All Forum Posts by: James Partsch Jr

@Anthony Dooley 

I must have missed your point because what you mention is what I’m looking to accomplish.  Your advice was wait and pay it off.  That is one school of investing.  I’d love to hear from the other side where people prefer to leverage their money while paying down.  

I would like for you to elaborate on that recommendation so I can better understand the numbers.  I just feel missing out on compounding is leaving an entire wealth building stream on the table.  The buy and pay off is much safer but a bit slower as well.  

Is your approach to avoid risk? Or to make sure that the asset is owned outright and not use leverage against the object but instead use the cash flow?  Even paid off l, would you still recommend not using that equity as leverage?  If the house isn’t appreciating isn’t that equity then sitting stagnant when it could be working?  

I am assuming your recommendation comes from experience so I really want to learn what is driving you to recommend against what I have read so many times. I know there is no right answer or secret formula and we all invest differently.  

In a growing market waiting is not ideal.  I owe 30k and will bring in 1400 a month.  I have 30k worth of leverage if I wish to pursue that.  If I wait, the short term opportunity cost is now 60 k as I have to pay the 30 down and am not leveraging what is in it, not to mention the interest I am losing by not leveraging my money now.  This will increase cash flow by 400 per month with an roi in the 15 year range in my opportunity cost not considering present/future value of money.

 Also, the “jimmy” is unnecessary.  Let’s remain professional, you don’t need to use a name twice in one sentence.  I am looking for advice not a spanking.  

@Anthony Dooley

Definitely agree on the market in certain areasbut that is not the case here.  There are areas of buffalo that are closer to a “peak” but many areas are far from it. We are a redeveloping city and the market is heating up.  I truly believe there are several neighborhoods that are prime for investing now.  Granted, there will be others in the future.  

Our job market grew .6% last year and is targeted to grow over 30% in next 8 years.  This is all speculation but I cannot ignore the data.  

I can put my money away for a few years and miss out in compounding, or find a way to ensure I am leveraging my money and it is making a return for me.  I max my 401k, have a diversified stock portfolio, and wish to further diversify with scaling my property investments.  The only other place I know of to put my money away is a savings account which can’t even match inflation rate.  I would be losing money by putting it there.  

We could pay the property off now but then we put another 30k of investable money into something that is not appreciating at the rate of return you can get while building a real estate portfolio properly.  I also don’t feel we would be properly leveraging our money when I can take the equity out, buy a property, avoid the tax as it isn’t income, and have someone else paying the mortgage down while I build my portfolio.  

If you have a recommendation to house the money and yield a solid return vs growing my real estate portfolio, I am all ears.  I just can’t see me growing by sitting on money for several years.  It seems counter intuitive.  That being said, I am the newbie asking for advice so I don’t want to sound argumentative or unappreciative.  

I definitely value this conversation as it gives me another perspective to consider.  Thank you for that! 

@Anthony Dooley

Thank you for the honest feedback.  I know that 29,500 could easily get me one, if not two, properties in my area with commercial loans to boot (riskier and more expensive I know).  I definitely struggle with the camp of no debt/full equity vs leverage the money you have to work for you.  I am 34 and willing to be a bit more risky to scale.  If I wait to be paid off, I put scaling off and that 1400 is great but I don't plan to spend it so it is not compounding if I am not reinvesting.  I cannot buy more time to invest more aggressively so want to make sure I don't look back and wish I did more sooner.  I want to know I responsibly attacked opportunities but as aggressively as financially possible. 

The advice is not falling on deaf ears at all.  Maybe the dose of reality is what I need to keep me grounded and patient ;).  

Thank you for the reply! 

My wife and I will be renting out our first property with a goal of occupancy by October 1.  We are looking to begin the application process in the next one to two weeks.  We plan to leverage the Bigger Pockets Lease agreement.  We will still review with an attorney as we really liked a BiggerPockets post where someone recommended adding a list of incidental expenses that will be deducted from any deposit (well defined chargeable items vs wear and tear).  We want to be as transparent as possible and consistent in our process.  we have already told friends and family they will be subject to the same background check process but we prefer to not put ourselves in that position at all and will discourage them from thinking about the property for their potential rental.  

We will not allow animals or smoking, which will limit our tenants but also mitigate associated risks.  I wanted to verify the right order of operations to move this forward.  I have outlined a high-level plan below.  This does not include my work breakdown but should be fairly self-evident. 

1. obtain a formal application to collect information

2. Advertise rental through several streams (craigslist, sign, word of mouth, Zillow, potentially an agent depending on response rate)

2. sign up for a background check service to check on prospective tenants

3. cursory review of applicants

4. submit a scaled-down list to background service and follow up on any referrals for potentials

5. Review final applicant data to select tenants

6. contact tenants to fill out a lease agreement

7. collect deposit and file lease agreement for record

8. handoff key

9. happy tenant, happy investors

Wanted to make sure we were not missing something major.  We are in New York state, Buffalo/Niagara region.  Can never learn enough from others' experience so please be critical and honest.  

Thank you all!

My wife and I currently live in a home we purchased for $12,000 seven years ago.  We are located in the Buffalo/Niagara region of New York.  The home was zoned two family and we left it as such but have lived in it while we rehabbed and utilized as a full home.  We used hard money to rehab with a mix of our own money and refinanced once all repairs were done.  

