Looking to make my first purchase

23 Replies

Hey all, love the site and the podcast etc. 

I am looking to get into REI and am trying to find the best avenue possible.

- I have 200k in home equity that I could leverage into a max of 140k in a HELOC(approved already)

- 100k in trust/retirement funds

- 40k in a brokerage account

-15k in cash

I am in the Portland, OR market, which has been very hot and is hard to get return on rentals(around .5% per month). Should i be looking into other markets( I like the Jacksonville, FL market a bit)? I don't want to overextend my leverage and abuse my HELOC but also don't feel like I have enough to start out with outside of that.

Should I use my HELOC to oversee a few flips to build up my equitable assets before I look to buy and hold?

@Jeff Moe rentals here in the midwest are doing good, but it is still competitive. I wouldn't start flipping if your goal is to own a lot of properties. I'd find a market to BRRRR in.

@Jeff Moe Using that HELOC to do a couple quick flips would be nice to add some cash reserves and keep you in the game to do some longer term buy and holds. There are deals in every market and it’s nice to have an intimate knowledge of a market and it’s geography before you sink money there.

Hey @Jeff Moe welcome to BP Nation!

I would recommend investing in the BP book "Long-Distance Real Estate Investing." So far it goes through process step by step on how to network and to gain comfort investing a far, especially with the marketing being so hot in your area.

Based on your financing I would recommend to use your HELOC and try to get one buy and hold, biased because my strategy is buy and hold. I make sure it follows the 1% rule (purchase price+fix up costs *1%= Monthly Rent) and that the 50% Rule is > $100 per unit ((Monthly Rent*0.5)-Mortgage Payment > $100).

If you need help with any analysis feel free to connect.

@Mike Taravella ... is there any place left, where the market isn't hot? Everywhere you turn ... market is hot :)

@Jeff Moe Are you looking to invest in single families? multi families? other RE vehicles (mobile, notes, ... flips, ... )? You could partner with people and jump straight into multi family. 

Just my 2 cents !!!

Good luck ...

@Jeff Moe You are in a tough market, but if you want to stay close to home, you could try some alternative targets for a mail campaign. One that is overlooked is the seniors ready for transition (downsizing or Senior Living). You might be able to find some good off-market leads in this group.

There are 13,000Seniors with 15+ year ownership, age 60-89, single family homes  up to $450,000. Of these, 1400 have Low Financial Stability Scores (FSS).

Message me with your email if you want to get a full report

Hi Jeff,

A few questions? Did you shop around for your HELOC? Some smaller credit unions and banks will offer up to 85 percent LTV instead of 70. I think you have more than enough to get started in REI but you probably want to continue reading and doing your due diligence before you jump right in. Other question is, what about doing a self-directed IRA which you can loan out money at a set interest rate to other investors? There's also peer to peer lending if you are an accredited investor (someone with a net worth over 200k) like proser and lending one. By investing in Florida do you ever intend on checking on your property frequently on just once/twice a year? You could possibly combine the brokerage account/cash account and the retirement account to see if you get better returns in RE.

Originally posted by @Henri Meli :

@Mike Taravella ... is there any place left, where the market isn't hot? Everywhere you turn ... market is hot :)

@Jeff Moe Are you looking to invest in single families? multi families? other RE vehicles (mobile, notes, ... flips, ... )? You could partner with people and jump straight into multi family. 

Just my 2 cents !!!

Good luck ...

My long term goal is to own as many cash flowing properties as possible. With this as my goal; I think getting some cash flowing multi families is the best way to start out. I know that everyone says to just focus on one goal but I've contemplated flipping and re-investing the capital(1031 exchange) from those deals as down payments on more MFH's. I definitely don't want to over extend myself though. 

Basically I'm asking...

- Should I use HELOC to just flip for now

- Should I use HELOC or other means of money for 20% down on several MFH's(I could pay off up to 100k in HELOC next year with a trust fund)

- Should I buy one MFH and then try to flip as well

Originally posted by @Joseph M. :

Hi Jeff,

A few questions? Did you shop around for your HELOC? Some smaller credit unions and banks will offer up to 85 percent LTV instead of 70. I think you have more than enough to get started in REI but you probably want to continue reading and doing your due diligence before you jump right in. Other question is, what about doing a self-directed IRA which you can loan out money at a set interest rate to other investors? There's also peer to peer lending if you are an accredited investor (someone with a net worth over 200k) like proser and lending one. By investing in Florida do you ever intend on checking on your property frequently on just once/twice a year? You could possibly combine the brokerage account/cash account and the retirement account to see if you get better returns in RE.

I have not shopped it around. I can look into some of the credit unions around the area here to see what they have to offer. I am fairly ignorant to the self directed IRA; could I transfer over my 401k(20k in it) and my brokerage account(40k) into a self directed IRA or does it still have $5500 a year cap on added funds like a Roth IRA? I'll look into Prosper peer to peer as well, thanks.

If I invest in Florida, or any out of state property, I plan on seeing any property in person before I acquire it and will also run my own analysis of the deal as well as make connections with several realtors in the area to ask their opinions on: neighborhoods, potential for appreciation, previous sales history, crime rates, etc. I would also meet with several property management companies(would ask realtors for recommendations) before choosing one. Realistically, probably just 2x a year would I go and check in on the properties. 

@Jeff Moe ,

You are confusing rollovers with contributions. There is a limit on how much you can contribute to an IRA in a given year, that is $5,500/yr (plus $1,000 catch up for those who are over 50).

There is however no limit on how much you can rollover. If you had a million dollars in a 401k with your old employer - you can rollover entire balance into self-directed IRA.

