All Forum Posts by: Nick Allen

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $36,000
Cash invested: $36,000

SFH in c minus neighborhood. Stone exterior. Fully rehabbed interior.

How did you find this deal and how did you negotiate it?

a friend introduced me to his contractor he's used previously. He fully rehabs sf residences and sales them. Sounds like typical turnkey but the difference is the trust I had in the person over a 6 month period before actually purchasing the property.

How did you finance this deal?

cash

How did you add value to the deal?

I've worked on the exterior (driveway, windows, door etc.) and interior was fully rehabbed prior to purchase.

Lessons learned? Challenges?

so many struggles with the PM. That has been my single most frustrating experience over the last year. Every time I turned around I was getting charged ridiculous fees for repairs I never authorized. it took 9 months to get the house cash flowing properly.

@Bill F.- We're on military orders so it's a minimum of three years but could easily be longer based on other job opportunities down the road. Regardless, There's no doubt we won't be here forever so It would have to be a place that we could use as a personal home and then turn it into a rental afterwards which brings other issues into consideration (distance from work/school for the kids etc..). You're right on the different pathways that each person has and mine is a typical newbie. Not a lot of liquidity and need to focus more on cash flow now to get some momentum going. But i will say I think if it was in the right area for growth then it would be an easier pill to swallow. Great point on continue searching. i was disappointed the other day but i'll keep looking for a better deal. thanks for the help.

@Matt R.- Fantastic point about appreciation. I've never looked at it through that lens before. We're in an interesting situation as a family and it makes purchasing a home in the area we live in (point loma) next to impossible but i am interested in buying a duplex via FHA. Are there certain areas that you would focus on that you see continuing to grow over the next ten years? I can get a great deal in National City but i'm guessing this is not where the future growth is. Thanks for the feedback and putting up with my ignorance ..haha

@Dan H.- copy on the long term ROI. What is the best source to use to find out where the best long term appreciation exist in the city? I think your point about depreciation speaks directly to making your money on the buy side, right? what part of town was that duplex/quad? just curious.

Really appreciate all the help while I work through my own personal strategy.

V/r

Nick

All,

As part of my continued education, I've been trying to read anything and everything in hopes of being the most knowledgable I can be when I pull the trigger on my first deal, whether thats in CA or in TN. 

I also understand part of that is setting goals so I don't get analysis paralysis.

I have been 90% sure that I want to invest back in TN where i'm from since I know the area so well and the cash flow is hands down better. However, I wanted to keep my mind open and talk to a real estate agent about the market here. So, I set up a meeting with a local REA to discuss the numbers and what I could afford etc..Once we started going through MLS and all the "off market" deals, it became obvious that there are no "good deals" IMO and the number of opportunities are at a all time low right now. The pricing is out of control (even for foreclosures) and as a newbie I don't see anyway to justify a purchase especially not with the negative cash flow. There was nothing cheaper than 400k for a SFH and that was the outskirts of the city.

Whenever I mentioned my cash flow requirements to the REA, they quickly dismissed the importance of that and that they were hopeful the rent would "probably" cover the mortgage. This struck me as hope for a strategy and you know what they say about hope. I also know their trying to make a buck so I understand where their coming from. 

 I have also been warned from mentors and through BP podcasts about using appreciation as the sole justification for a purchase. Didn't brandon turners book talk about appreciation as the icing on the cake and not the whole thing? I've also been encouraged to disregard California entirely due to the cash flow situation. Interested in the communities thoughts on this.

I'm just looking for some guidance on how to think logically about investing in CA or not. I have seen the effect of appreciation because of the major increase in property from 2010 to now and wish we would've bought a condo back then but I didn't have a crystal ball.

My other question is whether to purchase a SFH for our personal home since I feel like i'm throwing away good money on rent every month (3300.00 a month!) which could be going towards a mortgage.

thanks for helping a newbie wrap his head around these issues.

V/r

Nick

@Michael Lucero

thanks Michael. You're spot on with the psychology behind most of this. I feel like Neo when he took the pill and saw what the matrix really is. Mind blown at every turn.

