All Forum Posts by: Steve Smith

I'm with the longer terms. Better cash flows and you can always pay off earlier. If a good deal comes up that I can only get 10 or 15 years, then interest only helps or if it's negative cash flow, get another with positive cash flow to balance things.
Seeing how 85% of my properties are seller financed or "subject to", sometimes I get terms that I can't change and sometimes I can dictate what I'll pay.

As much as you guys like the LLC for property ownership, I could argue strongly that a trust is a MUCH better way to hold title. Much easier, more anonymous, you're protected because you're not on title, and the trustee is protected by state statue (most states). And you can easily create one in a heartbeat, no costs and simple (but you must get educated on that). But if you're doing more that a few properties, works MUCH better.

Quote from @David Lutz:

@Steve Smith Congrats that you’ve got a system that works for you and it’s finding success.

One of the challenges of living in California is that buying local doesn’t make sense. The properties are so expensive due to the land that if you need a mortgage you’re going to be cashflow negative, and the laws are so anti-landlord that I’m not sure it would be smart to buy here regardless.

How are you going about finding your seller financed and subject too opportunities?

David,

But we're not talking about California, but it still works. Have several friends that are doing well out there. Yes, it's pricey, but the basic concepts still work. I won't do California, nor will I live there with the crazy liberal politicians that want to tax and harass you  to death. Life is too precious to spend it there, but a beautiful state to visit, just not going back there for now.

As for seller financing, I have not issue finding it. Just ask for it and it it doesn't work, go on to the next deal. You just don't need that many deals to afford to wait for a good one. I'm finding it all the time.

David,

Wow, is all I can say. You got some bad training and headed down the wrong path. You don't need 5 houses, you need ONE good one, PERIOD. Buy local, manage it yourself and LEARN the house investing business. Get a GOOD quality house, and a GOOD quality tenant. Have the tenant do the basic maintenance as part of his lease. Let him pay you monthly ON TIME, or AHEAD OF TIME, without fail. If you give him a good deal on a great house and you get a qualified tenant, he will do this for you.

THEN, buy house number two next year. Repeat this over and over again. If you do it right, it will be easy and you should create about $1M in net worth in 10 years. As time goes on, sell your worst rental and replace it with a better one. NEVER ReFi anything! Every time you do that, you loose money. As time goes on, pay off your small loans and end up with free and clear houses.

Once you have 10 free and clear houses you can live off of them debt free for the rest of your life. If you want to live a bit higher on the hog and buy expensive stuff, get 15 or 20 or a few more, but do it with the same formula as above.

You don't need 100s of houses. I cringe when I hear about folks that bought 100 or 200 or 1000 houses. Makes NO sense. I keep reminding myself: KEEP IT SIMPLE, STUPID.

And, YES you can do subject too's and seller financing. 90% of mine are that way. And lease options to sell work great.
Just learn how to do it right. And you don't have to do repairs and remodels yourself (unless you like to work for low wages and sweat). My hammer is for cracking open nuts, not remodeling.

Just food for thought....

Quote from @Guy Gimenez:

When gurus tell people "just take action", I cringe. Taking action without preparation is tantamount to telling someone to jump off the cliff and we'll figure out if the water is deep enough later. Nothing is "rocket science" except, well, rocket science. I've talked with far too many "investors" who were encouraged to "jump in" to investing without any knowledge or plan on how to monetize it. No one would tell a 1st year medical student to do surgery just so they don't have analysis paralysis, yet I see this everyday on real estate forums.  

Guy,
You hit the nail on the HEAD! You're going to pay for education one way or the other. A simple classroom course or a book is a lot cheaper and more effective than a lesson of hard knocks after you've bought the wrong property at the wrong price in the wrong area. There's lots of reasonable education out there.

My rule of thumb is:
1. Buy your education from those who have succeeded in doing what they preach. Ask them, and get references if you need, and talk to investor friends that have taken the class or read the book. A REIA is a great place to start. Lot of good info on this forum.

2. Pay accordingly. You don't need an $8 or $10K course, especially from someone who has never done it, but is a "trained" coach. A good class today can be had in the $300 to $600 a day range. Good courses in the $500 to $1500 range.

