All Forum Posts by: Paul Erickson

 Oops, misread the figures, or my imagination ran wild or something... not sure. But yes partnering is a decent option to unlock an investment type that your capital currently doesn't get you to.  In your case 75K with a partner or 2 might bump you up to a unit with a few more doors, lower overhead, and higher returns. 

@Mike Holman, Welcome to BP, I feel that your questions on Syndications can likely be answered in the typical demographic BP seems to pull in.  Many of the BP subscribers are not quite at your level of financial security.  That being said, the resources are definitely out there.  I like the idea of Syndications, however I offer one other suggestion, you may want to look at partnering with other investors to buy properties otherwise unattainable by yourself, but not at the level of the typical syndication.  Maybe getting 3 additional investors willing to put in 750k each, and turn around and use that $3M capital to buy a nice class B or better apartment complex? owning 25% stake in a nice apartment could be a happy compromise to syndication if you find the right property manager to run the building.

 That is great Tara.  
Here is what I would like to recommend.  Cut your teeth on your first purchase (leveraging a good investment friendly realtor) using your non-retirement funds, see if you can maybe find a family member or friend that would be willing to go in on the opportunity with you. if you cannot find anyone to defer some of the capital expenses, I would look at either buying a single family home and house hacking it (look for a home with an adequate floorplan to allow somewhat separate living spaces) and you live in the smallest portion of the property if you can, and try to eliminate your entire mortgage expense with your tenant.  Once you do that, you should be able to save how much per month? 1500-2500 per month? if you can set aside 2500/month, you could then have a 30k down payment in the next 12 months, or 60k in 24 months? with that kind of money you could then go out and buy a multi family property and see if you can leverage and down payment assistant programs in the area (multifamily has some opportunity right now in our area, not sure about yours) 
typically with those down payment resources they will require you live in the property for 2 years, so you would want to move out of your Single family house hack, turn it into a traditional long term or short term rental. you then will have positive cash flow on the single family home, probably positive cashflow on your Multifamily property, and basically be living rent free for the next 2 years, building up your chops in the property investment space.  
During your time you are living in your multifamily property, if you have the confidence that you know what you are doing, take out a 25% loan on a 3rd property using a Self directed IRA (move money from your retirement into an SDIRA, set up LLC, etc (ask me if you don't know what I mean). The money you make from your SDIRA investments are still retirement moneys so this isn't cashflow for today, this is money for the future, so you don't want to calculate it into your income, but it would give you the opportunity to keep moving forward and put your retirement accounts into an investment you control and will likely have greater gains. After you have lived in the Multifamily property long enough to meet the down payment assistance requirements, you can then look at buying your next single family home for your own use (and I typically recommend trying to keep your mortgage close to what you will receive as rent from the unit you are moving out of. by doing this, you are always living off of the previous investments and you are leveraging your W-2 income to a much higher potential. Once you live in your new home for a few years and you have built up some equity and the rental rates in the area support it, you may want to flip that home over to a rental and buy yourself a new home again.. by doing this method you may be forcing yourself to move every few years, but very rarely do I meet anyone that buys their dream home on their first attempt and actually decides to stay there for the long haul, so this allows you to "test drive some homes to figure out exactly what you are needing for your own forever home if that is even a thing.

I know this plan seems long and potentially a pain in the ***, but it limits your exposure, you are always applying for traditional primary residence loans, so you don't have to worry about higher interest rates, or larger required down payments, etc. and you can have 10 mortgages in your name without any issues.... and after that you will be cashflowing very well and your investment game will change drastically because you will have the money and experience to take it to the next level

Bryce, Congratulations to you and your wife for being in a position to make a huge decision like this and having the foresight to look into the investment market in the area in more depth before committing.  If you decide Minnesota is the best fit for you, I would be more than happy to help you decide on where best fits your needs.  My first question is, are you intending to live in a multifamily property and rent out the other units? or would you be living in a separate residence? If you are to live in a separate residence, are you planning to self manage? Do you want to be near the property or would you be comfortable with a drive to the property? What are the things that YOU are looking for in your home? do you need to be in close proximity to anything in particular? do you want all the creature comforts of urban or suburban life? are you happy to live in a rural community?  I believe these are the things I would be considering to try to narrow down my searches.  If I were to break the twin cities into rings, I would place Minneapolis and St. Paul as the inner rings and those areas are the most urban, moving outward the next ring is the Urban "Lite" areas - these are the suburbs that still share that urban feel.  There is then another ring of suburbs that lend themselves more to the stereotypical Suburban lifestyle (cannot high five your neighbors from your bedroom window) but still have all the basic shops/restaurants etc to get you by on a daily basis, and then we get out to the more rural, yet commuter friendly communities. many of these communities will lack a nearby Super Target or Bestbuy, and you may be limited to mostly bars, fast food establishments or a quirky supper club... but a 10 minute drive gets you close enough to the cities to take care of your daily shopping or sit down for a nice bite somewhere more interesting than a bar.  

After deciding on which ring/rings you feel comfortable in, then you get into which side of the cities fits you best. and each side has its own character and nuances.  
I agree with a lot of the recommendations made, but without knowing more about you and what your goals are personally, as well as investment wise, I wouldn't want to point you one way or the other.

Good luck in your search, and if you decide to move to the twin cities, I look forward to meeting you at some of the BP meetups in the area in the future...

