All Forum Posts by: Jonathan Cope

Hi Chad, We refinanced a unit from a 15 year fixed to a 30 year fixed conforming while cashing out the down payment required for our newest unit. We explained to the seller via our broker what we were doing so did not put down earnest money or any preliminary deposit out of pocket. All closing costs were rolled in the the new unit’s loan. Other than the usual paperwork frustrations the overall approached worked well.

Hi Cory, Start now. Acquire the business owner mindset now by doing and giving your future earnings purpose. Done correctly your rental and business efforts will pay for your education loans. I found following Rich Dad Poor Dad a powerful way to leverage the good fortune of high earnings to pay for past expenses and protect future earnings from taxes. Good luck. Don’t wait.

Rob Roy congratulations on achieving your first professional ambition. Your service and achievement to date make us proud to be American. Nicely done. Go Navy! Your next aim is similarly impressive and challenging. The key will be to maintain commitment to undertake what others won't or can't by constraining your own consumption to house people other than yours. It is a meaningful and rewarding service but a challenging one initially. Finding inspiration from those undertaking similar journeys will help. Heroes, mentors, partners all make the effort easier. But it is a slow go in the early months/years so be prepared to be committed. If you are looking for content beyond BP to read consider some of the following: The Richest Man in Babylon Rich Dad Poor Dad The Millionaire Next Door The Millionaire Mind The Snowball and Mr Money Mustache Each of the above will help with perspective, systems, delayed gratification and subscribing to the alternate path - the one to wealth rather than to consumer debt. Enjoy the BP podcasts from 1 on. The production quality improves with each episode and many of the early ones, like number 2, help when just getting started. Don't be too surprised if the content above makes you think quite differently about your primary residence in the short run. Lastly, don't undertake the journey alone. Be sure your life partner is with you in mind and spirit every step of the way. Good luck!

Leah Bonner yours is the challenge faced by ambitious professionals regardless of industry. Day to day, I work with young people newly entering a professional setting from university. We provide analysis and advice to decision makers with more years of experience than the young people have years of life. Our decisions concern investment totals that none of our young people have considered other than as a dreamed of lottery winning. The young folks who succeed in establishing credibility early are those who know the details cold. They are the authority on the minutiae. If there is a variable to highlight they can and do. If the variable really matters they say so. Otherwise, they over-prepare, arrive early, stay late, and always ask if there is something more they can do before they leave. And when they know the detail better than a meeting blow-hard they hold their ground with the confidence that they are correct, prepared, and credible. Young talent of this type attracts the best mentors; the mentors who were themselves the talented young people who figured out that hard work well done was key to their advancement. Many of these most successful and confident young people got their start working in service at an even younger age. Waitress, infantry, crossing guard, landscaping, etc. Always be learning by doing. Offer your help to be involved in more work and more deal flow even if you don't get paid for every deal. The compounding benefit of consistent good work underpinned by a complete understanding of the detail will return exponentially in the short, medium, and long-term. Congratulations on your success to date

Ericka Grant your review of whether to grow your portfolio with debt may benefit from a more fulsome consideration of what you want to achieve. The ambition you state initially in this forum thread is largely achieved. If that is really what you want then you have little if anything to consider. You are soon done. However, inherent in your line of questioning, and the details you share regarding your husband's interest in a multi-family and the use of debt, is maybe an unstated goal to continue growing your portfolio and its income beyond your here stated aim. How big is your unstated ambition? Stating it to yourself and your husband may make your arithmetic planning simpler as it concerns the use of cash or other people's money. Ensuring you both share the same ambition may also help. Is his goal the same as yours? Divergent goals, stated or unstated, may somewhat underpin the difference in attitude you both have had recently regarding the use of cash versus of other people's money. You mention retirement, with free lance work included, a few times in this thread. Early retirement coupled with considered frugality is certainly an admirable ambition, if that is yours. In such a case, your current cash approach would be a powerful advantage. Not the only approach but a good one. If you are inclined to live a more conventional consumer lifestyle, one that would likely be less frugal, then the tax and compounding benefits of using other people's money, at least some, may prove to be to your advantage. In the end, however, the right answer is the one that solves the extent of the full ambition for which you are striving. Congratulations on your success to date. May your success continue.

