All Forum Posts by: Paul Enzinger

I HATE paper assests. They have their place, but a 401k as a retirement vehicle is a broken system. It always has been - it was intended to be used as a supplement to a company-sponsored pension plan but almost no company in modern times has one. They've abandoned that system due to cost. I currently work for a Utility company and the year before I was hired, they abandoned their pension plan and instituted a cash-balance plan instead. They deposit extra money but it's up to you how to invest it...

I think that instead of having cash just sit there earning a menial amount of interest, or stock investments in companies you do not have management control over, having your own company(ies) that produce a monthly check that you take to the bank is FAR more valuable. You can leverage on that cash flow (albeit only 75% of it) and purchase even more properties/businesses which increase your cash flow....it's a positive feedback system.

Financial gurus always say what the value of your account would be in x years earning y interest compounded over z time. So what if my 401k account is $2.3 million in 30 years? Adjust the cost of living. 30 years ago, my mother was making approximately $25,000 as a starting wage as a nurse. Today that starting wage is $60,000 (in metro NY). That's a dollar value loss of 2.5x! Let's extrapolate in 30 years...the starting wage (an indicator of the cost of living) would be $150,000. A 401k account that could grow to $2 million would be worth only $2mil/150,000 = 13 years of a constant standard of living. As you age, your costs only increase, not decrease! Healthcare, end-of-life care, long-term care, medical costs,... So what, after the 13 years you drop dead? Become a moocher on your children? Is that a life of dignity?

I'm not talking about the extra $300 per month rental income so that you can finally buy that TV you always wanted. I'm talking about mercilessly reinvesting everything and increase your velocity of money 10x to become unstoppable.

Since I generate approximately 30% cash-on-cash in my investment properties and businesses, I do not focus my efforts on finding the best interest-accruing deals. I reinvest as much as I can into my business interests which then return hand-over-fist. I do have a money market account at a local credit union to park cash (I hate excess cash) until I need to use it. The money stays in the account for no longer than a few weeks. I usually find ways to improve my properties and proactively attack maintenance issues.

investingpirate.com

I use a property management software, Rentec, which has an integrated ACH option. Love the software, gives tenants the option to pay via ACH or credit/debit card. The funds go directly into my LLC account at a local credit union. Posts into the built in accounting software automatically with an id# and clears into my account a few days later. @ErikBaumer ACH stands for "Automated Clearing House" which is run by the non-federal Federal Reserve. My time is better spent looking for properties or ideas than running around wasting time and energy.

We recently closed on our second investment property, a duplex, which is cash flowing nicely. We live in a duplex ourselves, so we have a total of three units. All our tenants have stable jobs. We are looking to perhaps move into a larger place, and rent out our original duplex, which would increase our monthly cash flow even more. We did some renovations on property #2 and think we have a good chunk of equity that we can use as a down payment on a primary for ourselves (another duplex). Does anyone have a lead or knowledge of a reputable institution to place a HELOC on the investment property? A good amount of banks I spoke to only were interested in HELOCs on primary residences.I

Any suggestions would be appreciated.

When I was renting an apartment with my wine a few years ago when we were starting out, our landlord required renters insurance. It wasn't that expensive, and at the time I thought it was a nuisance. Now as a landlord with 3 properties myself, I require insurance of my tenants. It's not expensive and if one of their dogs bites a neighbor my insurance is not on the front line; it's theirs. It doesn't cost a lot, and it's piece of mind for you, and you don't shell out anything. Why not?

We did so as well. In my mind, the HELOC is just extra cash you can use for any purpose, our objective was just buying another property. Just make sure you do ALL the math on the property . If you miss something, it may cost you dearly. Using the HELOC is, in my opinion, simply an amplifier/accelerant - we moved on our investment goal sooner than if we simply saved our cash linearly through our day jobs. But, it is a second lien, and your underlying asset can be repossessed which is why I stress doing the math. All the cash flow from both properties will go to paying this off so that we can use it again as soon as practicable.

Investment Info:

Small multi-family (2-4 units) buy & hold investment in East Setauket.

Purchase price: $364,000

Cash invested: $34,266

Small multi family which was completely rented out before or first mortgage payment is due! Very excited that our concept of Real Estate investing is working so far! 5 bed 2.5 bath / 1 bed 1 bath.

What made you interested in investing in this type of deal?

Our first son was born in January, so that provided a large impetus; working salaried jobs would put us in the rat race even more. I am a first generation American born and the first of my siblings, so I feel it's my obligation to try to make a better life than what I knew growing up with my folks and provide an example. Call me old fashioned...

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

My real estate agent who we are on very good terms with (she came to our son's Baptism) found us this. It needed some work which we were happy to provide because it gave us a good deal...forced appreciation!

How did you finance this deal?

HELOC for a portion of the downpayment, cash for the rest of the downpayment, and standard mortgage for investment property.

How did you add value to the deal?

Redoing the floors in the entire upstairs, doing the carpets, repainting, and power washing everything.

What was the outcome?

Unit is completely rented before our first mortgage payment. So far, so good.

Lessons learned? Challenges?

For now, it's a bit early for a perspective view, but make sure even after the purchase, you have enough capital for fixing and replacements. After we purchased, we decided to do a bit more in repairs than we planned, but we rationalized it by likening it to insurance to protect our investment.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

We worked with Jen Torre who was marvelous throughout the process. We purchased it first home through her too, so we have a good working relationship.

Hi, my wife and i are taking the plunge and going into our 2nd rental property ( our first was house hacking and becoming unintentional landlords). We purchased a duplex and need some repairs initially, which we are in the process of completing. We have a Tenant lease signed for the main unit for a move on of November 1st, and are accepting applications for the smaller unit. Our financial matters are getting a bit complex, so w decided to start an LLC "do this landlord-ing thing the right way". I have a bit, ok a lot, of hesitancy with telling either set of parents because, primarily of their poor financial habits and the potential of getting into arguments/being expected to pay for everything now we have resources...

It's a pickle because of both sets of parents' lack of transparency about their matters and poor financial habits.. I'm not vindictive, but cautious. For example, just the other day my father, who is retired after having a more-than-normal difficult time finding a job since early 2000s , asked my opinion regarding a supposed large purchase (they bought a boat when times were good only to have it sit there in idle and in disrepair for 10 years) and whether it would be prudent either for a HELOC or credit cards so i can only imagine that they want to fix the boat and buy a truck to tow it with. Nevermind living within your means and buying assets that appreciate in value... My mother is 11 years his junior and still working. They also squandered an apartment in NYC by selling it and renovating/extending their house. They have the most expensive house on the block now and will never recoup the money lost (forget about generational wealth).

The other set of parents are not as spendthrift-y but do buy new vehicles quite often and max out their credit cards by living well above their means.

I would love to hear what other investors would do in this situation. It's a moral conundrum because by not telling them they can hold the fact that we withheld information over us and catch us in a lie, but if we do, my greatest fear is that we will be taken as "showing off"/ pride being the greatest of the deadliest sins  and/or authorizing more spending foolishness.