I'm also reading rich dad poor dad right now and i'm questioning everything i've ever been told. I have been controlled by fear for years. It's the unknown. And ever since i've been in the Navy (super safe job - financially), that fear has only grown. isn't that interesting? It's to the point now where I can't even point to what i'm actually scared of. But, this itch inside has led me to this wonderful site and i'm seeing a different way. 

I'm determined (i mean I will!) have my first property this year so I can start some momentum and overcome the fear. The reaction to these ideas are exactly what you said. A friend literally told me to enjoy what I have and just relax as I "have it made as an Officer in the Navy" or others have said don't do anything until you retire because you'll still be young. I respect these people but it's a drastically different mindset. aka scarcity thinking vice abundant thinking.

Well, i'm finally sick and tired of being sick and tired and it feels good. I'll keep you posted about the progress. Next step, is a work trip back home (Memphis) starting tomorrow and while i'm in the area, I have a sit down scheduled with a prominent BPer to pick his brain. I'm super stoked about what lies ahead. Thanks for the help.

V/r

Nick   

@Fabio Salas - Wow..wonderful comments and thank you for the assistance and great advice. I will PM you if that's ok. I wanted to dive in a little deeper on the SD region options and how you started in this area.

I regret not buying our condo that we stayed in here back in 2010 but my logic then was the same. I just saw this large mortgage payment and was scared of the risk. Of course, the rent on that property now has almost doubled in the last 7 years. Could the same be said of Hawaii? We lived there on a previous tour. If you can accept the risk, it seems that the upside is huge given that the demand in those areas are the highest they've ever been.

Thanks all for the warm welcome and the great advice. I will continue to research what is best for our family and look forward to engaging everyone in the future!

Hello BP Team,

My name is Nick and i'm originally from Memphis, TN. I'm active duty Navy and my wife, two daughters and I are currently stationed in San Diego, CA. I came to this website via a real estate investor friend. I have always admired him for his entreprenurial spirit and I'm now determined that I can do it too. I've never bought an investment property but I have used my VA loan to purchase a home in TN (last duty station- bought for 194k and sold it two years later for 230k. After all I put in it (new hardwood floors, appliances, Interior Painting, fixtures and TLC) I came out ahead by maybe 8k. Overall, I felt pretty good about it as my first experience in home ownership. I'll be honest, I've always had doubts that I could ever do housing investments based on the perceived risks. I guess thats the psychology for how most of us were raised. But, the last few years, the idea of passive income has become what I think about most throughout each day and investing in my IRA and TSP just isn't enough anymore.

*side note* I think it's funny but if I told my family (at large) my plans, they would probably discourage me (directly and indirectly) from ever investing b/c of WXYZ reasons. I've also discovered this from most friends as well. Why is that? 

So, for now i'm just a student of the craft and keeping it to myself so i'm not surrounded by negativity. Just being upfront and honest of my situation.

I've been scouring this website to soak up as much intel as possible and already have been getting more excited every time I come back. I have a bunch of questions and I know most of what I will ask will be somewhere on this site but i'm throwing myself out there anyway and looking for some guidance. I'll keep my questions general for now because i'm having trouble linking all the puzzle pieces for how it works in my head. 

1. As a family man starting out i'm leaning toward the strategy of single family homes that I can buy and hold. Long term I want to build a portfolio that brings in enough cash flow that is paying me more than my day job. I'm not too interested in buying and living in a multi unit place with my wife and 2 kids based on this local market and the necessity of being in close proximity to my daughters school. With that in mind, how does one afford to buy and place a downpayment on properties in this area (median cost of 600-800k). Even if I could afford it, the fear of not having it rented out for one month would be detrimental in my head since the rent would be around 3500-4k. Interested to know how the pros justify this even if the cash flow works out on paper.

2. Is it better to purchase a low income single family property in TN (25-35K) that has a 9-10% Cash on cash ROI or a single family home in CA which is much more expensive but the demand for renting is very high? I'm just curious how the experienced justify the risks of purchasing any type of expensive property regardless of ROI.

Thank you for enduring this diatribe as my intent is to just put myself out there and humbly ask for your guidance. Thank you to this invaluable site and those who give up their time to lead others. Thanks in advance.

V/r

Nick