All Forum Posts by: Michael Barry

@Brendan Flannery that's awesome how you set the bar you wanted to achieve and then crushed it! Are you focusing in our neck of the woods or are you investing in other areas?  I'm really interested in how you put together your team and if you have any advice to share about selecting people to work with.  

@Chris Hopper thanks for looking into it. 190k definitely sweetens the deal! 

@Adam Saball basically in retirement, my taxes will be on my investment net profits and my 401k income.  We save somewhere around 40-50% of our income so in theory, we will only need at most half of what we make now in retirement assuming we have a good nest egg.  Kids will be grown and out of our pockets (hopefully) so it’s just my wife and I sitting on our lanai in a paid off house in Hawaii, traveling a few months each year...or something like that.  So I just expect our living expenses to be much lower so our income and tax bracket will reflect that.  Of course, tax brackets can change. Roth’s are great hedges for tax uncertainty but I prefer to save 30% on taxes now and let the magic of tax-deferred compound interest work to my favor.  

@Cody L. and @Chris Hopper your advice mirrors my thought process on the equity stake and neutral cash flow. I would be perfectly happy with 20-30% equity and no out of pocket money at the end of the deal for my first deal. 

@Ethan G. No I don’t have more information. See, this is how much of a newbie I am, I don’t have a RE agent yet. I can reach out directly to the listing agent for details but I feel like an agent would be able to extract better intel. 

@Adam Saball I’m in a similar position as you. I have a young family and we Have been utilizing the 401k to the extent that we can stuff pre-tax dollars into it.  I am confident we will be in a lower tax bracket in retirement so we fully enjoy the ~30% tax deduction up front on a sizable chunk of income. Our employers match portions of the contributions so that’s also awesome. We also save a lot into a non-retirement trading account where I generally follow the Boglehead philosophy. With the market’s incredible gains over the past year, I realize I need to not only diversify in the stock market, but diversify into assets not directly tracking the market.  Hence here I am trying to learn real estate investment. 

Ok here is a real world example of something I'm interested in. 2315 Colonial Court South, League City, just listed on MLS. Listed at $120k, I'd guess ARV around $175k give or take. I know this area well And I live pretty close. Good school district, convenient to the big employment centers in the area, well kept neighborhood for the most part and a low(ish) tax rate for the area of 2.375%. After rehab, would rent somewhere around $1650 for buy-and-hold. I get an NOI of around $650/month - I included 8% vacancy, 10% maintenance, 5% capex, $4k/yr taxes, 10% PM fee (of gross rent), $1750/yr insurance and a small HOA $150/yr.

So before I even analyze purchase price, rehab and finance costs, I know $650/month NOI is basically cash flow neutral to negative after considering financing but the equity stake looks great to me. Let's assume for sake of argument you put it under contract for $110k and everything from inspection is cosmetic, you may put $15k into rehab and be all in for $125k plus any financing costs. At an ARV of 175k, it looks like a potentially sweet deal either as a flip or as an equity play.

How far off the mark am I?  I’m writing this on my phone so I couldn’t include the detailed analysis. 

Final note - I’ve listened to a quite a few podcasts and I’m learning some investors do not want excessive cash flow for tax purposes.  In my situation, I don’t necessarily want more taxable income right now, I want equity for future 1031 exchanges into cash flowing properties for income in early retirement. 

Speaking of fears as a newbie - yes lots of them! I really like the idea of partnering with an investor experienced in the areas and types of deals I’m interested in.  I’ve never partnered with someone on a business deal so that is also something on my mind. I’m looking forward to meeting other investors and building rapport. The founder of the company I work at for my day job valued partnerships and win-win deals for all parties and he built a multi billion dollar business over his lifetime based on that principle. 

At the moment I’m working on a draft business plan and it is really helping me zero in on what I’m looking for, set up some rules, guidelines, exit strategies and timeframes.  It’s helping me identify and study up on areas that I don’t have at least a basic understanding of. Of course the plan will change over time but it forces me to set up a framework in which to evaluate deals as opposed to finding a property and winging the analysis. 

I’ve got my financial documents ready to go for lending pre-approvals so once I have my business plan in good shape, I’ll be visiting brokers and bankers in the area. 

I’m also building connections with RE agents, looking for property management companies, and contractors. 

As you said, all the reading and studying in the world won’t be enough. It still takes real-world experience so getting that first deal I feel like will be the hardest and most important one. 

Happy New Years, everyone! Over the past few weeks, I've made a few contacts, started to put my business plan together and started pulling my documents together for financing and pre-approvals. I've started researching some of the local banks and credit unions so I'll start visiting with them soon.  I created my own property analysis spreadsheet to learn the math and have practiced the analysis on several properties. I've also been listening to the BP podcasts and picking up a lot of great tips, strategies and resources.  Not bad for January 1st. 

I think we need to set up a local meetup.  It would be great to meet with other BP members in the area for networking.
   

@Adriel Hsu I'd like to connect with multiple sources for leads. I'm using the MLS as my learning grounds right now purely because it's free and to learn the analysis so I can more quickly evaluate deals. I've started joining some Facebook groups as well. It's like the Wild West there, definitely overwhelming if one doesn't have a good BS filter.

@Adam D Rinehart thanks for taking the time to write such a detailed experience.  I had a horrible experience with conventional mortgage Refi on our first home (Wells Fargo) and I will never use them. I had a lightly less irritating experience for our conventional mortgage through Quicken for our second home purchase. I will never use these large lenders again especially when more risk is involved with investment properties. I will definitely invest the time up front with local brokers and banks with solid work with investors to build good rapport. 

@Vijaianand Thirunageswaram thanks for continuing to share your knowledge. I like the idea of writing a specific plan for each property and including alternative strategies if plan A doesn’t pan out.