Financial Freedom and Success

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Hello everyone,

First I would like to say BiggerPockets is awesome! I stumbled opon this website one day while looking up realestate investment strategies and have been lurking for 7 months or so before deciding to make my first post.....to say the least I am in need of advice with a game plan I am working on.

BACKGROUND

I am a mechanical engineering student at my university and happened to get my foot in the door for the oil and gas industry specifically one of the largest refiners in the US. Me and my parents have set up an agreement that as long as I excel academically my expenses in school will be taken care of.

Because of this I have an excess amount of cash saved up 23k right now from a previous internship and on schedule to make another 48k from my next co-op with the company. I am 20 years old. Upon graduation (22 years old) I will have ~90k saved up cash.

I listen to a man who's name is Grant Cardone he is a real estate mogul who has 400M in real estate holdings and he tells his listeners to go big (nothing below 16 units for the first deal) because of the added benefit of having room for property management and economy of scale. I know he is not very popular here but what he says and his energy speaks to me personally.

In regards to my geographic location I will be located in the midwest after graduation. I have been reading alot of books on real estate investment and am very confident in my ability to analyse a property and calculate all the important investment ratios, however I am no expert and will need to look at atleast 100 more deals.

The Game Plan

I currently have two game plans I am looking into....so I will list them both and then ask my question

Plan #1

• 90k upon graduation saved up (co-ops) (Starting salary 95k)
• Saving 40% of income 38k a year saved
• Work 7 years (contributing min to 401k)
• After 7 years 356k saved in cash (Age 30)
• Buy a multifamily building 1.4m (75 LTV 25 down)
• Been talking to family about plan #1 could potentially raise 50k for the apartment deal as well by bringing them on as investors

I received feedback from another investor who told me

"The biggest problem with your plan right now is holding on to all that cash--which isn't doing anything. In fact, it's a HUGE risk with what is going on in the world. Cash is a huge liability--inflation could kill you. Short answer is this: buy smaller properties for now. You can always 1031 exchange them later into your big property."

Plan #2

• Upon graduation FHA into a fourplex live in one unit rent out other three units (live for free) (contribute min to 401k)
• The following year take 100k saved up buy two more fourplexes...with this could buy 500k worth of real estate
• Expecting to relocated at least once with the company when that time comes move out of the unit and hire property management to manage the 12 units...
• From there not really sure...keep buying smaller deals....or save up and 1031 exchange into my goal which is a bigger deal 16+ units..could also bring on the family members who want to invest 50k in an apartment deal

This plan I believe reduces some risk of my money sitting in a bank and not working for me.

Question

My biggest question is what do I do with all my money!? =\ I want my money working for me not because I want to quit my job or anything but because I want financial freedom....whether that be being able to spend more time with my family or never having to worry about money so I can focus on providing value to the world....what is your suggestion....am I way in over my head on this one?

My question is a super long one....but I feel like my situation is a bit unique....

Thank you all so much!!!

[David Thompson]

Michael,

I don't believe much in market timing.  If the market, deal and team can find value in something and the numbers works, we don't really care what's happening too much around us.  New president, ok, is that going to impact our blue collar, hard working families needing a good place to live, safe, convenient, decent schools...hardly.  You could wait a long time for what would be considered a crash but would you know when you are at the bottom.  We have a partner in Houston who has 10+ B/C class apartments and hence, were at the epicenter when oil prices dropped, their occupancy went slightly up from 92% to 93% while class A fell 20 - 25%.  Houston could be considered a microcosm of what could happen to this class of apts anywhere in the country if we had a severe recession.  Low beta if purchased correctly, value add, in solid locations.

I just got done reading my friend Paul Moore's book The Perfect Investment. Paul is a former engineer at Ford and now MF syndicator. He did some great research in his book and two things stood out to me. During the 2008 market crash, the delinquency of MF apt loans was about 1% while SFR delinquency was near 5% and in some hot cities like Vegas and Phoenix more than that. He goes on to state that for MF owners who were in solid markets run by experienced operators (not mom n pops) the delinquency was almost nil. His second chart blew me away. MF risk adjusted returns were 4x the stock market. This based on returns vs risk tradeoffs. Stay focused on MF.

I like your money savings and aggressive focus.  Get connected locally in MF and start learning and networking.  I'd put your money to work once you understand what you are doing, find some partners that you gel with and complement you and  get in the game.  Alternatively, hire a coach and accelerate your growth.  I would not worry about the markets as they will take care of themselves. Be patient but expectant.  Choose the right markets,  find deals where you can add value in those markets and team up w/folks that know more than you to start.  Leverage their credibility and knowledge.  Once you've built up a track record, you are on your way.  Then you can start thinking bigger w/OPM.