All Forum Posts by: Steven Hershey

Good Morning BP!

I am a new and very eager soon to be investor in Lancaster, PA. Ive been on the analysis paralysis train lately. I currently have 20k to start with my first investment property. I have a family of 5 so rehabbing project myself is limited at the moment. Price rang is under 95k single family or multifamily. I had a few questions for the community this morning.

1st : What is the best way of going about REO properties? I have emailed banks and got nothing back. Can i find all the properties they own on zillow, realtor and the MLS? I currently have a realtor agent and she is not familiar with REO properties.

2nd : Once I give a offer to the  bank and lets say its excepted, Do i contact a construction company? or should i contact a bank for a loan first? or should this be all done before the offer? I am currently in the middle of a REFI and i cannot get pre-approved for a construction loan yet until my single family REFI is complete.I have spoken to a bank that does portfolio loans and construction loans for investment properties already.

3rd : Should i be concerned about the upcoming election? or covid related issues after the new year with tenants being able to delay/ not pay rent? I am not going to wait for a market crash because I am always looking for the deals below market value. 

Maybe what I am trying to say here is, Please guide me in the right directions. I am ready to rock n roll with investing with using the BRRRR method, even if i can only get out what I put in to move to the next house. I need

Any insight would be greatly appreciated.

Hey!

Im also looking to land my first deal in lancaster/york area. I am also very interested in meet ups. Im currently working with a realesate agent and have been looking at properties the last few months. This is a tough market right now. my price range is capped at 100k and its tough trying to go find BRRRS here in lancaster and york.

Maybe we can all bounce ideas off of each other?

Where are the meet ups? or when are they?

@John Underwood couldnt landords just charge them more during the "non-winter" months and not charge during "winter months"? So then they can evict if they dont pay... tenants will pay a lot more obviously during the payment months... but the landlord will revieve there money!

Just a thought?

Thank you all so much for the insight, i have the best of all worlds here and i will be doing my diligence on property analysis and be patient. I think after all these post Paying the PMI is probably the way to go, work the Brrrr and let that work in my favor, if a great cash flow deal comes up i may use some small funds out of my 401k to cash in big.

Biggerpockets is such a great tool, i will invest more time reading logs and post to educate myself!

thanks again

Already looked into plan specifics, im allowed to withdraw any amount but with penalty. I cannot afford a 401k loan per month and it wouldn't let me take out the amounted needed anyway, $211 max biweekly. My credit is pretty good 782, so would i qualify for a lower % down? Here are some numbers ive been looking at.

properties between 80k - 155k with a 20% down payment id have to withdraw 33k from 401k to get my 20k if needed. I would only do this for my first property and with changing my withholding's and taking my 401k contribution from 12% to 18% would give me a $50 less paycheck biweekly only until my penalty is paid back 2 to 3 yrs. I would have to mess with some numbers to see how bad it would affect my tax return. @Greg Powers then i would not be stealing from myself, If i wanted two down payments i would need 40k which means id need to take around 65k out(half of my 401k) and with changing contributions to 18% id have about the same in it at retirement.

I really want this to work but if paying the PMI makes more sense then maybe that is how ill do it instead of messing with 401k money. @Paul Enzinger I only have paper assets other than my house, but i totally agree with you that is why im trying to work my way into the physical asset class. have friends that do it and its been working out very well for them.

this is all great feed back and i appreciate everyone's time. I really just dont know. Should i sit down with an accountant and do my taxes at all different withdraw levels? my wife and I lend the government a lot of money every year just to get it back at the end.... should i just increase my withholding's and wait  until i have money saved up? im pretty antsy to get into the business but i do not want to make the wrong move.

401k

 now - 121k invested, 12% contribution, yrs to work 30 * 7%return + 7%/yr company match on salary = 2.5mil at retirement.

withdraw(65k to get 40k) 60k invested 18% contribution, 30yrs to work * 7% return + 7% company match = 2.5mil

would it really matter? other than my yearly tax return amount? 

@Daniel Hughes Im not 100% but i will be employed with this company until i retire.

Hey @Bill B. thanks for the insight, yes we fall right at the front of the 22% bracket. so adding in the 56k we would still be in the same bracket. also it would take about 93 months to pay the 20% on a 200k loan with 172/month pmi. That could be the difference in a cash flow property. although in 93 months my 401k with 7% annual gain would be 58k more, but looking at this as an opportunity to get into the business and create more cash flow out with other properties in the future.

