All Forum Posts by: Chad V.

I have thought this a million times while listening to the podcast and I just had to post this on the forum to see if anyone else has thought this. Regular show is this silly cartoon that is on Cartoon Network that my wife and I watch some times when there is nothing else on...

Here is a little Youtube summary of the characters: https://www.youtube.com/watch?v=gwB8EBjjYbc

Mordecai = Josh

Rigby = Brandon

What do you think?

I am just curious whether Bigger Pockets members have been actively pursuing Reno, Nevada, for investment now that Tesla has disclosed they have broke ground near Reno for their planned "gigafactory".  This seems like a potentially profitable strategy given that the factory is supposed to employ 6500 people with good salaries.  I just wanted to ask the community whether this is a strategy people are thinking about and I am curious about how veterans have taken advantage of opportunities like this in the past. It seems like spec building, purchasing existing multifamilies, and commercial property investments would all be good options.

I appreciate your responses in advance.

This is a post Brandon Turner himself shared on the FI/ER blog mrmoneymustache.com on this very topic. 

http://www.mrmoneymustache.com/2013/03/23/reader-s...

It was funny, I was reading this post and I thought to myself, "I know this guy!" It turns out I kind of do from the podcasts.

You are very welcome Josh. It is very cool to hear from the man himself! I personally think what you done with this site is genius! I think that the other people in the class will benefit from seeing your business as a model for other start-ups (web or otherwise).  

Update: My post on Bigger Pockets is getting a lot of buzz on the class page.  Assignment number 2 consists of evaluating what makes startup businesses successful by comparing companies in different industries and in different parts of the world.  I will keep everyone posted on comments, etc. as they come. 

I just started a free online course offered through Stanford University called Technology Entrepreneurship.  The first assignment was as follows:

In the text box please:

• Identify the start-up/company (name)
• Describe the business (what it provides or produces) and how it is successful (number of users, market share, revenue)
• List five specific, detailed reasons for its success

I decided to write about Bigger Pockets because I think it is a great business model!  Below is my submission.   I think that most users will agree with what I wrote but I wanted to share it with other users of Bigger Pockets to see if others agree with what I wrote or to see if other people would like to add to what I wrote.

I have no direct connection to the website biggerpockets.com but I am a member and I listen to their podcasts and participate occasionally in the forums.

Biggerpockets.com is a social networking website that is dedicated to real estate investing. The owner is Joshua Dorkin who lives locally (in Denver, Colorado). According to the website's podcasts, he started the business circa 2004. The site claims to have approximately 200,000 members. The site derives revenue by allowing members to upgrade there membership for $90-290 per year. The upgraded membership allows members to gain access to additional features of the website. The site also has paid sponsorships throughout the website and an occasional promotion on their weekly podcasts.

I do not know any details about the company's revenue. Biggerpockets.com has essentially 100% market share when it comes to real estate investing social networking.

Biggerpockets.com is successful because Mr. Dorkin identified that real estate investing is an area where many people can make a lot of money if they gain the necessary knowledge. Prior to biggerpockets.com, most people relied on "real estate guru's" to be trained in real estate investing. These guru folks often charge high fees. By offering a free/inexpensive way that people interested in real estate investing can connect, share information, and learn from one another; thousands of people are able get involved with real estate investing.

Five specific, detailed reasons for biggerpockets.com's success

1. Low cost compared to alternatives means of gaining real estate investing knowledge

2. Social connections between users which leads to increased profits for users

3. Valuable content not availble elsewhere on the web

4. Created a market that did not exist prior to website's existence

5. Low cost for promotion: biggerpockets.com gains users by word-of-mouth promotion from satisfied users of the site

Mark and others,

Thank you for making me realize the seriousness of the owner occupancy clause. I definitely would have involved a lawyer (as is always recommended) so I don't think I would have gone through with it, but it is nice to know that there are people out there to warn me before doing something stupid and have the whole deal trashed.

It appears that investment loans will probably have a higher interest rate than what I anticipated and I will check with the mortgage broker I have been in contact with but I'm guessing that the loan I was thinking of may be for primary residences only and it might not be possible to remove the OOC.

That being said, it would not be a huge thing to move across the wall into the other property and rent out our current residence. In fact, the rent that our current home would get is likely higher than the neighbors since we have completed a few updates. It might take some time to get used to because the units are exact replicas but in the opposite direction... ha.

The other option would be to buy both townhouses under one loan, which would double the size of the loan and I may not qualify for a $600,000 loan...

Are there any other suggestions others might consider?

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I might start to look at other investment strategies while I sort out this potential deal.

If I was able to get a 2% rule property for the same loan amount, my monthly rents would be more like $7000 instead of a measly $2400. Of course, this would definitely require a down payment.

