All Forum Posts by: Liam Goble

@Jay Barndt, Welcome to BP.  I've been investing in the Centre County area for the past four years and have definitely found the smaller the bank, the better the chance for a loan.  As an example, I was a student (ie: no job) and my wife was a stay at home mom and one of the smaller local banks refinanced my entire portfolio.  

@Justin K. is right, Centre County is behind the times, which just means there is money to be made hand over fist by utilizing tactics found here on BP from more 'advanced' markets here in the 'behind the times' market of Centre County.  

Good luck.

I'm curious how everyone tracks cash flow (if they do).  Do you use a simple spread sheet and reconcile it w/ the bank statement? is there software?  If you don't track monthly cash flow...do you just maintain a sizable chunk of cash in the bank?

Thanks.

@Bryan O. Thanks for the post.  A few replies/thoughts:

- The NYSE has been around since ~1790.  However, I believe most returns are calculated from late 1800's early 1900's for the 4% return I mentioned above.  I believe that historical testing will prove the 4% rule, depending on when you begin pulling money out (ie: if you formed your portfolio and in 1929 and began pulling the 4% in that year, you got burned, but if you stared in the 19teens, you were fine.

- I partially agree/slightly disagree with your discussion of owning.  Please note that in my discussion, I defined 'stock ownership' as ownership of the market as a whole (ie: entire S&P; total market equity).  As an owner of a stock, you do own part of the company.  That's why some stocks pay dividends - a share of the earnings (in a well run company; a share of debt in a poorly run company).  As an owner, you are sharing risk with the other owners - risk of your capital.  In the event of a collapse or sale, stock owners receive their money last after debt holders, bond holders and preferred shares are paid out.  You do have the ability to voice your displeasure with the management - annual meetings and shareholder votes.  We may not like the system and may feel we don't have a voice, but we do have a vote (just like November every four years).  Remember, in the event of a collapse, it's afire sale of assets, similar to a foreclosure.

- We could include time in the risk calculation.  For instance, is there something you would rather be doing than vetting roofers?  Maybe not and that's fine, but maybe so.  Either way, I feel your time should be considered in the risk/return.  As you note, if time is included, return better be better, otherwise why do it?  I think too often we ignore the time risk.  In my case, my younger brother died in 2011 at 28.  He left a little money which allowed me to begin investing in real estate.  I'm aware that I may be more acutely aware of the 'time risk' and need for a return on that risk. 

- I did leave out immigration.  As the Brits learned in the 1700s (and again at the close of WWII), empires only last so long.  You'll still have immigrants (until walls get built), but empires do end.

@Brent Coombs I do consider real estate investing the quickest (legal) way to get to FI.  My dad used to be an FBI agent and there are certainly other ways to achieve FI, but I would have received a knock on my door had I chosen those other paths.  I plan to diversify into lower return but (maybe) less risky investments to preserve my wealth.

The arguments I presented are arguments I hear often on the BP podcast.  I just wanted to provide my thoughts on the matter.  

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I love the BP community and I'm probably going to get speared for this post, but I'm tired of the drivel spewed on this website by really intelligent people in regards to various investment vehicles, but usually aimed at the stock market (DJIA/S&P).  Probably every other podcast the hosts unleash on the market without thorough consideration of what the market is: another wealth building tool.  My discussion will focus on 'the market' as a whole - one of the broad base ETFs available at extremely low costs (are there any PM companies managing your properties for 0.5%?).  I've got an MBA (finance concentration) but am extremely leery of individual stocks.

@Brandon Turner always talks about building your 'tool chest' of financing options for real estate; consider the stock market another 'tool' to building long term sustainable wealth.  

Let's consider the arguments:

- "You can't control the market." If by 'control' you mean 'run every company', yes, you're correct, you can't. If by 'control' you somehow feel you can't sell bad investments, why can't you sell? And BTW, don't sell during a down market when you're feeling 'bad' because you see those paper losses. Selling during a down market is similar to selling your cash-flowing property when it's vacant because the NOI has gone to $0 or negative.

Staying with control, I'll ask this for consideration: Where can you pay $2,500 and retain the collective knowledge of some of the best and brightest business minds in the world?  

- "You lower the risk and increase the return."  Malarky.  Risk and return are correlated and every investment will revert to the mean over long enough periods of time.  Unfortunately, none of us have been investing 'in the long term' (over 100 years).  We've all been investing in bubbles and dips.  Yes, we can try to pick better properties and earn a return, but to get outsized returns, we need to take additional risk.  I'm sure Rust Belt investing was great before steel got outsourced to low cost producing nations.  How's Rust Belt investing AS A WHOLE right now?  Might there be a few gems?  Sure.  But there are in the stock market as well (NFLX, AMZN, MSFT, etc)*.  

- "I own a physical asset."  Yes, you do.  In both cases you own a physical asset.  As an owner of a stock, you own a portion of the company.  When Brandon Turner is better off because he "owns 50% of something rather than 100% of nothing", does he own half the boiler? half the roof?  Does he own nothing because he can't figure out which half of the investment he owns?  Owning one share of a company you may own 1/1,000,000,000 (or less) of a company but you still own part of that company.  If you think otherwise, you don't understand the market.  