3. Get involved. Get to know other investors in your area. Attend REIAs, get newsletters, AND once you've had the basics MAKE OFFERS. Make them smart enough to be able to bail if it's really a bad deal, but better yet, get some guidance on those first few. Learn how to recognize good deals.

4. Make those first investments cash flow, especially if you're using W2 income to get them going.

5. Keep it simple. I could argue it's hard to beat a good clean single family house in a good neighborhood that will attract and excellent tenant. They are out there.

But start with a good education. It isn't rocket science, but it IS science.

Engelo,

You make a good point, but there's a reason that they are calling you and you can control it and you've gotten a lot of ideas from others, here. If you don't want to talk to them, don't answer the phone. Sounds like you'd be better off doing your own deals and not get involved with newbees at all. Nothing wrong with that, but don't complain when they call.

And, yes, I'm sure all of us do a bit of mentoring and most of us will do that forever. You don't have to hand carry them thru the process, but just recommend some good training (that's a must!) and let them take the first step. Then mentor if you wish.

I've found that less than 10% of the wannabes actually buy their first investment. If they get through the first investment successfully many will go onto the second and the third and more. A very small percentage will make it to that multimillion dollar status but it's gratifying to see when one succeeds to that level. Certainly worth the effort.

We need to remember, we were all newbies at one time.

Really need more info, BUT if you had to make a choice, go back a read Scott Trench's comment. Spot on.

Personally, I'd do neither, but if forced to, absolutely the Duplex. I don't do syndications where I don't own them. And by the comments here, they look pretty risky.

If you're buying rental real estate, buy right, below market or with excellent terms (like zero percent interest). By good property, and duplexes are generally NOT good, and do not attract good tenants. The BIGGEST goal in rentals is to attract GOOD tenants, and that almost always means single family homes.

Do more research, learn from others, take some seminars on investing, especially in single family.

Henry,

Great ideas, thx. The buy their house looks interesting and will look at that. But concerned about the homestead exemption.... I'll see if there's and angle around that.

"With $300,000 I can make $1.7mm profit plus get my $300,000 back in 2 to
3 years. I don't want a Roth. You ask for nontypical or
unconventional techniques that you won't get from a Financial Advisor."

That's quite an aggressive return on your dollar! More that doubling every year. Impressive. I like the non-typical and unconventional stuff, and that's where the Roth comes in.

The Roth is really a retirement vehicle, but works extremely well. If you take that same $300k and have it in a Roth, it can easily grow to well over several mm in value if one has a reasonable amount of time before retiring.
It can hold real estate assets of all kinds, and the rents, sales, option money, etc., come into them all tax free. Huge. And, it keeps building and building.

As for getting deductions along the way, car, in house office, businesses, etc. That's all fine and good, but has it's issues. I used to deduct my car, but have another for personal use, and you'll need two cars to do that. You can deduct mileage, which I do now, much easier. The in-house office has issues if you sell, you have recapture. The BIG deductions is in owning property. You can be creative on that one.

My issue, is my Roth can't self deal with my kid, so I have to help them along somehow.

But, I'm squeaky clean with taxes and very careful to do thing right. Last thing I want is an audit.

Quote from @Henry Clark:

What are your kids and grandkids ages?  What jobs do they do?  Have they owned their house for more than 2 years and have appreciation?  Do you have a business and a website?  Do your grandkids drive a car?  Will they or are they going to college near you?  Many other questions. Your response will then dictate potential methods to transfer wealth.  To your original message not transfers in a traditional sense.  

Henry,

No grandkids, owned house for over two year and appreciation has been huge, but they are not moving. No business or website, I'm only an investor. Will give you a call... been swamped with some big projects over the past week.

It depends. There are some folks with lousy scores that make great tenants. A bankruptcy that's not their fault, medical bills, foreclosure all could be reasonable. But multiple credit cars, car payment, rent is a no go.
I've had a few tenants that went thru foreclosure when the market crashed, and want to rebuild. They have made great tenants that usually last several years or more, and pay the rent. I'll often give them an option to buy. One was a CPA, great guy, credit was ruined with a partnership that failed. He was with me for 6 years with option to buy, great cash flow and a great profit when sold. Both of us were very happy.

You can tell pretty quick if you don't want to rent to someone with a simple phone call.