Creating an investment plan

17 Replies

Hey all! How did you guys go about creating your investment plans? Anybody have interesting stories with that?

Sorry, couldn't help myself.  Didn't mean to troll.  I'm not old enough to say if my plan is sustainable, but I automatically move a set amount of money out of my checking account every month into an investing account.  When the account is large enough for another property, I make offers until one is accepted and passes inspection.  Historically, I've been investing in low income, inexpensive houses because they're affordable enough that I can buy them with regularity and they provide strong cash flow.  Now that I'm more comfortable with real estate investing, I'm working on setting up a jointly owned remodeling syndicate and using the dividends to buy personal rentals at a faster pace. 

I think that figuring out the what and the where are key.  The what is buy and hold vs. flipping vs, wholesaling vs. all the different ways to invest (the podcasts are great for exploring the what).  The where is the geographic area, and the smaller the better.  We focused on a 40 block area, and in hindsight I wish we had narrowed it down even more.  The better you know your area the better you will know whether to pull the trigger or walk away.

I.  Live on less than you make to ensure that you have cash to re-invest in yourself or business model.

II.  Pick the right investment vehicle that fits your niche.

For example:  Buy/Hold creates:  tax reduction, cash flow and property appreciation for future captial gains.

III.  Study successful people and follow there habits of wealth buliding.

Work hard at creating systems and processes to make your business work for you.  To close, BP is the best place to get it from...

@joshuadorkin

@Michele Fischer

The where is the geographic area, and the smaller the better. We focused on a 40 block area, and in hindsight I wish we had narrowed it down even more. The better you know your area the better you will know whether to pull the trigger or walk away.

I couldn't have put it better. Most of my coaching students want to "concentrate" on Eastern Massachusetts...

@Gideon Sylvan  

You buy "cheap" properties in Seattle? What's this "cheap" price range? Under $50k?

Originally posted by @Chaz Reid :

@Gideon Sylvan 

You buy "cheap" properties in Seattle? What's this "cheap" price range? Under $50k?

Most of my acquisitions have been single family houses in a neighborhood called East Tacoma (in Tacoma, WA).  On average, they have been small (<1800sf) 4 bedrooms that cost around $80,000, needing $20,000 to $35,000 in improvements, and appraising around $140,000.  I rent them for $1,400 a month, though $1,200 is a little closer to average. 

Hi Joshua - I started "small"... bought a place to live in while doing renovations and also rented out rooms to friends. Often times, when you don't have a lot to work with, I find hacking homes to be the easiest. Depending on your focus, you could live in a SFR and hack or buy a duplex and live in one unit to hack and rent out the other. This is a great way to build equity down the road so you can tap into it when needed to purchase a 2nd property.

Originally posted by @Gideon Sylvan :
Originally posted by @Chaz Reid:

@Gideon Sylvan 

You buy "cheap" properties in Seattle? What's this "cheap" price range? Under $50k?

Most of my acquisitions have been single family houses in a neighborhood called East Tacoma (in Tacoma, WA).  On average, they have been small (<1800sf) 4 bedrooms that cost around $80,000, needing $20,000 to $35,000 in improvements, and appraising around $140,000.  I rent them for $1,400 a month, though $1,200 is a little closer to average. 

 Hi Gideon,

I recently got pre-approved for a home loan and live in this market. What general things did you find in this market around that 80K mark? Were the houses hard to come buy? I plan on finding a fixer upper and putting some rehab (similar) to your numbers into the home. 

Originally posted by @Gary Waldron :
Originally posted by @Gideon Sylvan:
Originally posted by @Chaz Reid:

@Gideon Sylvan 

You buy "cheap" properties in Seattle? What's this "cheap" price range? Under $50k?

Most of my acquisitions have been single family houses in a neighborhood called East Tacoma (in Tacoma, WA).  On average, they have been small (<1800sf) 4 bedrooms that cost around $80,000, needing $20,000 to $35,000 in improvements, and appraising around $140,000.  I rent them for $1,400 a month, though $1,200 is a little closer to average. 

 Hi Gideon,

I recently got pre-approved for a home loan and live in this market. What general things did you find in this market around that 80K mark? Were the houses hard to come buy? I plan on finding a fixer upper and putting some rehab (similar) to your numbers into the home. 

All of my East Tacoma properties (all meaning three) are LTV on the last (have another very talented all purpose finance referral if you're looking for one).

Full disclosure: I haven't made a purchase in that area for over a year and my latest appraisal (for the BECU HELOC) came it at $150K for the smallest one, so I'm guessing comparable deals are proportionally more expensive. Here's a list of "inexpensive" 4bd Tacoma houses that have sold in the last six months: http://www.matrix.nwmls.com/Matrix/Public/Portal.a... (I'm a licensed real estate agent but no longer soliciting or accepting clients).

