All Forum Posts by: Karen F.

Hi,

My question is, can a real estate professional (primary job is managing my own real estate; spend 750 hrs +) with active participation in their own privately held properties ... can that individual ADD to that grouping new holdings in limited partnerships (where they are not the general partner and do not have active participation in the management of the building -- but where diversifying to these holdings is part of their overall investment strategy?) Is this a valid grouping? Would love to hear thoughts/feedback/or recommendation of someone to consult.

Thanks!

 Marek, I'd love to hear your experience. i do long term rentals but just finished a very nice rehab and wondered if airbnb would be a more lucrative approach. please Pm me if you are willing to share your knowledge! Thanks!

I did a full gut renovation on a triplex.The day after granite countertops were installed over the brand new cabinets on floor 2, in this secured property ... the carpenter called and asked me to come over.  He  found a tied up  bag of human (I assume) excrement, and some dirty clothes, stacked up on the lazy susan -- felt I should share the moment. Needless to say, no one on any crew raised their hand and said, "Oh, that's mine." 12 years later, that carpenter still says, "Remember the time..."

Oh... and I have one carpeted kitchen to this day. The tenant, who has lived there since the 1980's, recently asked if we could get him new kitchen carpet. I said .... no. Move out for three months, and I'll get you a whole new kitchen and a new bathroom too... and build you an extra closet or two, as well! (Currently, there is clothing hanging across a bar as you enter the bedroom ... you pass through the clothes like love beads to enter.)

Bill, my two cents, I had limited cash flow on mine at the beginning, too. Now rates are low and leverage is attractive -- BUT my whole portfolio is 100% paid off except for one 15 year mortgage which pays off this November. (This is where almost everyone will chime in and say I am an idiot :) !)  I stopped working 5  years into RE investing; around age 45. I did some flips and paid off everything with the profits over the last few (nonworking) years.  I am debating putting financing on some places just to diversify and enhance investment income, but honestly life is easy and stress free with no debt, and my income is greater than my expenses already. It comes down to more toys, more luxuries .. and I do okay in those areas already :)

I am currently paying cash to invest in $30,000 in upgrades that will wipe out all of my net cash flow for this year and part of next year on a 3 unit building. However, it will raise rent by as much as $450/month, and raise the value of the property by as much as $50,000 -- and reduce my worries on having ugly old kitchens and baths, make it easier to rent, and easier to maintain, AND easier to sell. And I see the cost to do these same renovations as being higher next year, plus I have the cash -- so why not? I could defer these expenses and rent my dated property because demand is high. I could finance the improvements (I have an LOC I could use; I could do a complete refi or this or any or all the properties). I just prefer not to...so far.

So, I think you are fine based on your own goals. I also think selling and taking the profit in this hot market isn't a bad idea (as you said, your profit is way up after 3 years of renting) -- and you will likely need to make your capital improvement to get top dollar on the exit.

It all comes down to having a business and life plan that works for YOU (which can be flexible), and executing. My plan was first, to make enough to quit working (done.) Then, to reach specific net worth goals, and income goals, by specific ages. I originally planned to cash flow my kids through college -- now their tuition is sitting in a 529, fully funded. I planned to live off rentals for life in retirement; now I may liquidate the portfolio prior to collecting SSI -- but that is a decade away, and tax laws and economic conditions are constantly changing. So, I remain armed with a plan, and flexible enough to adapt!

I  will just say that paying off debt aggressively was hard at first -- but is making life very, very easy now! I recognize that greater risk delivers greater rewards; I risked quite alot when I got started in RE; I am enjoying a low risk, low stress lifestyle now.

I am a buy and hold investor with several units as well as a flipper; always looking to make new connections! 

100% paid; 10 Class B units, SF and multis; 14 tenants that work across the 10 units, and all individuals claim they have been unaffected by virus. Have one unit that went vacant as planned and that's my real concern. Couldn't show it while tenat was there; managed to get flooring replaced after she moved on the 30th; still needs cleaned and painted. Overall, I'm feeling pretty optimistic -- except that I have so many tenants asking for August 1 on my current vacancy, and I'd prefer not to leave it empty for three months. Anyone actually turning apartments amid social distancing?

Todd,

My immediate thoughts are -- Quit. You're done! Congratulations! Great job! I completely get your fear of letting go of income and insurance. I had an easy time quitting (I was self-employed so self-insured anyway), but  a much harder time convincing myself to just enjoy my income -- it took me two years to convince myself I could afford to buy a horse. (I am now spending $1200+ per month indulging myself, and I am so glad; if I had waited another 10 years I am sure I would not have done it.)

