All Forum Posts by: Dave G.

@Kyle Curtin You are spot on. Reserves do not get enough attention on BP. So many investors are getting leveraged to the hilt and miscalculating expenses and net income (if any) and risk finding themselves in an unsustainable situation. This exact situation happened to me in the early 90s, long before BP or the internet. I was a young investor and bought 3ea properties with nothing down on any of them. One had an assumable w/o qual FHA loan, the 2nd an assumable w/o qual VA loan and the 3rd the owner owned the property free and clear and I hand wrote the note on an 8.5"x 11" sheet of paper into my offer (and he accepted! From a 23 year-old!).

Anyway, after all my acquisition success getting 3 properties with nothing down, I rented them out and quickly started experiencing how properties need maintenance and things break. I was a young realtor barely making enough to pay my own mortgage. I had no reserves whatsoever to fix these rentals. When something broke, it went on a credit card and they were adding up. It seemed like the 3 of them took turns each month with stuff breaking. Fast forward ~18 months, I had to dump all 3 properties because I couldn't keep up with things. And obviously this was more than just a reserves problem, they were negative cashflow essentially. Years later, I got back into RE investment and the lesson of reserves was a key requirement as I began to build a resilient portfolio. 

I learned the hard way. A warning to aggressive, eager BP'ers, do not make the same mistake!

Well, I'm not a tax expert, but at the most basic level, I am only aware of the IRS occupancy rule. Which is what residence do you spend the most time at. There are some additional qualifiers such as where are you registered to vote and where are your cars registered, etc. But I know of nothing regarding the financing used for purchase being a contributing factor to the definition of "primary residence"

Well I'm no lawyer, but the lease is between two identified parties (at a minimum). If one of those parties intends to change, then the other side would need to agree to an update to the contract. That being said, I would find it surprising if a tenant cared much about this requested change. Unless they wanted to try to use the request as an opportunity to get out of their lease or some other agreement change. But I would think that would be low risk.  

@Juan Chavez dude, you're all over the place. You really can't narrow it down more than what you've put in your question? If not, then this isn't a one-shot deal. Pick one and adjust from there. Or take a breather and read " Emerging Real Estate Markets" by Dave Lindahl. Not a new book but has timeless principles that are 100% true today. I'm sure there's other books that are newer, but this is the one I've read is still valid today. Cheers, Dave

@Blake Ramsey How did I feel? I felt awesome! Of course my cockiness and arrogance completely overshadowed my ignorance, and that's why I felt great. How did it turn out? I had to sell the prop after about 18 months since I had no money and no reserves specifically. Basically, I failed. This was before the internet and BP, and I was a young dude like you. I learned from it and moved forward. 

How do I feel now when I do a deal?? When I put in an offer now, I feel like I'm doing drugs it's so cool! Such a rush, so exciting. The feeling of opportunity and risk and leaning forward! Progress pending!

So my recommendation for you: learn and lean on experienced-others for advice, but know you have to make the plunge at some point and that you will likely not hit a homerun but rather experience an intense learning opportunity. And not just with what transpires in the transaction, but how you emotionally and personally manage all the nuances & challenges that will occur.

Good luck to you Sir, 

Dave 

@John Pelaez thanks for asking a really interesting question. Not just because I'm a retired aerospace professional with a perennial interest in aviation as well as RE investment, but because it's refreshing to see something other than a "starting out" question in the forums. Thanks for posting. Cheers, Dave

This is awesome. Reminds me of a Richard Branson quote responding to the age-old question of how to become a millionaire - "Start with a billion dollars..."

@Tony Zhang the credit union I already banked at was able to open a biz account for my LLC (Desert Financial Credit Union). Wasn't a big deal. I will tell you I am anti-big bank. Credit unions are so much better when it comes to fees, rules, etc, so if you can join one that has biz checking all the better. And I am someone that actually did a stint working for Bank of America accounting dept for 4 years and still stayed at my credit union even though BofA offered incentives to employees...no regrets.

Cheers, Dave

@Greg Blake

IMO Depends on your financial situation. I would only do the HELOC if it was something you could pay off within say 12 months. I would not substitute the HELOC for a fixed 15 or 30 year, especially on the cusp of rising rates.

I used a HELOC on my primary many times (combined with a loan on my 401k) to piece together all-cash purchases for investment properties. Cash is king, so my offers were strong with no finance contingency. However...I was able to pay off all the loans inside of 12 months because of my strong W-2 income combined with rental net-income.

Good luck to you,

Dave

@Jeffery Cooper not sure this will work but attempting to send a link to another poster with my response:

see my answer at https://www.biggerpockets.com/...