All Forum Posts by: Account Closed

One issue to be aware of is the possibility foreign governments might nationalize real estate owned by non-citizens.  This might not be a showstopper, but go in to any deal with your eyes wide open.

For example, many Americans retired in Mexico in the 1960s and 1970s and bought homes there. In some areas, the Americans outnumbered the locals and there was backlash. I remember from news reports at the time the Mexican Government seized their homes and I made a mental note to myself never to buy a home in Mexico.

In another example, I worked for a Silicon Valley chip company in the 1980s that had had its sales offices in France seized (for one French Franc) in the 1970s. The French voters at the time decided socialism was a better economic system than capitalism and the elected French Government acted accordingly.

These specific situations might be different today, but who knows what tomorrow might bring. I've read where many hotel chains only franchise their name outside the United States and do not actually own the hotel buildings or real estate. If a government comes into power and decides foreigners are bad or capitalism is bad, the hotel chains won't have to write off any foreign real estate holdings from their financial statements.

If you're willing to settle for a 2% cash-on-cash return, consider investing the money in a cherry-picked portfolio of Dividend Aristocrats. If I set up my account today, my immediate cash-on-cash return would be 2.4%. But since I set it up years ago and the dividends have increased on average by 9% a year, my historical cash-on-cash return is now 6.3%. The Dividend Aristocrats are S&P 500 companies and most earn their income from businesses they run all over the world, a good income diversifying to rental income earned on a local basis.

The better news is the ROT ("return on time") or ROE ("return on effort"). Although it took me awhile to figure out how to do this approach, it only takes me 4 hours a year to manage the account. I update my spreadsheet once a year after reviewing each company's Morningstar and S&P 500 (rebranded as CFRA) reports I have available through my online brokerage. It might take me more than 4 hours if one or more of my companies needed to be replaced, but I haven't had to do this yet. Overall, I follow a couple dozen companies (about 20 of them are Dividend Aristocrats and the rest are Dividend Achievers).

Let's say you invested $40,000 this way. At a 2.5% dividend yield, the portfolio generates $1,000 a year in income, or $250 an hour for your 4 hours of annual effort. Let's say the dividends increase 7% a year on average, which means the income doubles every 10 years according to the Rule of 72. A decade from now, the portfolio generates $2,000 a year, or $500 an hour for your 4 hours of annual effort.

Let's say you want to bring your children into your real estate business and they are too young to negotiate contracts, but are willing to shovel snow, mow lawns, and walk dogs. Starting a Roth IRA in their name and funding it from their earned income means they can become millionaires by the time they retire and have a supplemental income stream to the income stream they receive from their rental properties.

I have no idea, since I'm not a tax specialist, nor am I trained nor licensed to manage money for other people. All I can tell you is what I did, which was the right thing for me to do when I did it years ago. The world might be different today. To get started, read articles on personal finance sites to come up to speed and then talk to a licensed expert. 

I knew someone whose new landlord insisted on being paid in cash. The money had to be left in an envelop on the counter the day the rent was due and the landlord would stop by to pick it up while my friend was at work. My friend didn't like doing this and found a new place to live. I don't know if my friend turned in her former landlord to the IRS. I've read where the IRS gets its best tax fraud tips from former employees and former spouses.

FYI -- If you think you might need a Plan B or Plan C as a fallback, consider the new collar job opportunity. Perhaps real estate companies will need more IT talent in the future.

It depends on your state law and market. Some cultures, for example, take issue when there has been a death in the house. Depending on your market, another item I haven't seen discussed on BiggerPockets is feng shui.

I was at a rapidly-growing startup that needed a larger office space, but office vacancies were hard to find at the time. The company finally found one, but it failed the feng shui test (a couple of the founders were Chinese). At that point as a matter of practicality, these executives were required to agree a space was OK as long as their own offices passed this test.

In the world we live in today, money orders can be counterfeit and most of the cash you handle is probably drug money.  I've read where the average person's computer keyboard and mouse have more germs per square inch than their toilet seats.

Do you wear latex gloves when you collect the rent and enter the information into your accounting software? <just kidding>

I donated my BiggerPockets books to my local public library. When I need to reread them again, I'll check them out. In the meantime, others in my area can profit from their words of wisdom.

I went through that transformation back in the day. I'm still in beta and am redoing this exercise now as a retiree.

A couple of techniques I used back then: Tony Robbins sold the cassette tapes Unlimited Power that helped me identify and prioritize my short, medium, and long term goals. Og Mandino's book The Greatest Secret in the World kept me motivated by keeping me focused on those goals with its daily and weekly exercises that last a year to complete.

I also learned the technique of taking a blank sheet of paper every day and writing down my most pressing problem at the top ("find more sellers," "find more buyers," whatever) and then coming up with 20 possible solutions. It doesn't matter how silly these ideas are at the time; what matters is you get them down on paper quickly (just before bedtime is a great time to do this exercise). Date the sheets of paper and keep them in a three-ring binder. Most of the ideas will be worthless, but every few months or so, you will look back and find the one that became your million dollar idea. Highlight this idea with a yellow magic marker. All it takes to be successful is just one million dollar idea in your career.

If you end up having to go back to a W-2, as I did, don't think of yourself as a failure. Entrepreneurs never fail; they only have temporary setbacks. I learned my new craft of technical writing on my W-2 employers' dime (which is not something you want to volunteer during a job interview or while you are working there). Then I struck out on my own again, but working through a temporary help agency on a W-2. I didn't get a paycheck if the agency didn't have a contract for me to work on (which is a great way to learn how to live on a lumpy income stream), but the agency took care of my marketing and revenue collection (for a fee) so I could focus on being the best technical writer I could . Once my investment capital reached a point where it could support me (on a 4% safe withdrawal rate), I downshifted and worked fewer hours.  I had thought about retiring completely at that point, but when the Financial Crisis of 2008 hit, I'm glad I had kept working in some part-time capacity.  You never know what is coming around the bend.

From my experience, property crime is probably higher in A and B neighborhoods than it is in C and D neighborhoods. The wealthier neighborhoods have more and better stuff to steal.

One technique I've heard about for 40 years is the brazen daytime robbers dressed as movers who show up at a house with a large moving van and empty it out while the neighbors watch (it happened on the street where I lived in the Rose Garden neighborhood of San Jose, California). Some people were having their cars broken into during the overnight hours if they had forgotten to lock their doors. My neighbors had this happen to them whether their cars were parked on the street or in their driveways. People in ritzy areas don't often talk to each other much (and don't know each other) and the crooks take advantage of this social isolation.

My takeaway is a good security system is worth the cost. My house was broken into twice when I first moved in. A third attempt was thwarted when an alarm system my insurance company had me install convinced the crooks to go elsewhere.