@Tara Eggenspiller, Michael has a great point about your income and how much you can set aside each month.  I hope that a large portion of what you are using your income on is retirement investments (roth/401k/etc). The best way in my experience to get wealthy is to truly save as much as you humanly can, especially when you are starting out.  buying a nice car or an extravagant home sounds nice now, but putting that money into income earning investments will net you nicer cars, bigger houses, and earlier retirement in the future.  I have yet to meet anyone that regretted having the financial freedom to retire earlier, travel more, and stress about money less.
@Michael Dumler - Kudos on bringing this topic up, this is something often ignored in these conversations.

Hey everyone, I am not all that familiar with any of the regions you guys are located, so my only comments are more anecdotal than specific to your markets or how hot or cold the market is in any of those sub markets. My thought on your short term rental being "dead" right now and looking at migrating to MTR or LTR is a good idea, I would also pose the question, what is your equity position on that property, and would now be a good time to 1031 exchange that property and move on to a property more like your other property to keep the higher rates of return by having 2 similar properties (maybe in the same sub market, where you could maybe reduce your management efforts also in the process by having the same maintainance teams, cleaners, etc. able to service both areas. If you are truly only making MTR returns on your STR property, the property is likely misallocated as STR anyway. if you cannot make more money, i would be trying to reduce your overhead in terms of your TIME. managing your STRs should be taking more effort than your MTRs and the reduced effort makes those a more passive income item where STRs are much more active and your increased rates should be paying you for that additional time.
We all have different income, different costs, different values, but we all still only have 24 hours in a day, so use it wisely.  

Sorry this became a rant, but with my investors I always want them to treat their decisions as business decisions and include their hard and soft costs into those decisions and many people undervalue their time. 

Hey Paul, I forgot to mention before that if you have issues getting a traditional loan, feel free to reach out to me, I am happy to provide private financing for the right projects.  I am able to lend up to 1M, I also have many investors that are able to lend much larger amounts. 

@Paul Xiong, Like the replies you received above, the issues you are likely experiencing are pretty common. Some loan officers have access to different loan products that may have worse terms but are willing to underwrite your loan with the information provided. Additionally, you may look at less traditional financing options. Independent investors may be willing to lend you funds on the right opportunity. You may be able to get a DSCR loan if you can prove the investment will cover the debt. If this is your first deal, you may also want to work with a Realtor that can try to find you opportunities where seller might be willing to finance the deal.

There are many ways to accomplish what you are looking to do, the key is aligning yourself with the right people and being diligent in your efforts. Welcome to the BP community, we wish you the best of luck!!!

Paul Erickson - Realtor - Realty Group LLC

I have had great luck with "Directed IRA" - you likely have heard some of their podcast content or read the owner's book about self directed IRA's but they seem to be one of the most knowledgeable tax law companies out there and will get you on the right page. take advantage of their free consultation and then decide if you would prefer working with them or someone else...

I refer many of my investor friends/family/clients to these guys and have not heard anything negative yet.

I agree with much of what was said in the responses above, I believe leveraging ROTH is a great idea to limit your tax exposure in the future, additionally I have become aware that you can self direct an HSA in the same manner as a Roth, this could be a great way to allow you the benefits of the Roth but allow you to pull out before retirement age due to health issues if needed with no penalties. I believe this would also allow you to take distribution at retirement age, but I am not 100 percent sure of this, please fact check this as this is something I myself haven't had time to research, but became aware of in the last few days.

Investment Info:

Single-family residence buy & hold investment in Whitefield.

Purchase price: $300,000
Cash invested: $60,000

Working on purchasing a 5Bd/2Ba SF residential property to be used as a LTR in Farmington MN. This is a location well within the commuter range of the Twin Cities or for families looking for this school district. This property will require minor updates to capture top dollar for rental, but the property is in great condition overall and is well worth the effort.
This is a property that I am personally investing in and that I work diligently in finding for any of my investor clients.

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

This was an opportunity for me as an agent to get a homeowner out of a tough spot with some cash in their pocket during the foreclosure process while positioning myself to be able to invest in a great rental opportunity in a community that needs additional high quality rental properties.

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

I was able to find this property was available due to a foreclosure notice on this property and once learning about the family's situation, I was able to determine they really needed help and I was in a position to help them with a mutually beneficial deal. By building trust and a positive relationship, I was able to get this deal put together so everyone will walk away happy.

How did you finance this deal?

I will be purchasing this property with cash and doing all rehab with cash. The renovations are minor and will allow me to do a delayed mortgage and recapture most (if not all) of my capital. After financing I will likely have no capital tied up and approximately 22% equity on the property at time of financing.

How did you add value to the deal?

In order to make this deal work for the seller, I am recommending they live in the home for next 4-5 months up until our delayed closing. This will allow the family time to find alternative housing as well as additional time to organize the renovation crews as well as property marketing to ensure maximum rental rates/minimum vacancy/and quickest time to market after capital is spent. If the seller is able to move out sooner, closing will be moved up, reducing my risk, and more cash to seller

Lessons learned? Challenges?

I have learned that there are many creative ways to put a deal together to make the deal beneficial to both parties involved. Seller motivation is critical to putting together a great deal for investors that may be more flexible on terms (like myself).

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

I am a licensed Realtor that works with other investors. I am new to the industry (Jan 2022) but have found a niche in the investment space.