What Would You Do?

Question

Hey all,New to BP! I made an introduction post but I didn't want to get too deep into the advice there. I was hoping to do it here, in the proper section. I was hoping to get some advice on how to structure the future to set myself up for success.I'll give you a more in-depth backstory here and this way you don't have to go to the introduction thread.So I have a home paid for, free and clear, in West Virginia. It was $205,000. My fiance and I decided to give Texas a try so we rented the house in WV out. The rent in West Virginia is $900/mo. If you're wondering, I have it rented so cheap because of the area. It is in a town called Masontown, WV. It is about 15 miles from Morgantown (where West Virginia University is) so it's hard to get $1,100 or so like you get in that area. The great part about that property is it sits on 1.23 acres, is surrounded by farms, isn't visible from the main road, and has a 40'x60' garage with one raised bay for a camper or anything of that nature. I could park my big rig in there easily when I had a small trucking company. It's not the ideal rental property at all from what I've been reading here. We are getting married in October and after that, our plan is to go trucking over the road. We are going to be able to start really saving, planning towards the future, and eliminating our bills by living on the road. Our bills will mainly be property taxes, insurance, and cell phones. We should have around $5,000/mo. coming in between work and rent. The plan is to save at least $4,000/mo. if not more. We plan on staying out for two years in hopes of then being able to have a little passive income from rentals and finding good, full time, local work. Now here is where I need help figuring out what to do. The tenants currently there are great. He works in the oilfield and has remained relatively steady even with the industry being slow in the area. He doesn't bother me over much. The rent is always on time. I also know he has project vehicles tore apart in that garage so I think that pretty well guarantees he'll be staying long term. He has even talked about purchasing it but said he has a mortgage on farm land in the next town over. He said it will be paid off at the end of this year and is going to see about getting a loan sometime next year.I also want to say our goal is rentals. We would like to be somewhere in West Virginia, Pennsylvania, or New Jersey. Preferably in Pennsylvania I would say to be between our families. I like the idea of having things paid for. I don't like borrowing money. I know there is a time and place but I think I would like to start with property that I can pay for up front. Obviously there are a lot of variables to this situation but I was hoping for some ideas as to how to proceed. I see a few options.- I could just stick with this one property for now as it has been working well with me being absent for a year now. Once I come off the road, I could tell him it's time to sell. He needs to come up with the financing or I'm going to have to find someone who can. - I could try to go ahead and sell it and buy multiple properties and attempt to find property management. I hate to do that to a good guy with a family but it is business after all. - I could give it six months and check in with him about getting financed again and re-evaluate then. It would be nice to make a deal and not have to get a real estate agent involved, keep some money in our pockets. It would be nice to have at least two properties bringing in money for the next two years but then again I don't like being an absent owner. Two houses, two sets of possible frustration. I also have to consider purchasing a home for us when we come off the road. Like I said there are a lot of variables and I'm sure there is information I'm forgetting to include but can anyone tell me what they would do?I appreciate it in advance!

Mark Gallagher · Answer

@Ryan DaltonHustle is worth more than a college education any day of the week. Some of the richest folks I know don't have a college education, and one of them even has a GED. Not having a silly piece of paper (I call it a receipt) from college doesn't mean much when it comes to real estate.I personally didn't want a career. A career is working for someone else for 30-40 years, earning a limited pay check. If you REALLY want to make money, you have to work for no one other than yourself. Sales can be a tough gig, and to shell out $100,000 just to get into the sales gig is even tougher. You'll have to sell a lot of tools just to break even. Having $200,000 to start is a great spot to be in, as many folks are not able to start with that. I started with essentially $0. If you're handy, you could start flipping houses and make $52,000 a year pretty easily.

Thomas S. · Answer

First do not buy a personal home if you want to save to invest. A home is a life style choice not a investment and will cost you far more than renting. Rent something inexpensive and save more money to invest.For now concentrate on investing in one city and make that city your final destination to settle. As long as you invest properly, even with a PM, you will still make cash flow. Do all your investing with the same end goal regardless of your present decisions.

Greg H. · Answer

Sell it ! You can invest in 5 or 6 properties within an hour of Bryan and gross $4000-5000 per month paying cash for them

Rachel H. · Answer

In many states, I think you have to offer the tenants right of first refusal if you decide to sell. When you do, just be sure you have a concrete plan. It could be difficult showing the property when there are tenants living there. Good luck!

Mark Gallagher · Answer

@Ryan DaltonIt sounds like you want to work very little, and still travel, is that correct?With $200,000 to work with, you could easily bring in at least $3,000 a month without doing much. If I were you, I'd buy an RV, travel across America, maybe working some odd jobs here and there to make $1,000 a month to cover the bulk of your expenses, and you'll have $3,000 coming in from some sort of real estate investment. Just my 2 cents..

