All Forum Posts by: Mike W.

I own 2 houses in the same neighborhood less than a block away.  Although it is handy for them to be close, I have not found a reason that being a block away vs. a mile away would have much advantage as I don't typically go from one place to the other in the same trip, but if you were rehabbing both at the same time, there would definitely be an advantage.

Let the deals decide for you, not necessarily the location.

 This is my policy as well.  It has suited me well and has happened to me.  She even ended up with a restraining order on him...crazy stuff can happen.  Over communicate expectations and it becomes less of a surprise if/when it actually happens.

I have 2 houses on the same block.  One moved in earlier this year and pays $1620 the other moved in about 7 years ago and pays $1460.  I typically do a ~3% increase every 1.5-3 years for long-term tenants unless rents are trending down. 

My longest tenant moved in 1984, I inherited them in 1999 at $675 and now they are at $850.  They are in their 90s, so I am having a hard time justifying an increase as I feel a bit of extended familial responsibility after all these years.  Market rent for the unit is around $1000 maybe $1100 with some remodeling. 

Keep doing the ~3%($50) increase each year.  Eventually, it will catch up to the market or they will move.

I would recommend 2x your current wage income in cash flow before retiring your wage job.

I have a friend that has about 25 doors and was working a plan towards walking away and his company laid him off about 12 months early...he worked it out anyway, just less money saved, and now he continues to do new and bigger deals with partners.

I heard of a guy that got a $600k judgment from a number of tenants that got together many years ago.  If memory serves correctly, he was negotiating sex in exchange for not collecting rent and operated poorly maintained units.  Pretty sure if he had an umbrella policy, it didn't pay out for this...

If you are reasonable and are not actively trying to screw people over, it is very unlikely that you would be liable for much.  A $1mm umbrella will cover you for the most part and in a worse case scenario, you might have to cover something, but I don't know that I have ever heard of a judgment of six figures in a landlord case without gross negligence or actively doing something illegal where an umbrella policy wouldn't help you anyways.

In 19 years and more than a dozen tenants and 2 evictions that went all the way to changing the locks with there stuff still in the unit, I have never been sued...knock on wood.

Q1 - My first rental was a move in ready duplex I lived in for a couple years. $7850 down payment and $700/mo rent. I didn't have to do any work, it was move in ready. 19 years later it is more than 2x value appreciation and cash flows about $500/mo. This is after cash-out refinances and rate term refinances that pulled out around $100k for other purposes over the years. While BRRRR is a better strategy and may require working with contractors if you can't or don't want to do the work, the best strategy is to get your first deal done sooner than later.

Q2 - Don't do it.  One rental will consume very little time.  I have gone for months at a time without talking to a tenant.  Turn over is stressful for a few weeks at most.  With good tenants and good up front and communicated expectations at move-out, you can often do same day or 2 day turnovers easily.

Q3 - Do your first 2-3 deals in your own name and get a $1mm umbrella liability policy from your insurance agent for about $300/year.  Don't worry about entities until you decide to scale faster.  By then you will have enough experience to find the right people to help direct your path with entity selection. 

Q4 - That is just fine.  Just know that your returns might be smaller and it could take a lot longer to see benefits. Also highly depends on what you mean by downtrodden.  Everyone should have their limits.

What would I do?

Step 1 - Max contributions for company matching 401k, usually around 4-6% or ~$4-6000 in your case.

Step 2 - Max contributions to HSA in 2018 it is $6900 I believe ( this is the only money you will save that goes in pretax and goes out pretax when spent on healthcare-related items. )

Step 3 - Save another $10-20k/year and live like you are broke.

At 20 years old making $100k, you should be saving upwards of 60% or more of your income. As much as you can handle in pre-tax accounts, but make sure you are saving money in a taxable account for RE investing purposes. You could have a conventional 5-10% down payment in a year or less.  While you certainly can do creative real estate deals, your income makes you fortunate. You don't need to do low/no money down deals or wholesaling to get going if you aren't ready or willing to devote the time to learn all you need to do and perform the hustle required for low/no down deals.  It is always better to take action than wait until you think you are ready, because there will always be one more thing to learn before you get started.

Have a Great Day,

Mike

I can't figure out why the new Atlas Shrugged movie has had essentially no advertising. I can hardly find reference to it on the web. http://www.imdb.com/title/tt0480239/

Most of the reviews I have read say it does justice to the 1000+ page novel. I am eager to see it and recommend you do so as well. Tell your friends, I hope that lobbyists didn't keep this thing out of the publics eye.

