All Forum Posts by: MIchael Rickerd

 A 2001 Grand Caravan can tow 1,800 lbs and has a GVWR of 5,550 lbs, with a self weight of 3,999 lbs.

A 2001 Tundra has 7,800 lbs of towing capacity, a GVWR of 6,200 lbs and a self weight of 4,644 lbs.

Even a tiny 2001 Ford Ranger can tow 5,620 lbs.

How is that minivan going to outperform a pickup truck, in any way related to rehabbing and maintaining real estate? I am genuinely curious as to why you think this way. You say funny things quite often, but this one may take the cake.

I'll agree with others and the observation that you will  need to analyze and make lots of offers before you strike gold. Keep hammering away. Run some numbers beforehand to determine if it is even trip worthy. Keep pushing.

BUT, sometimes the stars align and a deal is created out of thin air.

For me, it was day 2 of my search. First MFR offer I ever did, which was $57,582.38 less than asking nonetheless! A wild stab in the dark. A very offensive offer to tell you the truth. Lower than it needed to be to make the numbers work.

The seller came back at $35,000 less than asking. I got it under contract in a heartbeat. 

So yes, the road is long and arduous most of the time. Though sometimes it is as easy as pie.

This is the one on 691 E. Zuni? The one that's currently on the MLS?

Are you trying to wholesale it at the full 340k price? Or do you have an agreement with the seller for less? Just trying to put together why you would spend your valuable time trying to wholesale a property that is active on the MLS?

I know I'm going to appear a bit insensitive, but a very simple analysis is going to show that with a 272k note and 2100 in rental income (assuming the current owner occupied unit is at least as nice as the renovated, rented unit and can be rented for 1050 as well), you aren't making out very well (I anticipate negative cashflow, depending on the conservancy of your analysis), especially since you had to put down 68k + closing costs. You have a CoC return of less than 3%. Blah.

2100/340000 = .617% (monthly rent divided by purchase price). This is terrible for Flagstaff. I am 2 weeks away from closing on a duplex that will hit 1% after 6-8k in rehab!

My tenants all pay their rents at a local bank here in town. While I will accept checks, the paying of their rent at the bank is the "preferred" choice of payment in my lease.

I use the "Name Your Own" account feature at a local bank. The account is free, and I can have as many as I want. This means each property has its own account (and they allow you to name each account whatever you like, so tracking payments per home is very easy), and the teller has to put a note in with each deposit, which is the tenants name. They receive a receipt for their records, thus alleviating any payment discrepancies. Also, not waiting period for funds to pass through another company or companies (we all know how that can go) before it gets to me.

Come the first of the month (unless it falls on a non-bank day, then tenants have until the next business day to deposit) I simply log into the app on my phone and can quickly annotate who has paid.

When I meet with my lender about another purchase, rents paid is available in an easy to read format from the banks website, and available anytime with the click of a button.

Haven't had a single complaint with this approach, and I plan to make it the norm with all future tenants.

Relating keeping a depreciating asset that you have is like saying "I have a tumor growing on my leg. Welp, since its already there I might as well keep it!"

No! Cut that sucker off!

I had the exact same reaction as @Steve Vaughan above.

We really can't be talking about starting out as a real estate investor, and maintaining a dying, depreciating asset in the same sentence. Does not compute. Once you have a handful of income producing properties under your belt, the story changes. But at the beginning? Never.

Staying in the rat race for an additional 5 years, all over a car that gets more and more worthless every day, is a terrible mistake.

Start as soon as you possibly can. Remember, this system, if done right, eventually creates its own momentum. The earlier you start, the earlier the system attains critical mass and carries itself forward. 

Delaying that life changing occurrence over a financed car is incomprehensible to me. Agent or not.

I am wrapping up the acquisition of my agents license here in AZ. None of the people I have talked to about real estate, or selling there homes, or helping them buy a home, have made a single comment about the old, tired pickup truck I drove to meet them. Not one. 

Here's a life tip that has tremendous value.

Become the kind of individual that makes a positive impact on the people they come into contact with.

Then it won't matter what you drive. 

Before real estate, I had limited financial intelligence. I really had no idea about money at all. Never made much, never had much.

I served in the Marine Corps, making a low-low income. Then I went to college, where I spent 4 years doing 12 hr shifts as a nighttime security guard, again, making low-low wages. I always justified the poor wages with statements like "I am in college, I'm supposed to be struggling. But when I start my career, you all just watch out!"

Then I finally graduated, Dean's List, with a degree in Mechanical Engineering. I landed a job here in town, and was beyond ecstatic that I had "finally made it" as far as my income was concerned. I had grand visions of all of the things I was going to do for my fiance and I, the kind of truck I would drive, the upgrades I would do to our home, you name it. I was on Cloud 9.

That was, until I received my first paycheck. What was leftover, after having worked 90 hrs in the past two weeks, was pitiful!! To say the very least. I felt cheated. Robbed. Used. 

Words cannot encompass the symbolism. 

I remember sitting in my bedroom, and coming to the realization that all of those visions I had were not going to come true anytime soon. Not a single one of them.

Something changed in that moment. I began reading again. Lots and lots of books. 70+ a year since I had this epiphany. And that changed everything. 

Real estate reared its beautiful head, and I bought my first deal within 45 days of understanding this phenomenal wealth building vehicle. 

I'm not where I want to be, but I am in a much much better position than I was after I received that first paycheck. I still have that job, as all cash is currently reinvested, but those visions I had at the start are beginning to poke their heads above the surface. 

