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All Forum Posts by: Derek Levine

Derek Levine has started 2 posts and replied 9 times.

Post: Diversifying with Real Estate and Stock Portfolio

Derek LevinePosted
  • Investor
  • Posts 9
  • Votes 3

Hi Nicholas,

As a contrasting thought, consider that "diversification" only makes sense if you are allocating your wealth into several good bets. Many of the money-greats have been adamantly against diversifying because they wanted to focus their efforts into one arena, or just a few strong channels. It doesn't make sense to take money out of one area only to put it into a less likely growth area (or one in which you have no competency in), simply for the sake of diversifying.

With that said, since we cannot know the future with certainty, we do have to decide how to allocate our funds and cash-flow. Putting a quarter into cash may be excessive, depending on how much you have to work with. Cash is great to have on hand, but remember that cash is always losing value when sitting in a bank or under a mattress (and this loss is accelerating). As for stocks, putting most into something near-certain (like a time-tested index fund) can be wise, using dollar-cost averaging is smart, and then betting on likely hyper-growth opportunities (e.g., buying oil companies when they crashed a year-and-a-half ago) can work for us. And consider putting a percentage into cryptos - sure, many coins may crash and many approaches are not time-tested, but also, there has never been such opportunities for life-changing gains as now exist in that space.

Our wealth is spread between real estate, cash, stocks/funds, crypto, and a little in physical metals. Oh, and books, tools, etc. Whatever directions you choose, keep learning and refining your own path.

I want to add this thought I've had (and I agree that we don't know which way the gov't will go and who will be most favored)...

When the Fed raises interest rates up to where they "should" be, the traditional idea is that this lowers the cost of real estate because the higher rates cause mortgage payments to go up, and since people can only afford so much in monthly payments, sellers "have" to ask/expect lower pricing for their RE. Maybe rates will remain artificially low, but they can only move in one direction if and when they do move. 

But, we are truly experiencing a housing shortage in many areas, and building costs have raised substantially, so high-demand "should" continue to result in higher-prices for RE. These two scenarios are in conflict with each other, but both are realistic.

All I'm saying is that I'm feeling very skeptical towards anyone who claims to know what is coming in regards to sale prices. Add my points to your points, and we are truly in murky waters. With that said, I'm trying to buy up what I can right now because I am leaning toward there being increasing shortages of supply, and I could imagine the Gov't simply sending out vouchers to lots of people to help them pay for rent. The gov't may increasingly subsidize landlords in this way.

Post: Starting out- tax benefits

Derek LevinePosted
  • Investor
  • Posts 9
  • Votes 3

I would like to be the first to say that you are probably better-off not trying to invest in the Bay Area. Maybe you live in some pocket where you could pull it off, but not likely. 

For one thing, most people agree it is nearly impossible for new buyers to cash flow in that area. For another, although nobody can say exactly what would cause the next housing crash, many feel it is coming. Soon. Just when things look like they can only keep rising and we are living in CandyLand, that's when the floor falls out. When that does happen again, it will hit the Bay Area harder than almost anywhere else (consider this: When the markets collapsed in 2007 and the next few years were a nightmare, most of the nation experienced virtually no to little changes in their realty values. The whole thing basically happened in a handful of cities around the nation).

If you do proceed in your area, make sure you cash-flow right out the gate, after accounting for a vacancy rate, capital improvement savings, regular maintenance expenses, taxes, insurance, etc.

Post: $200k liquid, $5k a month Cashflow goal

Derek LevinePosted
  • Investor
  • Posts 9
  • Votes 3

Hi Steve,

I have a similar goal and although I can't say I've already been where you are trying to get to I have been researching a lot. I recently listened to both of the Multifamily Millionaire books from Bigger Pockets and it seems to me that getting a mid-size multi might be your fastest track to your desired numbers. You have some cash, and assuming you can get a good loan, you would probably also need to team up with one or more other investors to pool financial and mental resources. Of course, there are many creative ways to get to $5k/month in two years, but MF seems like it may be the most direct. Not something to jump into unprepared, so get a knowledgable partner and/or keep devouring books, forums, videos.