- "Everyone needs a roof over their heads."  Yes, most of us do.  Has anyone considered the long term demographic trends of the US?  Fertility replacement rate is 2.1.  The current rate is 1.86 (2014; http://www.cdc.gov/nchs/data/nvsr/nvsr64/nvsr64_06...).  What does this mean?  Less people need roofs.  Considering a simple supply/demand curve, as demand decreases (in the long term), what happens to the price of supply?  If there is an excess of supply, prices will decrease, thereby lowering real estate returns (probably reverting to the average which matches inflation - http://www.pragcap.com/robert-shiller-dont-invest-...).

Closing thoughts:

- What investment vehicle can you IGNORE except to pull 4% annually and have a 96% chance of your investment lasting 100 years.  Ever ignore a roof?  How about when a tenant vacates?  How did that $5000 flood affect Brandon's homes?  Many people are very successful using the 4% rule (mrmoneymustache.com, etc)

- People will complain that amassing the necessary nest egg to pull 4% annually is difficult/impossible yet there are plenty of discussions here on BP regarding living below your means.  Live below your means and invest the difference.  

- I do believe that real estate is one of the best and fastest ways to accumulate wealth and is the method I am using in the near term.  However, when I consider the long term sustainability of the investment, I would prefer a broader investment base.  Picture a stool: You can sit on a one legged stool, but you've got to balance carefully.  You can sit on a two legged stool and your balance is a little easier.  A three legged stool requires no balance.  Real estate is one leg, the stock market is the second leg, and (business interests, bonds, CDs, Treasuries, FX, etc) can form the third leg of the stool.  

In conclusion:

As real estate investors we must not categorically eliminate the stock market as a viable investment vehicle (does BP offer a 401k or does @Joshua Dorkin only allow employees to invest in Denver real estate?).  I do believe that real estate is the fastest and safest way to amass wealth but there is increased risk with the investment.  I believe a truly safe portfolio will include a variety of investments including but not limited to: Real estate, stocks, bonds, etc.  

My personal plan is to reach my FI number through real estate then diversify out of real estate into other investments.  

*Disclaimer: I do not own nor recommend any of the stocks mentioned in this post nor to I anticipate opening a position w/in the next five days.  I am not a financial adviser.  This post is only for provoking thought. 

As a real estate mentor of mine says "When you've gotten "no's" from ten banks, you're only just getting started."  

Head to some of the super small super regional banks.  I generally try to work with banks that only serve 2-5 counties in my state.  They have a bunch more flexibility to work with you than the larger guys do.  

I've also had luck paying cash and refinancing after I've got a track record with the property.

I don't see the 800lb gorilla.  Investing may force you to be creative, which is painful for many people who are taught to color in the lines, but as an investing mentor of mine has said "If you've gotten "no's" from ten banks, you're only just getting started".  My first and only loans for my real estate have been commercial.

Point in fact: I'm coming up on my fourth year investing (ie: I've got a track record).  Last year, while a student and my wife was a stay at home mom (ie: What do you think our income was?!?  AGI ~$7k (I didn't miss a '0')), I was contacted by two banks and refinanced my entire portfolio including paying out a balloon.  

You can't go to only one bank, have them say no, and quit.  You've got to look around, ask other investors and meet people.  Sometimes you invest with rich buddies (there are more of them out there than you think); sometimes you flip and roll the cash to an all cash purchase; sometimes you use banks.  If you want to make money in this market, you've got to THINK.  

When I first started, I assumed all loans were 30-yr conventional fixed rate loans.  I also asked how it was possible to be an investor.  At this point, I don't even really consider 30-yr conventional mortgages as there are so many options for lending. 

Get uncomfortable.  THINK.  Go out and ask banks questions.  You'll be able to put it together.

Welcome to BP. It's a great community to learn about REI. Incorporation is NOT required to invest in real estate but a good examination of your long term goals would help determine if such a move is necessary. An LLC may offer additional liability protection, but it's easy to lose the protection if you're not careful with your business. That being said, I do invest through my LLC not so much for the liability protection but more for the ability to shift benefits to other owners within the company.

Depending on your financial backing, I would encourage you to read @Brandon Turner's book "No (and low) money down".  The methods Brandon outlines do work though you may have to force yourself to think creatively.  

Good luck.

Wanted to provide a quick update to my post above. My VAs left the scene at some point after the New Year. After about a month, I realized that I hadn't received an invoice (not a bad thing) so I looked into it, reached out to the VAs and received no response. The best part of the VA experience was that it allowed me to refine my systems on the cheap ($4.40/hr). I am now considering working with a friend of mine who wants location independent work and I need/want the help. The systems are in place but can be further refined.

Awesome work.  I'm totally stoked.  Your work gives me confidence.  

I've been an investor for almost four years now.  Had a few crazy times, but I've learned a ton.  I'm getting ready to graduate with my MBA and get into investing full time (wife is a stay at home mom).  It makes me a little nervous, but reading about the success you've had (as well as others) makes me feel good about the steps I'm taking.  

Congrats and good luck in the future.