All Forum Posts by: Timothy Howdeshell

The solution that comes to my mind is to take the equity pull a HELOC and then BRRRR to acquire enough cash-flowing property to offset the expenses and then pay off the HELOC. This should be relatively low with only covering mortgage expenses on the home. This strategy is highly leveraged though, and of course requires a lot of management.

Hey Justin,

It seems like there has already been a ton of great advice here. I was in pretty much your exact same shoes 1.5 years ago. I managed to make it work by buying a condo using CHFA, refinancing out of the loan after 6 months (way lower interest), and spending all of my free time and money for a few months finishing the basement. You can read the write up here: https://www.biggerpockets.com/forums/223/topics/54...

I would say definitely keep looking with your agent, and forget about the SFH for now as others have said. Good luck!

The price/rent ratios make it difficult to cash flow properly on a lot of properties. People are not factoring in vacancies, capEx, etc. A $250,000 house might rent for $1,400. Also, contractors are a really hot commodity here right now!

Hey Dane,

Wow! So much to unpack here! First of all, congrats on getting started on your first house. I started with a live-in flip/house-hack, and learned a ton in the process. It is also somewhat valuable to be doing some of the work yourself (if only for the 1st deal, then hire it out) so that you can learn about construction. It's also great that you were able to find money partners to help you get started! You have some stellar financing options there. 

I would say to be careful using the top comps in the area to run your numbers. To fully BRRRR, you need to get all of your cash back out. 56,200+30,000+3,000 (closing costs roughly) = 89,200. You guys can refinance 95% of the value of the property, so 360,000 *.95 = 342000. But only if it is your primary residence. After your rehab, you'll be into the property for 224,800+89,200 = 314,000. This means you guys may be able to get an extra 28k in cash, and pay off the parents using the new 342,000 loan.

This makes a lot of sense to me. You guys would need to live in the property for another year however to get the 95% refinance loan. The only catch I'm seeing here is that rents don't seem high enough to cash flow on a 340,000 mortgage. We have that problem in Denver for sure. Just remember to be conservative: use median comps, reasonable rents, factor vacancy and capEx etc. into your cash flow calculations. 

@Irwing Gama I've already made plans to interview Oct 1st. But for all I know they could say no thanks, and then my dilemma will be solved! I will need to decide before December if accepted. I'll try to remember to follow up on the thread and let people know the outcome.  

@Frank Jiang I completely agree. It is hard to get an accurate assessment of the salaries (put out by the school), as well as the likelihood of landing such jobs. All of the data that I've found strongly suggests that these values are accurate however. As part of my due diligence, I will keep trying to get these numbers more accurately. Do you mind if I ask where you went for your degree? I've found that that makes a massive difference. Also, congrats on your transition! 

@Omar Khan That is where I see the value as well. The brand and the network are really crucial, as most of the information can be found online for free. To be honest, I've never considered working in a real RE job as you put it. I've always been drawn in by the entrepreneurial side/nature of the business. Can you explain more about the median income being misleading?

@Tara Wright P&Q puts the numbers at the same as reported above. That would put me at nearly 100% salary increase. Other posters seem to think that these are misleading figures however. 

@John Acheson Thank you for your input. That seems like a really scary time to have lived through, especially in the MBA market. I agree with you though on the generality of the degree. I am looking at the general management track. There would be substantial loans involved however, which is the main cause of doubt. 

@Caleb Heimsoth Were you in engineering prior to the masters? Those two degrees are quite different. 

@Shaun Brush I do love me some Jim Rohn! Regardless of the decision I ultimately end up making, I don't intent to ever let my schooling interfere with my education (a la Mark Twain). At the end of the day, this formal education would serve as the means to accelerate my self-education. 

@Jim K. Thank you. You've echoed my roommate's, a young construction manager, sentiments! I definitely see this as a viable alternative. 

@Kelly Iannone Technically yes, however it is only 5k per year with a 2 year indentured servitude. Furthermore, there would be limited to no career growth in those 2 years. So, I'm obviously not considering that option. In your situation, it seems like an awesome opportunity! Congrats!

