All Forum Posts by: Nicholas Johnson

@Bob Malecki thanks for the reply on that. I hear you on taxation being a moving target - it's an area I'd like to understand better when it comes to note investing. It seems a self-directed IRA would be a good place to start and still reap tax benefits/protection for the novice note investor.

Do you factor in taxation on your spreadsheet? @Bob Malecki @Chris Seveney 

@David Moore Hi David, have you pinned down a location for this meetup?

Great question. I love this question because I've battled with it a lot in my first handful of years out of college. My plan/perspective recently changed on this after reading Josh Dorkin’s most recommended book (based on podcast mentions), The Richest Man In Babylon. In short, 10% of the money you make is yours to keep/invest before student loan debt payoffs and other investable income and living expenses. I debated this for a long time myself and recently decided to allocate a portion of income to Debt Payoff while also setting aside 10% + per paycheck for investments and/or savings. You mentioned your credit. I started there too and was able to bring it up quite a bit in the beginning by opening a gas card, i.e. Holdiday or Super America gas card. All I did was pay for gas and pay it off the same day... it helped build a foundation for credit. From there you could do the same with a BAC Visa card for groceries. From my observations, building credit is easiest and safest with predictable and regular expenditures (like gas and groceries). People get in trouble when they use credit cards to buy their toys.... don’t make that mistake. A simple ROI calculation is hard to deny... look at your percentage of interest growth on your debt. Then look at what you could earn on that cash if you invested it. Compounding positive returns will grow exponentially and there will come a day where you can squash any remaining debt very quickly. Or pay as you go.

You’re off to a good start and getting plugged into BP will be huge for you — it has been for me. Best of luck with everything and enjoy the journey. Nick

@Adam Rothweiler Yeah for the most part the issues came up after bringing it under contract. I knew there was going to be work needed. From the pictures online and from walking around the property the day the listing was posted, I found tattered siding and a roof style that was flat - which is a little bit of a red flag. Flat roof + Age = water damning potential. I've fixed flat roofs before that had moisture build up, but this roof had a hole in it. Yes, a hole... where squirrels can play. I think you're wise to consider the fundamentals of a property. And for the first house hack, yes you need to look at your cash on cash return but when you're doing a low money down financed deal, it behooves you to consider the cash that you need to put into it to make it liveable. Best of luck on your househack search Adam!

Kurt Pauley I appreciate the tips on finding off market deals - that’s an area I need to explore. There’s a duplex out there, just need to find it!

@Tim Swierczek for sure. With time and a greater base from which to invest, I would be open to pursuing deals like this in the future. Eventually I could do some BRRRR type of investments also - it would be possible to find a line of credit or borrow hard money but that affects credit and I'm not looking to borrow at high interest - pretty risky given my financial position.

@Bruce Runn My thoughts too. This one was in NE Minneapolis

@Account Closed I like your idea - I was looking for a way to do this for rental data. In researching my local market to get a feel for what certain areas would command in rental dollars per bedroom, I put together a simple spreadsheet with addresses, links to the "for rent" website where I found the rental asking price, and then calculated a per bedroom rate, as well as rental dollars per square ft. rate. Needless to say, it takes time. There is a Zillow Rentals app that cluster maps for-rent prices but not on a per-bedroom rate, and many listings come from different sources... so there is a need for an efficient, comprehensive gathering of this information.

If you could set something up to syndicate rental data, you could really pinpoint areas to target in a given market. I love numbers but I also know how useful it was to drive around the neighborhoods and see things for myself/ listen to my gut. 

We recently put in an offer on a duplex that eventually fell through for several reasons. Wanted to share some takeaways in the hopes that it might help someone else.

The property and our offer:

We put in an offer on a duplex that was below market value -- asking price was 225k, market price in the area would be close to 300k for something similar, in decent shape. I jumped all over it - it has 3 bedrooms on the top floor and 3 bedrooms on the lower floor, and looked like a lucrative house hack if the condition of the home panned out. 

From looking at photos, and visiting the property, I could tell it would definitely need work: new siding, some roofing work, interior touch-ups, etc. I figured the biggest expense would be siding and I've got an investor willing to come up with cash (thanks dad) for some initial rehab work. We offered 235k and asked seller to pay closing costs, and they accepted our offer, contingent on inspection.

Results:

The property was in rougher shape than I imagined and had some major blemishes that would cost quite a bit of time and money. There was a hole in the roof letting water in, and a heating unit in the top that doesn't currently work, which is a big deal in Minneapolis this time of year. Water damage, unfinished flooring, potential plumbing issues, and foundation movement, as well as aged siding. I figured we'd still be looking at about 25 - 50k after purchasing it, and we don't have cash to throw into a property for that kind of rehab. It will make a great investment for someone willing to invest the money - just not a fit for us right now.

Takeaways:

For our first house hack, we've got two ways to go: 1) purchase turn-key. or 2) purchase a fixer-upper with strong fundamentals (i.e. the carpets are stained, and the place stinks, but the roof is in good shape). I will be looking for more of a turn-key investment for our next one. If we do find one that we can put some elbow grease into, I'll be up for it as long as there aren't big fundamental issues that would take a lot of upfront cash.

If I could offer any advice, I would encourage new house-hackers to look for investments with a small upfront capital outlay - remember the point of doing a house-hack is to offset your rent or mortage expense with rental income and potentially earn some additional income. Too much upfront work can kill your cash on hand and affect your ability to swiftly move on to property #2.

Best of luck out there house hackers! Happy to hear your ideas and strategies.

Nick