Ryan Dalton · Answer

I appreciate the input Mark, that's a cool idea but I think I may not have stated my goals clearly. Traveling is actually the last thing I want to do. Driving over the road was one of those things where the transportation industry was kind of pushing me that way. Before Oil & Gas went bust, I could easily haul pipe locally and bring home $1,000/week or better. With both coal and oil & gas falling on their faces, it's extremely difficult to find that kind of money in trucking without going over the road at this point. My main goal is to make money. If I can find another primary career to do that, I'm all about it. I just don't see many options being a guy without a college education. I'm smart but I don't exactly have the paperwork to back it up. So taking up sales with a tool distributor might be the change I'm looking for. It could allow me to be home and start a family. I just don't know what to expect from it is the problem. The people I have encountered have been extremely successful and I think I could be too but it's that unknown. My goal from making money is to turn that into passive income. I don't want to just get to a point where I can retire. I want to be able to retire and live comfortably. The more the better. So any passive income I can get going ASAP, the better. If I pay cash, I should create a good positive cash flow to save faster. Between hustling at my primary job and the say 50% I set aside from the cash flow from the first property, I would like to purchase a second within a year. And then hopefully be able to keep recreating this cycle faster and faster. Eventually I will probably get into financing but I like cash flow. That's important to me for some reason. Does that make sense?

Ryan Dalton · Answer

I plan on selling it very soon, I just need some direction after really. There are so many ups and downs to each scenario.Trucking:Pros- Very little expenses to maximize profit margins- Can use the whole $200,000 for rentals which means more opportunity to capitalize on passive income to continue to growCons- Have to spend money for property management- Have to spend money for maintenance as I can't be there to handle it My biggest concern there is what do we do when we want to come off the road in two years. Then what? Buy a $30,000 house or something for us to live in?Or we could buy a cheap house to live in now in PA and continue a "normal" lifestyle where we have a place to call home.Tool DistributorPros- Have a place to call "home"- Can manage the properties myself- Can handle maintenance myself- Have a higher income from my main job to put into investing- Get to keep our dogs- Working during winter time isn't so badCons- Have to buy a cheap house to live in and then can only start investing with maybe $50,000 since $100,000 has to go into the tool franchiseIt's a very hard decision to make. It's also very hard to know which one could play out better. It will be a gamble either way, I just don't know which has the best chance for success.

Thomas S. · Answer

Sell the property asap. You are actually losing money every month and do not know it. Considering you have $205,000 in equity in the property and based on a 5% return ($854/month) on cash the property itself is only earning $46/month. That is not going to come close to covering any costs and my guess is you have a negative cash flow of about $400/month on the property.Sell the property and invest the cash at 5% or more return and you will actually start to earn a profit.

Ryan Dalton · Answer

Well. My fiance had another idea that I think is worth exploring! Tell me what you think of this.Someone in the family works for larger tool company that has the distributor trucks. We were thinking about taking $100,000 and investing to get started with them. Does anything think it would be possible to split the other $100,000 between two houses? Preferably one for us to live in and one to rent for the passive income. We were looking at Allentown, PA or areas outside of Philadelphia such as Conshohoken, Abington, Chalfont, and Doylestown. There are ups and downs to this.1. I wouldn't be battling the winter in a tractor trailer. I love driving truck but after five years of it, it just isn't any fun anymore during the winter. I am only 25 and want to set myself up for a stable, sustainable career. I would eventually prefer to do real estate full time but I have a lot of work to do before that time. The transportation industry as a whole is just a mess and it doesn't show any signs of improving for a long time in my opinion.2. I would be learning from an excellent salesperson who has done extremely well for themselves. With paying for the upfront expenses of the franchise, I should have an excellent return once I get the hang of it. I should be able to save more money fairly quickly to keep investing into real estate.3. I wouldn't have to hire property management if I could invest in the area in which we decide to live. I could handle the landlord responsibilities and the maintenance. My fiance would actually probably more so handle the day to day "landlord" responsibilities with paperwork and keeping everything straight and whatnot. I'm very good with my hands and know my skill set. I know when something is beyond my capabilities and when to hire it out. The place where trucking trumps tool distributing is the living expenses. With the tool distributor we would have living expenses to pay but with the income I should have, that shouldn't be an issue at all. This may seem silly but we also have three dogs and they do mean a lot to us. Only one of them would be able to come trucking with us whereas if we did the tool distributor, we could keep all three of them. What to do, what to do?! All input and ideas are really appreciated!!

Bret N. · Answer

Sell it!Then take out a map where you will be traveling the most. Mark way points around your central area and try and buy around those areas( where most job growth is). Call management first or seek out investors/ wholesalers in those areas as they might have the deals you are seeking.