If you had these resources...what would you do??

89 Replies

My wife and I want a different life...where we are not accountable to anyone but ourselves...who doesn't right?

If you click on my bio you will see our basic background and goals...short...I promise. 

We are not beholden to any REI discipline and do have some skills.

We have a SFR in Las Vegas that is rented to a family member for cost...so no cash flow, but well kept and debt pay down and has approx $70k in equity and can be disposed of as necessary. We have a home in Silicon Valley with approx $200-250k in equity (depending on which RE Agent we speak with) and which we are willing to sell to help bankroll our business. In addition, we have approx. $250k in 401Ks we are willing to structure in a way that will allow us to get at...at least 50% or more (at least that is what we have read here). We would love to leave our jobs but are willing to stay to facilitate things. Our salaries are around $200k combined.

Tammy and I are in our mid/late 40s and our goal is to be able to have enough freedom to travel and take care of our families while we still have our health and are young enough to enjoy those experiences...whether that takes 5 yrs or 25 yrs. 

We aren't strangers to hard work and are willing to do so to get started.

So if you were starting over and had these resources and the willingness to use them...what would you do??

@Joel G. ,

Welcome to the site!

I would normally suggest getting smart on REI, (i.e. learn about all the tools at your disposal), but based on your profile it looks like you're already checking that box. If you haven't listened, the podcasts are phenomenal sources of ideas, varied strategies, and a great way to enjoy SF bay area traffic jams. I utilize them to sharpen my mind when I'm commuting to/from work. I like to say that after 5 months of joining BP I've learned more practical knowledge about real estate finance and investing than I did after 5 years of studying Real Estate Finance in college.

Given your great situation to springboard into real estate, I would focus on lower risk options for REI. I've never done it, but I think buying notes or hard money lending would be a great way for you to step directly into the REI arena that would allow you to fully utilize your capital with maximum protection.

I feel that your thought process to diversify your methods of real estate investing is solid.  I would additionally offer that geographic diversification is also prudent.  I believe a good foundation of a market comes easier when you live in a market.  However putting all your properties in one basket leaves you exposed to singular market shifts.

One last thought would be to see who is working in the syndication marketspace.  A syndication could also provide solid returns and allow you to spread your investments across multiple stable platforms for long term cash flow.

In what geographic areas have you thought about investing?

What level of involvement do you want to have?

Good luck!

-Sam

@Samuel DeMass

Hi. Thank you for your taking so much time to post such wonderful advice.  Many years ago my wife and I were in Albuquerque and it was such a wonderful time. The views of the city from Sandia Peak were amazing and made the background for arguably the best picture of me and my better half...ever....lol. 

That being said...we recently discovered the podcasts and listened to one of them together on a plane back from Pheonix, but will certainly take your advice and start checking out more of them to listen to while in traffic...great idea for that lovely time everyday.

Being that my wife is more conservative with her investment philosophy...it was very helpful  that you mentioned that our situation is better than she realizes....I have felt that way for sometime, but convincing her has been somewhat difficult. (For anyone reading this,  please don't misunderstand my meaning of that...we know there are many who are starting out with much less...and we greatly applaud you for having the courage to move forward with your aspirations...Tammy and I come from very meager backgrounds and it has taken us many years together ((25 yr anniversary this year)) to get to this point...so moving out of that protective nature (finances that is) is actually fairly difficult for us...her especially ...should've been there 3 years ago with that first property...lol) anyway she was glad to here that from someone other than me...so thank you.

I will have to look into the types of investing you mentioned...of course I have read about them and have a general idea...but the inside baseball of those types of investing are Greek  to me at this point. 

Our original thoughts on REI were much more hands on...ie rehab and hold, possibly some flipping (with my experience in renovation), but we will certainly take your advice and look into other avenues.

Diversification is also very important to us as well and I appreciate your reminder of how important that fact is.

As far as syndication goes...(mind blowing up)...it is an area that I know very, very, very little about...unless you are referring to a REIT...which I am more familiar with but hope to be more hands on....but given that I don't really know what the term means...I am probably wrong...lol. 

As far as geographic location goes...we are very open to almost anywhere in the country and happens to be the topic of a different question that I was planning to post soon.

Level of involvement is also an interesting subject....we are hoping that we will eventually be able to leave our jobs in the Bay Area and move back to Texas (our original home and lots of family still there) but are willing to stay here for awhile...use our jobs and credit...for financing as needed...and then move into full time REI...with the eventual goal of "system-izing" everything and having passive income that will sustain us....but again who doesn't want that right?

This reply went longer than I intended, but I find myself thinking about this stuff constantly these days...maybe there is some amount of therapy in writing it down...maybe this is the start my business plan...lol

I certainly appreciate your post and the thought provoking ideas you have given me.

If there is ever anything I can do for you please let me know, and I will give my best efforts!

Cheers!

@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?

Originally posted by @Darin Knight :

@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.

@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

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.

Originally posted by @Arlen Chou :

@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!

Originally posted by @Daniella W. :

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? 

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!

I would also look to join your local REIA.

Yes, I am both an investor and an agent in San Diego. @Joel G.   

I think the fastest strategy to get out of the 9-5 would be to find a good fix and flip market and start doing fix and flips there. However, it's obviously extremely difficult to leave the guarantee you have when working for someone else. I'm not sure if either of your jobs would allow you to work from home but perhaps the best way would be for one of you to continue at your job (which will also mean that conventional financing is still a possibility) and for the other to take on REI (just as you will hear in the podcast). This is what my husband and I have done (not fix and flip but one in Real Estate and one in a secure job) and for starting out it seems to be a winning strategy.

Originally posted by @Elizabeth Colegrove:

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!