Very interesting thread, and it is motivating to read everyone's responses.

I want to take a slightly different approach with the advice I wish to share with you, and anyone who happens to read what I write.

Finding the deal, taking the first step, learning something about REI, finding a mentor; these are all excellent tips that will make the difference in your investing career. However, I would like to make the analogy that doing the things others have mentioned, without first understanding how things work, is like building a house with no foundation.

Jim Rohn said it perfectly back in 1984. "People want to have an above average life, with above average experiences, and above average income, without becoming an above average person."

He also said, "If someone were to give you a million dollars, it's best that you become a millionaire quickly. So you get to keep the money!"

What does this mean? To me, it means that no matter how many deals you look at, and how many people you talk to, things will not happen until you have reached the interpersonal level that is required to become who you need to become. 

If you do not have this massively crucial first step in your toolbox, your entire journey will be wrought with tragedies and heartache. But, if you do have this knowledge, there is literally nothing that can deter you from your end goal. Not a single thing. Why? Because at that point it has nothing to do with what you possess externally, but it has everything to do with what you have inside of you.

REI, relative to the returns and rewards I receive from owning real estate, is by far the easiest 'work' I have EVER done. I am a firm believer that this is the way that it is because of the intense detail I pay towards my mental state and the way I choose to view the world.

I operate on the opposite end of the spectrum from Mr. H. above. 

If I acquire a property, and it has single pane windows, upgrading them to vinyl, dual pane windows is one of the first projects I complete. I also blow insulation into the attic with every house I acquire (if it needs it).

I live in a cold climate, with substantial winters. Insulating my properties well has several benefits:

1) The main one: These upgrades keep my heater from running as often as it would have if I left the old windows/insulation in place. You ever live in a drafty house? It feels like the heater runs non-stop in the winter. Not a fan of this. Also, considering this is a big CapEx, I'd prefer to ease its job as much as possible.

2) Shows my tenants I think about, and care about, them and their month to month expenses. My tenants all like the upgraded windows and the subsequent decrease in their utility bills. I market the upgraded windows in all of my rental ads.

3) Immediately adds a nicer feel to the home. Homes rent very quickly (5 days on average). If I ever had to sell the house, nice new windows go a long way, IMO.

4) Replacing the windows is not difficult based on my skills and the tools I have at my disposal. This is not the case for everyone. I also get to upgrade all of the trim to smart trim, which helps with curb appeal. 

I may stand alone in this regard, but I really enjoy the rewards of upgrading windows from old, ugly, aluminum framed single pane to nice vinyl dual pane windows.

Interesting thread.

Here's what I do. Now, this isn't right or wrong, but this is how the REI/401k debate applies to my life, based on my situation, using my experiences and education, and with my final goals in mind (this is the most important part, IMO).

Years ago I once heard Jim Rohn say that only 5% of Americans can survive, in retirement, off of the fruits of their own labor. This is to say that 95% of Americans, when they reach retirement age, are dependent on someone/something to maintain a livable existence.

This struck me as powerful and eye opening. This small bit of information changed my outlook drastically. 

I immediately began looking around and paying attention to what 95% of the people around me were doing. And I also paid attention to what the 5% of people around me are doing.

I made the decision to do the exact opposite of what 95% of people around me do. And this single decision has had massively positive impacts on my life.

All of my coworkers sit all day at their desks. I choose to stand for at least 60% of my workday.

All of my coworkers routinely choose to eat garbage fast food for lunch everyday. I choose to bring a packed lunch to work everyday.

Most of my coworkers choose to drive very new cars. I choose to drive a 2001 Toyota Tundra with 290k miles. 

Most of my coworkers choose to spend and spend and spend. I choose to do things like read books on the weekend, find additional venues/ways to make extra income, etc.

All of my coworkers contribute to the companies 401k. I stand alone in the fact that I do not contribute (based on a variety of factors, such as fee's, my income relative to home prices in my area, etc.) to the companies 401k. I choose to divert my attention, and all of my left over income, to buy and hold rental properties. I have received pretty intense opposition to this decision.

My coworkers will brag that they are receiving a 16% (misinterpreted return to boot) return on their 2065 TDF. They'll ask what kind of return I receive in REI. They usually aren't overly excited to hear that I am making an infinite return on my investments. And I have hundreds and hundreds of dollars in cashflow every month to boot!

TL:DR Ultimately, choose what works for you. This is what works for me, based on who I am, and my present situation. Will I start a SDIRA one day? Maybe. But the most successful of my friends, who do and live the way I want to, do not.

@Jon Holdman is absolutely on the money.

I happen to be a Structural Engineer. 24' ft in a home is a rather long span to support. One quick word of advice, bring someone in (i.e. Professional Structural Engineer, with the ability to seal calcs/plans in your state) in at the very beginning. Remodel jobs where we are brought in on the front end are always easier for everyone involved. Bringing someone like me in at the back end is always more expensive, and it is always more frustrating for the homeowner. 

Others have touched on the liability aspect as well. There is a reason my firm carries high levels of insurance. By signing off on something, we are accepting responsibility for the design. This is something you definitely want. 

One final note, while everyone is familiar with gravity loading, very few are probably familiar with shear loading. A 24' long wall, (assuming 8 ft high) has tremendous shear capacity. This capacity plays a big role in your house standing up through time.

Best of luck. But yeah, seek professional help!