All Forum Posts by: Joel G.

Welcome Joel!
Great site! Would love to help any way I can. I will be happy to show ya around Cleveland if you hook me up with a waterfront place to stay when I go to California! lol

Hi Joel,

To answer your question "what percentage of our net worth would be considered safe to invest. In other words...If we have $400k available to invest...what amount could we invest that would give us the greatest chance to succeed, yet still be considered not over leveraged?"

Warren Buffett is indisputable the greatest investor of all time.  This is what he has to say about diversification.  "Diversification is protection against ignorance.  It makes little sense if you know what you are doing."  I’m heavily weighted in real estate.  Does that mean I know what I am doing?  Not really.

To give yourself a chance to succeed, learn as much as you can.  Network with other investors and see which strategy fits your circumstance and helps meet your goals.  As they say...your network = your net worth.  Also, take action is much more important than learn continually without putting it into practice.  How do you know you’re over-leveraged?  When you can’t sleep like a baby at night.

My strategy has been buying properties at 70% to 80% FMV. Rehab them nicely and rent them for top dollars. After the properties have been seasoned, I'd refinance, pull out the equity and move onto the next deals. Does it sound like I leverage to the hilt? Maybe, I'm currently at 43% LTV and looking for ways to deleverage to 25%.

How am I able to consistently get deals?  I’d say reputation.  Keep your promise.  Don’t be a pain in the rear to deal with.  Do what you say you will do, and you’re the first one, who agents will call when they have a deal.  Of course, this takes time.

By the way, don’t be greedy and stretch yourself too thin.  There have been times when I got more deals than money.  I have passed them to family members, friends or take on a partner.  There is nothing wrong with taking on a partner.  50% of something is apparently better than 100% of nothing.  Syndication is also an option to make some high yields, but that’s another topic.

Feel free to use me as your sounding board whenever you need a second opinion.

Glad to have you here @Joel G. You are in the good company and you are in the right place to learn all about REI! All you need to do is read the blogs or post a question and the responses will be educating and gratifying.

See you around the site!

@David Nolan awesome post!!!

Exactly what I needed to go from "instinctually" knowing my market and target to actually knowing and able to track what I am doing.

@Joel G. thanks again for this great question. I am learning a lot from the responses.

@Joel G. Hi Joel to answer your question regarding a system to identify Opportunities and Threats in order to write a business plan the Opportunities are based on the drivers in your selected area that drive prices upwards. For example properties that present as bargains based on local market metrics, proposed changes to local planning laws, land re zoning, changes to market confidence, changes to access to capital, proposed population increases, shifting demographics, the falling cost of money etc. These and other drivers can create opportunities.

Likewise the negative effects of those same drivers can create threats, In order to do the business plan effectively you would be wise to understand the key drivers in the markets you propose to operate in. Unfortunately there are no short cuts to understanding these factors. You would be wise to learn from local operators who enjoy success in the markets you wish to trade in and seek their guidance as to what drivers they monitor the most.

To give you some guide, I am at present, after more than 30 years in this business in Australia, looking to enter the market in the USA. Hence joining BP and I am having to do the same level of research and homework that you would have to do. My vast knowledge base and experience will count for very little if I do not understand the local drivers of any market I propose to enter. All markets are unique in some  regard, but have common factors in many others. Making money in real estate is about understanding what it is that improves a property's value and they are not all necessarily to do with the individual property but more so to do with economies, international, national, statewide and local. The more you understand these things the better your business plan will be.

Furthermore, you started out asking what you should do with your assets and there are some good pieces of advice here about different ways to make money, however, they only apply if the method suggested fits within your business plan. I would suggest that once you have a detailed written business plan the types of deals you should do will become very self apparent. Once you have this clarity of vision you will see only those deals that will make financial sense to you and the confusion that many new investors find existing because of the vast majority of investment alternatives that exist will subside. The clearer your vision the easier it is to hit the target. The target being your financial goals. A sound, well thought out and researched business plan is one of the the keys to creating good vision in investment decision making.

If you have limited experience in writing a business plan I would strongly suggest hiring an accountant or business adviser with the experience you lack to help. The money invested will be repaid many times over by having a clear path to follow and one that shows very clear financial objectives and strategies.

Hope this helps.

Enjoy the journey!

Welcome! Interesting way to pose the question... My experience is that it's harder to get residential mortgages after quitting the full-time job (I did so 3 yrs ago, and yes, it's as awesome as it sounds :). All other types of income need a 2 yr history. However, DO check out commercial lenders if you go this route and haven't already. I don't know why this hadn't come to my attention sooner and wish it had!!!

Also worth crunching your DTI numbers to see if one of you staying salaried help you with this, and one thing that has been helpful for me in budget balancing during this transition was doing some part-time and/or consulting type work.

Hope this helps!!!

Here is what IRS says about Prohibited Transactions in an IRA:

http://www.irs.gov/Retirement-Plans/Plan-Participa...

Nice problem to have :). I buy in cash in the under 100k house market, and then seller finance, sometimes rent. About 10k in rehab and then resell. Straight cash flow. I like buy and hold cash flow and that's how I invest. Good luck ! 

@Joel G.

I would leverage your day job income/credit and accumulate more good debt... quickly.

Frank