@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.

Originally posted by @Skylar Dejesus :

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!

@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

@Michael Delpier it is definitely possible to cash flow in BA, but it does take a lot of work pre and post purchase to get the cash going.  However, once it starts to flow the tight rental market here turns the trickle into a good size stream pretty quickly.  My purchases in 2013 started with rents at $900/month but are now around $1800/month.  I closed on a property in February that started out at $600/month and plan to start stabilizing at $1250/month by the end of the year.

I travel to Texas for my W2 job quite a bit.  I have often thought about investing in North Dallas or Austin, but for various reasons I never made the jump.  I think forcing appreciation is just easier when it is local.

Regards,

Arlen

Originally posted by @Michael Delpier :

@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!

Originally posted by @Arlen Chou :

@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. 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

Hi Joel,

I'm glad I read this post.  You love your posts with all the sense of humors.  You're spot on about kids.  I'm still enjoying mine at 5.  Arlen's avatar was either 20 years old or he photo-shopped it.  Arlen *gained* his wrinkles from all of that sweat equity.  LOL!!!  That's the price you have to pay.  

Kidding aside.  Solid advice from @Arlen Chou .  Forget the 70% rule.  Come up with rules that would work for your situation be it 75%, 80% or 85%.  If you could consistently find deals that fit those 70% to 80% rules, you would be able to build your real estate empire faster.

Your example above was perfect. Find a property or $120k + $30k in rehab, and it has an ARV of $200k. You then do a cash-out refinance for a new loan of $150k (75% LTV). Forced appreciation would give you the highest ROI and would speed your goal to financial freedom the quickest IMO. Rinse and repeat until you hit your goal.

Arlen and I love our BA housing market because of its high growth in rents and appreciation.  Once that property goes up to $300k, you can refinance, pull out a $225k loan, use the extra $75k buy a second property. Things will start to snowball fast after that.  You'd be going from owning 2 to 4, 4 to 8, 8 to 16, etc.  If you can achieve this in the next 10 years, not only you would be set for life, your kids would be too.  They would thank you long after you kicked the can.  

A word of cautious, don't over-leverage.  Make sure every property can service its own debt when you do cash-out refi.  Best to leave each property with at least $200/month of positive cash-flow.  Recognize which phase you are in the real estate cycle so you know when to go all in and when to scale back.  

By the way, a $3MM net worth is comfortable.  It's not rich by any means.  At $30MM net worth, I might consider getting myself a Lamborghini Aventador, but more than likely I would settle for a Lamborghini Huracan and a Tesla P85D.  Sigh......I will have to wait for that day to come.  

  

@Joel G. listen to @Minh Le he knows what he is talking about.  Be very careful about over leveraging.  That is the trap that so many people fall into... The next shinny object catches a persons eye and they don't keep enough cash on hand or a quick way to get cash if needed.  They find a deal and over stretch their fiances because they think that another deal won't come around.  This is especially true in the BA market!  

@Joel G. Hi Joel and welcome to the world of REI for a living.

I would suggest the following as a start. Write a detailed business plan of what you want your business to be. This is a business so treat it like one. Pay particular attention to the SWOT analysis. Strengths, Weaknesses, Opportunities and Threats. Your Strengths and Weaknesses are unique to you and are basically under your control. The Opportunities and Threats are what the market controls. You would be wise to be sure an have a plan to take advantage of the Opportunities and mitigate the Threats.

Once you have done those things then set some goals. Be sure your goals are in line with your values, lifestyle choices and financial capabilities, one of which is to understand your personal risk profile. This means can you live with a lot of debt, some debt or no debt and be at ease with yourself. If you cannot handle being in a lot of debt then be sure not to overly leverage your deals. Then set a realistic budget, and stick to it.

After you have done these things your path should appear a little clearer as to what types of deals you might like to do and where you might like to do them. This would then lead you to one of the most important aspect of REI. Understand the drivers of property prices in your chosen market. Simply following the crowd as many do and relying on the market to drive prices up, with little or no knowledge of how it is happening, what is driving it, is very dangerous indeed for a anyone in this business. You NEED to know what drives your market. Is the market at the bottom of the cycle or the top? Can I add value to this deal? Is it the right property for my objectives as per my business plan? What are my risks both financially and emotionally? Do I have confidence in this deal? These are all questions I would ask before I do a deal.

Property markets are cyclical, they move up and down. Please do not fall for the false belief that property always rises in value, it doesn't. Develop a sound business plan and stick to it. Learn as much as you can about the market you choose to work in. Don't over extend yourself financially, emotionally or physically. Stick to what you are capable of and you could enjoy a great career as an REI.

Good luck on your journey!

@Joel G.

Welcome to BP. It is a great place to learn about RE investing. I am pretty new my self and learning.

We are investing locally because that is what we are comfortable with. 

I typically am nervous about investing out of state but in your case since you plan to move to Texas eventually and seem to know the area  I think that could be a goop option.  

 Since you seem to be open to selling your house to start your investing one thing to consider is house hacking in a duplex/triplex or 4 plex.  That way you get still live in a property you own and have your most of your mortgage covered by the tenants. 

Good luck.

Congrats on jumping into the fray @Joel G. !

One of your biggest assets is having a spouse with the same goals and positive outlook that investing in RE as you do. It took being very successful in our first investment to truly get my wife involved. Lucky for me, she is way better at all of this then I am!

You've got the goals, now write down a plan that will help you get those. Make sure it starts within the next hour. The first thing you have on your "list to do" can be something that you do immediately and can cross it off. That way you get the satisfaction of moving forward today and not putting it off tomorrow.

Good luck... I'm looking forward to your success!

Alex

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