The home was assessed at 70k upon completion, seven years ago, and comps in the area are now between 80 and 90.  We will be closing on a single family, for us, in August.  As soon as we close and move we plan to rent the two family out for approximately 1400 per month (combined) which allows us to cashflow 1,000 with the 15-year mortgage payment.  The cash flow is only taking mortgage, ins, and taxes into consideration.  We plan to put all cash flow in an account with a goal to reinvest prior to the money being considered income so we need to make sure we are reinvesting it relatively quickly (outside 30% for repairs and incidentals).  

We are looking to leverage the equity as soon as we are fully moved and this place is fully occupied (goal is by October 1st to be occupied).  I have found a lender willing to lend 85% of the assessed value minus what is owed (30k).  This leaves us 29,500 to invest (at 70k assessment).  We have personal money saved for incidentals and cushion in case of something unexpected hitting while we build up savings from cash flow for cap-ex. 

Now that I am done with the long-winded intro, on to the question. Would we be best to focus on a single BRRRR with a target to refi by jan/feb 19 or is there a potentially better strategy one may recommend to build out a stack and increase available capital to reinvest?

The longterm goal is buy and holds. We plan to focus on BRRRR's but are not opposed to turnkey or flips if the deal is right but it is not where our focus is. We truly believe our area is at a low end and has a ton of upside before we look to expand to other areas. Any help, direction, or reference material is greatly appreciated. I have read the book on rental property investing as well as other sources of information, but am always open to more knowledge. I value real-life experience just as much so please feel free to share.

I would love to better understand the legalities around surveillance in a location that is not your primary residence within your area.  Not sure if this is state or locally controlled.  I know certain areas can be very strict and some even have rules around how long you can keep recordings or how to dispose of if requested in writing by a recorded party.  Also, many areas do not allow you to record without written or audible notice.  Granted, I don't foresee a judge holding it against you if it helped resolve a serious issue.  

Welcome Solomon, I too just joined the community a bit over a month ago! The market here does seem very ideal for investing and I’m excited to see more people in the area joining. I look forward to crossing paths (maybe at one of the meet ups mentioned above). I’d love to stay in touch and share our experiences as we both learn and grow in real estate investing.

Gary, 

I will definitely be reaching out as buy and holds is where I really want to focus for now.  That being said, I will definitely be reaching out to pick your brain and see what I can do for you to earn your time and experience.  

Thank you

Thank you Matthew, I will send you a request to connect.  Definitely looking to get more involved in the community of individuals in our area.  

Hello BiggerPockets community! My name is James Partsch Jr and I am happy to finally have made the move to join the community as a Pro member. I lurked for quite a while, but it was time to take the next move and join a large network of people with experience to learn from, diverse backgrounds, and similar financial interests.

I am a moderate DIY’er and purchased my first home for $12,000 as a short sale (it was once offered for $3,000). This just goes to show that there are still crazy deals like this if you look hard enough. My now wife (then girlfriend of only one year) jumped right in with me and we closed off a back area that collapsed, removed that from the structure, closed off the upstairs, and made the lower livable. After the lower was done we began a full rehab on the upstairs, keeping the home zoned two family, separating utilities, and gutting to the studs. We eventually did the same with the lower and live in the entire home. We are moving out in two months to finally cash flow the property and will be leveraging the equity to find the next deal.

I grew up around rehabs as my father and stepmother as they rehabbed 13 properties in the western NY area. It is now time for me to take that experience and evolve it to fit what I wish to do. My goal is to pursue the BRRRR model as I want to generate sufficient income from multi-unit homes to allow me to expand my investing business into a full-time affair replacing my current 9 to 5. The Buffalo area is beginning to see the growth that I feel will make it catch up to the other larger metro markets over the next 5-10 years. My wife and I will be a part of that growth and help to revive the homes in our city. I am also open to flipping if the deal is right but prefer to hold the property as my priority.

For my current paycheck, I am in Senior Management at New Era Cap as a Program Manager of digital programs. I get to work with an amazing brand to bring our sales tools and commerce into the current atmosphere of e-commerce through innovative business process engineering and technological system builds. I help take ideas, turn them into actions, and ensure those actions result in measurable benefits. I would love to use my experience and consult other organizations while I build my real estate investment portfolio. Having a PMP and Lean Six Sigma Black Belt certification have helped me create a process-oriented approach to executing strategy and analyzing data to prioritize initiatives as well as course correct well before issues become catastrophic. I am also well versed in Agile methodologies which I feel is underutilized in the real estate industry and will give me an asset to bring to the table with future partners. I should have my Agile Certified Practitioner certification by the end of July.

The next steps for me are to find my next deal and really what I consider my first deal as it will be purely from an investing standpoint. I also will continue to build out my personal brand for investing and consulting as these two ventures will complement each other nicely. I want my next deal before the close of 2018 and then two more in 2019 at an absolute minimum. The goal is to be transitioning into self-employment in 2020.

I have been following the BiggerPockets community through podcasts and webinars for the last year. I am looking forward to finding a mentor that can show me the ropes and hopefully I can give back through managing some projects. I knew it was time to take my goals to the next level and felt BiggerPockets was the ideal community to begin learning from and participating in. I look forward to learning from those with the experience I don’t have and learning alongside those going through the same growth I am experiencing. I hope that I am able to share with the community and bring yet another perspective that is beneficial.