All Forum Posts by: Tim Houzenga

@Randy Bloch. I Wanted my goals to be irrelevant as I wanted to see what other people would do in my situation. I know what I’m going to do, but am curious as to what other individuals would do.

@Curtis H. If your happy with the current rate and the numbers look great.... why hold off. Seems immaterial to me.

What would you do in my position to acquire another income producing property of any type. Land? SFR? Commercial? Long Distance? ( I know what I want to do, but would like to see how other people would approach this situation):

I’m in a linear market where appreciation is around 1.5% a year. We do not bake appreciation into our numbers when analyzing deals.

I have one rental fully paid off worth $95K. Cash on cash return is 7%. $95K equity.

Second rental i bought for $70K. Traditional 30 year fixed rate at 5%. I have $17K of my own cash in the deal. Cash on cash return is 8% and 11% if you include principal paydown. House is worth $80K (sweat equity and added a bedroom). 25K in equity.

My primary residence is a zero down 30-yr fixed rate VA loan at 3.875 APR. worth $130K. Only $8K in equity.

I have the ability to save $20k a year from W2 income and rental income. $20K is more than enough to buy one property a year in my area with 15/20/30 yr fixed loan with 20% down and cosmetic rehab prior to renting.

I’m going to assume answers will vary depending on personal investment philosophies and where people conduct real estate activities globally. I’m in Northwest Illinois or as Brandon Turner would say..... ruuuurrwwaaallll United States.

Penny for your thoughts! Best Regards!

@Shawn O'Gorman. Absolutely not! Get out there and make it happen!

I’m dieing to find a 20-25 year old to partner with. I need somebody that has time and hustle while I bring the knowledge and cash.... I got a full time job, wife, and two kids so it’s hard for me manage a growing portfolio.

Find somebody in my situation where your at. Hit up agents, real estate meet ups, brokers, property managers, etc.... to get in the industry. Guarantee there are people looking for some ambitious young buck

Not all markets are cash flow Kings. If it is a new build you should not have to worry about capes for awhile? If the market is known to appreciate you could be alright.

You talked about a significant amount of household income..... I’m no accountant, but can’t you use depreciation and minor losses to significantly decrease your tax bill while waiting for appreciation? You may have low cash on cash, but what happens when you add in principle pay down, tax reductions, etc...? Real estate is multi-faceted. Just curious.

I’m from the Midwest so my main focus is cash flow since most markets are linear. We can never bank on appreciation here.

Best of luck figuring it out

I'm in rural NW Illinois and 1200 SF 3/1 seems to be the bread and butter.  Especially if I can find a 1100/1200 SF 2/1 house.  That is about all the tenant base can afford ($750-$900).  Plus the taxes are a doozy in Illinois.

@Brett Palmer

If you made me choose, I’d pay down the primary. I’m making an assumption you do not itemize your tax deductions. You can write off the interest on the duplex loan.

Obviously knowing the terms of the loans, your income, risk tolerance, age etc... would help to make educated decision. It’s all situational.

@Joanne Hanson

Start by visiting local property managers. Tell them you are in the process of buying rental units and need a manager. Let them know your business plan. Good managers will shoot holes in your plan or validate it based off their experience. They are a wealth of information.

Second, ensure you have a strong lease agreement. Consult with an attorney with a focus in real estate. They may be able to provide you with a lease agreement and then you can tweak it to add/remove clauses.

Third, never shortcut your background checks, paycheck verification, and recommendations. For instance, one individual used their “old landlord” as a reference.... come to find out it was the guys brother. However, most tenants are great and will reciprocate how you treat them.

Best of luck!

@Stephanie Jamgochian

I’d let them get a pet. There is a lot less risk when you have had time to develop a relationship with the tenant. No deposit if you foresee them staying in the property for several years. Turnover is a huge expense.

However, I would not reduce the rent. I think they are anchoring low and seeing where you stand and your thought process. I think they are as logical as you are practical. Good luck!

@Nick Farrell

Make sure you have a business plan and operating agreement in place dilineating roles and responsibilities. The more properties you procure the more you both will become comfortable in your roles. If it’s still work after two or three properties you are probably not good business partners. Most likely your to similar... counter intuitive but true. Partners should complement you.

I never do deals with family unless both sides would not be ruined by a total loss. Watched this happen with my parents and grandparents. Takes a long time to rebuild that relationship.