I have this Idea of taking a 20% withdraw for a down payment out of my 401k to avoid PMI costs and down the road to grow my properties to gain financial independence. I understand all of the consequences like 20% fed tax/10%penalty and a 3.07% state tax for PA. I would be only looking to pull enough out for only a 20% down payment, Im 32 years old and have 120k+ in my 401k with a 7.5% inception gain. Now my plan is to do the BRRRR strategy, I can pay the 10% penalty back in a few years 2 ways, upping my contribution which was already the plan or I can pay it back with the cash flow out of the rental property. The contribution change would be the most ideal with changing withholding's in my check which I can afford. Im really hesitant on this decision because of the amount I would have to withdraw just to get my 20%. I have 60k withdraw room to work with before I would get pushed into the next tax bracket.

I know 99.9 percent of people would say DO NOT TOUCH YOUR 401k, but im thinking different. No Matter what I will be paying those taxes in later years after I withdraw them for retirement... and the Goal is always to make more money right? well ill probably have to pay more taxes in 30 years then I do now. I am projecting(based on my wife's job and my increases) we will be one tax bracket higher then we are now at retirement(24%) and those will change with ever election. So would it  make sense?

This is really the only option we have at the moment, we have a large HELOC out that we used to consolidate student loans and we do not have extra cash for a 20% down payment. We are patient and not rushing into anything.

Any insight would be highly appreciated and I am not trying to talk myself into this, I just think it makes sense. I will still work my full time job contributing to my 401k for the next 30 years times 2(wife) to save for retirement.

Has anyone else ever did this, or ran actual numbers on a done deal. I know real estate renting can make 10%+ return and that is much better than my 7%. My only take back is the cash flow might not be always saved, hence BRRRR, I would like to grow from 2 to 4 to 8 to 12+ units. I would have actual money on hand to wait patiently to make a move on a good deal.

I appreciate all help and opinions, please tell me how it is. Ive been debating this for the last few months and watching how the market and housing market with interest rates have been moving, Waiting for a market pullback to make a move. In the mean time ill be sitting here doing my diligence and reading all the great posts and educating myself in every aspect.

Thank you for your time.

 Special thanks to all of you for giving great advice, I am going to listen to you all and especially @Alex G. My wife and I will game plan, learn and wait for the opportunity to jump into a great property. I do have a few extra questions!

1. What is the most difficult part of owning a rental property?

2. Would it be smarter to buy a rental property out right with a equity Line of credit instead of putting 20% down and taking another mortgage out?

3. What % of rehab should I do on a 80k property? I know this is a vague question but on avg I would be looking to spend no more than 80k on my first property and wouldn't want to spend 20k extra on a property accessing at 80k. unless i see the value increasing over the years?

4. Final I will always do my diligent's, but you never want to buy a property at list price, On avg what % under asking price do you see yourself offering for the first offer?

Thanks for the great help and advice!

I have been very bullish on this market... I wanted to wait for the market to come down a bit to invest to get a good deal but I have found what I think are some pretty good deals and with my perspective on the market I believe it will go even higher so waiting around might not be the best idea. I do not have much capital to put down on a property, but I do have about 100k in equity in my home. I am wondering what is the smartest way to get started. Should I get a partner as an investor? or should I go all in by myself and mortgage out another house, then go ahead and rent it out. Obviously the numbers would have to work. I have also thought about taking a large HELO out but what if I cannot find tenants and have to pay a few months of my own rent? I am pretty lost on what to do, I also thought about taking a HELO to put 20% down on a home and then mortgage the rest but that would be two different loans which does not make much sense.... I even thought of buying 2 or 3 mobile homes but then found out about lot rents which can be as much as the mobile home per month. My market is Lancaster, PA and real estate around here is booming, so I would like to get some skin in the game and then learn from there. 

If there is any advice out there I will take it! I have been listening to these pod casts which are amazing! I also have some close relations to a CEO of a credit union, Project manager of a construction company and also a real estate agent to help me though the process. I have a total of 3 kids this month, so for me to sell my house and go from there is just not an option. I have looked into duplex's but most of them are in bad areas and I was looking for more of a single home/apartment/townhome in a good school district.

Any advice is much appreciated.