All Forum Posts by: Amit Kal

How? Work, live below your means, save the 20% and then buy. Slow and steady. I also partnered up with a buddy and we both put in half so we can do more transactions per year. No overnight (for us) riches here, but after only two years, we are cash flowing $6k a month EBITDA. If we don't touch our cash-flows and instead use it for the next down payments, we can accumulate the same number of properties we have now in only one year. Snowball effect.

Originally posted by @Franklin Romine:

@Amit Kal

I would probably suffer through another day job so you can accumulate more good debt.  Real estate loans are much easier to get when you have a w2 day job.  Accumulate more real estate debt and then jump off the ship.  That's what I did and I haven't looked back since....

Franklin

Yes, that's a great point -- no W-2 job, it makes it almost impossible to qualify for conventional financing. So on the one hand, I am more time to find better deals that I could when I am working full-time, but then financing them becomes an issue. ughhh

Originally posted by @Reed Schlesinger:

Very Impress with your holdings Amit! The fact that you were able to acquire that amount of properties all while working and raising multiple kids is impressive as I aim to model my portfolio with how you strucutred. Best of Luck! 

Thank you Reed - best of luck to you as well. And just remember, RE is only one part of the puzzle. Your portfolio should remain diversified with a good mix of equity investments as well (i.e. low-fee ETF's tracking the broad market). 

Originally posted by @Chris Masons:

Hi Amit,

Sorry to hear  about your job loss.....

I deal with the same struggle about leaving my day job as a System admin for a financial services in NYC... I look at it like this:

For ease of example lets say I make 100k at my day job and 100k in passive income with my self managed real estate investments. Do I want to give up that 100k w-2 income which include health benefits if I am able to manage my Real Estate and work a day job? Obviously I cannot sustain this forever especially if I want to grow  Real Estate assets there will come a time where I cannot do both OR hand of to a Management company. I am more  likely to eventually quit day job as I have trust issues with Management companies...

I am 44 now and am thinking if I can do this for another 5 to 10 years @ 55 I can surely quit my day job and live off my passive income. Can I do it now? Probably, however I would not be able to save much as all my income would go towards bills and cost of living which does not sit well with me. At work I get to max out an 401k with company match, I get good health benefits and some other things.

Hi Chris, definitely good things to think about. Hopefully you are also diversifying your RE investments with equity investments (at least via the 401k, HSA, etc.). If you've built those up to let's 500k, then at a 3.5% safe withdrawal rate you can pull out $17,500/yr into perpetuity (incl adjusting for inflation).  Good luck to you and thanks for responding!

Originally posted by @Joe Splitrock:

@Amit Kal right now you are making $48K per year cash flow on $1.5M in equity which is 3.2% return. For comparison you could easily get a return above 4% by investing in index funds. There would be low risk and little time commitment compared to real estate. That 4% return would be $5K per month and after getting rid of your nanny, that would cover your monthly expenses. You could raise your own kids and do whatever you wanted in your free time, such as finding a time-flexible career for extra income.

I am not saying this is the right choice for you. Clearly you are already successful and you have several options that would all work out fine. I am just challenging you to think about your priorities. You could basically retire and raise your kids if that is what you wanted. Going back into the 6 figure corporate gig would probably get you further ahead financially. Your call my friend, good luck.

Thanks Joe - definitely some things to think about. The 3.2% return does seem a bit anemic, but my mom is living in a unit that would easily rent for $3k/month (so if you back that in, it jumps to 5.6%). The $250k mortgage remaining on the 6-unit property has 9 years left on it (it was originally a 15-year fixed) - once that is paid off (I'll be 47yo then), that will free up an additional $2k/month. And it is NYC real estate - so naturally the returns are risk-adjusted (i.e. very little downside risk, 3-5% annual appreciation, 0% vacancy rate in the six years I've owned the place). 

I do have a lot of personal interests and would love the time to be able to focus on those, including more time with the kids. My goal is less about making $10m, $20m, etc. and more grounded towards being financially independent; unfortunately life ends up with scope creep, and what I thought I could retire on 8 years ago is a much higher number now. I'm almost there but I know that when I do get there in 4-7 years, the number will likely jump up again. *sighs* #ratrace

This is a good question. To be honest with you, I could probably pull out at least $700-$900k in equity to use for other deals but it would be a commercial transaction. I've never done a commercial re-fi before for the following few reasons:

1) Intimidated. This is my "nest-egg" and I have a great deal of trepidation putting this asset at risk to chase other investments. 

 2) Again, I've never done it before but my understanding is that the transaction costs would be very high. It's not as simple as requesting a line of credit that I can use if/when a good deal comes my way.

3) Higher rates / Shorter term loans - another thing that worries me is that I might only get a 7 year fixed at 5.5% in today's market

So in the end, I guess I just need to do more due diligence on how find a deal with a strong enough cap rate that will help me to stomach the transaction cost of this type of re-fi ($50k?) to offset. I

If you have any other guidance you can provide here, I'd appreciate !

Thank you for the kind words @Christina Brown

Thank you for reinforcing my belief that a few more years of working a six figure job and building my assets is a low-risk and rewarding way to achieve my 4-5 year goal of being financially independent @Carlos Tavares, @Sean Davidson, @Christopher Brainard, @Sunny D, @Eric A. My job was by no means a drag; the work was challenging but not soul crushing, the work-life balance was great, and I really enjoy the social aspect of working with great colleagues. If I got another job paying close to what I was making for the same level of (minimal) stress/hours/work-life balance, I would likely take it. Another benefit of having a desk job was that there is invariably going to be downtime, so instead of wasting my time with cooler-talk, I would use that time to further my real-estate endeavors.

