All Forum Posts by: Joe Garretson

@Alex Wise, I'm dealing with the same question/issue. I've been saving as much as possible over the past 12 months and putting everything into my brokerage account at Betterment. It was doing great for awhile but we've all seen what the market has done this calendar year...

The other option is to stash it in a savings account and while those rates have climbed (1.9% currently with Cap1), that's a lot less than inflation and a lot less than what the market could potentially return. 

I've heard on a BP podcast recently and I think seen it here to keep it in safe accounts like a savings account if your time horizon is less than 24 months out. I'm not sure I agree but it's all a gamble in some respects right?

What is your timeframe for purchasing? 

Also, a great nugget I heard on the BP podcast this week (I'm working my way through all 600+ episodes and currently in the mid 200's) regarding analysis: we get hung up on numbers like CoC returns, cap rates, 1% rule etc and look at those as absolutes. However, all markets are totally different and getting big CoC returns in your market might not be possible. Run the numbers on a number properties and establish what average returns are in your hood; then you can use that as a benchmark for your deals and help you with the analysis paralysis.

Never thought in a million years a $1.1M tract house would exist in Castle Rock. Are you renting this out or is this your primary residence? 

 We're about to head out for an afternoon happy hour and I've already prepped her about the discussion. One thing I'm going to have is a print out from the rental property calc here on BP with a property I've been analyzing and then just straight numbers. The numbers don't lie. And the numbers tie into our bigger goals 6-8 years down the road in terms of what we want to do. So, it's really on me to present a well thought out case of start today, start small, and make calculated decisions based on numbers. 

I'll let you know how it goes!

 Totally makes sense on the split. I'd probably look at what $40,000 deployed in a savings account might accrue monthly and show them that even a low % will be much higher returns. 

Howdy, I'm making my way through every BP Podcast right now educating myself as much as possible before I make my first purchase. Earlier this week I happened to listen to episode 247 which was Brandon's 90 day challenge to buy your first or next podcast. You can say I'm energized to take action after listening to that. 

Onto my financing questions. I've got a mountain of equity in my house. Like $300,000 probably. I'm going to do my best to get my wife onboard (she's risk averse) with tapping into about $40,000 to buy a small multifamily in the low $200k range. We've got about $15,000 in cash ready to deploy as well.

To make sense of the cash flow (reason I'm investing) and all the financials, we'd use the equity and our cash as a down and then secure a mortgage for the remaining 75-80%. I'm just going to add the cost of our equity loan into my mortgage payment, the other costs and that's my expenses, correct? 

If I were to secure a partner instead of using the equity, is it the same process? Pay them 7-8% or something like that over 5-10 years and then I'd keep all proceeds from property with the goal to drive up value and refi to pay the partner back as soon as possible? Or instead of paying the partner back their principal, can you split the after expense proceeds 50/50 or whatever percentage breakdown that would get the deal done? That would seem to keep the loan costs to a minimum and maximize the cash flow. 

I'm trying to focus on these two paths because I think once I have my grasp on the funding side, finding a deal will almost be the easy part.

Just my two cents, I'd run, fast and far, from an ARM. Not much room really for rates to go down so you're only gambling on the wrong side. An ARM on a $750,000+ loan takes a somewhat manageable payment to untenable after even the smallest rate reset.

I don't believe this market will see big drops like has happened in the past. This last run up feels very much like what has happened in past cycles where prices shoot up, plateau, maybe come down a bit, but never drop significantly. It's unlike the chaos of '07-'08 with horrendous loans and bad practices. 

And if I may ask, why Ken Caryl/Littleton? Great area but there are many great areas around Denver metro that might be a bit more affordable (relatively speaking). And if you have no designs to live in the home long term, why not buy something that would provide a better rental situation when you decide to move east? As mentioned above, you won't cashflow a home at $750k with 3% down so buy a townhome or something less expensive that may be a better investment property long term. Or maybe even consider a house hack duplex or something like that? 

Got an interesting listing I'm looking at. There's a set of four townhomes listed together as a package deal. I did some research and it appears it's an older gentleman who bought these four separate townhomes and is now trying to sell them as a single multifamily investment. The townhomes all have their own property tax info, assessment details, etc so this is where it gets interesting.

I'll use mostly real numbers. Let's assume asking for the package is $2 million. That puts each townhome at $500k. I am working on verifying each home is identical; I don't think they are; but for simplicity's sake...

Market value is closer to$600k for each townhome should it be sold separately on the open market. That's mighty close to an 80% LTV if I were attempt to refinance each townhome separately after purchasing.

So my question is, how would you go about getting a loan for the initial purchase? Is it a hard/private money loan for $500k for 25% down on a $2M purchase? Commercial loan?

This is well beyond my financial means to tie up but this looks like a diamond in the rough type deal. These townhomes are new builds with tenants in place in a very strong market. 

My exit strategy would be to get out of the bigger loan as quickly as possible and then end up with four separate townhomes on their own mortgage which I could handle on their own. Continue to rent, sell one or more. Lots of options.

Yes, current savings account specifically for REI is at $15k and adding $1300/month to that balance. Growing that account while doing research, seeing what happens in this weird market and working through some mindset differences with my wife on what RE investing means to each of us.

Interesting perspective on income. You're right, we've all met and/or know people who are "rich" because they drive a fancy car, live in a big house and identify as a VP of this or Director of that at work. We also know those people can't rub two nickels together... I'm the poor one of my friends with a 17 year old Honda Accord, a 9 year old Ford Explorer and no debt beyond our mortgage.

My wife and I own our primary residence; have approximately $300k in equity, $15k set aside at the moment with an additional $1300/month added for strictly RE investing. We've got a six month emergency fund sitting in cash separate of this. 

We're on the path to buying our first investment property but disagreeing on what that path is. We have agreed on a timeline that we buy before I hit 50 (have just under 4 years until then). 

The biggest issue: she's risk averse, I'm ready to buy the first thing I see. 

Some solid advice in this thread. Congrats on taking the first step though and realizing you need to get out of debt now. That's always the hardest step. 

Second, you say you've been thinking of ways... does your wife agree on getting out of debt? It'll be exponentially harder if this is only you wanting to accomplish this. So if you haven't had that conversation, you need to do that now and show what the debt is doing to your long term financial goals. I was a debt-aholic until it nearly cost me my marriage in 2018. My wife and I had some hard conversations and have eliminated all consumer debt and have stayed debt free.

Some options for you after you and your wife are on the same page - depending on the amount of debt, you can sell the car you mentioned, buy a cheaper car or use a bike/public transportation/walk and use the proceeds from that sale to get out of debt. That's a fast way to make a huge dent. Used car values are insane right now so you could win with this.

Another option for fast debt relief is to empty any investment accounts and/or 401k to pay it off. Lots of tax implications and longer term financial issues to consider but it is a fast way to eliminate debt. 

The best path forward and probably the most sustainable is to figure out what's causing the debt, like overspending, and attack that. You likely have a spending problem, not an income problem. Fix the spending and use any and all funds to pay off the highest interest rate debt first. Change your lifestyle and you'll win long term.

Best of luck on getting out of debt. It's a huge weight lifted from your shoulders.