All Forum Posts by: Michael Swan

I had 10 too and found out about economies of scale.  Wow!!  1031 exchange those single family in for Multifamily.  I still have 4 single family in San Diego, 8 single family in Ohio and now 3 Apartment complexes, soon to be 4 apartment complexes in Ohio.  Started with 10 single family with loans and now have 45 front doors, a great $8,000.00 cash flow per month and soon to be $10,000-$11,000.00 cash flow per month and 57 front doors  after only almost 5 years of buying our first little 1br/1ba in San Diego.

Now I have $4,500,000 in total real estate and $2,000,00 in net worth.  That is the power of the 1031 exchange and the Multifamily business model.

Swanny

Mike, Sam, and Scott,

I am glad that I have sparked a burning desire within you. Now, follow my lead and always do deals based on 1. Never lose money. 2. It must cash flow. 3. You can't get financially free slowly, like 401k or IRA speculating and trying to reach some imaginary date in the future to retire and hope you don't outlive your money. With that old plan, we are planning to be poor when we retire. The pundits say we will be in a lower tax bracket when we retire. Sooooooooo, the plan is to be poor and make less in retirement. I don't like that plan.

Do you?

Swanny

Thank you Lyle and Charlie.  The best of luck to you in 2016!!  Remember, luck is when opportunity meets preparation.

Swanny

Hi Bianca,

I had an IRA. If I would have had a 401k, yes I would have done as you suggested. I advise people that have a 401k to make sure they only match their employers contribution if they are going to keep their 401k. The amount they were investing above and beyond this match before would now go to their real estate investing account.

Swanny

Don't get an LLC for a single family purchase. Put it in your own name. If you are worried about liability, get an umbrella insurance policy, plus regular insurance for the rental property. Make sure the umbrella insurance policy is at least 1 million. That should cost you about $400-$500.00 a year. If someone sues you, they'll for the insurance that has the bigger pockets. No pun intended :-)

Right now I have 46 front doors and soon to be 55-60 front doors. Presently, I have a 2 million umbrella policy rand will be upping that to 4 million soon. That will cost me about $1500-$2000.00 a year. No brainer. I do have an LLC for each apartment complex. That is for other reasons that are too convoluted to discuss here. Single family NO LLC. I see no reason for one.

Have a great turkey day all!!

Swanny

Hi Vanessa,

Your idea about the IRA is correct. You only withdraw about 30% more than the downpayment for the rental property you are financing. That way you pay the taxes and penalty. Personally, if I were you, with what I know now, I would get an apartment complex with that kind of downpayment money. If you put $130,000.00 down, you could purchase an apartment complex valued at $520,000. Right now, I am purchasing a 12 unit, that will cash flow at about $25,000 a year. The downpayment will be about $150,000. That will be about 30% down and is 1031 exchange money. The purchase price will be $485,000.00. The beauty of my situation is we only put down $17,000 each on the original condo. We have experienced 3 years straight of tax deferred cash flow ($20,000), plus $155,000 in appreciation ($120,000 purchase price in 2012). That is $175,000 tax deferred return on a $34,000 original investment. Soooooo, in a little over 3 years, we have had about a 500% return.

The stock market (speculation) and your IRA can't do that. If it did, just imagine the taxes you would pay if you cashed it in. Cash flow way more than my W2 earnings is my strategy. That is true financial freedom. I don't want a big bucket of cash when I retire from teaching. I want massive tax deferred cash flow for the rest of my life in retirement.

Off to Vegas now for a few nights.  That is the only speculation and gambling that I will be doing in the future.  I will be at the Golden Nugget.  Living the dream.

How about you? If you had to choose, would you want $2,000,000 in the bank or $500,000 to $1,000,000 in tax deferred cash flow per year for the rest of your life. I choose the latter. The first choice is my old map which was scrimp and save (speculate) in IRA etc... That was the wrong map. I am afraid that millions upon millions of people are following this map and when the next stock market collapse occurs, they will be in a world of trouble. If they are 5 to 10 years away from retirement, it won't be pretty.