@Dave G. Thank you! Yes, they are quite demanding from a lifestyle perspective, and the relationship impact is well documented. I'm at a 0% chance of divorce however ;-) And yes 11 years, it is a rather arbitrary timeline (40 years old). ASAP ideally, but I need a bit of non-9-5 income or excess free cash flow so as to not strangle the REI portfolio growth.

@Shawn Ward Thank you. Entrepreneurship is the ultimate goal!

@Anthony Gayden @Sung Park I agree with both of you that there is a market risk, and no guarantees in income. The employer sponsored programs make a lot of sense. Unfortunately, my employer doesn't offer such a thing. 

@Matt M. Thank you Matt! I will investigate this further. My initial thought is that this idea may suffer the same salary ROI concerns and free cash flow problems brought up by other posters, further delaying property acquisition.

Wow! Thank you all for your thoughtful responses! You've given me a lot to think about. It seems most individuals are leaning against the idea of the MBA. 

@Michael Plante I'm in agreement with you there. I think that you need to run a business to learn it, and not simply the theory. 

@Jen R. Thank you Jen! As an aside, the cost is astronomically high! In a general sense, the increasing cost of tuition is very concerning. This, coupled with degree inflation, and a stagnant median income, is really putting a strain on America's young people. The student loan debt has surged 50% over the last 7 years....crazy. But I digress. The salaries mentioned for graduates are an overall average for the school, but the range is fairly narrow (depending on industry, function, etc.). The jobs I would be targeting are management consulting and general management jobs in the food industry. Most of these jobs would require 60+ hours/week (more for consulting). 

Hi BP,

I have been an avid consumer of real estate books and podcasts produced by BP. Therefore, I really value the type of thinking common among our community members. This post is asking for general advice and strategy planning as it relates to getting started in real estate investing. 

I currently have one property which I am house hacking in the Denver area (see my previous post). And I am currently setting up a flipping deal with local Denver partners, as well as evaluating some out of state BRRRR out-of-state investing in Kansas City. So I'm not a complete newbie to real estate investing (REI). My plan is to acquire a small portfolio (~10 due to mortgage limitations) of SFR and then 1031 into multi-family to scale up from there. My dream is to be a full time real estate investor and leave the corporate 9-5 behind (in 11 years at the latest). In order to do this, I want to maximize my income from the 9-5 while I build the portfolio; for ease of getting loans (DTI), to scale faster, and have an income cushion for liquidity in case of emergency.

In my current career as a scientist, I am making ~70k per year, and could like get that to 85k with a job change (I'm overdue anyway). I have applied to Cornell (top 15 school) for a 1 year MBA program, and there is a strong potential that I will be accepted as I have been invited to interview. The cost of the program is ~ 130k all in, and starting salaries are around 130k going up to 220k base after 5 years or so. It would likely pay off financially in the long run (5-10+ years), and I really enjoy learning about and running a business. This would be similar to buying a property with leverage to achieve a higher cash flow. At the end of the day my main goal is to be a self-employed real estate investor as soon as possible, rather than grind out time in corporate. 

So my question for the community is, does it make sense to pursue an MBA, get a much higher paying job, and invest the spread to build the portfolio quicker? Or does this seem like an unduly large burden of time (1 year) and money (student loans)? Do you have an MBA, and what would you recommend?

Thank you for reading and for your inputs!!!

Have a great day!

@Erin Carpenter @Justin Koehn Thank you both for the kind words! I appreciate the advice. It is definitely a great reminder to file the photos (I have quite a few more throughout the process). I also really like your advice of going back through the numbers to track the metrics and starting a portfolio. Right now I have this information, but it is in several places and not well organized. Thank you again. 

Thank you guys! @Matt M. I do feel very fortunate for how relatively smoothly things went along the process. It sounds like you're expecting another year of high appreciation for Denver. I ended up adding 1 bedroom, 3/4 bathroom, and a living room, as well as walling off a utility room. In total I added ~700 sq' ft' of living space.