All Forum Posts by: Tucker Cummings

In 2021, I scaled from 1 rental to 9 rental SFR properties and reached financial freedom. Was able to do it all over the course of 18 months through traditional financing, BRRRR method, AirBnB and creative finance. Feel incredibly blessed and fortunate to have done this and can't wait to see what the following years have in store.

Before you do anything with it, get educated. Read some books, spend times on the forums, listen to podcasts. Get familiar with terminology and investing in general. You don't have any investments right now and you're talking about moving, so maybe make your first investment a Live 'N Flip or a House Hack so you can stop renting and turn your living expenses into an investment. While you're doing that, continue your education and network with other investors. You can make a lot of money in real estate, but you can also lose a lot of money if you jump in without knowing what you're doing.

@Account Closed I hear you on the retirement... but I've bought 9 houses in 18 months that allows me to retire at 28, if I so choose. Meaning my rental cash flow is greater than my living expenses. I have more ambition though, so I'm continuing to work to make further investments. I suppose that's what I mean when I say I want access to the capital now, because I can invest in a way that produces now with cash flow and appreciation and even more later by using leverage, 1031 exchanges, depreciation, etc. 

As for sitting at home and not working... I hope I didn't give the impression that's what I'm doing but I think I know what you're getting at (welfare state, UBI, stimulus checks, etc.). I don't agree with that either and I'm often disgraced this is the generation I'm associated with.

I'm changing jobs so figured this might be a good time ask this. My previous and next employer do a 401k with a 6% match. I guess 401k's the only benefit of a 401k is it's tax benefit and I'm making an instant 100% ROI with the match... but the issue I have is that my money is tied up for the next 40ish years (I'm 28).

I'd really like to be able to have that money more accessible to put into real estate and other assets. The way I see it, we're acquiring real estate which has great tax benefits from depreciation, 1031 exchange and maybe other benefits I'm not aware of. The other positive is cash flow, appreciation, leverage and debt paydown. 

Outside of my real estate, I still have an IRA and a regular stock brokerage so I have some exposure to the stock market. Should I stop contributing the 401k? Hoping to drum up a good conversation here.

Hi Ryan, first off, that's awesome with the live and flip. 

First thing I'm immediately seeing, can you not just do a cash out refinance at 75% LTV of the Beaumont property? You'd get your VA loan paid off, would have it on a traditional mortgage and have an extra 10k-ish to use. You could then use your VA loan to do the next live-n-flip and have about $220k for all the rehab work. Just looking at what you're saying... you're wanting to use your 211k to be able to pull out 193k, which doesn't seem to make sense. Yes you'll have more cash flow, but there are way better ways that you can accomplish that other than paying off the property.

My wife and I are actually in the the same boat, we did a live and flip and are in the process of going through our next steps. Here is what we plan on doing, if you don't mind me sharing. We're planning on using our proceeds to use an FHA 203k loan which we can use to buy a 2-4 unit in poor condition that we can do a live and flip, plus househack. With the money remaining, we'll likely put it into the market to grow a little and look for a larger investment, like a small apartment building, to generate additional cash flow. Just another route you may want to consider.

Personally, I think it's pretty foolish to have a lot of properties fully paid for in cash. Let me explain:

Let's start by asking, "Why do people want properties owned free and clear?" I'm sure there are a variety, but it seems like the biggest reason why is to have security, or be debt free. The second reason is perhaps to just increase cash flow.

If we take the first reason, security/debt free, is paying off the property the best use of funds? Paying off the property is perhaps the worst possible thing you could do. The reason why is because your return on equity (ROE) decreases with each passing month. For example, one of my properties rents for $1200/month and cash flows $450/month. When I first bought the property, I had $20,000 in equity, so my ROE was 27% annually [(450x12)/20,000], give or take since it's changing monthly as rents and equity increase. 2 years later, that property appreciated and I now have about $65,000 in equity and it rents for $1250/month and cash flows $500/month. My ROE is now [(500x12)/65,000] = 9%. This will continue until the property is paid off and the ROE will continue to go down.

If you want security, but we see that paying off the property is a poor use of funds, what else can we do? Perhaps take the money you would put towards the property and apply it to the stock market. You still have the liquidity to pay off property if you want, but you can start making a return on your cash. You can put it into index funds/ETFs for high diversity with modest returns, or you can learn to value business and pick stocks for greater returns, if you manage to master that skill. Secondly, you can start selling covered calls to generate cash flow if your picking individual stocks. Doing this, you get a greater return on your money and generate more income and handle both the main reasons to pay off property.

Here is my strategy - I aim to have money in the market equivalent to the debt I have on property. I'm currently working towards this goal. Should something ever happen, I can quickly pay off the property using stock or sell stock to weather the storm. Once my stock portfolio is built, I can sell stock as a down payment for a bigger property, the cash flow feeds my stock portfolio, I sell stock to buy a property, build the stock portfolio to get the equivalent values I want, and the cycle repeats. 

1) You borrow money at 3% to make 20% Yield or more.

2) The debt pays for itself. This is different than credit card debt or debt on a personal residence. Those debts are liabilities that take money out of your pocket. This kind of debt is leveraged to create income which pays for itself and provide additional payment on top of it.

3) The majority of businesses exchanged on the public market are taking on debt in order to purchase or create assets that produce more income. It's normal for business fundamentals.

4) Just do what makes you feel comfortable. If you hate debt, buy in cash. But you'll be better off buying stocks and collecting dividends or selling covered call option if you're looking at a 

One thing to do is keep track of a personal balance sheet that has your assets and liabilities. In other words, track your net worth. The value of the property goes on the assets column, the debt you have goes in the liabilities column, the difference is your net worth. Great companies that last long have more assets than liabilities and are profitable (among many other things).

You often hear the debate of "should I pay off all my properties or should I stay leveraged?" Personally, I think it's quite foolish to pay off the property, as your return on equity is horrible. Instead, a better strategy might be to build a stock portfolio equal to the debt you have on property. Invest the money into the stock market, continue getting greater returns, sell covered calls to get more returns at still low risk, but have the liquidity that you could pay off a property at will should the need arrive.

When I was starting out, I just had a very fine criteria and made a few offers on properties that had great numbers. I wasn't looking for the perfect deal, just a great deal. Some great deals came and went, but I ended up getting my first deal done that has been phenomenal for me.

As I started to grow and gain more experience, I started making more offers. However, I was not using an agent to make an offer, I was doing direct to seller marketing so I wasn't wasting anyone's time. I'd recommend the same approach. Start slow, make strong calculated offers, and the right one will come. Scale as needed.

If the seller is financing the 50k or 25% of purchase price, why not just go get the conventional loan? Sounds like you’re getting a deal for no money out of pocket.

Only thing is to make sure it still cash flows. You don’t want to be so leveraged on a property that you’re negative each month.

Using the credit line can be a great way to get started and accelerate. My recommendation would be that you should use the credit to get into deals that have a lot of equity in them already. Reason being that you can do a cash out refinance later on, pull the money out, and pay off the credit line so you're not on the hook for large credit card payments.