Your Help Needed: Analyze My 'Getting Started' Plan

[Nick Hedberg]

Hello everyone! First I wanted to say thank you to everyone for reading my first post and all of your years of amazing contributions on BP. I have already learned a tremendous amount from you and this is only my first post!

My goal of getting into REI is to generate passive income to allow me to semi-retire in 10 years and live a more flexible lifestyle. I also want to diversify my investments. I look at the below chart and think, hmmmm what could possibly happen next to the stock market?

I currently have a rental property in Virginia and have made most of the beginner mistakes by treating it like a hobby and not a business. I’m the property manager, do my own taxes and also renovated it when I first bought it. This has been a learning experience and so far my key takeaways are:

• I don’t want a second job as a property manager
• I don’t want to be a general contractor
• I'm a bad CPA
• I love it when other people do work for me.

I currently reside in Santa Monica and would like to own in this area, but I'm heavily leaning towards outside markets for higher long term cash flow. I recently talked to a RE Agent in Hawaii and he said 1/3 of his calls are from CA investors because CA has gotten too hot. I'm primarily looking for long term buy and hold residential properties. I would like to buy multifamily, but if I'm investing remotely I would prefer to start small on a SFH so my initial mistakes are less expensive.

I would greatly appreciate your thoughts on my below 'Getting Started' plan:

1. Learn, learn, learn. So far I’ve read:

• Rich Dad Poor Dad
• The Weekend Millionaires Real Estate Investing Program
• The Compound Effect
• The Richest Man in Babylon
• Rich Dad Poor Dad ABCs of Real Estate Investing
• Bigger Pockets: Investing with No (and Low) Money Down
• Rich Dad’s Cashflow Quadrant
• Many BP Threads

2. Pick an area to invest: I would prefer Santa Monica/LA area, but I think it will be difficult to get the 10-15% COC returns I'm looking for.

3. Setup Business Structure and begin establishing business credit. Long Term Goal: Have a completely self contained business entity that doesn’t require my person credit or savings to build wealth.

4. Setup team:

• Accountant
• Lawyer
• Bank/Financing relationship
• Local Agent
• Local Broker
• Local Property Manager
• Mentor

5. Start spitting out offers!! I love analyzing deals. I’m really excited for this part!

Sorry for the length and I would appreciate your input.

[Doug N.]

@Nick Hedberg I like your plan, and also that you seem to like reading!

Can I suggest a few books? These are dense reads, but very good. 

Real Estate Finance and Investments (14th Ed), William B. Brueggeman & Jeffrey D. Fisher

You will need a bottle of Advil (and vodka) to get through this one, but if you manage to get 1/4 of it, you're going to know more than a lot of folks. Very complete - everything you need to know. I think it has a lot of the coursework Ben teaches in his CFU (just a guess).

The Depression of 2008 - by Fred E. Foldvary

A good overview of the moving parts in RE cycles and some economics as well. It's only 30 pages, but very informative. 

The Complete Guide To Real Estate Finance For Investment Properties (How To Analyze Any Single-Family, Multifamily, Or Commercial Property) Steve Berges

An easier version of Real Estate Finance and Investments, very good, though I have not read all of it. This has a lot of the analysis formulas you can find here on BP and other places. PM me if you're interested. 

Regarding areas to invest, a lot of folks on BP have extolled the virtues of CA's lower central valley (ie Stockton down to Fresno and then through Bakersfield), saying that it's just like the Midwest except the winters are very mild. I like those areas a lot, and there's quite a population base, larger than a lot of US states in those MSA's, maybe 3mm+ and another 2mm including Sacramento. https://en.wikipedia.org/wiki/California_statistic...

You could easily commute up/over there in a day trip from Lovely Santa Monica™, and there's likely to be property for you in every class, price range and demographic. Not all of CA is overheated. 

Keep us posted on your offers, I'd like to know what you decide on!