All Forum Posts by: Jassen Bowman

Ahh, yes, the Nomad strategy.

As a purveyor of this particular strategy myself (currently at 5 doors), I am heavily biased toward the Buy, Occupy, Rent, Repeat (BORRing???) owner-occupant-turned-rental-rinse-repeat philosophy of real estate investing.

I went ahead and ran some simple mathematology for yee. Assumptions:

-$150,000 single family home price as you indicated

-owner occupy for 12 months, as required

-$1300/mo rent rate after owner occupancy period (based on random selection of Zillow listings), 10% property management, 3% inflation, 3% appreciation on value and rent, 10% maintenance, 3% vacancy

-mortgage at 4.5%, doing 5% down payment with FNMA financing

-$100,000 per year income for you and spouse, 21% effective tax rate, $5,000 per month personal living expenses 

-build up and maintain a minimum emergency fund/cap ex fund of $30,000 cash

-doing this for five years before getting sick of it, and thus settling into the 6th such house forever

Based on these assumptions, and maintaining that $5,000/mo personal lifestyle, your real estate investments will provide more than 50% of that $5,000/mo lifestyle cost within 30 years. Near the 35-year mark, with loans paid off, your real estate holdings will provide 86% of that $5,000/mo retirement income. In terms of net worth, this plan theoretically surpasses the $1 million positive net worth mark from just real estate in month 192 (16 years from now, inflation adjusted to 2019 dollars).

Here's a raw cash flow chart, including cash flow benefit from depreciation:

Analysis and chart courtesy of RealEstateFinancialPlanner.com. Your mileage may vary.

Welcome to Bigger Pockets!

I have two concrete suggestions for you:

1). Give consideration to the Nomad strategy. This is how I'm personally building my own rental portfolio, and I currently have five doors (3 single family, 1 duplex). My latest door is in Greeley. The gist of the Nomad strategy is that you buy a property as an owner occupant so that you can get lower interest rates and only put down 0%, 3.5%, or 5% as down payment. You live in the property as required for 12 months, then go buy another house and turn the previous one into a rental. It's a great strategy for starting off with little or no money.

2). Since you're in Northern Colorado, I'd encourage you to start attending meetings of the Northern Colorado Real Estate Investor Group (NCREIG). My real estate agent, James Orr, runs the group, and the classes they teach every Wednesday are *amazing*. And they're free. Plus, when you go to your first meeting, ask for the free copy of his book on doing the Nomad strategy, it's pretty good.

Good luck to you!

~Jassen

What you first need to determine is the asset allocation that you want to have across your entire investment portfolio, including ALL asset classes, including stocks, bonds, real estate, etc.

There is no one-size-fits-all asset allocation. It needs to be based upon your need, willingness, and ability to take risk (I know that's an overly used statement, but it's true).

For example, based on my own interpretation of economic data and my beliefs about certain things, I've chosen an asset allocation 50/35/15 -- 50% rental properties, 35% fixed-income securities, and 15% publicly traded stocks. Put another way, I'm 50/50 between real estate and securities.

I've chosen this allocation as the best for *me* for a variety of reasons that aren't important here. But having made this decision, it makes all other decisions easier. For example, I bought two houses last year, and I now own four rental doors and one vacation home that I'm currently occupying myself. Due to the massive appreciation last year on my Seattle-area rentals, my real estate equity is now significantly more than 50% of my total portfolio. So, I may not buy another property this year, and will likely max out the $56,000 maximum solo 401k contribution in 2019, whereas in 2018 I only put in about $44,000. In addition, I will be bolstering my municipal bond holdings in my taxable brokerage account every month, in order to get back to my target asset allocation.

So, start there. Determine the AA that's right for you, and then use that as the guiding star for making these other investment decisions.

There can be value in working with a financial advisor, but quite frankly, I believe their utility to be quite limited. Financial planners that have any knowledge about real estate investing are few and far between -- they're simply not trained on it. There are some that exist, but again, few and far between.

As others have suggested, it may be worthwhile to meet with a fee-only advisor to help jumpstart your education, but there is no need to pay one an ongoing management fee. Understand that no financial advisor is going to beat the market -- they just won't. So meet with a fee-only advisor to get started, but manage your funds yourself. Focus on extremely low-fee index funds.

I'll also give a plug for Bogleheads.org. Your question is precisely why that forum exists. They're the BP of securities investing, if you will. Great group of folks over there, very helpful. If you want to "fire and forget", take a look at the simple and effective three-fund portfolio, or even simpler options. 

I work with a lot of finance/accounting professionals in my consulting biz, and the number of advisors that can do what the OP is asking and include advice/insights about the real estate side of your investments is just really small. Like, really, really small. Financial planners typically have zero real estate-related training, largely because there's nothing there for them to get paid on other than flat fees.

If you're interested in running your own personal situation through a professional financial planning tool that incorporates stocks/bonds but is also real estate centric, check out RealEstateFinancialPlanner.com. It's a free tool.

I provide business coaching and teach continuing education to CPAs and other tax/financial professionals. There are quite a few of them that offer financial planning services, but it's quite rate for them to  understand real estate as an asset class (beyond the tax compliance function). This is something I plan to help change within the industry, and will soon be adding such training to my CPE offerings for them, because their is a need (as you're demonstrating by your post).

If you're the DIY type at all, there is a web-based software tool that runs some very detailed analysis for you about different real estate scenarios, particularly for retirement planning.  The site is RealEstateFinancialPlanner.com, and I use it myself for modeling my own rental portfolio.

Hope that helps!

Hi Stratton,

I recently moved to the SLC area and discovered the same thing. Too many of the groups I attended were actually just fronts for selling the Renatus MLM thing. So, I started my own group and am slowly but surely building that up. I don't think we're allowed to post links, so if you'd like more info, just look for the Salt Lake Nomad Real Estate Investor Club on Meetup. I pattern the meetings after those that James Orr runs in Northern Colorado.

Hope to see you there!

-Jassen

You'll never find a more data-driven Realtor than James Orr to help you with investing. JamesOrr.com.