All Forum Posts by: Cary O.

Welcome to Bigger Pockets, @Kyle Bilton

You've come to the right place to find a wealth of information on Bigger Pockets to help you on your journey. Check out the BP podcasts - they can become addictive to listen to! 

@Joshua D Black

John Schaub explains the concept of leverage well in his book "Building Wealth One House at a Time". Let's say that you purchased a house worth $100,000. Let's assume appreciation of 5% the following year ($5,000 appreciation, so house is now worth $105,000). Here are the rates of return depending on the amount of your initial investment into the property and assuming that the rental income would cover all costs:

- paying full price, your rate of return is $5,000/$100,000 = 5%

- with 20% down payment of $20,000, your rate of return is $5,000/$20,000 = 25%

- with 10% down payment of $10,000, your rate of return is $5,000/$10,000 = 50%. 

With positive cash flows, and with the tenants paying off your mortgage so that your equity  is growing, your rate of return will be even higher. The power of leverage becomes even more beneficial in the following years as your profits increase at a compounded rate. 

With that said, Schaub does caution that you need to plan to generate enough income to repay the loan and cover your costs as all debt does carry some risk with it.

Hope the example above shows you the reward for taking the risk of calculated debt. 

What is your primary goal at this stage? Acquisition and scaling the number of properties or cash flow? Financing allows you to utilize OPM = "Other people's money" to acquire investment properties. If you purchase using only your own cash, you miss out on the benefit of "other people's money" to pay off your property. If you have the cash and want the cash flow instead, then buy with all cash. Or, depending on the amount of cash on hand, you could potentially make down payments on 2 or 3 financed properties. Be sure to analyze the deals to make sure that you still show a positive cash flow even with the financed properties. 

In order to help you plan your path, find out what amount you would be pre-approved for to purchase a property. As @Chris T. mentioned, try to do both the W-2 job and become an agent at the same time until you can build up your income and network as a realtor. Most lenders will require you to show 2 years of income tax returns as a realtor (self-employed) in order to qualify for a mortgage loan. If you already have a W-2 job and are saving, living below your means, and able to get real estate experience as an agent, then you will most likely be able to start investing sooner.

Stick with the 12 month lease and renew prior to lease end for an additional 1-2 years if you have good tenants. If you had ended up leasing the property at a slow time of year (let's say November), you can renew for an 18 month period to get you on track for an easier time to find a new tenant. 

If you do end up going the MTM option, then increase the rent accordingly to offset your risk of vacancy should the tenants decide to leave after the month. When we first became landlords, we allowed our first tenants to go MTM after 12 month lease with a higher monthly rent. They only did 2 months of MTM and moved out as they purchased their first home. The timing wasn't great as it was in the fall. Thankfully, we found good tenants quickly with less than a 2 week vacancy. 

According to Kiyosaki in "Rich Dad, Poor Dad", your primary home is a liability - not an asset - as it usually consumes the largest portion of your income. He strongly recommends putting your money to work by acquiring income producing assets (i.e., rental properties). Rental investments increase your assets and income. You need assets to build wealth. Using leverage, you can create more money to acquire more real estate. Most real estate investors would tell you that they wish they had started investing sooner, so if you can, invest first. 

There is a difference between management and leadership. All real estate investors need to be good managers, as they need to be able to plan, organize, coordinate, and hold people accountable. Leaders provide the vision, influence and inspiration needed to achieve a mission or goal. Many people can manage, but few can lead and inspire. 

Hi @John Van der Kieft, TAD has simplified the property tax protest process this year as you can complete the whole process online. When you received your property tax statement, it should have included your account number and a PIN number to create an online account for the property on the TAD website via eAccess. After creating your account, you can then see what comps TAD used for the property valuation. There is a market valuation and an appraisal valuation (which is the taxable amount), which may not be the same amount given the high appreciation of home values. You can dispute the appraisal valuation online and if acceptable to TAD, you will receive an immediate response from TAD via email regarding acceptance or denial of your proposed valuation. Or, TAD may request additional documentation from you to support your valuation. You can also do the longer route of filing a written notice of protest and wait for a scheduled hearing to appear before TAD to protest in person. It took just a couple of minutes online and we reduced the taxable appraisal values on multiple properties. 

Welcome to Bigger Pockets, Dave! Listening to the podcasts will help you gain information and inspiration to get you going. You may want to specifically check out podcast #153 about a local DFW real estate investor focusing on primarily single family rentals. Best of luck to you!

Welcome to Bigger Pockets @Paul Burke! In addition to the wealth of information on BP, you may also want to join and attend some of the local Meetups to network with other DFW local real estate investors. All the best to you!