All Forum Posts by: Daniel Ditto

Thanks @Brian Roberts!

This is probably a really stupid question but I don't have any experience with it so your knowledge would be appreciated.

I own several rentals but I bought them all as investments from the get go and rented them right after rehabbing them. In a few years I would like to move out of my personal residence and convert it also into a rental. At the moment I am refinancing my home for a favorable rate and lowered monthly payment so that the rental opportunity can be even more favorable when the time comes.

With that said I know that I have to live in my home for a year post refinance before I rent it but I'm also wondering if I need to tell my broker to set up the mortgage in any particular way so that its not a problem to put renters into it in the future. Any advice here? Anything special I need to do or is it pretty much not going to be a problem because that is the norm?

@Michael Ealy this is gold. I'm honestly surprised you do not have more votes on this. Very impressive and certainly something you should be proud of because it is the type of journey that really defines you. My compliments to you on your optimism and tenacity. You found something out about yourself in this process.

Its also inspiring for me a growing investor. I currently own 12 cash flowing SFH which are rentals besides my own home. I got the first back in 2014. The growth has often seemed slow but I can see it snowballing more and more with the goal of moving into larger multi family units and small apartment complexes. Its great to hear a story like yours where the patience and consistency pays off.

Keep it up my friend, it sounds like you live without limits!

Syndication groups are definitely the easiest and you get pretty exclusive access. Regardless cash flow is king and if you are just hoping to let it sit and appreciate while you reinvest the income then multifamily in favorable markets is very attractive. Either let it sit and pay itself oft and then leverage that already favorable property to purchase others or take the income and put it towards additional investments of a similar nature.

This is great @Michael Ealy! These are the invaluable posts I feel like this board is useful for. Props to you and building such and incredible pool of income producing units. I have one question for you.

My only experience is with SFHs. The concept of improvement and leverage makes sense to me because it is similar with SFHs but I'm interested to know how you took the first step into apartment buildings. Has this process been filled with trial and error for you or did the first apartment complex you bought work out this way? Were you already a property manager for such properties or something similar? Did you start out buying these in better upkeep and then slowly transition new investments to more needy apartments where you knew by experience you could turn them into a more valuable asset? Just wondering because it seems like an experience leap that could be filled with pitfalls for a person who was jumping into your suggested process as a first timer or at least a first time apartment building owner.

Thanks for sharing your experience!

Dan

Probably a dumb question but it is possible to do a Refinance and apply for a HELOC at the same time and with the same appraisal? Seems like it would save money and time. Also if possible do they run the credit twice or once. Again seems like running the credit once would be preferable.

This is going to depend on how many units you have rented with each manager. When I started with my manager, he and I spoke every month and sometimes less frequently unless something was off or something big happened. Now with many more properties I make sure to set time aside to contact him for about 20-40 min every two weeks. We have become good friends and he likes to talk so part of my follow up is just to keep the relationship fresh and make sure he knows I appreciate all he does.

I imagine this will also depend on the type of properties you own. I own only C and D quality rentals so I guess I have less worry about minor damages and they are expected with the demographic that rents them. I live out of state and only go in person every year or so, again, mostly to maintain the relationship but also just because it seems the wise thing to do. So much of the management of your manager will depend on the level of trust and the history of execution that has occurred.

You have some serious dreams and that is a great place to start. Dreams alone will not get you to the finish line so the question to answer is how to get where you want to go. Those plan will inevitably change because unexpected things happen and believe it or not even your priorities may shift over time. Reevaluating through the process is key.

First of all recognize that all advice from anyone is coming from their own personal experience. That is one of the reasons that getting diverse information from as many sources as possible is key to being truly educated on any subject. Not matter what you believe about formal education, life education is going to be pretty dang important no matter what you do. Life education can come from a vast group of resources and some of those can be formal education while most of them will not be. My thought here is not to push you any direction but just to get you to think.

Let's talk about college really fast. My first question would be why you don't want to go to college? Are you asking yourself the right question here? Is your goal in life not to attend college or is your goal to own a lot of real estate? Is your goal really to own a lot of real estate or is it to be wealthy and you don't really care which legal way you get there? The answers to these questions and probably many other similar or branching questions should guide your decision.

To better explain let me say first that we all suffer from these issues but often we don't act in our own best interest because the steps to get our end goal is not clear to us. Which do you care about more, not going to college or becoming a successful real estate investor? If the answer is real estate investing than you should completely forget your goal to not go to college as a start point to reaching your goal. Maybe no going will be a step you take but assuming you can reach your end goal and do that is going to close to options that really might be necessary steps to get to you where you want to end up.

If I were your age with the goal of being a real estate mogul with my experiences now I would do or consider the following:

-Read a boat load of information out there- books on wealth, books on real estate, magazines and journal that real estate agents and buyers read. Listen to podcasts and gather enough basic information to make myself dangerous. Study competing opinions so that you can piece together the whole argument and see both sides before you setting on your preferred.

-If I want to be a real estate agent- talk to as many agents in person as I possibly can. Ask them who the most successful agents are. Contact those agents and also ask them to meet with and mentor you with advice. How did they get to where they are? What steps did they take? What are the most important skills and how are they developed? Do they know any successful agents that didn't go to college? Ask for their information, contact them, ask to meet with them and ask how they did it or if they would do it differently. Also ask everyone if they know any successful real estate investors that do the kind of investing you are most interested in. If they do ask if those individuals might be the type of people who would give you advice on how to get where they are someday. If they would ask to contact those people, do so, repeat and keep building a network of knowledgeable individuals that do exactly what you want to do. Write the information down as you speak with everyone and review it. Come up with new questions to ask as you go along. These are the type of nuggets that you can start to rely on when the information is robust.

