All Forum Posts by: Bryce Richardson

You are in a really good situation to scale. You’ve already started and it appears that you hit a home run with your first deal. Now there are a few things to consider:

1. How much cashflow do you need to create this security to get out of the dental rat race?

2. How quickly do you want to get out of the dental rat race?

With your W2 job (assuming you work for a practice, not owning your own), you can get financing much easier than if you are self-employed. Most would suggest to maximize that opportunity as much as you can. I have a mentor who worked marketing for HP for 14 years and cash flowed his way out of the job and now is starting a syndication. I didn’t go that route: I quit my job earlier and started businesses. It made lending harder but significantly improved my quality of life. I don’t think my position of staying or leaving was right or wrong. I just did what I wanted and what I thought was best. There wasn’t a wrong choice, just a good choice and slightly better one.

There is a way to buy multiple properties “at once” depending on how they are finances. Typically a solo investor does one at a time to start and eventually can get to a place with experience and stronger finances to have multiple deals going on at one time. It may be best to start with one now and grow to that scale. If you go straight there, it’ll be harder to mitigate human error when things come up. To scale, you’d most likely need to leverage partners. One deal can be under your finances, another could be your partner, then rinse and repeat. Go fast, go alone. Go far, go together 👍

The one thing that will slow you down going alone could be your DTI. If you have too many loans out and haven't stabilized rent fast enough, underwriters could flat out say no to you and make you wait until they're stable.

What’s best is up to you. If you function better drinking out of a fire house, go for bigger. But if you would rather be patient, there’s wisdom in that. Could I ask, what is the rush to move so fast? What is your timeline? 10 years? 5 years? 2 years?

You can go any direction you want in asset class. It’s really more what makes sense to you and what you have an advantage in that other people don’t. Sure, multifamily works, but everyone and their mother wants those as well. Commercial, fine, but commercial is literally anything else not residential….that’s A LOT of different types of properties!

If the questions are coming up about fear of making the wrong choice, that alone is wrong. Yes, there are poor decisions that can be made in real estate. But that can be mitigated through networking with others that have experience, reading books, podcast, etc. But you learn the most (I’d argue to say 95% of real estate) doing deals. The wrong choice could be not choosing. Maybe your decision making process shouldn’t be “what’s the best choice?” But rather “what would be awesome to do?”, “what could I do?”. Because really, you’re in a great position to make moves. Not many people are in your shoes, so don’t be afraid to choose. Do your research, get the evidence you need to create the confidence to get a deal under contract, and learn to become the best at that one thing. Build off of that, grow, push yourself, and you’ll be fine.

I know I didn’t really answer your question, but sometimes these questions are asked not so much for answer to the literal question but more so for confirmation or affirmation of what you already know what to do but you need evidence or encouragement to make the choice. A part of me thinks you know a lot about real estate since you already have your first deal under your belt and you’re killing it. Maybe you just need to talk to a lender or a local investor that can look at your financial picture and your goals and help create the next step, not “what should be investing for the next 5 years?” (Don’t put so much pressure on your decision making, just make one step forward at a time).

Hope that helps!

You can get the majority of your education by reading a few books. For example, I doubt your current property is cashflowing $1,500 a month after considering all expenses. You really want to learn how BiggerPockets defines "cashflow" and consider setting aside reserves. I'll provide you my beginner guide, a link that discusses cashflow, and a third that covers reserves.

BEGINNER GUIDE

1. Start with BiggerPockets Ultimate Beginners Guide (free). It will familiarize you with the basic terminology and benefits. Then you can read a more in-depth book like The Book On Rental Property Investing by Brandon Turner or The Unofficial Guide to Real Estate Investing by Spencer Strauss.

2. Get your finances in order. Get rid of debt, build a budget, and save. The idea that you can build wealth without putting any money into it is a recipe for disaster and the sales pitch of gurus trying to steal your money. A wise investor will not try to get rich quick with shortcuts. If you can't keep control of your personal finances, you are highly unlikely to succeed in real estate investing. Check out my personal favorite, Set For Life by Scott Trench , or The Total Money Makeover by Dave Ramsey.

3. As you read these books, watch the BiggerPockets podcasts. This will clarify and reinforce what you are reading. You can hear real-world examples of how others have built their investment portfolio and (hopefully) learn to avoid their mistakes.

4. Now you need to figure out how to find deals and pay for them. Again, the BiggerPockets store has some books for this or you can learn by watching podcasts, reading blogs, and interacting on the forum. There is a handy search bar in the upper right that makes it easy to find previous discussions, blogs, podcasts, and other resources. BiggerPockets also has a calculator you can use to analyze deals and I highly recommend you start this as soon as possible, even if you are not ready to buy. If you consistently analyze properties, it will be much easier to recognize a good deal when it shows up. Find Brandon's videos on YouTube for the "four square" method of analyzing homes and practice. It doesn't take long to learn how to spot a good deal.

5. Study the market. You can learn to do this on your own or get a rockstar REALTOR to lead the way. I highly recommend a well-qualified REALTOR that works with investors and knows how to best help you.

6. Jump in! Far too many get stuck in the "paralysis by analysis" stage, thinking they just don't know enough to get started. The truth is, you could read 100 books and still not know enough because certain things need to be learned through trial-and-error. You don't need to know everything to get started; you just need a foundation to build on and the rest will come through experience and then refining your education.

You can build a basic understanding of investing in 3-6 months. How long it takes to be financially ready is different for everyone. Once you're ready, create a goal (e.g. "I will buy at least one single-family home, duplex, triplex, or fourplex before the end of 2019") and then do it. Real estate investing is a pretty forgiving world and the average person can still make money even with some pretty big mistakes.

CASHFLOW

Here's a guide that describes what good cash flow looks like and how to analyze a property.

https://www.biggerpockets.com/...

RESERVES

This is not an exact science. It depends on your financial strength, the quality of the property, how many properties you own, etc.

I like to start with one major expense and three months of vacancy. Imagine if you had one single-family home. The tenant fails to pay their last month's rent and leaves the place needing new flooring and paint. It will take two months to turn it around and get it rented. That's three months of mortgage and utilities, the cost of flooring, and the cost of painting. That's a pretty common scenario and could cost you $10,000 - $15,000 so that would be a good starting point for your reserve.

But there's more!

What if you're a cardiologist with no debt and making $250,000 a year? You could probably afford $20,000 without much impact on your personal budget. If you're a single mom with student loans, a car payment, and living paycheck-to-paycheck, then $20,000 would be devastating and a reserve is critical.

What if you have an apartment complex with 20 units? Do you save three months of vacancy for each unit and $50,000 for the roof replacement? That would be around $90,000 sitting in a savings account! At this point, I would recommend having a line of credit to cover these things so you don't have money sitting in the bank doing nothing when it could be put to work.

I have 33 units, no debt except for mortgages, and excellent income. I can pay for all my problems using the cashflow from my current rentals. I also have a $175,000 line of credit at the ready if something catastrophic happened. A reserve is unnecessary, but I still keep around $15,000 - $20,000 in my account.

The point is, you should sit down and assess your personal finances to determine what the worst-case scenario may look like, how much you would need to cover it without impacting your life, and whether you will need to build a reserve.

Consider the current interest rate on your rental property and how much would it increase with current rates if you do a cash out refi. 

Your first deal is awesome! Are you able to tap into the equity? I would try to hold it if you can. I'd focus on adding 1 more and then rinse, repeat. If a portfolio or a larger project comes along then you can analyze but focus on another solid deal. As you start slowly start adding it'll snowball. Just be patient and don't get too over your head to start