2 votes3y
I agree with Eliott. Doing smaller, quick projects would increase your capital at a much faster rate. BRRR can still be a method down the line once you've increased your capital to a more desirable level. 300k is a such a good amount of capital to have in this climate if you were to go the quick project route. Just need the right team to get the projects done in a timely manner. I work with investors throughout the Indy metro area to help them acquire investment properties. A lot of them are taking this same approach. Either way I hope everything works out well for you in your real estate journey.
Best Wishes,
- 3yZach LemasterBusiness MemberRental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
Thanks for the mention about RTR! We are available to answer any questions you have at any point in time.
You are definitely in a good spot with having that much equity. I would take some time to really define your goals and strategy to see how you should apply that HELOC to scale. Do you want to continue down the development side & focus more on STRs? Why Indy? We are heavily investing in Indy, but we also like many other markets that perform excellent as well. Recently I've been focused personally on how to make my STR's perform in the top 1% of our market which is a 6 figure different from being in the middle 50% of where avg properties perform. It's all in the mngt! Anywho, our team is available to answer any questions you have at any point in time. Here are some threads that might be interesting to read as well from previous RTR clients:
https://www.biggerpockets.com/forums/92/topics/518583-feedback-on-renttoretirement-and-zach-lemaster
https://www.biggerpockets.com/users/ZacharyCole/references
https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review
- Real Estate Agent · Indianapolis IN · Member since 2022 · 51 posts · 24 votes3y
Hey Brian!
So many great responses on here. Im sure this has given you a lot to think about. If turnkey is your ultimate decision there are a few duplex's the city but not many. I am currently working with a few homeowners who want to take their stab at real estate investing. They both liked the idea of a turnkey duplex.
If BRRR ends up being your more ideal scenario the city is FLOODED with duplex's that are just waiting for some attention. There is so much opportunity for the right person within the Indy metro market.
If I can ever be of any assistance to you feel free to reach out. Id be more than happy to send you what is currently on the market and my opinion on it. Cheers!
- Investor · Columbus, OH · Member since 2020 · 39 posts · 32 votes3y
Hi Brian,
My husband and I started investing at 57 and 3 years later (yes, we are 60) we have 20 units and my income has been replaced. The goal for 2023 is to grow enough to replace my husbands. I can't tell you what peace of mind it has brought us while watching our 401Ks shrink and knowing that layoffs are around the corner at our companies. Both of us should be safe from layoffs and we still have a lot in our 401Ks, but we are not losing sleep wondering about retirement and are still on track to retire in 2 years. But that's only because of real estate.
My husband and I started with SFH and just last year moved primarily into BRRRRs. Yes, the interest rates for refinancing are rough but I've always heard "Date the rate and Marry the property." Rates change and they will eventually go down. So if we are making cash flow at 7.5%, we definitely will when they get back to the 5% range. We also had to move into BRRRRs as we were having a difficult time finding properties. Alot of investors were cashing out but wanted retail pricing. By going the BRRRR route, we had less competition and got better deals. BUT, BRRRRs are a lot of work. Does your job allow for the added work/stress? Even with the best contractor, there will be issues/questions, etc. that crop up during business hours. Can either one of you accommodate those with your job? What is your refinancing strategy? Always make sure you have that covered before you buy. If getting conventional mortgages, you will probably need to wait 6 to 12 months to refinance. Commercial mortgages don't require the "seasoning" period but have their own cons.
Good luck.
THE quicker the job the higher the cost. Contractors are now aware of their value to investors and it shows in their huorly rates and some wont even spare a half hour to look at the work. On a $250 paint job in a vacant house I had up to $1500 estimate. I wish these guys would just say no they dont have time. ... or interest, rather guzzle beer & watch CNN...
- Real Estate Agent · Bradenton, FL · Member since 2019 · 21 posts · 6 votes3y
Hey Brian!
Welcome to BP and congratulations for shifting your mind set! That is amazing at any age. How does the ancient Chinese proverb go..." The best time to plant a tree is 100 years ago. The second best is today". Have you thought about the option of Mid term rental after you BRRR? Depending on the area you can make more than a traditional rental, but not have the same restrictions as an STR. No matter what you do, I wish you the best!
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