-Do the same thing as above with lending officers or investors who loan their money out to real estate investors. Ask who they lend to and what they look for. Ask what the background of the people they lend to is. They probably don't even know but they can probably find out. Ask them to introduce you to some of them so that you can get advice from them as well. Rinse and repeat with anyone in the industry that works around the type of people you want to be (insurance people, lawyers, whole sellers, landlords etc. You will find that if you let them talk, just want advice, don't dominate their time, are grateful and maybe even offer to help them for free if they could use your limited skills you will have no shortage of people open to sharing their thoughts with you. Some of those people could become good friends and business contacts in the future. You will stand out even more because young adults from the beginning of time struggle to get on the phone or go down to a brick and mortar location and make this type introduction.You will instantly look more serious about your goal. It holds so much more weight than emailing, contacting through social media or getting on a website like this. Those things can be good back ups if more direct methods are not working but should not be relied on.

All of the above is relevant because you will get a pretty quick idea about whether what you are hoping to do is a likely path to success. Now if you are seeing that almost everyone has a college degree except for a few outliers whose actions did not follow any particular course you can duplicate than its time to drop the lesser goal for the greater goal, suck it up, go to college and establish yourself in every meaningful way that will get you to where you want to be.

My personal advice is just one of many voices but I'll give it. Go to college part-time and as inexpensively but as high quality as you can. Keep doing everything I described above but take 2 or 3 classes while doing it. Also work like crazy and spend nothing. See if you can get your real estate license while in school. Build credit. Save a sizeable chunk of cash and then buy a place near to the campus your schooling is at, where you can house hack and rent a bunch of rooms to other college kids. The location and cost of real estate in that area will be a big factor in pulling this off. Ideally rinse and repeat through to graduation when you are hopefully sitting on several properties. Maybe you never graduate because your properties take off and real estate draws you in full time, no big deal the degree was never the goal but don't make excuses if staying is the more successful route. From that point you should be able to expand pretty systematically and by the time you're 35 or 40 you are a real estate mogal and you are buying apartment complexes, trailer parks, office building etc instead of SFHs. Real estate is not rocket science and in my opinion is the route gives a high probability of success if stay the course, buy intelligently and don't live lavishly.

Much more than I planned on writing but there it is. Personally I love the books the millionaire next door and millionaire mind combined with the mentality of Rich Dad Poor Dad. There is a lot of financial truth in multiple taught methods of not spending and yet still taking reasonable risks that make your money work for you. One last thing I will add is that thinking of college as a degree is wrong in my opinion. It is the contacts that you make there and ideally the way they teach you to learn that are the true value. Most wealthy individuals met their spouse, best friends and many of their business associates through their college education. This is all true for me. 

Without reading every comment already made here I am saying yes where others may be saying no. If this is for the purpose of a loan double yes. There is no reason not to look like you are worth everything you own unless maybe you are overextending yourself on a loan, which in my opinion is another issue entirely. 

If you are overextending you certainly cannot count on a lender to tell you that so you should be realistic about what financial leverage you can actually support. Figuring that out is entirely on the person taking the loan but the total financial worth of a person can certainly include items which Rich Dad would call a liability and other things besides.

Separate from lender needs personally I reevaluate my net worth frequently just to have an idea on whether its growing as my cash flow is also growing. Its very motivating. Beside cash, stock and property, I check reseller trends on everything and then I undershoot the average sale price by 5-10% depending on the item and quality. If I have a used vehicle I see is probably valued at $10000 on the private seller market and I am near certain that that car could be sold today for $8000 based on my market then that item has real value right now even if it is depreciating. There is no purpose in pretending is doesn't have any value if it is an item that will move fairly quickly on the market and is worth more than $1000. Again, relying on that value is a whole other thing but recognizing it has value is simply reality.

This is even more true for certain items. Certain cars, watches, jewelry, antique furniture and artwork are actually appreciating significantly in very real and accessible markets. I have a coworker who buys, collects and resells Rolex watches. He gets them direct from a Rolex broker and can instantly sell them for several thousand over what he bought them. He views them both as a hobby, accessory and investment. If you look at ROLEX watches they have a strong history of growth because the number is limited on purpose. I have a close friend whose father buys and sells luxary cars on the side in a similar fashion. Most jewelry may not fall into this same category but I could see something like Tiffany's working out this way, though I don't know much about that so maybe I'm wrong. 

The danger is overestimating your networth on items that you don't actually know the value on and whether they will move on the market and simply presume have lots of value, then going and relying on the value to support your loans. Much of that would be just be ridiculous if you are including your run of the mill phones, computers, furniture and electronics. Items where there is probably not much resell value. Not the case with items like the Picasso on your wall or the one of kind Stienway piano sitting in the music room. There will definitely be a market for those, the market is real and the item has significant value. That is the reason you can include your cars usually. Vehicle transactions of almost every make and model are happening all over the world so almost everything that is functional and looks decent has real value.

Thanks @Anthony Michael, I sure hope so.

@Stephanie Medellin that is what I am wondering about. Seems like rental purchase lending in the last recession dried up some but maybe that was related to the type of recession it was and the previous trust everyone had in equity appreciation prior to 2007. I heard this second hand because I wasn't into RE at the time. Saving vast reserves of cash is also a decision struggle in my mind. I hate to leave decent cash flowing deals with low interest rate loans alone for now on the chance that the economy tanks and my cash is more valuable to lenders down the road. Seems like a bit of a catch 22 because I may have to miss out on increases now in the hopes of larger increases in the future. I would love to continue buying properties I believe will preform consistently, even in a down economy but be in a position to take advantage of richer deals in a recession

I know this is probably what everyone wants but I guess I just wonder how much cash I should be reserving for a recession? Does LTV increase or decrease in a recession?