All Forum Posts by: Michael Win

Hi BP,

I am closing on a million dollar property with 12 renters this week with 200k down.  I should be able to get 50K a years  in Free cash flow.  I think its a good deal and hopefully in 2 yrs, all rent rates will be raised, and I could get 75k/yr in FCF.

I do not need any of this cash as my job is stable and provides me with a great living.

Where would you go next?

1 Use the FCF to pay down my 30 yr note?  If I did this, I could have the property paid off in 10 yrs

2. Use FCF to buy more rentals?

3. Finance someone's flip?  Let someone else do the work and just be an angel investor?

4. Any other ideas?

My current idea would be to use the cash flow to buy more rentals. Maybe leverage 2 more per year and have about 25 rentals in 5 yrs? If I have equity in 5 yrs, maybe do a 1031 into a larger complex or bunch of SFH/Multi family homes?

If I have 700K equity in 5 yrs, why not use this as down payment (30%) on a 2.5 mil project?  If the deal is right, I could retire on the income.

 Its funny.  I am in this exact position 2 months but with a larger amount after selling my company.  My job gives me great flexibility and income that puts me in the top 1%.  I could easily just keep working for 15 more years and have enough to retire on.  But I decided to jump into real estate and should be closing on a million dollar property this week.

I am using leverage and the rental should easily pay for all of the costs and leave me with a good amount of money left over.  I plan on paying down the principal, hopefully sell a few of the properties in 5 yrs.  If I have gains/equity, I will do a 1031 and pick up a bunch of more properties.  

My goal is 30+ renters in 10 yrs and retire right at 50.  

BP,

So I saw a show yesterday about 1031 scams where the owner would use the 1031 escrow money for personal use.  There appears to be no governmental safeguard or guarantees that the money will be there when you need it.

Is this a big worry.  How do you go about picking a 1031 company?  It seems even well run companies could be bought out by someone to use the money as their personal piggy bank

Great thread.  I am not there yet but maybe in 5 yrs, I will be there.  Hope the Austin Market is available in 5 yrs.

Great thread.  I am not there yet but maybe in 5 yrs, I will be there.  Hope the Austin Market is available in 5 yrs.

I agree, if Cali doesn't have option, its pretty backwards.  I would never sell a home without an option to make sure buyer is serious.  Once people start to abuse it, Cali will surely start an option clause.

All Contracts that I have been under either buyer or seller has a NONREFUNDABLE option ($2-500) and Earnest which is refundable.

Why doesn't a nonrefundable option make sense?  You are asking the seller to take him home off the market so you can decide if you really want it in 7-10 dys.  Without an option, you have no skin in the game.  A buyer without an option cost, could literally go under contract with 10 homes and pick the one that he really liked without any cost to him/her.

Without an option money, a buyer could literally send out contracts on every home he sees online that looks decent, and then tie up hundreds of homes.

Its too late in the game to change mortgage brokers as we are closing in 2 wks plus I had the best rate by far. In the future I will look around on putting them into an LLC if I choose that route.

CO A&B are management companies.   HE is the insurance agent.

The rentals should be profitable from day one b/c almost all units are currently rented.  I expect a cash flow of 50K the first  year.

My plan is to seed the account 20K from day one to cover any make ready/repairs.  And hopefully not have to put any additional money into it.  I would not touch the money or mix it with my personal accounts as I have enough income from work.  I plan to use any excess money after it is over 50K to buy additional properties.

I have a 1 Million per occurrence personal liability umbrella that my agent said would cover all of these rentals.  He said when I accumulate more, we can buy a commercial policy.

I plan on opening two accounts (one for condo, one for the 12) as there will be two management companies accessing the accounts.  I would not like for them to have access to the same account.  Once I switch the condo to company B, I will likely just use one account.  

No business partner or will anyone in the future be involved in this.  

I am leaning towards not doing an LLC at this time, maybe in the future to keep things clean.

Thanks for the information and help.  I just want to make sure I have everything set up once I close on the properties.

Hi BP,

Started picking up rentals late last year and have 1 Condo that is currently rented.  I will be picking up another 12 rentals this month and likely a few more by years end.   My condo currently is under Company A and i have all proceeds linked to my personal bank account.

The 12 I will be picking up will be under Company B b/c I really do not like Company A much but under contract for another 6 months.  I will be switching the condo to company B when the contract ends.

When I close on said 12 rentals, I can not purchase it through an LLC per my mortgage broker. So I plan on closing under my personal account and possibly put them under an LLC later which can potentially create some issues.

My questions are

1. I want to run this like a business and not mix personal & business accounts.  I would like to open a bank account under my name to receive the funds and pay for rental issues that arises through management company B.  Is a checking vs a savings better?  Does it matter?

2. I have a 1 million personal Umbrella that the condo is also under.  Should I take out another 1 million Umbrella just for the rentals?

3. Is it worth putting these places under an LLC. I hope to eventually have 50+ rentals in 10 yrs

4. Is there any other issues I should worry about or prepare before I close on the properties at the end of the month?