All Forum Posts by: Darian Richardson

Hello BP,

Through a few networking events I am being advised not have my properties in my own name for asset protection purposes and legality reasons . One of the strategies that I ran across was opening an LLC to have assets in the business name instead of my own. One thing I found interesting was the suggestion of opening an LLC in the state of Nevada instead of forming one in the state that I am investing in or majority of my properties are located.

Does anyone have any experience with forming an LLC in a different state elsewhere than their assets, specifically Nevada? If so what was the process of forming one, and what are the pros and cons of doing so. Any tips and insight would be appreciated.

@Ashley KehrThis is awesome. In the near future I am thinking of doing something similar with my duplex. Just to be clear when you refinanced 75% of the appraised value equaling $41,250) You paid back the first loan of $35,900, leaving a remainder of $5,350 in your pocket correct?

What were the terms  of the unsecured loan that you first received?

@Ryan Davis

@Ryan Davis 

Evening Fellow Investors, 

As I am finishing up  @Scott Trench's own Set For Life, I came to a section in the book under "Exploration of Financial Freedom" about The Safe Withdrawal Rate. I thought this section was fascinating, so fascinating I had to explain to another a friend of mine @Ryan Davis, thinking I might  have the answer to the question we both have been wondering. "How much wealth do I need to accumulate to become financially free with little to no risk?"

The Safe withdrawal Rate is a brilliant strategy that is explained in the chapter of THE Exploration of Financial Freedom in the awesome book of Set for Life.

"The Safe Withdrawal rate (SWR), expressed as a percentage, determines what percent of usable net worth ("real assets) that can be withdrawn each year, such that your assets are not depleted. The SWR is defined as the quantity of money, expressed as a percentage of the initial investment , which can be withdrawn per year for a given quantity of, including adjustments for inflation, and lead to portfolio failure."

I couldn't help but think of this idea of tying The Safe Withdrawal Rate with the classic 2% rule. Let's say you have properties that were renting for at least 1 to 2 percent of the purchase price, in this example having a total of $500K in real estate assets specifically rental properties. Approximately, this would calculate to around 5k monthly of gross income (depending on different variables such as property tax, pmi, insurance, etc.) only getting a 1% percent return per purchase price, 10K monthly if all the assets producing at a 2% rate. 

2% rentals are tough to come across especially in today's competitive market, but I myself recently closed on a duplex that has the potential to be producing 1.04% rental income of the purchase price, the crazy thing is I did not realize this until I was already 2 months deep house hacking! The safe withdrawal rate formula is the individual's (annual lifestyle expense)/ (total real asset value). If an individual kept their monthly expenses moderately low at $2K monthly having a total of 24K annually in expenses and 500k of total real asset value, their SWR would be 4.8%.

I would be interested to hear if any other fellow investors have used The Safe  Withdrawal Rate to work backwards to blue print out their success in real estate or journey to financial freedom. What are some Safe Withdrawal rates, that made you take the leap of leaving that wage- paying job?

Perfect, I got the FHA loan already, when I'm ready to pull the trigger for my next deal I will definitely keep this in mind.

Thank you @brian Garlington

@Brian Garlington Thanks for the input, have you dealt with this same situation before? Of having a FHA already out on a property and wanting to finance another deal by using the Chase Dream Maker loan, or the Fannie Mae Homeready loan? If so that would be an excellent strategy to finance multiple properties with a low down payment!

I'm obligated to have the duplex as my primary resident for 12 months, although from my understanding the only way to verify that would be the mail continuing to be mailed to that address. 

On my search I was planning to utilize the 203K loan as well but I would suggest only dealing with a broker and agent that handled that specific type of loan before. Due to the many hands in the pot to finalize everything, what I learned was that there is a need of at least 3 different licensed  contractors, realtors, attorneys, brokers, etc. Also something to think about, the repair cost will be tacked onto the loan, which will have to be paid throughout the course of the loan whether it be 15 years or 30 years. How major is the repairs and would you be willing to repair the unit for yourself while househacking?

In regards to the terms, I received a 30 year fixed mortgage with a 4.4% interest rate, at the time I got approved I was at solid 690- 700 credit score but my credit has grown since then.

The home warranty is about $960-$1,100 annually which averages to about $83-$85 monthly, and covers just about everything in BOTH UNITS, the sweet part is my realtor fought for it to be paid at the closing by the seller, so I ended up getting the first year essentially for free. From ceilings fans, dishwashers, HVAC units, electrical outlets, and basically everything under the roof, I highly recommend it.

I hope this was helpful,

@Charles Kennedy

@Filipe Pereira Thank you so much, I will look into that.

Also on a side note from your other posts about potential heavy expensed utilities such as HVAC units, water heaters, dishwashers, etc., although having cash on reserve for repairs is crucial,  I would suggest purchasing a home warranty for your properties, to have a little piece of mind.  I have American Home Shield, and when my tenants HVAC unit went out, I only had to pay a service fee of $75 for the whole unit to be replaced. The warranty  was negotiated at closing, and I am contracted with them for a year, but will definitely will be contracted with them on all my future investments, it relieve a lot of repairs and expenses as an investor.

Good Luck, and enjoy being financially free!

@Filipe Pereira This is awesome to hear, as a 24 year old my self with a duplex under my belt, I aspire for my next deal to be a quad plex and bringing another cash flow stream.

One question I do have, do you mind explaining how you financed the second deal, did the bank or where ever you loaned from give you difficulty because you already had a loan out?