All Forum Posts by: Matt Vogt

Depends on how much your potential rental property costs and how much of a HELOC you can get. If you can get a large enough HELOC, you'll avoid paying the origination charges and will save yourself a few thousand. How quickly would you pay the property off, would you be renovating (ie. BRR), what else is involved with your strategy?

The downside is that you'll end up with 25K out of pocket (2 + years of payments) before you have all your capital out. If you made 12% holding the property last year, then you were making roughly $400/mo by my calculation... 

Anyhow, you'll have an initial cash outlay of $40,000, then cash inflows for 18 months at $400/mo. Then you have a cash inflow of 15K, then you have $1000/mo cash inflow for 40 months. Overall, you make $62,200 over 4.9 years... a total profit of $22,200. 

A straight calc shows $22,200/4.9 = $4,530/ year. 

Now if you discount the cash flow by your cost of capital (which you should), you'll come up with another figure. The question you need to answer is what is your required return, your opportunity cost? A good metric I would use would be the historical return on the stock market of 10%.

At 10% cost of capital, you have a NPV (at time of doing the deal) of $8,355.21. $8,335.21/40,000 = 21% ROI.

With that, I would say that it's a good sell if the following conditions are met: 1) you don't want the property to continue making money for you beyond the sale, 2) you can reinvest the profits into another good deal. 

Good luck and nice deal.

I would say that a college degree is a good asset to have, although not an absolute necessity in todays world. I have friends that didn't graduate, and have good jobs making well above the median income, I also have friends that have graduated with a good deal of debt and are doing nothing with their degrees. For me, it all comes down to cost-benefit. If you choose to get a degree, make sure it's useful in a way that translates to direct income. Choose a career that's attainable, in demand, and has a good payout. If you can get a bachelors for 25K, get an entry level job for 50K, you're doing alright. Now flip that... if you have 200K or more in debt and can get a job making 30-50K... you'll never dig yourself out (or at least for a long time). 

I would probably step back, look at your long term goals, and see how college fits or doesn't fit them. 

Can you upgrade your work without a degree? You write well and use grammar correctly, how about an office manager or sales admin or secretary etc position that would give you a higher income and allow you to get into RE further via the higher income. 

I would avoid college until you have a clear-cut path determined... if that is present, then go for it. 

In my case, my parents expected that we went to college and helped finance a good portion of it. I left school with 12K in debt, with a bachelors degree and an entry level job paying double what my retail management job while in school paid. For me, it was a great safety net and springboard to get my feet off the ground. I also probably would have been better off going to a trade school rather than traditional college, and probably will go back for similar training in the future.

Good luck with your decision, I just wouldn't go just to go... make sure you have a career in mind. 

Honestly, I think the margins in wholesaling are too thin for you to be farming out the work. If you have an agent looking at the properties for you, I am missing the value-add you're providing (necessary to be able to sell it). Maybe I'm not understanding your business correctly, maybe it would help for you to explain what you're doing a little further.

Thanks Ryan, looking forward to digging into this!

Yes I would bring a small claims suit if you have a few hours and want to gamble the $100 or so to do it. I would start by suing the seller, and then would follow-up with a suit on the buyer. I would double check your contracts to ensure that you have a case, but it sure sounds like it. 

Additionally, I would try to figure out a way to prevent this going forward. Maybe you should be in the close meetings with seller/buyer. 

Typically this is allowed. Most mortgages have a primary occupancy clause in the contract that states what the term of occupancy is. I believe the standard is 1 year, however it could be different depending on lender. I would consider living in the property for 2 years as well, so that you can have the option to sell within 3 years after moving out and not get taxed for the sale. This is currently part of my strategy, as I am starting off and can only float so much debt with conventional loans. Eventually I'll hit a point where I will need to sell one property to buy another (more productive) property. By living there 2 of the last 5 years, you can avoid the capital gains tax if you need to exit from the property. 

Good luck

Do you have rentals currently or other significant assets to acquire it? even for a 5% conventional, you'd be looking at a $215K down + Closing costs. I also imagine that if someone had 6 or 7K/mo to rent a place, they would probably just buy the property. Seems like a HUGE risk if you cannot afford this property on your own. Maybe pool a bunch of people together to buy a stake in it, then rent it out as a weekend rental, wedding reception etc as planned. If you go that route, make sure your friends are affluent so that you can all stomach a vacancy for a few months (or year etc) along with the repairs and maintenance a property of that size will take. 

Good luck, my gut says avoid this one.

Maybe a good approach would be starting by breaking down the debt into groupings to show the interest rates, total debt, and minimum monthly payment. Build a little spreadsheet to show all of this, it will help you attack the situation in the most effective way. Feel free to PM me if you need help with this, I'd be more than happy to throw something together for you. 

Additionally, I would find out what your raw personal expenses are in order to survive (Rent, food, insurance etc). Then I would work on  finding your base revenue (weekly cleanings etc) that are pretty locked in and don't fluctuate. I'd then see how much is leftover to service the debt. 

I cleaned pools for 2 years during and after college, it was definitely lucrative ($50-100/hr with a lot of cash payments). It's pretty cool that you can do that year-round in CA. Ours was only a 4 month season or so in NY. 

Best approach is paying the highest interest debt first (after monthly servicing), although I'd be looking at 0% balance transfers etc to help you eliminate debt. 

Additionally, switching to a mainly cash basis for your expenses should help you manage your money a bit better while not increasing credit balances. Find out your base expenses and take that much out in cash each week, and hold yourself to the budget. 

Best of luck, it will take a lot of discipline.

+1 for Diatomaceous Earth. I sublet my apartment a few years ago and the kid left them behind. I covered the ground with it and they were all killed in a week or so. It's like microscopic razors that slice the bugs up and force them to dry out and die. About $10 a bag at home depot.