All Forum Posts by: Eric Schultz

@Nathan G.

NYC will eventually recover. Tourism will help bring it back. The pent up world wide demand to visit NYC only grows stronger until things open up further.

My prediction in the STR world is that NYC will drop or at least greatly reduce their regulations on STR's now that so many NYC hotels / operators took hits in 2020. The hotel lobbying against STR's in NYC has weakened as a result of 2020, and NYC may look to relax regs to boost tourism...therefore boost their tax revenues.

@Cody Smith

Assuming you have a primary mortgage on your properties with 1st lien rights, you already have some level of asset protection. You would only lose your equity at that point, which isn’t to be taken lightly with a risk of heading towards foreclosure.

Get a minimum of a $1M umbrella policy and possible more, depending on the value of your assets + exposures.

@Wendy Boone

You might be able to use stock ‘architectural’ floor plans, but the site architectural plans (for example, site accessibility) and all of the engineering disciplines will need to be custom for a commercial project.

Beyond the conditional approvals in place, the local authority having jurisdiction (e.g. city planning & development dept) will be focused on fire-life safety, ADA compliance, etc. per current building code. Your structural engineer (or hired by the architect) will need a geotechnical report to design the building and site structure foundation systems. There is more to it than just what I have stated, but the point is this process is much different than a new build single family home.

@Sachin Amin

Here is one not mentioned yet, though it may be only for 1 in 5 serious investors for building long term wealth and lifestyle funds in later years:

Overfunded cash value whole life insurance

I’m not talking about the “retail” whole life policies that get sold to the majority of the population. Those are the types of policies to skip, buy term and invest the difference.

I’m talking about the investment grade policies that only a small % of life insurance pros actually know how to design or are allowed to design. It’s usually the small firm you want to go with that brokers a specifically designed policy from companies like Penn Mutual or Mass Mutual. These policies have a lower death benefit than the retail version, but allow for much higher thresholds for annual overfunding the premiums (while still growing tax free with tax free withdrawals via policy loans). The death benefit grows with the paid up additions written into the policies. There are several other riders that can be included to benefit health related issue while the policy holder is still alive.

When designed properly with low fees, the policy break even point is about 3 - 4 years. Beyond that timeframe, the real long term wealth building kicks in. Again...that part on the break even point is not for everyone.

These policies are private contracts, so it is very difficult for creditors to look them up or get access to them. The 4% guaranteed interest + (1% - 2% dividend) is tax free growth and basically equivalent to an 8% - 10% return in the stock market before expense ratios, advisory fees and taxes. The cash value growth is also uncorrelated to the stock market or real estate markets, so you get that diversification.

The cash value (typically up to about 95%) can be accessed at anytime, typically 30 days after the policy is initiated. Keep in mind that the overfunded annual premiums do not equal the cash value in the policy until about year 4.

These policies, when brokered and designed properly, are backed by life insurance companies that have paid consistent annual dividends since as far back as the Civil War days with no bail outs along the way.

You never have to pay the policy loans back on the cash value while you are alive. The death benefit that grows over time will do that. Your beneficiaries will then be left with the remainder of the death benefit, tax free.

A family can rinse and repeat this for generational wealth, as you are basically buying net worth with cash value / income benefit along the way.

Most people write off this idea when they hear about whole life, which is why I shared some detail. Again, not for everyone but a “5th income” option for later years.

@Javonn Musgrove

Have a local investor friendly / knowledgeable realtor put you on a filtered MLS distribution list that auto generates and sends updates to you on the daily or weekly basis.

Connect with some local wholesalers.

Check the county websites for auctions.

Call up local property management companies and let them know you are looking to buy in case any of their owner / clients are looking to sell.

You can also learn about buying lists and doing direct mail campaigns, cold calling, driving for dollars, etc.

There are probably another 10 other methods I haven’t listed here.

@Lewis Chaloner

Crunch even some more numbers.

What if you could take out a HELOC on the equity and then thru arbitrage, put that previously dead equity to work into 3 - 4 out of state properties with net positive cashflow?

Then hang on to that San Diego property for another decade only to have grown your equity higher with continued market appreciation and mortgage paydown by the tenants.

Your out of state properties may have also experienced similar equity growth, so recapture that equity to expand into yet more properties or cash out refi to payoff 1 or 2 of those properties.

All of this wealth building made possible by harvesting the equity in that one original San Diego property back in 2021...

@Drew Slew

Mortgage lenders seem to prefer W2 income over other forms of income because it is “steady”, “predictable” and fits nicely into their underwriting format. Losing the W2 income without having a solid 2-year track record of other consistent streams of income could make financing more challenging in the short term.

So, I’d say hang on to the W2 a little longer and take advantage of the no state income tax to accelerate your capital reserves.

Test drive how it feels without that $5K - $7K of W2 income on your monthly cashflow. Set it aside for a month or two and see how far you get with paying your monthly expenses on other income streams. Spreadsheet projections are one thing, but you’ll get some good feedback on your actual monthly cashflow and see if there is work left to do.

Finally, before you leave that W2 income behind, I would procure some debt tools. Setup a HELOC, personal LOC, business LOC, etc. so you have liquid reserves for not only getting your investing going, but for emergencies as well.

Looks like you are in a great position, but don’t let off the gas too early!

@Chase Yokoyama

Fix & flips!

Then progressively got more passive with built up capital for private lending, to buy rentals or invest in syndications.

@Robert Hooks

Pen Fed Credit Union is another option for HELOCs on investment properties.

@Giovanny Vizcarra

It can depend on the terms of your HELOC product. After year 10 you may need to start making principal payments (+ interest) back to a zero balance by year 20. There are likely opportunities to refi along the way.