We currently live in the east side and it is really block by block. Fair warning - prices have increased dramatically over the last two years. A house on our block just sold for almost $200,000. Insane! They purchased at auction for $110,000, spent about four months upgrading and sold it in about two months. Yes, it's cute. Yes, the renovation is nice. But if you look at the comps even the nicest house in the larger neighborhood with immaculate double lot and perfect placement doesn't appraise for that. These people are going to be underwater for years. 

Off topic. Sorry.

Take a drive around the east side. When you see a neighborhood that seems promising, walk it. We've found people to generally be willing to chat in the decent areas. It also helps you get a sense of how much you could count on the neighbors there. :)

Originally posted by @Caroline Hedin :

We currently live in the east side and it is really block by block. Fair warning - prices have increased dramatically over the last two years. A house on our block just sold for almost $200,000. Insane! They purchased at auction for $110,000, spent about four months upgrading and sold it in about two months. Yes, it's cute. Yes, the renovation is nice. But if you look at the comps even the nicest house in the larger neighborhood with immaculate double lot and perfect placement doesn't appraise for that. These people are going to be underwater for years. 

Off topic. Sorry.

Take a drive around the east side. When you see a neighborhood that seems promising, walk it. We've found people to generally be willing to chat in the decent areas. It also helps you get a sense of how much you could count on the neighbors there. :)

 I recently ran into a listing across from McKinley Park that made me feel like that. It was listed around 210K with the comps near by way lower than that. Have you ever used a realtor to find you listings or did you just walk in neighborhoods you were interested in. My wife and I are currently looking at the McKinley Hill area. 

@Gideon Sylvan

I'm looking to invest in buy-and-holds in the Tacoma area within a year or two, so would love to get in contact with you or your agent as I am not familiar with the area (right now I'm scared of everything in Tacoma).

How come you purchase through hard money first and then refinance as opposed to purchasing directly with a bank loan? I can understand with auction properties, but you mentioned MLS properties too. Is it because you wouldn't have been able to get the property with a financing contingency (because sellers wanted to sell quick)?

BECU is great, but I started looking around at other credit unions in the area and have found them to be better, either offering lower interest rate or 100% LTV on a HELOC. So I recommend always shopping around.

Originally posted by @Nghi Le :

@Gideon Sylvan

I'm looking to invest in buy-and-holds in the Tacoma area within a year or two, so would love to get in contact with you or your agent as I am not familiar with the area (right now I'm scared of everything in Tacoma).

How come you purchase through hard money first and then refinance as opposed to purchasing directly with a bank loan? I can understand with auction properties, but you mentioned MLS properties too. Is it because you wouldn't have been able to get the property with a financing contingency (because sellers wanted to sell quick)?

BECU is great, but I started looking around at other credit unions in the area and have found them to be better, either offering lower interest rate or 100% LTV on a HELOC. So I recommend always shopping around.

I buy MLS properties without conventional financing because the properties are generally not fanciable in their then condition (but would be after repairs/improvements) and because the competing offers don't have financing contingencies.

Regarding the other credit unions, I would be interested in learning more.  I'm a little hesitant to leverage beyond 70-75%, but it's good to know about, especially for the lower rates.  I'll connect with you to get that info please (or you can share it here), and I'll message you some recommended professionals to work with. 

@Gary Waldron

I bought my first house out there on A St., a couple blocks up from McKinley hill area and would be happy to help answer any questions you have about the area.  210k for anything in that area seems pretty steep, there are deals out that way that you don't need to spend that much money on.  @Caroline Hedin is right though, it really is block by block and there are some areas I wouldn't live in.  I still live in that house but am going to lease option it out here in the next 2 months and my street is pretty nice.  Come to think of it there is a house on that block that they have tried to sell several times but couldn't that might be a good candidate for a lease option, not sure if that is your cup of tea or not but an option.  I would just recommend driving block by block and if you see a house you like and want to pick up, knock or send them a letter saying you are pre-approved and want to buy their house.

@Gideon Sylvan

Have you tried financing with a HomeStyle Renovation loan from a Portfolio Lender?  But offering to pay with cash in order to beat the competition makes sense.

I haven't checked out all the Credit Unions yet, but have been referred to Verity and Columbia for low rates, and Sound Credit Union for the 100% LTV with easy qualifications.

@all the Tacoma investors-

I'm licensed and live in Tacoma. I am hungry to help anybody I can on the buying end of real estate transactions, and hang my hat on my dependability. Feel free to send me a PM, so we can meet face to face and see if it makes sense to do business together. 

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