Your numbers are alot like mine, and I find no problem living off just RE. I still have two kids getting ready to go to college (one next year - one in two years.) I am putting them through private school, and their college money is saved and ready to go. Health insurance for me has been affordable. Get a quote through the healthcare exchange ... you might be able to get a better policy that provides more coverage?

My rental portfolio yields about $13k/mo, I have one tiny mortgage left (I owe $18k on a $350,000 triplex that grosses $3150/mo -- my payment is $750/mo; will be gone before second child goes to college.) I sold many houses over the years. In the past 3-4 years, I started paying off all my mortgages, and buying with cash. NOTE - I did this solely for peace of mind, as a purely personal choice -- I began buying at 100% leverage on HELOCS and mortgages, and I still keep a HELOC open. Debt truly worked for me; now it just doesn't fit my comfort zone. I would have MORE money if I took on more debt, so I am not bashing debt! I flip, too, using cash ... but I tend to hold for a year to keep my gains in the Long Term range.

So, based on what I did, one thought is to sell a single, highly appreciated property. Use the proceeds to eliminate all your mortgages. You'll have the cash cushion you want on hand. And you can easily step into another investment when you're ready. They are always out there; clearly you are very good at finding them and doing them well!

I agree with the poster who said your taxes may go down substantially. My current flip I bought for $ 300,000 cash, putting in around $75,000 cash and I believe I will get out in the $550,000 range. I am holding it for over a year, so taxes will be 15%. This is an "advantage" of having no income except real estate ... your tax rate will go down. 

Good luck in whatever you choose. Put yourself and your family first; you have worked hard and deserve to enjoy it while you are still young and have your health. I think you are in a solid position, and should be safe and secure.

My question for you --please share with  me your favorite dividend stocks, and any more crowd street or similar passive income opportunities. I want to simplify further; love to hear more insights from someone doing so well in that vein. I am very interested in passive investing now. 

I truly think you will be fine. Best of luck! Excellent work!

Karen

Cannot recommend "The Millionaire Real Estate Investor" by Gary Keller strongly enough. Tons of ideas on setting BIG goals, and tracking your progress. The last chapter contains the personal stories of many different investors who made it past the millionaire mark using many different strategies. Some people hold everything and buy more, others cash out their profits and reinvest -- either buying more or bigger properties. This strongly emphasizes goal setting, and measuring net worth, and I have found that habit to be unbelievably helpful. 

My advice: make your goal HUGE, with interim goals along the way. I set a goal with about a 5 year timeframe when I read the book (about 2 years into my RE investing career.) I thought it was ludicrous and unachievable at the time. I passed it handily and early. Setting new goals is harder when you mentally think "you're done"; it took me a while to regroup and set new goals. So aim very, very high -- and have a long time horizon.

Once you have a handful of investments under your belt and a spreadsheet of your net worth numbers over time, you can easily see where the biggest jumps in net worth occurred, and understand the actions you want to repeat. Seeing the number jumps in black and white, and the bottom line figures growing year after year, is VERY affirming and encouraging, and helps clarify your strategy to those things that demonstrably work for you.

Good luck in finding a formula that works for you! PM me if you want to just chat goals!
  

Hi! I haven't installed carpet in a rental in a long time. This is a new duplex rehab, very nice neighborhood bordering on the highest priced areas in my city, and very pet friendly (located on the parks; popular walking area.) I am doing LVP in the kitchens and hallways (natural wood look in darker tone), white kitchen cabinets with stainless appliances, and have painted Agreeable Gray SW throughout. What carpet would you suggest for the bedrooms, as well as the attic living space? I was heading towards a plus in dark gray ... but don't want to make a mistake. Love your tips! 

I am of the "not overly worried" camp. I have done 14 century homes so far and have number 15 under contract (just like you; 1800's duplex!) I currently live in a very high end, 1910, 7000 square foot house and I'll guarantee we are running some knob and tube -- no worries on insurance, and anything we gutted and redid we rewired, but the rest we left alone. I am writing this from my fully wood-paneled sunroom office ... no way I'm taking down this paneling! 

My under contract property has no visible knob and tube in basement, and I am not worried about behind the walls. It has 3 Federal Pacific panels (house panel and each apartment panel) -- and those I will replace. I have $8k in the budget for the new panels and a rewire of two kitchens, plus having him swap out outlets, switches and light fixtures. Separate line item for new fixtures.

As for insurance, mine usually asks: 

a) is your panel fuses or circuit breakers (no fuse panels allowed); and 

b) any VISIBLE knob and tube to be eliminated (i.e., they are not opening walls to check if anything is tied into old knob and tube.)

Good luck!