All Forum Posts by: Paul Novak

BP Community,

I was wondering if anyone had any recommendations on insurance providers. It’s been years since I got quotes on changing insurance providers and I thought it might be time to shop around. The last time I shopped around I didn’t have any rental properties. While I am not that big, I still have auto, a primary residence, and 5 additional rental properties. Our insurance costs are currently at $6,838.54 annually. Recently Scott Trench talked about how much he saved by quoting everything out on a BP Money episode. I was wondering if anyone had some local recommendations? Obviously, making sure you are covered is important but if I could lower costs by 10% plus while keeping the same coverage it might be worth making a move.

It all depends on your goals. If you want my simple advice I would make sure I am maxing out an HSA if you have one offered to you and make sure to invest the money that is in that account. Next I would max out a Roth IRA each year if your income level allows it. Yes the gains in this account can't be accessed until retirement age but you can pull your principle out before retirement age so the account is less restrictive. Lastly I would park my remaining money in a taxable brokerage. Investing in this account will allow you to access your money preretirement age. You will pay more in taxes but it will help you avoid the middle class trap. What I am about to say makes this seem to simple and its really boring but I would park all that money in the lowest cost index fund that tracks the S&P 500. I personally like VOO. I still follow this strategy myself for the money I put in the market.

I plan to retire at 45.  For me it's more work but long term rentals have super charged my returns.  Yes it's more work but I have found it more rewarding and allowing me to grow my income quicker.

Good question.  I view my real estate agent as a partner in our business not just a transactional person.  I have had the same agent for years and I have looked for the following things not necessarily in order of importance:

- Have a personality that fits in well with my wife and I.

- Is willing to tell you the truth even when it's not what you want to hear.

 - Strong background in real estate with connections that help us.  Our agent has provided recommendations on contractors, home inspectors, and lenders that have made the entire buying/rehab process easier for us.

 - Understanding of what to look for in a property.  Our agent doesn't just walk through properties with us but has called out things like foundation issues, walls bowing, etc... Things that as a young investor I wouldn't have known to look for myself.

 - Someone who seems to always be available.  I have never called my agent and not got into a property same day and we have looked easily at 100 properties over the years.  A sense of urgency and availability are key.  It helps that our agent owns his firm so on the rare change he isn't available he can send someone from his office to make sure we are taken care of.

- Someone who has experience investing in real estate himself is helpful.  They can see properties from an investors perspective.

- Our agent is someone who has taken the time to go over our goals and strategy to learn our buy box and where we are taking our business.  This shows he cares about our success.

- He is someone based on my comment above that has brought deals to us as opportunities when I knows of properties hitting the market.

- He has also increased our knowledge on what to look for with properties.  I would say we have become better investors because of him.  We throw in all sorts of perks when underwriting deals that set us apart from other buyers.  Those are things we would have never known of if it wasn't for him.

- Lastly he has reduced his fees on properties we have brought to him on his own accord.  Now that we have been investing for a while sometimes other investors come to us with opportunities.  When that has been the case he has lowed his commissions on the deal.

I have a lot of great things to say about our agent.  I would say the inverse is also true of a bad agent.

Nick, welcome to the group.  You are in a great place to get perspective from many of experienced investors with a wide range of strategy, knowledge, and experience.  I do like a lot of the perspective that others have shared above.  I have been a long term buy and hold investor that has done limited flipping.  My strategy has been one where I have put the traditional 20% down, maybe more to protect cashflow, and financed properties for 30 years.  My only caution to you is to make sure you have enough cash to protect yourself if things don't go according to plan.  From my perspective my first property was the riskiest deal I did.  I lacked experience, and didn't have a buffer if things didn't go well or the property was vacant.  My number one goal when doing my first deal was to make sure I put myself in a position to do my second.  As your portfolio grows you can afford to take a little more risk because the income from the other properties can prop up a short term underperforming property or unexpected repair.  I get nervous about hard money lending or taking on additional debt especially in the beginning because if things don't go well you not only have those costs you have interest on top of it.  Having said that I understand you need to get capital from somewhere to get started.

One option that has worked really good for my wife and I is borrowing from our 401K's.  Not sure if this is an option for you but most 401K's let you borrow against your balance up to $50K or half the balance, which ever number is smaller.  You lose out on that money growing while you have it borrowed but if your taking it out to achieve financial freedom and shifting that money from one investment to another I don't see an issue.  The other great part is the interest on the loan gets paid back to your account.  When we did this on my wife's 401K the only fee to do this was a $75 origination fee.  The rest of the money we retained.  For us our 401K's have been a way for us to become our own bank.  Between the two of us we can borrow $100K.  I wouldn't recommend this for everyone but it's an option.

Another tool you could use is a HELOC on your primary residence. We also have one of these in place as an emergency fund. I prefer to borrow from myself and pay myself back the interest but if something bad happened we always have our HELOC to fall back on.

As for hard money lending I don't have a lot of experience.  I have done hard money loans as the lender but only for small amounts, $20K and under, never as the borrower.  My cousin works for a hard money lending company that specializes in helping people in your situation.  Short term loans for real estate flips.  She speaks highly of them but I have never worked with them directly myself.  They are based out of Milwaukee and they are called the Hard Money Co.  Maybe they could be an option for you if you go this route.  If nothing else at least it's a lead.

I wish you the best of luck getting started!  If you ever have questions on the long term rental side of getting started once you have your property feel free to reach out.  I have a ton of work instructions and processes my wife and I have established to manage our business that I would be happy to share once you get to that point. 

Welcome to the community Matthew.  I have found these forums to be a great place to network and learn from others.  I have learned a lot from others on here and gained some great perspective over investment decisions / issues within my business.  I am an investor in Sheboygan about an hour north of Milwaukee.  If you ever have questions or need help with anything feel free to reach out.

 Daniel, thanks for taking the time to reach out.  I agree with you.  There are common rules of thumb but everyone's situation is different and I feel those common rules of thumb are almost like guiding principles to use as a starting point.  Once you bake in your variables for your situation you can figure out what works best for you.  I think danger comes in when you use those common rules of thumb as hard fast must abide by rules, or if you lack the ability to be flexible and adjust as your situation changes.  Like you stated you can always pivot strategies as conditions change and you get more information.  I'll reach out to direct message you the calculator.  Let me know what you think.

 That's correct.  I have tracked my cashflow closely since doing rentals and I set a goal of retaining 73% of that cashflow monthly because of vacancy and maintenance.  I haven't had much turnover on this property the one tenant I turned over we filled the same month so the property was vacant for about a week.  My assumptions are 20% for maintenance costs and one month vacancy a year.  I then track actuals against those goals.  I have continued to beat that goal annual on this property.  That even included replacing things like hot water heaters and doing two bathroom remodels.

Ryan, you have it correct.  I track this on a monthly basis and I count all cash accounts, investment accounts, equity in properties, and vehicles.  I don't count any other things I own, such as personal possession.  I know technically I could sell my appliances, and other things in my home but I don't include that because the value would be small and I don't feel it's worth my time to calculate.  I do include my personal residence but it's easy enough to exclude it if I need to seeing as it's two line items, current value and current mortgage debt. 

 Marcus, I actually met a young couple in person from connecting on these forums that was living in Houston and moved to Milwaukee specifically because of what they heard about our multifamily rental market.  They are actually closing on their first deal this week.  There is another person leaving Texas to invest in Milwaukee.  Not much of a trend but seeing your comment made me think to post this.

I don't invest in Milwaukee I invest about an hour north in Sheboygan.  Having said that my sister lives in Milwaukee and I really like the area she is in.  She currently rents in Bayview and it's a nice area.