@Joel G. thanks, but that picture was taken WAY after 29...hahaha.
I don't actually look for such high LTV on my refinancing. I only pull out what I need to reach my goals. With that being said, my 2013 purchases basically doubled in appraised value, so I did not need to go to 80% LTV to get my cash back out. There are 2 reasons that I don't push for the max value out: to keep my monthly payments down so I can cash flow, and secondly I don't really have a good place to park my money until I find another deal. If I had too much cash sitting around I would probably do something stupid like buy a new car or go on some expensive vacations...hahaha. I have a pretty tight criteria on the type and max price for my target properties. In my plan, once I have acquired a certain number of my current property type, I will go up a step and target a higher/larger asset class.
The logic behind my financial strategy, generally speaking, is to have a balance between cash flow/equity/cash on hand. Once my cash flow and equity have reached a target point I plan to shift to higher cash on hand to re-balance. My belief is that this should then allow me to reach that next asset class. From a personal growth strategy stand point, buying into MFR right now allows me to test my skills and learn about renovations and property management. I strongly believe that having a basis of hands on knowledge will allow me to better manage from a distance. Once I get to a target number of doors, I plan to off load all PM and maintenance/renovation duties to others and get fat laying on beach while sipping on fruity drinks. I hope that is enough for you to open up a beer for dinner tonight ;-)
-Arlen
Thanks for the info Arlen...the beer was great!
Your advice was even better though...it is very inspirational to myself (and I'm betting others) to know that there are folks succeeding in this business to the degree that you are!
Your plan is very sound and well thought out and certainly a blueprint to follow...Tammy and I were reading these posts tonight and she mentioned that your plan of string at each level til your are ready to move to the next one was great advice...I agreed...BTW I always agree with her...better to swim with the stream...but she was right...sound plan solidly executed and certainly something that we will try and emulate.
Thanks again for your advice! I owe you a drink my friend!
You are a great resource for folks Sue!
Have you possibly started a blog yet about this subject...your experience and knowledge on this very subject would be one that I personally would follow.
Stable, gentle renters are a commodity that should be valued at all cost in this game...and your insight on the subject has already got me thinking about our property in Las Vegas as UNLV has recently received approval to move out north of the city...right around the corner from our house!! (Whether they actually move their or not is another subject...but the skinny is that the builders are already gearing up to build 5000-7000 additional homes in the area...but that's just rumor ;)
I have sent a collegue request to you and would love to hear more about your experiences...seriously Sue you should start a blog about this subject!
Aw, you're sweet. I think I just shared most of my vast knowledge LOL. But, I couldn't resist Googling to see if UNLV has a law school and voila! Shoot, if you could get a couple multi-family units, or a large building and convert it into tiny studios...
The building I rented was a WW II conversion. If you didn't know, the SF Bay Area had a severe housing shortage during WW II, and there are many large old buildings that were converted into apartments during that time. Most of our units (19 out of 25) were studios. Most of those were only about 250 square feet. But, students loved them because they didn't have to have roommates, and of course, we were across the street from the university.
But, even a large home where you rented out rooms would work. I think this would be higher maintenance than separate studios, but you shouldn't have trouble keeping either one full.
For summers, there is a market for short-term housing for students who come to the university for summer internships and they'll pay a premium for short-term housing, because normally their only other option is an expensive hotel.
Hmmmm, maybe I've turned your thread into my person blog LOL. I'll shut up now :-)
Not at all Sue. I feel like a sponge right now, and feel very lucky to have all of your knowledge available to soak up.
I was serious though about you starting a blog...one of the easy to start ones here on BP...where they provide the platform...all you gave to do (I assume) is to name it and start writing.
Your knowledge in this area is very valuable...and I'm not saying that just cause you're cute!
I have read so many articles on getting and keeping good tenants...that I feel your thoughts on the matter would be very well received.
If you want to start it but aren't sure what to write/how to start...then just pretend it's me that you are writing too and for...helping me figure out how and why to rent to grad students...it may not be the first blog on the subject...but with your wit and unique perspective on the subject, it'll probably stay busy, from time to time anyway.
You could call it the "Oh my god, Joel won't stop bugging me about starting a blog about renting to grad students" blog....just rolls off the tongue like honey...don't cha think?
@Joel G. sorry for my typo error, it should have said refinancing strategy. Basically, I build up cash and then make cash offers. It seems like the only way to win in this market right now. If I win, I then start the renovations and increase rents and then refinance my money out and get ready for the next property. As the property appreciates, I refinance again to get more cash out. I am paying interest, but rates are low. The best part of this strategy for me is that money I am getting out is tax free! Getting the snowball rolling is the hard part, but once you do get it going it starts to pick up speed... at least that is my thought on the subject.
