All Forum Posts by: Aaron Sauceda

Hi All,

I'm a new investor located in Orange County, CA. With the usual caveats in mind -- i.e., this doesn't constitute legal advice / consult your CPA, attorney, etc. -- I wanted to get a sense for how experienced investors approach funding and taxes, and better understand how to leverage things such as a Self-Directed IRA to invest in real estate.

I have a W-2 job and was previously contributing to my Roth 401k. There's a relatively small, yet material, balance there now. Is there a cost-effective way to roll that over into an account that allows me to invest into real estate? Similarly, based on when I started, my company match begins on 1/1/2017. At that time, I will contribute the minimum to maximize my match. Is there a way to structure my accounts in order to utilize those funds, including the company match, to invest in real estate?

Lastly, as I'm starting my business, is there a way to reduce my overall tax liability? Are things such as Internet, cell phone, cable, gas and other items I'd use both personally and for business tax deductible to the extent I use them for my business? 

I understand I may be getting ahead of myself, but I'd like to be educated early on regarding funding and tax-related issues. Any tips to ensure I start on the right foot -- or at least start with the right frame of mind -- are greatly appreciated.

All the best,
Aaron 

Hi Melissa,

This sounds like a great event. Are there any seats still available? I'm looking for 1-2 seats.

Thanks,
Aaron

Thanks for starting this thread, @Ben Leybovich.

I'm a new investor so I'm still trying to learn much about the market. I know in my market based on local REI meetups, there's a lot of cash but very few deals. Deals are hard to come by, competition for deals is extremely tough, and margins are thinning. Interest rates are rising, but still relatively low ... with the mismatch in supply/demand, prices are driving closer to peak 2006 values. I'm not an RE historian, but I tend to get more cautious as we approach previous peaks, particularly one like 2006.

That said, this thread reminded me of something I've been wondering recently: what are some of the better publications real estate investors like to read? I'm sure it's specific to each market, but there must be a few publications many read that are better than others...

For example, when I was graduating college and looking to get into tech, TechCrunch, VentureBeat and GigaOM were the sites to read. I'm wondering if there's anything even loosely similar for RE...

@Account Closed,

Congrats on getting into grad school! Most people here are recommending grad school, which I believe to be a fair recommendation.

I'd like to argue against it though. For background, my perspective is that of a recent grad and not as much of a real estate investor.

You graduated from an extremely good school, UCLA. As long as you're hungry and networking directly with people at companies you're interested in working for, you should be able to secure a fairly well-paying job.

I went to a comparable school (albeit different major, business), and the average starting salary was between $65-70K. Certainly not crazy money, but a great place to start IMO.  

My question becomes: is the ROI of the incremental salary and network you'll earn via a master's degree enough to justify the cost of attendance (~$150-200K?) and opportunity cost of two years of earnings / real estate investments (~$120-160K?)?

That is the question I'd be asking myself. It sounds like you have a good scholarship, so some of my above assumptions may be off. Only you can answer if it's worth it. But I wanted to play devil's advocate and represent a differing viewpoint with the way I'd approach the question. 

Hopefully that's helpful.

@Mark Nelson @Dev Horn @Billy Bell @Jack Butala @Michael Quarles

I'm an investor from southern California. Thanks for sharing some of the methods you guys utilize. I think it's quite a brilliant approach; I'm a huge proponent of leveraging data and automation to streamline processes. 

Would you guys be willing to share your purchase agreement template? Perhaps the cover letter you've found to be relatively effective, as well?

Thank you in advance for your time. 

Cheers,
Aaron

Hi @Michael Quarles -- great looking site. My apologies for a potentially ignorant ask, but would you be able to link me to the template on your site? I wasn't able to locate it. Thank you in advance for your time.

Cheers,
Aaron

I recently came across @Jack Butala's "How to Make 10,000 Offers a Week in Less than an Hour." Now, I'm not against hard work, but the idea of (at least trying) automating the acquisition process immediately captured my attention. I acquired property data for a few cities in my local market, but I'm having some trouble now deciphering the data in order to take next steps.

