Moving Forward With Cash

[Steve Kordish]

Ok, looking for some input from the BP community. Here's my situation ( Ill try to be as succinct as possible)...

- left my financial services business in January '15 to go full time in RE
- current income = $0/mo
- credit score 720+ (never used credit cards so lack of history was a negative to score)
- renting apartment, expenses/rent = $1200/mo.
- my personal townhome is under contract for $240K. (rented @$1900/ mo. since 6/1/11)
- should have 0 tax consequence/gains on sale (paid $180K cash in 2010)
- have $40k in additional emergency fund/checking
- have two small (and only) flips under my belt since January 2015 
- all work done myself except for electrical/ major plumbing/HVAC
- will be 55 in 2016 (so I don't have 50 more years to "play around" to build nest egg

Ok, so, my idea is to buy a place for cash in the 60-$75k range and fix it up over the next 6 months then move in as my lease on my apartment expires. This allows me to live rent free. I figure with the remaining $125k or so from the sale of my townhome I can purchase a combination of small rentals for cashflow as well a a small flip or two for additional working capital. Also considering/investigating lending out some cash ( short-term) if it makes sense. Maybe also partner with someone on some flips too. (50/50?)

I guess what I'm asking is, does this sound like a reasonable plan going forward and are there any things I may be missing. As always, I appreciate any input! - Steve

[Marc Jolicoeur]

In case your deal flow pipeline is not great for wholesaling or flipping.  I would do the following if it was me.

- Get your RE license and MLS access. Could save you money buying and selling your deals. One deal should pay for the cost of getting your license.

- Then consider doing quick flips that cost no more than $5K or $10K.    

- Buy properties that would be easy to flip because they are in high demand to the largest demographic where you live, but the unit needs some small amount of effort like :   Short sale negotiation, trash out and cleaning, doesn't show well due to clutter, needs all new appliances, needs carpets, needs new light fixtures,  been on the market forever, or needs paint job.   

- The current "issues" are showstoppers for most retail buyers.   Also, these are not so deeply discounted or so badly distressed that they are attractive to flippers.  Low competition.

- Buy for $20,000 below value,  Spend no more than $10,000 on rehabbing.   Sell for $20,000 more than you paid.  You will make $10K to $15K profit on each flip.

- Do one per month.   This should pay for your lifestyle.

- These flips take a few weeks to get done, and you can do all the work yourself.   Probably three months overall to fix and sell.  

- If you are single, travel light and live in these same flips. No need to buy a house to live in!

- Use your pile of capital to assist you in getting short term commercial business financing. Most banks want you to put 25% down and pay for rehabs.  Tie up $40K-$50K into each project means you can afford to have 3-4 projects in process at any given time.

- If you get some that are a great rental, you can rent it out and refinance it to get most of your capital out of it.  Pick up one rental like this every year.   After 15 years, you will have 15 rentals cash flowing.