All Forum Posts by: Tim Porsche

@Michael Siekerka - That's what I was thinking and I hope you're right. I actually like Carson but he scared me when he said he would eliminate all deductions in one of the debates...I was like "WAIT A MINUTE, I LIKE MY DEDUCTIONS!" haha. 

I agree though it does seem highly unlikely that legitimate business expenses wouldn't be allowed to be deducted...think of all the businesses that have a lot or revenue but maybe thin profit margins...they would all go out of business if they had to pay taxes based on their revenue instead of profit. 

Hi all, so since hearing and reading about the BRRRR strategy I have become very interested in possibly doing it. I would be looking for fixer upper multi-unit properties to renovate, rent out and refinance. There are a few areas of the strategy that I am unclear on though and would really appreciate if someone could shed some light on those areas.

1. Lets assume I purchase a fixer upper triplex for $130,000 using a hard money loan and putting 20% down for the house plus $20,000 in renovations. So the total investment would be $150,000, with $30,000 (20%) coming out of my pocket. Lets say the renovations get completed successfully and I have great tenants and have all the units rented out. Right now I have a triplex that's fully rented and is financed with a high interest hard money loan, and lets just say the appraised value of the property is now $190,000. What does refinancing look like when I go to the bank and try to get a traditional 30 year mortgage?

Do I get a mortgage based on the initial $150,000 investment ($130,000 + $20,000 renovations), or a mortgage based on the current appraised value of $190,000? Basically could someone break down how the numbers work, and how (or if) I would still have money in my pocket after refinancing that I could use to purchase more properties? Sorry if this is a dumb question, I'm just having a bit of a mental block here.

Total Initial Investment - $150,000

$130,000 for property

$20,000 for renovations

Financing with Hard Money, Total Out of Pocket Investment = $30,000

ARV = $190,000

Mortgage Down payment Amount = 25% of $150,000 or 25% of $190,000??

Again sorry if this is a dumb question, just trying to wrap my mind around this. Thanks in advance for any input!

Hey all, bit of a hypothetical question here, but would you be worried if Carson's 15% flat tax would be adopted at some point? He said there would be no deductions...which would obviously have a huge negative impact on your cash flow if you couldn't deduct depreciation, mortgage interest, insurance, operating expenses, repairs, amortize capex costs, etc.

Am I missing something, or would a 15% flat tax with no deductions be as bad for landlords as I think it would?

When dealing with tenants, "Be friendly with all but friends with none." - Leigh Robinson

@Daniel Kenney Yes I would certainly keep some funds aside for repairs, upgrades and operating expenses. In your opinion what would be a reasonable amount to keep set aside for four trixplexes or quadplexes, each in the $170,000 - $200,000 price range? $15,000 - $20,000 or so?

@Jarred Sleeth Thanks for the advice. I haven't really thought in detail about my plans past the 5 year mark. If I get to the point of owning 4 multi family properties, I know I probably won't be able to get any additional mortgages, so I'll either have to take the money I'm earning and invest it elsewhere, or else use it to pay down the principal on one of the properties until it's fully paid off and I could get another mortgage for another property.

@Brooks Rembert Thanks for the encouraging words! I'm hoping all will go as planned, but you never know. I'm planning on trying house flipping in 2016 as well, so if that goes well it would have the potential to speed up my progress even more. Will have to see what happens.

Hi All,

So below is my five year plan to reach a state of financial independence, where all my bills can be paid with (semi) passive rental income. Would love to get your opinions on how doable you think it is, or if you see any issues with my plan that I'm not seeing. 

Current Financial Situation

1. I'm 27 years old and currently earning about $48,000\year before taxes at my 8-5 job.

2. Own 1 single family rental that is worth about $140,000. I bought it for $122,000 a little over a year ago and have around $35,000 equity in it. It currently brings in about $450\month total profit after all expenses have been taken out, before taxes. 

3. I just purchased my second rental property, a two story duplex. I will be moving into the bottom unit in early 2016. Total monthly payments for everything are $950. The second tenant pays $750 in rent leaving me with just the difference of $200 to pay, plus any repairs here and there. 

4. I've looked at my spending in depth and found that I'll really only need about $2,000\month after taxes to cover all of my expenses. That is the base minimum amount that I need. 

5. Living in the duplex, I feel confident I'll be able to save at least $1,500 every month after taxes.

6. I currently have $12,000 in savings, $6,000 in 401k, and $6,000 in gold and silver. 

5 Year Plan

1. In 2 years, I want to buy a triplex or quadplex in the $160,000 - $200,000 range with 25% down. I would like to be able to get at least $800\month after EVERY expense has been taken out, plus taxes. This would be factoring in a 10% vacancy rate, 10% of the monthly rent for maintenance, and 10% of the rent for management. I'll still be working full time so probably won't want to manage it myself. 

2. 3 years down the road, I would possibly look to sell the single family property that's netting me $450 every month, and use the proceed from that to cover about 80-90% of the 25% downpayment on a second triplex or quadplex. Again, I would like to achieve at least $800\month after all expenses and taxes from this.

3. 4-5 years down the road, I would hopefully be able to purchase a third triplex\quadplex achieving a similar income stream as the other two. This would net me $2,400\month after taxes from rental income, which even with inflation after 5 years should leave me enough to pay all my bills. 

4. At that point, I would look to just cut back to working 2 days per week. I believe I could bring in at least an extra $1,500\month after taxes from this part time work. This would give me a nice cushion each month and also give me money to reinvest and use for growth. In addition I would be pursuing other entrepreneurial things on the side, but I wouldn't need to depend on making that money on the side to pay my bills. Also, I would actively manage the rental properties at that point as I would be working part time and be able to do so more easily, and I would save on the 10% management fee. 

So there you have it. Is my plan crazy, incomplete, or do you think it looks solid? Would super appreciate your opinions and any advice. 

Hi Bryan,

I'm sorry, I should have been more clear. I would do the 25% down payment + Closing costs on the house with my own money that I've saved up. And then I would simply get a loan from Lending Club or Prosper for only the renovations.