As for the picture, it is smalls so it hides the battle scars of age! I am closer to 50 than 40, but luckily I don't feel any different...hahaha!
Good hunting to you!
-Arlen
Lol...ok I'm newer...but I've heard of refinancing...thought you had come up with some new way to get leads or something...lol.
When you refinance, what percentage of your property can you go up to....several here say no more than 70% LTV but I've read there are some 80% LTV loans out there (maybe more) and I feel that 80% would be a real sweet spot, harvest the equity -tax free :), stay away from PMI, We started building models on 80%, but then I started reading that some never counted on more than 70% so we stopped that model...make my day Arlen and tell me you've been getting 80%+ with a low rate on 20-30yrs with a small refi fee....you don't have to tell me the bank but please tell me they are out there....if they are I'm having a beer tonight with my supper and will owe you one when we finally meet, just for lowering my blood pressure... cause those models looked way better for us than the 70% models looked.
And that picture doesn't make you look a day older than 29 ;)
@Joel G. We are also in a very similar situation. Same age, same amount of equity, same 401K. BUT... our kids are 4yo and 1yo. I live in Texas and want to move back to my home in the SF Bay Area. :)
You have a great question that I am eagerly awaiting the replies to. "What would the more experienced REI's do if they were me?"
Just as a note on the Houston REI from my uneducated perspective; I am comfortable with ~$200/door cash. But I cant seem to find it here in Houston without buying at foreclosure (meaning on the courthouse steps). I can find a few fixers which would meet a 1% rule, but those are gone before in an instant. I haven't seen anything even close to a 2% rule. I am beginning to think I need to get several agents looking for me.
@Arlen Chou You have some good points and I agree with you. I often look at the SF area RE. The appreciation is historically great, but I have never seen a way to be see cash flow day one. If you can just hold on for 8-10 years you can be cash neutral. But the equity will be huge and well out does the $200/door. But keep in mind I am not a great investor, and have made many painful mistakes.
I am supper happy I found BP and read it every day for posts just like these.
Welcome to BP to you as well Michael!
Tammy and are not about to start over with new babies...but we do envy your coming journey...having and raising kids has been the absolute joy of our lives...and we actually put off some things because of them...not a disparagement against kids...but...for us...a choice of how we wanted to raise our family...and we wouldn't change a thing if given the chance...they do not stay 4 and 1 for long....so do enjoy them as much as possible...mine are 23 & 22 and it truly seems like yesterday that they were that small...that is until your daughter, getting dressed for her waitressing job at a sports bar and wearing a slightly lower cut top than you would like grabs her boobs and says "come on Dad, stop giving me a hard time...these are the money makers" and laughs while walking away... Gray hair getting grayer and thinner....my response " Jordan...please stop trying to kill me" lol.
What a fun ride!
Houston, so I've read, has become a strange animal in the RE business in the last decade, for a multitude of factors, so I can definitely say I understand there is a problem you're up against. Unfortunately I don't have enough experience to give any really meaningful advice on how to combat the problem.
As you mentioned, hopefully some of the BP more experienced may have ways to combat those market driven type of problems and if we come up with anything I'll let you know.
Best of luck! Have fun with those kids!
I would also look to join your local REIA.
Great idea Skylar! We'll definitely look into finding a local group.
Let me know if there is ever anything I can help you with!
I think there are so many more factor based on what you "want to do".
My husband and I are 27 and 28 respectively! We decided 4 years ago that if he make it to 20 years in the military god and navy willing we want to retire on our cash flow! We also knew I wanted to be a stay at home mom so we needed to find them early and than have them pay themself off while I wasn't working (ie not as much active investment) . I am a huge "sweat equity" person so me self managing them has saved us huge amounts of money while making the control freak nature of me happy!
This is just a quick blurb but I have written tons about my class a style strategy on my blog, on bp blog and talked about it in the podcast!
At te end of the day put together your end goal with exact years. Figurd out a startefy and just hop on! Our road has changed a lot (think candy land) but the end goal has never!
Pm me if I can help. We own all iver the country but are buying our 3 and 4th investment in centrL valley ca ! Love it hear!
Thank you for your thoughts.
Thank you, as well, for your husbands service and for your family's service as well. Our family LOVES all of our heroes that protect us and give us the lives that many in other places dream about.
Living in San Diego we were proud to have many friends in the military and if I have one regret in life it is that I did not go into the Navy when I had the chance too. I was an aspiring professional athlete at the time and chose to follow that road, it is a choice that I wish I could go back and make again....anyway tell your husband thank you for us!