Demand for historic Jersey City and Hudson County property continues to rise. (I own residential in Hoboken and developed commercial in Paulus Hook.) Development of Lower Manhattan commercial space and its increasing uptake by former midtown occupiers is drawing Upper West Side and Upper East Side residents to Hudson County and Brooklyn for family sized residential and improved commutes by ferry and PATH. Paulus Hook/Downtown and Hoboken each have seen increases in such family sized property buying in 2015/2016. Hoboken saw a $6mm brownstone sale in 2016, and $3mm sales are increasingly common. The Jersey City challenge is that it is more sprawling than Hoboken, and many blocks are still less than fully desirable due to deferred maintenance, services deficits and weak streetscape planning. $900k does not strike me as near the forever top end of the pricing range for the property you describe if it is Downtown. Do explore why it is priced lower than its alternates. Renovation in Jersey City is expensive and annoying. One might consider Bergen Lafayette or The Heights for similar product at half the cost. But neither offers as convenient transportation to the City, services or street life. Good Luck.

Hi Chris, It would appear that you are in a win/win situation. I would be slow to sell if you are confident in the quality, location and desirability of your home. The percentage rules of thumb (e.g., 2% rule) can be a distraction from quality cash flow and should likely be ignored in your case. From your description, it would appear that you have already undertaken most of @Brandon Turner's BRRRR strategy. Consider keeping the property. You know it well. You already control it. Its cash flow and appreciation will contribute to growth of your net worth tax efficiently. If you need equity to acquire incremental property consider a line of credit or a refinancing the existing property. You may even want to establish the line of credit now before converting the home to a rental property. If you need more information regarding the tax efficiency or financing approaches BP has a number of useful books available in the bookstore. We have used a similar approach four times in the past fifteen years. Each home served our purposes as a primary residence for a few years, and in each case we added value through enhancements or repairs. Now as rentals, the homes are well known to us and in markets where we understand the common tenant demographic. We undertook a comprehensive refinancing of all the properties 18 months ago to lock in low interest rate 15 year debt while releasing equity to purchase our newest primary residence. Good luck with your decision and congratulations on your progress to date.

I would encourage you to do both. Use careful selection of rental property purchases to generate cash flow with which to pay your student debt. A classic 'Rich Dad Poor Dad' approach. Finding cash flow is tricky given that low rates have increased many asset type price levels materially since 2009. But it does still present itself from time to time. We bought an A neighborhood bungalow in NJ this year that cash flows $600 monthly. Luck, persistence and circumstance were the ingredients for finding it. We've found little since. Restrict your consumption (e.g., Tim Ferris stoicism-style) and avoid a property purchase for your primary residence, unless you intend to house hack over and over. Treat your rental property business as a business and plow as much of your earnings (W-2) and cash flow (Schedule E) in to reserves, future down payments and debt elimination. 3G Capital has used this approach for 30-40 years in brewery purchases and is now the world's largest brewer having started with no beers sold. They own Budweiser, and just recently closed on SAB Miller. Don't be in a hurry exclusively to prepay your student debt but do look to refinance it. As the dollar weakens and rents rise your loan payments will be easier and cheaper to make in future years. Groups like SOFI have rates that improve as your credit improves, so keep checking what's possible regarding student loan payment reductions. Finally, make the math hard on yourself and shop for cash flow only, and ignore appreciation. Appreciation will then be your bonus for good work done and finding cash flow will ensure your purchases have a legitimate margin of safety. If you do not have a material margin of safety in every deal you will find yourself tired and desperate at times. I like appreciation. But I would advise anyone to avoid including it in their models. It has provided us seven figures in upside over 15 years of ownership but no model we ever built would have credibly forecast it. Good luck. Be conservative. Keep doing a lot of reading and studying.

It can be HR but is often the Travel department of larger firms. Many are increasingly using AirBNB's nascent corporate program as a way to outsource the management. Corporates are definitely the path of most resistance. You might consider hospitals, as patient families often need long term stays.

@Ben Leybovich your command of the paradigm is strong as always. (Your description often reminds me of Ray Dalio's 'Economic Machine' video on YouTube).

The relationship most folks have with financial services is reminiscent of serfdom. 

Do you also arrange your expenses, e.g., the Tesla, primarily as business related to reduce the tax burden of your cash flows? 

Beyond paying for expenses, a sweet ride or otherwise, with W-2 income most folks seem to bear more tax burden than is necessary.

If one has to pay for depreciable assets it seems best to pay for them in a manner that the depreciation serves a beneficial purpose (i.e., reduction of taxable income). 

Avoiding the use of credit (business not personal) in the current system seems unduly risky unless one has access to float or a growing base of earnings in a low capital business. And there are not many folks in that position (<1%). 

And if one correctly organizes their business and cash flows - like you  -then they justly deserve luxurious rewards, cars or otherwise. After all, even Mr Buffett flies private.