All Forum Posts by: Jeff S.

@Tom Server there is no requirement but it is much easier to organize with separate accounts. You can take draws and make contributions as you see fit.

Yes @Dean Valadez it is hard to cash flow and upgrade a property. What you are calling 'cash flow" is actually capx or repairs of some sort. Unless you need money out of this property best to let money build up for your next upgrade and/or repair. Cash flow sounds nice but often misleading when  large repairs pop up.

@David Lutz total operating expenses at about 40% with cap ex at about 10%. Their PI better be less than 50% or they be borrowing to stay afloat. Rehab to improve rent another story.

@David Lutz back of the napkin calculation would say $10k month rent with 5k for taxes, insurance, property taxes, maintenance and repairs plus cap ex and reserves which leaves 5k for principal and interest. That would be a break even anymore for PI would likely put you negative sometime in the futures because reserves aren't being built up. The beauty is if rents can keep up with expenses then PI remains constant and that is where the appreciation of increasing rents becomes a good thing.

Sure overall costs can come in below 50% then that is a safety net. If they are over for a long-term then under rented. I tracked a 20 year period with a few properties and came in at 48%. This included lots of terrible things happening along the way.

@Ian Rysdale I think you will find credit unions to have less red tape and are much quicker. HELOC's are very expensive. Better to get a HELOC for backup then use personal savings or a combination of the 2.

@Wes Brumit your HELOC on your home is a mortgage on your home which will be a variable rate. Your house will not be free and clear as long as you owe on a HELOC. Your HELOC will move from 2nd position to first and they can foreclose just as easily a your original mortgage. How many years to pay off your HELOC? Hard to know with a variable mortgage and their fixed rate conversions are not favorable rates.

@Rachel Waldorf How do you live with 0 income? Are you thinking that you will live exclusively off the cash flow of your rental?

@Kyle Kline are you thinking of this as a longer term transaction? Generally these are for short term cash needs as you can see rates can become very high.

@Jessie Dillon I don't think it is one size fits all. If one had enough income to cover all their debt payments outside of rental income then reserves would not be as necessary as someone who relies on rental income to live on. Also with a healthy outside income the ability to use credit would also be strong. I personally don't worry about reserves and keep my cash in hand while deploying HELOC's for projects. Relying solely on a few months reserves seems very inadequate to me. There is nothing worse than running out of cash.

Accounting basics being able to understand and read financial statements very valuable. Getting a degree is not totally necessary but one that can bring income is good like engineering or computer tech. A good degree is one that brings  balance into your life so there is that too. Sometimes people can be too much one way so all education is good but most important is that you can feed yourself and maybe a family. Trades can be a great way to do that. Most really successful investors I know were in the trades and/or real estate sales and are self educated and millionaires a few times over. If you are working on roofs in bad weather you might long for a way out and becoming solid financially is the way to do it. No degrees but a degree in hard knocks is nothing to ignore. Go back to school when you are rich ok too. Not everybody is cut out for college.

While you are young and energetic I would suggest both investing and school at the same time. Demanding GF's can derail you in a hurry. nothing wrong with finding a great partner though.