That being said...congratulations on your choices! One of our friends in San Diego was transferred about every 3years and using VA financing was able to pick up several houses all around the country...with very little effort. They would live in a house while they were there, and then rent it out when they got transferred...I don't know if they rolled the financing over from VA to other (can you finance more than one property with VA?) but I know that over the years they picked up 5 or 6 houses that he said he planned on paying off and then living off his military retirement and the rent that those properties would produce...so I'm guessing pretty well and at a pretty early age too!
That strategy coupled with your sweat equity will definitely pay off for guys!
I have not looked up a blog here on BP yet...do we do that by the band of the blog or if I hit your profile will it just come up?
Also, I agree that that we need a roadmap with a timeframe. Isn't that what they say..."the difference between a dream and a plan is a timeframe"
You are very sweet to give your advice...love to hear you guys on such a successful path at such a young age. Have fun with those babies!! Unfortunately they don't stay that way for long enough! Maybe we should have put a brick on top of their heads to slow them down a little!
I would suggest listening to podcast #002! (Starting out with Karen Rittenhouse). I notice a lot of similarities and think you would benefit from listening to her success story. @Joel G.
Thank you so much for the suggestion Daniella!
Btw, are you a RE agent as well as an investor?
@Joel G. I am in my 40's and just started seriously getting into REI recently, but I had been planning for a long time. When I say planning, it was not just reading books and listening to pod-casts. I started with "house hacking" and building up cash for a very long time. I used the appreciation in my primary residence and dove deep once I had the financial strength to make a meaningful purchase.
Replacing $200k of income is pretty large gap to fill. Not sure if you are considering NET or Gross income as the $200k target, but both are achievable. My intent is also to get to a point where I can travel and enjoy life. For me, that means not being active, but collecting passive income = buy and hold strategy. For others it might be a different strategy.
Cash flow is the key to reaching a passive REI business... This then leads to the debate of cash flow vs appreciation. In principle I think real estate investors all seek cash flow, but how we each get to that cash flow is really core of debate. For many it is to go out of state and look for cash flow right away. Personally, I believe the limitation of that strategy is that ability to accumulate assets is limited by your access to cash. Meaning you either need to either work your W2 or go looking for investors to build up cash to buy additional properties. I feel that by investing in a strong market, you can take advantage of both cash flow and appreciation and accumulate assets at a faster rate. The barrier to entry is much higher, but once you get past that barrier, I believe that appreciation can give you the cash freedom needed to purchase more properties.
Please note, I invest locally and trade my time for sweat equity in forcing appreciation. I don't do turn key purchases because I believe that the lost appreciation is too expensive. There are couple of threads on BP about the appreciation I have seen over the past 10 years along with my referencing strategy.
This is an active strategy for me so I really cannot say what I would have done different yet. Perhaps the only thing I would have liked to have done was taken the leap at a younger age. But there are many things that I wish I had done when I was younger...hahaha!
Good luck!
-Arlen
Your picture makes you look very young and I suspect you have MANY "younger" years ahead of you!
I agree with your strategies, which is why with our available resources we are struggling with putting all those eggs into 1 or 2 baskets here in the Bay Area. Now if I could find a Palo Alto SFR for $800k that I could live in (house hack-love that term), renovate and then sell for $1.6mil then believe me I would be all over that...but with the big money here in SV...they would offer cash and my leveraged deal would be done. It would be fun though if it could happen!
Tammy worked downtown PA in the only tall building there and when I would take her to lunch sometimes, I would secretly hope that I would run into Michelle Pfeiffer, who sometimes reportedly eats lunch down there...Tammy was aware of my game and said no problem but that if Sean Connery were to walk up...that I was to get lost...lol.
We would love to replace $200k net but that is our gross salaries at this time...and if we moved back to Texas would provide a wonderful life for us and would allow us to also help our families.
I love your forcing appreciation strategy...Tammy and I have done that on our own homes over the years but have only just recently really started to focus on the strategy as a means to a successful business. I mentioned to Darin in the previous post that that strategy is probably the only way we will be able to move forward as it (at least) affords some downside protection if the market were to fall off...as markets are prone to do.
I will search for your posts for your "referencing strategy" as I am not familiar with that term.
Thanks again for your input on this subject. It is very helpful for us to have the knowledge of experienced REI, so willingly shared.
Hope to meet up with you at some time in the future!