Are you in that category?  I fear you won't have a shovel big enough to get you out!!!  Let me know your thoughts.  Read Second Chance by Robert Kiyosaki's.  It is coming.

Swanny

Hi Vanessa,

I don't know about the podcast.  Joe Fairless contacted me to be on his podcast and I dropped the ball there.  As a teacher, I have the ability to break down, seemingly complex concepts into understandable units.  Right now, I feel I am at a very low stage of expansion.  Maybe, after I sell all the rest of my pricey condos this summer and completely stabilize the current apartments complexes I have purchased in 2015, I will be able to see the forest to through the trees.  The short term goal, by Jan or Feb is about $10,000 tax deferred cash flow per month. Then, Jan or Feb of 2018 we expect to be up to approximately $20,000 in tax deferred cash flow per month.

I need to achieve these midterm goals and then  I may feel my story would be worthy to share at a bigger pockets podcast or Joe Fairless podcast etc...  I have detailed goals and am still trying to achieve my short term goals of $10,000-$12,000 cash flow per month.  Right now we are at $8,000.00 per month.  That isn't really exciting yet.  Although, I see the light at the end of the tunnel.

Thank you again to all that have read my posts here.  I truly believe by me writing my thoughts and ambitions here, it will help me to achieve my goals and then some.

We are only limited by the size of our dreams!!!  Dream big and dream bold my friends!!!!

Swanny

Hi Justin,

Those were two separate issues. I was talking about how the IRA and 401K path to financial independence is flawed. There was a period of 10 years where I put away $6,000.00 a year into my tax deferred IRA and after 10 years the balance was the same as I started with 10 years before. Of course, I am pretty old (50 years old) and had been contributing all along since I was 25 years old. I liquidated everything and refinanced my personal residence and pooled my money together with my parents to accumulate those original condos in San Diego over a 3 year period. So yes we were all in with my parents on down payments about $400,000.00 seed money in those 3 years. Then at the end of 2014 and the first 6 months of 2015, started to use most of our cash reserves to invest in single family in Euclid Ohio. That was about $250,000 all in and cash purchases and rehab for those 8 single family. Then at the same time was getting educated on the 1031 exchange and exchanged our first pricey condo in San Diego for a 10 unit complex in Cleveland Heights, Ohio. Then, we sold another pricey condo and 1031 exchanged it in for a 15 unit in Painesville, OH. Last, we 1031n exchanged another condo for an 8 unit in Shaker Heights, OH. Now we are trading in another condo for a 12 unit in Euclid Ohio. We also did a straight sale on a condo we only owned for about 18 months to increase our reserves.

The map is there for everyone to follow.  Keep trading up, until you have two or three large complexes.  That way we go from our current 46 front doors and soon to be 57 or 58 front doors and 1031 exchange 4 or 5 more condos this upcoming summer and buy 4 more apartment complexes and have about 90-100 front doors minimum.  Two or three years after that have about 200 front doors. Two or three years later 400 front doors. Three years later, 800 front doors.

Ultimately the goal is to have $50,000,000.00 in property value and $16,000,000.00 in net worth and $1,000,000.00 in yearly, tax deferred cash flow.

This will not be easy.  Imagine if a lowly paid teacher with combined family taxable income of $80,000.00 living in pricey San Diego could make tax deferred even half this amount.

Again, what a country!!  AMERICA!!!

Swanny

Right now trying to stay away from section 8.  CMHA is horrible.  They owe me approximately $2,000.00

Hi Christopher,

I am pretty hand on right now. My single family property manager their in Ohio is growing with us and managing my apartment complexes too. Brokers I have created connections with are now sending me pocket listings and my property manager scouts the property for me and then I negotiate an LOI and Purchase Sale agreement with the my Attorney's help. My attorney takes over and protects me from there. I then do the financial due diligence from afar and then I travel to the property to do the property inspection with my property inspector and my property manager. If we find anything dramatically out of order with financial and physical due diligence, we renegotiate or walk away from the deal. It is soooooo, exciting!!!!

Swanny