Post: Financial Statement Template

Derek LevinePosted
  • Investor
  • Posts 9
  • Votes 3

If you are trying to create a "Profit and Loss Statement" the following may be useful...

I didn't find one on BP as anything officially "BP," and I recently had to create a FS as did my partner (wife).

My lender said I was overthinking the format, and after looking at a few examples online I just put together a simple, slimmed-down spreadsheet which included the major expenditure headings (costs of goods, advertising, office costs, etc.) and income that are (or will be for 2021) included in my 1030 C business tax form (and then a "net" total).

As long as you are honest with the numbers (and use the best year-to-date figures you can) it should be fine. Just like a "pro forma," my concern was that it seems like something that is too easy to fudge around on (and people probably do). Lenders basically want to see that your past few bank statements line up with what you are claiming, and that this year's totals won't be less (or much less) than previous years'.

Post: 21yr Old...$220k in cash, don’t know where to start.

Derek LevinePosted
  • Investor
  • Posts 9
  • Votes 3

Anything is easy IF you can do it, and do it consistently. You have hustle and frugality, apparently. You already know you have drive and you can save. Now, consider putting yourself in a better environment to meet your objectives. Maybe Florida or Tennessee or Texas. You have saved money staying with your folks but you may grow even faster if you throw yourself out of that nest and land somewhere that is full of potential for REI. It could be beneficial to begin your realty journey someplace where living is affordable, decent income is possible, and overall growth is likely (oh, and freedom may be important as well - and the US is becoming very segregated in that respect). Others have already commented about leveraging - no need to spend much of that savings. And although you don't have that two-year work history (?) yet, it is easier to borrow money when you already have money. Remember, almost everything is negotiable. If a lender says "no," ask why and how you can turn that no into a yes. Same goes for sellers. There are a million little details to learn, so watch and read and ask with all of your free-time.

We use Zelle...and there is an option on the payment screen (simple phone app) that allows recurring payments. Set a recurring payment up once (from the renter's end), and the process is automatic thereafter. I assume other free payment apps also have this feature. The payments go from Zelle into a bank account used strictly for receiving rent from this address, and we have a separate account to hold the address/renter's security deposit.

Post: Buy-and-Hold in South Knoxville, TN

Derek LevinePosted
  • Investor
  • Posts 9
  • Votes 3

Investment Info:

Single-family residence buy & hold investment in Knoxville.

Purchase price: $102,000
Cash invested: $65,000

Solid concrete-block/stucco 1400sf Single-Fam on 1-1/2 acres in beautiful, quiet area of South Knoxville. Rehab involved interior paint and minor wall and ceiling cosmetic fixes; full kitchen remodel with new stainless steel appliances and granite countertops, cabinets; new PEX plumbing throughout house (tricky going through some concrete block walls); full electric re-wiring; LVP flooring throughout house; all new windows; updated bathroom...lots of work in all.

What made you interested in investing in this type of deal?

After relocating from the West Coast to beautiful Tennessee and buying our own home to live in (and spending a few months rehabbing that), we were ready to buy our first new rental in our new Home State. This home seemed solid but would require a lot of updating. Seemed doable. Took longer than expected. Cost more than expected. But nothing excessive and we learned A LOT. Also made good contacts for local contractors.

How did you find this deal and how did you negotiate it?

Used the same Realtor we had used to find our home property. Did most research on Zillow, and looked at a few dozen properties before finding this gem-to-be. Offered below asking, got accepted (came in with a large down-payment), and after our inspector reported on how much work this property would need, we adjusted our offer down further (as allowed in the original offer contract).

How did you finance this deal?

Were already "pre-approved" by a lender who was recommended to us by our Realtor; the loan was for a small cash-out from our primary residence (which we had bought in cash a few months prior to finding this house). Put thirty-percent down and had cash reserves in the bank ready for an extensive rehab.

How did you add value to the deal?

Rehabbed and improved the property with the intention to avoid "unexpected" events from popping up in the near future. This involved a serious water-main replacement and all new everything (except the roof and walls), even serious tree-trimming done by experts. We rehabbed with the intention of attracting a serious-minded, long-term renter.
Bought at $20k below asking but rehabbed with $30k out-of-pocket, and then another $5k for a replacement of a 300-foot water-main line.