@joel g thanks for the post. I'm in a somewhat similar situation. Decent 401k, good equity in a few properties and honestly wondering if doubling down is the right way to go. You (we) are doing great as is working for the man. We need an exit strategy, but would like the $3M number to hit first. How to get there? I don't have the answer only more questions. Are you planning significant leverage to get you out of the rat race?
Hi Darin,
We drove through Portland once on our way to Canada and wished we had had more time to spend there...so green and lush, slightly rainy that day...the EXACT opposite of where we grew up...so VERY appealing indeed!
It is comforting to hear that we are not the only ones in a situation like this. We have some ideas about our future...but they have actually changed as our kids are getting older.
Our son is finishing his nursing degree and should be working by years end, a lucrative endeavor in Northern California. And our daughter is finishing her masters degree in business and has recently applied for several jobs with baseball teams for entry level management positions, something she has always dreamed of doing.
The reason I mention the kids is that now that they are spreading their wings and are starting to leave the nest...Tammy and I are finding that it may be possible for us to branch out to areas we never thought would be available to us at all in the past.
Our original idea was to go to find a mid market size city c universities/airports/etc. that has growth potential, try to find some A/B type neighborhoods, buy some fixers/flip'em or hold'em (depending on the situation) and then move on to the next area as the market dictates.
Now, however, we are finding that we may be able to do some of that without necessarily leaving our jobs (which would greatly enhance our financing prospects on projects...say that three times fast)...so now we may be changing gears a bit.
As far as leverage goes...we are willing to do some but would prefer not to bet the entire farm. I don't mind having properties financed at all...that is not my worry.
For example, if I can find a fixer for $120k + $30k renovations that has an ARV of say $200k then (according to the 70%rule) I slightly overpaid for the property but as far as having a loan on the property vs actual value of the property (sale price anyway) I feel at least somewhat protected if the market falls...especially if it is a long term hold anyway...I personally feel almost all markets bounce back over time....BUT if we paid retail for the property and rely on the cash flow...forget it...I would never get a nights rest for fear of owing $200k on a property worth $150k and for $200-300 cash flow...not for me...but I appreciate how some have the stomach for that game...being mortgaged to the hilt and pressing their bets at all times that is....just very dangerous at our age 46 & 48...I'd love to retire someday and see more of this beautiful planet!
Tammy and I lived in San Diego from 1996-2008 and saw the carnage that can happen when those games are played...we lived in a solid "A" neighborhood with amazing schools that went from high living to graffiti on the walls and cops at the schools daily for drugs/weapons/violence/gangs/you-name-it. We chose not to purchase in 2004 (could've made a mint on that house alone $239k that eventually sold for $550k) but the writing was already on the wall of what was coming down the road...that house honestly wasn't even worth $239k...our small jack Russell would paw at the back door and (literally) shake the front door of the house...so we stayed as renters during that time...missed the ride up...but also avoided the chaos on the way down...that was a bad time for lots of folks. The reason I mention it is we (and sounds like maybe you guys as well) want to avoid that kind of situation as much as possible...which is the reason that we were thinking of looking into markets that have not had the run up of say North Dakota, our SF Bay Area, etc.
You guys are in an interesting place though!! Portland is on everyone's list as hot new growth area, great jobs and has high life satisfaction...at least the last time I checked anyway. And if you guys would have the OU Ducks lay off everyone a bit on the football field...I mean really, do the guys have to kick everyone's *** year after year...my Longhorns need some of those players! So tell the coach to chill out a bit and give some others a chance...really...call him and tell him that.
I like our (your and our) prospects going forward and would love to keep in touch with you about your plans. Maybe together we can figure out a great path that we can later share with our friends here on BP...at the very least we can float the ideas here and get expert feedback on them!
Sorry so long...again.
Hi Joel,
Welcome! You'll find that a lot of people are really helpful here! I've made a lot of great contacts and it's helping my investing biz a lot. Love the tag line. So of course they mean Diphenhydramine... ?? LOL. I was guessing you worked ER. Rideout Hospital? We have a contract there (my other full time biz is in ambulance transportation.) Anyhow. Good luck to you and Tammy.
Best,
Makenzie
Hi Mackenzie.
Thank you so much for your welcome!
The "D" drug I meant was dilaudid...lol...but Benadryl (can't spell the generic...lol) works too! Yes Rideout was my home away from home when we lived there...such a great group of people to work with!! If you are in picking someone up just tell them that Joel Gallimore says hello and that he misses/loves them all.
Ambulance business in that area must keep you REALLY BUSY!!
We lived in Plumas lake and the kids went to school at Wheatland high school...absolutely one of the best times of our lives!!
There were lots of opportunities in the area as I remember...let me know if there is anything I can assist you with there.