All Forum Posts by: David Grabiner

@bill 

@Bill Henley I am not an attorney so you have much more experience than me but can you explain how an LLC will protect you from a nondisclosure suit? As far as piercing the corporate veil here is an article that I read about with some cases from TN http://www.frostbrowntodd.com/resources-1468.html

Maybe those cases would not apply to LLCs ? Anyways so in your opinion if I own 24 houses and put them all in separate LLCs but i self manage them run them all out of the same bank account, us the same software have the same employee work on all of them I will still be protected and no one could pierce the veil?

@Bill Henley How will having the property in an LLC protect you from a non disclosure suit? Most likely the remedie will involve the property itself or paying for the repairs that were not disclosed. Punitive damages wouldn't be applied unless it was clearly a malicious nondisclosure which is something you don't have to worry about if you operate your business in an honest manner. All an LLC does is compartmentalize your risk to the extent of what is held in that individual LLC, which is why people say you have to have multiple LLC's one for each property if you really want to protect yourself. But then you run into the problem of the veil being pierced because if you run all your LLC's with the same employees using the same office using the same management software etc it will be easy for a lawyer to argue it is the same business and all those individual LLC's don't matter and all your assets are at risk in the lawsuit.

@Audrey Ezeh 

Lol. I guess it was you I was referencing. 

I get your points however I would just say that just because someone can hit a low FI number doesn't mean they are going to stop there. They can have goals that are much higher and work towards that but they have still attained FI quickly meaning their passive income is equal to more than their living expenses. 

I have attained my FI number in 3.5 years but I'm not stopping I'm just transitioning that new freedom into making even more passive income. 

So in your case I think what you were saying is that 85sfr at $200/door is your ultimate goal, but is not the amount that you "need" to be FI.

Lastly I would never say someone has to live on 60K per year, that is their choice but if they have a desire to achieve FI sooner the lower they can get that "need" number the sooner they can be FI. This is not for everyone, many people would rather not sacrifice their lifestyle now in order to no longer need a W-2 job. 

@Llewelyn A.

I totally agree there are a far more post on here about how you can a achieve it or how they will achieve it then people who have actually achieved It.

If you look back at my post you will see I'm one of the few like you who have tried to answer the questions asked by the OP. It would be interesting to find the common thread between them all and see what theyhave in common. I would venture to say is that all of them had the drive and self control to live well below their salary, some may have 200K plus incomes like you others like myself may have done it on 56K incomes. But we probably all did it by saving more and investing quicker. 

For example someone was posting on here that you if you earn 200K per year than you need 200K per year to be FI. Well if that is true, that person is living off of 200K per year to support their lifestyle there is no way they can save enough to invest to replace it because they "need" all of it to live. If someone needs their full amount of their wages to live of off they will never be FI. Someone who earns 200K but only needs 50K can become FI quickly, keep working and soon surpass their 200K of salary through their investments, but they became FI as soon as their passive income reached 50K. It all starts with living off of significantly less then you earn. A simple concept but very hard for the majority of Americans to achieve.

@Account Closed I was just checking out your website and I got a little confused, because on your website you mention 

Yet based on your post here I was under the impression that you were against using other peoples money? Or maybe I am misunderstanding you and you are just against long term leverage?

@Account ClosedThe other issue, is you are tied to the market in that if you become upside down on that loan" 

As long as it is cash flowing who cares if I'm upside down in a loan? I'm not trying to speculate on appreciation I am investing for cash flow. I plan to buy and hold for the long term.

You would only pay capital gains tax on the Gains not the value of the property so it is not correct to say your property value would be down 26%. If the property didn't appreciate you would have no capital gains and thus pay no capital gains tax. therefore you would be out the 6% of commission only. 

Finally I'm not Guru and I'm not trying to tell you to change how you invest. Your strategy is yours and using leverage on such low price properties may not be the right way to go. I just want to be clear that leverage if used in the correct situation at the right time can be used to grow wealth and create financial independence quickly. I don't think leverage is always right and using other peoples money when you don't know what you are doing is extremely foolish. 

@Account Closed Ok let me give you an example to show how leverage can multiply your returns significantly If you have properties that cash flow well. Let's say you have 100K to invest and you have the option to buy a duplex for 100K that will cash flow 200 per door or 400 for the property if you have a 75% LTV mortgage. This mortgage at 5% 30 year terms will cost you $403 per month. So if you buy it all cash you have doubled your return and are getting 800 per month. However if instead you bought 4 duplexes with that 100K you would now be getting 4*400 = 1600 per month. So using leverage would double the return that you could get instead of paying cash.

Now lets say because of improvements you are able to increase rents and thus increase cash flow and increase the value of the property. Lets for example say you were able to increase cash flow by $75 per door or $150 for the duplex you could then refinance pull out 25K (which would cost $128 per month) buy another property and make another 400 per month. Basically you would trade the $128 of mortgage cost to get another 400 per month of income. If you did this on all your duplexes you have now used 100K of initial investment and turned it into 45,600 of annual income in a few years. The person who bought all cash is only making 9,600 per year while he waits to save up enough money to buy another property all cash. Yes the leverage route will require more work and is higher risk but It seems to me that the risk is worth the return if you were able to find the deals to do it. 

The key is having properties that cash flow at a high rate. And finding those deals is not always easy however it can be done I have several properties that make 200 per door and were purchased for less than 50K per door. 

This thread has a lot of posts already but I think I have an answer to the original question. Yes I have become FI in 3.5 years of investing. However in order to accomplish this my family of 4 has learned to live with less thus the amount we needed to be FI was lower than what other people would need. 

During that time frame I have invested $138,226 and have a cash flow after all expenses of about $33,000 per year. Yes that probably isn't much to a lot of people here but it is enough for us to be completely financially independent. All of the money was invested in small multi family units. All properties were bought off of the MLS or through networks. All have traditional mortgages on them. What I did was, I set aside 60% of my salary for investing every year and I reinvested any cash flows and money from refinances.

So yes it can be done in a short period of time but it takes commitment and sacrifice to live well below your means so you can invest 60% of your salary every year. Now I do agree with the article that in order for me to scale my investing and truly become wealthy I do need to turn it into a business. So I will stop working 9-5 in July and commit to RE completely, and grow my investments exponentially. 

@Sarah Ruf Collegedale area is pretty small market so multi families only show up every so often. There is a Triplex that SAU is trying to sell but it is only being listed internally for the moment, if you know someone who works there you could ask them for the email about it.  The problem I see about investing in that area is that the property values are higher but the rents are not higher.  Expanding your search area to other nice areas around Chattanooga will allow you get a property for much less and yet gets the same amount or more in rent. The areas I recommend East ridge ( Has lower city taxes then the rest of Chattanooga), Harrison (some parts are in the county and dose not have any city taxes), Hixson, and Red bank. As for single families they rent well in any of these areas if you can get them for the right price. I haven't tried investing in the Cleveland area yet but I have noticed that rents there are significantly lower than in Chattanooga.

You can always use Rentometer.com to see what things are renting for in the areas you are looking at.  

For all the time spent back and forth on this forum you could have already created a listing on Zillow, Craigslist, and put a sign at the main rd intersection and one in the yard. It doesn't take much work and in my area even higher end ($2000 per month is higher end in my area) I haven't had a problem getting applications using this technique. It is amazing how many calls a sign at the road and in the yard will generate because people often drive by the areas they want to live in. 

If you don't have time to show the property just pay someone you know and trust open the doors and let the people see the property. He/she doesn't have to answer any questions just give them the link to fill out the application and do the credit report.