All Forum Posts by: Jeremiah B.

Hey Julian,

This is a good question, but the answer is pretty damn complicated.  I'll try and summarize my personal views.

Ideally, you:

• Invest yourself in like properties
• Do, or have worked as a property manager
• Have worked with out of state investors before.  Or, at the very lease, have worked with both investors, and out-of-state non-investors.

Ideally, you should:

• Be responsive!  Responsiveness is key!!!  The turnaround time on an email or text should average 20 minutes.  The turnaround time on a voicemail should be about the same.  You should answer when I call.  It should be rare that I don't hear back from you within an hour.
• You should be active.  Find deals for me to look at and consider.
• Come with rent information - always!  This is more important than housing comps!  When you present or discuss a deal, be able to speak to the rent amount with authority.
• Have a team behind you.  This one is personal preference, but I would never work with an agent without that agent being able to oversee, or seamlessly hand-off rehab work, and property management.  My personal preference is that the agent will be the only one I talk with until we are screening applicants - meaning that agent is quarterbacking a lot of the work.
• Be honest, and tell me when to pass.  I want an agent who walks a house and says "I recommend you pass - here's why..."  I will not always take your opinion, but I want to know that you can tell me to pass on a deal.
• Make paperwork easy.  Docusign, or like, is a must.  I will not fax you, or print/sign/scan things for you.
• Be willing to view a property that I find within 24 hours at the latest!  Within 3 hours is strongly preferable.  Longer than 24 hours as a norm is unacceptable.  And if I like it, I want an offer in within the next couple of hours.
• Be willing to write loads of offers.  I try and have around 25% of my offers accepted...

Some of this is personal preference, but most will be fairly standard.  

Happy Hunting!

Regarding Portland:  Portland is a city with a lot of upside, and it looks great when you do some longer term projections.  Employment, salary, and wage growth are all strong.  It's a beautiful area, and has great migration numbers - largely from CA.  Rent rates are increasing by leaps and bounds, and houses rent faster than they can be listed.  It's a great place to live, and 10 years from now, it may have been a great place to have been invested.

With that said, I'm a little bit surprised that Portland made it through your cost of business, median house price, and short-term rent analysis.  The houses are expensive, and while increasing, rent rates are still quite low with a rent to value of around .5% - and that's with a 70's house on a run-down street.

There is also some employment risk.  Intel and Nike are big employers in the area, and feed in a lot of the money in the market.  And while both are in great shape today, both face business challenges over the next 5 years (Intel is behind on mobile chips and Nike is being seriously challenged by Under Armor).  Both will likely be fine, but there are risks...

In short, in the short term, it will be real tough to turn much cashflow in Portland.  If you are comfortable breaking even for a bit while betting on appreciation, it feels like a decent gamble.  But personally, I choose in live in Portland and invest elsewhere.

Just my take.

To quote Stephen Covey:  Begin with the end in mind.

I want to highlight three core components of goal setting:

• Start with your long-term goals.  Specifically, ask yourself what you want your financial life to look like at the day that you retire.  Every single short term goal that you create, should support your long-term goals.
• Goal setting is an iterative process, so don't worry about being 100% accurate with the above point.  Instead, set a long-term goal, and then start working towards it.  If it become apparent that your short term progress is not leading you on a path to your long-term goals, then one viable solution is changing your long-term goals.  Having a long-term goal is more important than having an accurate long-term goal.
• Your skills, resources, time, current situation, etc. will all factor into your goals, but don't include these on the first iteration.  The best first two questions are: "what do I want to look like when I retire," and then "what do I need to do this year to get there?"  Only then should you ask the question of 'how.'

Remember that long-term goal will (or should) drive your short term (annual, monthly, daily) goals.

Happy Hunting!

I went through a similar situation with a close personal family member a few years ago.  And here's what I learned.

If you're going to rent to family, such as in the situation that you described above, do it as a family member and not as a landlord.  Here's what I mean...

@Matthew Paul asked if you would be willing to evict them.  I think the only (!) correct answer is as follows: No.  The landlord in us all says that the only answer should be "yes" - but in that situation you're going to tear a family apart for a few thousand dollars... and that's never a good cost.  So, if you answer the eviction question as a "yes" - you're putting yourself in a situation that is both likely, and with a known horrible outcome.

The family member in us all says that the answer should be "no."  This is the only correct answer, but it has a lot of downsides.  This route can strengthen the relationship, but is likely to be a bad business transaction.  You'll need to be open to bending rules, and you'll need to be taken advantage of without it impacting the relationship (they will not think that they are taking advantage of you, but you will!).  And even if you can, it's likely to cost you money.

So, let's call this what is is:  charity.  There's nothing wrong with giving charity, or not giving charity.  But, if you go this route, you need to be honest to your self and your partner about what it is and what it isn't:  this is an act of charity, and not a sound real estate investment.  

I don't think you should own both.  Here's why:

One of the core principles of any good investment plan or portfolio is diversification.  Personally, as a real estate investor, I already have a sizable chunk of my net worth in real estate.  That's fine, and part of my long-term plan, but is a risk and a limitation as well.

What I wouldn't do is increase the portion of my net worth in real estate through a security (REIT). That just increases my exposure to a segment that I'm already overly exposed to.

Just my two cents.