If you haven't read Steven's post, I highly recommend you do. But if you're strapped for time, here's the basic premise (apologies to Steven if I'm rehashing this inaccurately, but it was my interpretation): acquire public property ownership data, set acquisition criteria, identify potential owners most likely to sell undervalued properties (out-of-state, owe back taxes, etc.), and mail offer letters to those that fit all of the above criteria.

Now I have the property ownership data, but I'm having a hard time using the data to fulfill the remaining steps. For example, my data has fields such as "DocDate," "Price," "StampCode," "TaxAmt," and "Total" (presumably in dollars), among other things. I'm not completely sure the meaning of these fields within the context of your approach here.

How would I take this data to the next step? Which fields would I filter to identify owners who owe back taxes or no longer owe anything on their home anymore (i.e., mortgage paid off)? Similarly, in the spirit of automation, how would I know which amount to offer? Would I simply insert a new column and multiple the "Price" or "Total" field by some sort of discount I'm looking for, say 40% (or more)? Is the "Price" or "Total" field typically indicative of a market value to do that sort of calculation?

I really appreciate everyone's help with this. I'm really intrigued by this process and would like to take it to the next steps, I just want to ensure I'm executing it properly!

All the best,
Aaron

I'm a new investor as well, so certainly don't have much to add beyond the great comments above. However, I wanted to mention something about the 50% rule and multi-family. Someone above mentioned not to use the 50% rule aside from a quick-and-dirty proxy or filter. In addition to that, based on podcasts I've heard and multi-family information from Ben Leybovich, Serge Shukhtat, and Brandon Turner (among others), multi-family expenses are really closer to 60-65% ... in a good year. 

So I think using when using the 50% rule as a quick-and-dirty proxy, for multi-family, it should really be the 60-65% rule.

Hi Ally,

Thanks for posting this -- I think you've hit on the million dollar question here. I'm actually in a very similar position as you, and I'm always interested to hear what people think. I also live in SoCal and have a chunk of savings I'd like to invest in RE (albeit a little less than you have), but also have student loans (~$12k @ 4.75%). 

I think the advice here is all great; I can't responsibly argue against paying down 6% debt. However, I would like to play devil's advocate. I think it's common to have a negative view around personal debt and to want to pay it "as fast as possible," but it really all depends on your investment options and their corresponding risk-adjusted returns.

Someone mentioned it already, but regardless of which direction you take, I think priority #1 should be to refinance your student loan debt for a lower interest rate. I had loans from the government at over 6%, and refinanced with SoFi to consolidate them at a lower rate. There are several ways and lender options to refinance, so feel free to reach out if you'd like to discuss. The downside is you lose protections that go along with government loans (such as forbearance), but I was willing to take that risk given my perceived job security, income, and relatively low balance. 

Now, if you're able to refinance at, say, 4.75-5% or lower like I was, then I do think it becomes interesting: the real question becomes, you have a guaranteed return of 4.75-5% when paying off your student loans. Can you earn a higher risk-adjusted return elsewhere, whether that's in the stock market or via real estate? If so, how much higher? 

I'm currently grappling with the same thing. I can use my savings to be completely debt free, earning 4.75% on that money. Or I can invest it. I'm currently earning 6% YTD on my money in the stock market, so I'm sure it's a worse risk-adjusted return. But could I earn a return in RE that's materially higher than 4.75%? For me, given the amount of hard work and risk involved in RE (especially for a newbie) relative to simply clicking a "pay" button for a 4.75% return, materially better would mean around 10-15% ROI. That's what we need to figure out. If we can, then IMO, it makes more sense to make the minimum student loan payments and invest our remaining capital.

@Joe Homsthanks! Just PM'd you.

@Joaquin Martehaha, thanks man!