BTW, Who is John Galt?

I am happy to receive these responses. The last time I published this, no one questioned it and I received good feedback only.

Matt, Your response shows me that you caught the message in the post. Good for you. Good luck in your investing and business aspirations. My one recommendation is, write down(literally) what you want and why you want it. Use it as your guide and direction when things aren't going well.

jawsette, I definitely have not limited myself in my investing. As Jon said, "Investing means putting money into something with an expectation of a return." That puts it fairly succinctly. I never said that I don't wholesale or that wholesaling is bad, just that it is not REI by definition.

Purchasing an income producing asset is an investment with an expected return. Being a finder or a wholesaler or a transactional lender(this I consider being a banker not a real estate investor, you are investing in people not property), you can have systems and create a business around it, but in the end it is not a real estate investment, it is at best a business investment or self employment at its simplest. This post is not intended to confuse the difference between purchasing income producing assets and pursuing work in the RE industry. I am not saying someone should not become a wholesaler or lender, I am just recommending that folks don't bother becoming a real estate investor(in its pure form, buying income producing assets) unless they are going to invest and know what their goals are and work to achieve them.

If this is discouraging to you and you quit, good for you, you have realized that real estate investing is not for you. There is nothing wrong with that, in fact, I see it as a good trait that you can identify that you are not cut out to be a RE investor. You can certainly invest passively through a REIT if active investing doesn't work for you. You can open a restaurant, if that is what you desire. The key is you need to find out what is important to you and then do it.

"All you can do is all you can do, and all you can do is enough" - Art Williams

Ashley,
Transparency is always best. Don't try to fake experience you don't have.

Your rough idea of the numbers is generally correct. What is more important to the investor buyer is that the 100k number from your estimate is correct and that the repairs number is correct. They will know whether or not a property is worth 100k after it is repaired, they will also know if the property needs a match rather than the 10k you think it needs. If you misstep and the property is really only worth 90k, can you see how quickly a seemingly good deal becomes a marginal or not so good deal to an investor?

I always will recommend people get to know the investor buyers first. Find out what they want, then go look for it. Make sure they are specific in what they want.

If you become a good finder, you are worth the money you charge to the investor. If you continually bring the wrong properties to the right buyers, they will quickly lose interest in you.

Since most all investors have specific criteria, you need to make sure you understand what it is, and then find it for them. One investor might be looking for one thing and someone else another, you need to be good at tracking who wants what and who is active at what time. Money ebbs and flows, investors don't have an endless supply of time or money, so you need to have the deals ready when they are ready to take them down.

One last thing, I might reconsider your assignment fee. 10% of your asking price is a lot of money for simply getting a contract and assigning. Everyone has their own business plan and opinions will vary on this point.

Do you have what it takes to make your first deal happen?

What kind of deal are you hoping to do?

If you are wanting to wholesale or birddog for an investor, are you willing to contact all the investors you can find to know what kind of investments they like and what they currently have available? Are you willing to create a database of people and organize it so that when a property comes across you can target the people who buy the type of proeprty you found? Are you willing to talk to a lot of people you don't know and sound like an idiot until you start getting the lingo and understand more about the business?

If you are wanting to buy a place and rent it out, do you know how to calculate whether or not the property will create a positive cash flow? Do you have money for the down payment available to you? Are you prepared to make the payment if the property goes vacant for a couple months?

If you are working with a coach or realtor/investor, are you sure that your best interest is being served by the information you get from them? Do they make any promises or suggestions for a time frame for you to become wealthy? How do they know this?

If you have spent thousands on REI courses and bootcamps but have not done a deal yet, are you willing to take action? If you have gone into debt to buy the courses, are you willing to payoff your debt and lower your monthly obligations to become in a better position to be an investor?

If you want to do creative REI, are you willing to do the hard things that are uncomfortable for many people to do, namely force yourself to meet a lot of people, take a lot of phone calls and make a lot of phone calls to folks you don't know at all or very well?

If you don't have what it takes, don't worry, you are not alone. You can make what it takes a little at a time. If you first start with one property with the goal of just a little cash flow, over time you will gain the real experiance you need to gain confidence to have what it takes to do more deals.

The biggest thing my momma always told me all through my growing up was:
"Don't skip steps"

You will achieve your goals and aspirations if you have a plan that doesn't skip steps. Many who skip steps find fleeting happiness and success, but those that move slowly and deliberatly always have firm ground to hold onto.