What was the outcome?

After a multi-month and expensive rehab (for us, anyway), the property was in great shape. Didn't take a long to find a great renter and after their first two-year lease contract recently expired with us, they signed another two-year term. And, they treat the place like their home (with respect).
Cash-on-cash numbers aren't great because of how much our own money we put into the down-payment and rehab costs, but in the 2-1/2 years we've owned the property it's value has more than doubled.

Lessons learned? Challenges?

Some things you don't know until you experience them...it's a challenge to find reliable electricians, plumbers, etc. You can do internet research and ask for referrals, but it can take time to find a good team. We had a plumber do half the job and then stop returning calls. Several window installers said they wouldn't touch the work we wanted done before we found a dream-team who completed the job in one day. In the beginning I did work I could myself, even if just to know what to expect.

Post: Buy-and-Hold in South Knoxville, TN

Derek LevinePosted
  • Investor
  • Posts 9
  • Votes 3

Investment Info:

Single-family residence buy & hold investment in Knoxville.

Purchase price: $102,000
Cash invested: $65,000

Solid concrete-block/stucco SF on 1-1/2 acres in beautiful, quiet area of South Knoxville. Bought at $20k below asking but rehabbed with $30k out-of-pocket, and then another $5k for a replacement of a 300-foot water-main line. Rehab involved interior paint and minor wall and ceiling cosmetic fixes; full kitchen remodel with new stainless steel appliances and granite countertops, cabinets; new PEX plumbing throughout house (tricky going through some concrete block walls); full electric re-wiring; LVP flooring throughout house (replaced old carpet); all new windows (again, tricky to find competent installers who were willing to remove old aluminum windows from concrete and stucco walls); updated bathroom...lots of work in all. We saved some cash, if not time, by doing all work we could that wasn't overly technical or required permits. Tip: If not familiar with larger properties (over a 1/4 acre), consider how landscaping/mowing can be a considerable cost if not passed-on to renter. My plan has been (so far) to only buy properties that I would be proud to live in myself (after rehab). A beautiful property we are glad to have in our portfolio. Cash-on-cash numbers aren't great because of how much our own money we put into the down-payment and rehab costs, but in the 2-1/2 years we've owned the property it's value has more than doubled (not that we counted on that to happen). Ripe for pulling equity out of for another deal.

What made you interested in investing in this type of deal?

After relocating from the West Coast to beautiful Tennessee and buying our own home to live in (and spending a few months rehabbing that), we were ready to buy our first new rental in our new Home State. This home seemed solid but would require a lot of updating. Seemed doable. Took longer than expected. Cost more than expected. But nothing excessive and we learned A LOT. Also made good contacts for local contractors.

How did you find this deal and how did you negotiate it?

Used the same Realtor we had used to find our home property. Did most research on Zillow, and looked at a few dozen properties before finding this gem-to-be. Offered below asking, got accepted (came in with a large down-payment), and after our inspector reported on how much work this property would need, we adjusted our offer down further (as allowed in the original offer contract).

How did you finance this deal?

Were already "pre-approved" by a lender who was recommended to us by our Realtor; the loan was for a small cash-out from our primary residence (which we had bought in cash a few months prior to finding this house). Put thirty-percent down and had cash reserves in the bank ready for an extensive rehab.

How did you add value to the deal?

Rehabbed and improved the property with the intention to avoid "unexpected" events from popping up in the near future. This involved a serious water-main replacement and all new everything (except the roof and walls), even serious tree-trimming done by experts. We rehabbed with the intention of attracting a serious-minded, long-term renter.

What was the outcome?

After a multi-month and expensive rehab (for us, anyway), the property was in great shape. Didn't take a long to find a great renter and after their first two-year lease contract recently expired with us, they signed another two-year term. And, they treat the place like their home (with respect).

Lessons learned? Challenges?

Some things you don't know until you experience them...it's a challenge to find reliable electricians, plumbers, etc. You can do internet research and ask for referrals, but it can take time to find a good team. We had a plumber do half the job and then stop returning calls. Several window installers said they wouldn't touch the work we wanted done before we found a dream-team who completed the job in one day. In the beginning I did work I could myself, even if just to know what to expect.