Each market is different.  Generally speaking, when I'm buying, I'm looking at something like this:

• If you want recently remodeled/flipped house, or buy from a turnkey provider, you'll pay something like 105%-110% of market.  
• I've always been shocked to see this, but if you want new construction on the lower end of the spectrum, you can actually get that for around 102% of market.  I haven't gone this route yet, but it's awfully tempting.
• If you want a well maintained, move-in ready house, on the open market, you are, by definition, paying 100% of market.  I haven't gone this route, but would be open to doing so.
• If you want a generally well maintained, in a strong area, house that needs paint and carpet only, you can get that for around 90% of market.  Probably built in the 90's or 2000's.  This is my preferred buying method, but you need to know that there is not a lot of money made when you buy (~ 5%).  This is my sweet spot, and what I'd consider a solid double.
• If you want a house needing major rehab (15K+) in a B area, I can get that for around 70%-80% of market.  Probably built in the 80's.  I've done this a few times with good success, but it requires a lot of capital, I've missed my rehab estimates by a lot, and it takes more time and energy than the above strategies.  Cash is king here, and non-cash offers will struggle to be considered.  The biggest downside to this for me has been that I haven't been able to get as much cash out at refi (delayed financing) as I had hoped (it sounds easy on paper, but I've struggled with this).  Still, I will typically make 10%-20% in equity when I'm done, and end with a good rental.  This is a higher risk, higher reward strategy for me.
• If you are open to major projects in C-class areas, you should be able to get these for <50% of market.  You will need cash, and you should work with wholesalers if you want to go this route.  Rehabs will be well over 25K, and you run the risk of lower rents not justifying the work or maintenance.  Appreciation is also a big question mark here.  With that said, I've never gone this route as I prefer newer, stronger neighborhoods, and am willing to pay for that.

Hope that helps.

Happy Hunting!

Financial Freedom is the most obvious and vital,  but if I'm being completely honest, the second reason is status. 

I work in corporate America.   And I'm in my mid 30s and make a good, five digit income.  Seeing the shock, and even envy of a 50 something who is making 350k a year when they learn I have six rentals is pretty dang motivating to me.

Ludmila,

Bigger Pockets provides the world's best place for real estate knowledge.  But being honest, we as a community, don't know much about traditional investments like Roths. I encourage you to verify all of this with a certified financial planner. Still, here are my take.

You can take your contributions out of a Roth IRA without penalty or taxes as long as those contributions have been in your Roth for 5 years. Note that this is limited to your contributions, and is not true for any return those investments have made.

You mentioned part of a key point:  Taking money from your Roth will indeed decrease future Roth earnings.  The obvious side of this is simply returns.  But just as big of an issue is taxes...  Roth IRAs are extremely tax advantaged!!!  Real Estate can be tax advantaged as well, but you're still moving money from a tax advantaged situation to one that probably doesn't have the same level of tax benefits.  For this reason, it's preferable to invest new money into real estate (though I know this is not always an option).

I'm also very worried by the comments you made about your Roth returns last year.  Generally speaking, IRAs are long term investments, and it should never ever matter what happens over a 12 month period.  How have those investments done over the last 5 year, or 10  year period?  Or, more importantly, does your current allocation still align to your long-term goals?

I may be reading between the lines a bit, but it sounds like you may be considering using capital from your Roth to avoid taking out a mortgage.  Is that true?  If so, I would generally advise against this.  Using mortgages is one of the big reasons that real estate returns can be so high.  

Should you take the money out of your Roth?  That's a decision that you need to make for yourself.  It's a big big decision, and one with huge long-term implications.

Either way, Happy Hunting!

Free advice here as well, but here's my take: No. You should NOT get a HELOC yet. Here's why:

• Because you just purchased the property, any appraiser will default heavily towards the price you paid, and their analysis will basically justify the 135K price tag.  This will be true for at least 6 months.
• Even after 6 months, I'm not sure that there is enough meat on the bone to justify a HELOC. HELOCs typically go to 80% LTV, meaning if your house is worth 175K, the total amount lent will probably not exceed 140K. Given that you owe 135K, the HELOC would cap out at 5K. That's not enough to justify the expenses (at least $500) and not enough to start investing. Note that some banks may go to 85%, but that's rare, and doesn't change the overall story.
• Using a HELOC may over-leverage you. i don't know your personal story, but based on your message, I worry that if you got a HELOC for an investment, that you would be cash-poor. My rule #1 of investing: Never be cash poor. Expenses come up, and you need to be able to not only pay them, but to pay them and sleep at night.
• Related to the above comment, this would also put your primary residence at risk if something goes wrong with the rental.  If I had a rule #2, it would probably be to protect my personal home and security - and this move would put that at risk.

Using a HELOC to support investing can work, and it can be a good idea. In fact, I've done it for a couple years and had great success with it. But my personal take is that it's simply not a fit in this situation.

Happy hunting.

I think that becoming an investor friendly agent isn't for everyone.  Here are some of the pros and cons:

Pros:

• Gap in the market that can be filled.
• High likelihood of repeat business from high volume buyers.
• Because many investors lean heavily on their agents to do legwork, you have a fair bit of control over your sales volume/performance.
• Your customers tend to be savvy.
• If you do well, referrals will fly in and you will have a full book of business.

Cons:

• Requires several unique skillsets which are not required in traditional real estate.  Some examples include wholesale, rent estimates, rehab estimates, etc.
• May require (or benefit from) work beyond the traditional real estate agent role.  For example, if you can also find a tenant or oversee the rehab, those are big pluses!
• Rarely results in a big sale.  As such, your salary is largely dependent upon volume.
• Requires a lot of leg work including finding properties, putting in lots of offers that will be rejected, etc.

Just my two cents.