I appreciate your words of encouragement to take seriously consider making the leap @Sunny D.@Pedro Recarey, @hannah Bretz

Regarding the return on investment for my current holdings, you are right @JD Martin, @Account Closed the cash-on-cash return for my NYC investment is quite low. But when you consider that I paid $850k for it six years ago, put about $200k into it, the FMV would very conservatively be $1.5mm at this point. That and my mom lives there in a very nice duplex with rear yard (a rarity for NYC!) and only a 30 second walk from where I live. In this case, I've interwoven both my business and personal interests in a way that has worked well for us, even if it comes at the expense of some annual cash-flows. For those interested, the NY Times did a story on us here The Hunt - Let No Bus Separate Us. I would also say that @Llewelyn Adal hits on some of the finer more nuanced points of investing in NYC real-estate; unlike many other markets, global investors look at NYC real estate as akin to a Treasury bill - a super safe place to park cash, low returns, but inflation-adjusted appreciation potential. @Llewelyn Adal hope you don't mind, I will send you a colleague request - would be great to connect with you. 

Thanks again for everyone's comments - keep them coming and happy to answer more questions!

Edit: The tagging (@) feature here is maddening. Really buggy and doesn't work at all when you try editing a post to fix the tags. Some of you were untagged because of this and I have idea how to get those tags live now, sorry about that =(

Pardon me in advance that this is a bit long-winded, but you can get a "too long; didn't read" summary down at the bottom. So I've been working 18 years now. All of those years were in fairly well jobs, but it is here in New York City, so my living costs were definitely higher. Two weeks ago the company I was working for the past three years had major layoffs and I was affected. I'm getting a decent severance package so I have about six months to figure things out. I've been investing in real estate for the past six years not including my primary residence. I'm also married and have two kids and no consumer debt. Just something to think about because the kids obviously are not cheap. Wife is a teacher so she is not killing it by any means. My portion of our monthly expenses are about $7000. This includes the nanny who we pay about $2000/month all in (food, train fare, etc). That's probably the one expense I can easily cut if I had to become a stay at home dad. But if I become a stay at home it would severely limit my options as well. So while I am enjoying this time off, I am going to get my real estate license within the next 45 days. I am also closing on a duplex, all-cash (in Nashville), and including repairs it will cost me $190k and bring in $2100/month rents (net monthly cash-flow of $1200). I'll add my sister to this deed, and hoping to refinance back out my money once the seasoning period is over which will drop the monthly cash-flows to ($400). I also own a six unit building in NYC (purchased in 2011), now worth maybe $1.5m, $250k mortgage left and brings in about $9k in gross rents. The ROI on this building might not be the best but it is in New York City and my mom lives there so she doesn't pay rent; selling this one is not option. I am also 50% owner on 8 other units in Nashville which bring in about $10k/month in gross rents. Each of these were purchased with 20-30% down and were bought over the last 2 years. As you can see, despite having a full-time job, I really tried to ramp up my real estate investing over the last several years. I probably have about $1.5 million worth of equity in my real estate investments, not including my primary residence since that does not bring in any income. These real estate investments probably kick off about $3k-$4k a month in net cash-flow EBITDA. So if I don't go back to a full-time professional job, what should I do? At this point I am in a favorable position of having a track record and quite a number of folks that are eager to invest alongside me. This gives me the opportunity to continue getting conventional loans by partnering up with folks that have W2 jobs and low debt to income. I probably have about $200k to allocate to additional deals if I have no other income coming in, which gives me runway for another 2-4 deals at 25% down + rehab costs. Commercial real estate interests me and I was recently involved in negotiating a 25 year lease for 30,000 ft.² at the nonprofit that I serve on the board of. I'm not as interested in the grind of residential sales/rentals. I have some contacts with big landlords in the commercial space who would probably give me a crack if I want to make go of it. So BP community, if you were in my position and at this juncture in your life, what would you do? TL;DR - got laid off. Have a accumulated $1.5 million in net real estate assets. They cash-flow about $3-$4k/month. I have monthly expenses of about $7k/month. Should I make the leap into RE or go back to a 8-6 corporate gig making six figures?

John Bernabel that makes two of us buddy! I got laid off a couple of weeks back so I know the feeling. Do you have your real estate license yet? If not you might as well use this time to get it. But reading over what you have accomplished to date, I present suggestion would be that continue working a normal job, accumulating a bigger nest egg, and doing as many details as you can on the side every year. Do that to the point where you have enough net cash flow coming in that it offsets most of your expenses. And THEN you can make the leap. I love the BP community and I'm going to post my own layoff story in a few.

Hi all, I needed some help in thinking through how to properly structure this deal so it works out equitably for both investors.

Purchase Price: 180k

Renovations: $7k

Closing Costs: $3k

Holding Costs during renovations: $2k

Total to acquire and renovate: $192k

ARV: $210k

Cash-out Refi (70%): $147k (only 70% b/c it is a duplex)

Transaction costs for the Refi: $2500

Cash to disburse between investors: $144,500

Investor A - Will put 172k cash into the deal, but has no job currently so cannot get the re-fi

Investor B - Will put in 20k cash into the deal, has excellent credit and great debt-to-income and will be primary applicant on the mortgage

My questions:

1) How would you restructure this deal if you were Investor A and found the deal and are structuring the deal? 

2) How would you distribute the cash out re-fi funds between both investors?

3) How would you distribute the monthly net cash-flows between both investors?

$) A lawyer will be needed to set up the operating agreement and that will incur some fees. Who should pay this fee? 

If I left out any details, please let me know. 

Thanks in advance and mods please move this to the right forum if this is not the correct sub-forum!