So this is not a subsidized homebuyer program, it is a type of loan that is available in some states for physicians or physicians in training. I have not seen a contract for this type of loan before but from the way it is advertised it appears the loans can be used for real estate investing as well.

So I should have asked this question in my original post: So I know that you can buy a multifamily and legally live in one unit and rent out the others; is it different if the property is split under two different loans and the owner of the one property lives in the one side that is not on the loan he/she has in his/her name?

I knew this was a nuance in my plan and it is awesome that several people picked up on that. Perhaps it is a grey area... @Bill S. I agree that moving to the other property might be the most "by the book" way to handle this but I'm not sure the bank would care as long as the mortgage is being paid. Kind of like the "Subject to" deals with "due on sale clauses" that they talk about on the podcasts.

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About the ARM, so some back of the napkin calculations.

If purchase price is $330,000, current fixed rate mortgage is around 4.1%. The monthly cost basis for this would be around $2100 including interest, principle, taxes, insurance, garbage and water. This would leave me with a maximum cash flow of $300 and I may not get $2400 in rents.

The same scenario with a ARM on a 30 year loan with a 2.8% interest rate (fixed for 5 years) would give me a cost basis around $1600 and a potential cash-flow of $800. So after 5 years I would have a potential cash flow of $48,000 minus repair costs, vacancy, etc. instead of a maximum of $18,000.

This is thinking in terms of 5 years, rather than for the long, long term but as an optimist (like @Mark Ferguson) I always think things will be better in 5 years!

I do agree that this would be risky and probably not particularly smart under normal circumstance.

I guess the elephant in the room is that my (job) income will go from ~$55,000 to >$200,000 when I complete training in 2017 or 2018 and this is virtually guaranteed unless the US healthcare system completely unravels.

I am a bit more risk tolerant with that in the back of my mind. My wife also has a good job so we have a fair amount of disposable income. If things go awry we have cash to plug the hole.

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Final note: I really look forward to working with experienced BP investors when I have real money to invest circa 2018.

It is so awesome that I am getting so much useful feedback! I really appreciate that you all have taken the time to respond to my post.

I do understand there are probably better deals around; probably not in Denver though. Our market is on the warm side. @Mark Fergusen deals in Greeley I believe he mentioned on the pod cast, which is quite a way from where I live in terms of distance and in terms of real estate cost. I would definitely like to hear his input!

The subject of ARM versus fixed is a good thing to discuss. 5 years from now is basically guaranteed (>99.9%) chance to be a better financial time for me than now. I would basically be trading guaranteed improved cash flow now versus possible worse cash-flow in the future.

I will not be spending cash-flow; all of that money will go towards additional RE deals and potential future maintenance in this property.

I would definitely start low when purchasing this property. The current owner would be crazy to sell for less than $300,000. If that were the case, I could just flip with a pretty good profit.

For me the biggest positive is that I can get a $0 down loan (as it is attached to my primary residence), I know the exact condition of the property and what I can expect in rent.

I am new to BiggerPockets. I have been listening tirelessly to the podcasts for the last month or two. I really want to get started in real estate investing but have little cash on hand...

The property below seems like the best way to get started. I know it does not meet the 2% rule or the 50% rule but both of those rules are basically unattainable anywhere near where we live.

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We live in a town home near a major university in an affluent neighborhood. We "rent" from my wife's elderly father who also lives with us. Thus, we do not have a primary mortgage. Because of my profession, their are special primary loans available that are $0 down without PMI.

Our attached neighbor is currently a rental property and I have noticed the owner is growing tired of managing and would likely be willing to sell (although it is not on the market currently).

The market rent is $2000-$2400, probably on the upper end of that range. The property's market value is $310,000 to $350,000.

I would opt for a 5/1 ARM (current rate 2.8%) with the plan to refinance in 5 years when my income is much higher (I will be done with training; I also hope to have some cash flow real estate properties by then as well!) when cash-flow is less of a concern.

The monthly mortgage including taxes and insurance would be median $1450-$1600 depending on the sale price.

I know the roof is in great shape. HVAC was replaced in the last 1-2 years. The chances of additional expenses are quite low and we live next door so I can handle most issues immediately. The water is actually not separated from us so we know the water bill - ~$60 for both town homes.

Therefore, monthly cash-flow without unexpected expenses would be $370-$920. (There are lots of assumptions but I think the likelihood of being in this range is >95%)

I know this is not a "home run" investment but my cash on cash return is essentially infinite with a $0 down mortgage. Also, I want some practice as a landlord and it would be nice to start out living close to the property. Further, because of the neighborhood, this is a "Class A" property and I could easily get a very responsible tenant, which would further decrease the likelihood of unexpected expenses.

Eventually, we will utilize our current residence as a rental property and it would be nice to own the entire structure (2 town homes).

I apologize for the long post and I appreciate any input that anybody has related to this potential "deal."