Those who are self-employed or own a business can contribute significantly more than $5K/yr by utilizing truly self-directed Solo 401k plan, which allows contributions up to $61,000 in 2018. 

I would consider findings a seasoned partner. You have enough money and equity to bring something to the table. You could hit up Joe Fairliss who has his own podcast or any other syndication expert. I would choose that person based on whether they would be able to answer a bunch of newbie questions as you are just starting out. 

You WILL want a mentor. It's repeated over and over in the podcasts. If you bring money and a willingness to work you'll have people clamoring to help you. So, look up people on Biggerpockets in your area and start asking questions. They will have access to deal not on the MLS if they've been at it awhile.

Don't tell everyone you have a lot of money to bring to the table at first. You just can't be too sure who to trust. Start with smaller deals and make sure you can trust your mentor. 

DON'T get impatient. The deals are there, even in a hot market. You need to dig, drive for dollars, write letters. 

Originally posted by @Dmitriy Fomichenko :

@Jeff Moe,

You are confusing rollovers with contributions. There is a limit on how much you can contribute to an IRA in a given year, that is $5,500/yr (plus $1,000 catch up for those who are over 50).

There is however no limit on how much you can rollover. If you had a million dollars in a 401k with your old employer - you can rollover entire balance into self-directed IRA.

Those who are self-employed or own a business can contribute significantly more than $5K/yr by utilizing truly self-directed Solo 401k plan, which allows contributions up to $61,000 in 2018. 

Thanks for the info. I've been a very passive investor up until this point so I just let my financial advisors from Northwestern Mutual run my accounts up until this point. I want to be more hands on so I appreciate all the feedback from tapped in investors/advisors like yourself. 

Hey @Jeff Moe there are quite a few hazards to be aware of with flipping out of state. Our local market is very difficult to find deals in as well, as you know. I would ask what your goals are, 1 year, 5 year, etc. to see how to best achieve what you are looking for. I'm local and invest out of state, happy to grab coffee and share my experience. 

Jeff:
Definitely look into a heloc from credit union. I got 90%. I am a jax local and sounds like I’m in very much the same boat as you. It is nice to be in a market that is mentioned so frequently as a not fully tapped market. At the Beaches it’s hard to find a deal but other areas of town seem pretty ripe. I am going to pm you my number and I can give you my two cents on different areas. Who knows maybe we could even partner on a deal. I have very much the same mindset and same questions/dilemmas you’ve stated. I’ve found a contractor I believe can help me. He’s a fellow BP member and an investor himself. Seems to really have his **** together.

Just FYI you cannot 1031 exchange flips into MFR's. Flips do not qualify for 1031 exchanges.

Hi @Jeff Moe and welcome to BP! I am south of you in Eugene, and have been investing OOS since 2012. The local market is very challenging and I know even more so in Portland. I have done turnkey, private lending, flips and BRRR (buy, rehab, rent, refinance), and syndications. I can tell you from experience that flipping at a distance is very, very challenging. If you are thinking something more passive I wrote a BP article on Three Key Routes for Passive Real Estate Investing

@Henri Meli unfortunately

I was looking in Pinehurst, NC because I have friends there and the Open is coming there in a couple of years. Unfortunately a Airbnb scenario isn't in my cards juuusssst yet.

@Jeff Moe Hey Jeff, I'd advise you start with the HELOC first as opposed to cashing out on all your cash sources at once.

Overseeing flip projects as your foray isn't as easy as it seems on HGTV and as you hear on podcasts, it requires a ton of what I call "special skills", which includes dealing with contractors and all the people involved getting a flip to the closing table. 

However, you can mitigate these elements by finding good partners who have done this and partner with them (their capital + your capital). So, this way your interests are aligned. This way you learn as you invest! 😃

Hope this helps. Goodluck. Thanks! - Ola 

Originally posted by @Dmitriy Fomichenko :

@Jeff Moe ,

You are confusing rollovers with contributions. There is a limit on how much you can contribute to an IRA in a given year, that is $5,500/yr (plus $1,000 catch up for those who are over 50).

There is however no limit on how much you can rollover. If you had a million dollars in a 401k with your old employer - you can rollover entire balance into self-directed IRA.

Those who are self-employed or own a business can contribute significantly more than $5K/yr by utilizing truly self-directed Solo 401k plan, which allows contributions up to $61,000 in 2018. 

 @Dmitriy Fomichenko can you still get the same tax (or pre-tax) benefits on the entire $61,000 contributed in a year?

@Cam Jimmy ,

If you have enough eligible income and you can contribute the maximum amount of $61,000 ($55,000 if you are under 50 years of age). Contributions to a retirement plan reduce your taxable income so yes, you are getting tax benefit on the entire amount. 

Truly self-directed Solo 401k also has Roth provision allowing you to make post-tax (Roth) contributions. Of course those are not tax-deductible but will grow tax-free. 

Originally posted by @Jeff Moe :

Hey all, love the site and the podcast etc. 

I am looking to get into REI and am trying to find the best avenue possible.

- I have 200k in home equity that I could leverage into a max of 140k in a HELOC(approved already)

- 100k in trust/retirement funds

- 40k in a brokerage account

-15k in cash

I am in the Portland, OR market, which has been very hot and is hard to get return on rentals(around .5% per month). Should i be looking into other markets( I like the Jacksonville, FL market a bit)? I don't want to overextend my leverage and abuse my HELOC but also don't feel like I have enough to start out with outside of that.

Should I use my HELOC to oversee a few flips to build up my equitable assets before I look to buy and hold?

 Anybody with good credit & income can buy an out of state rental property. Isn't any magic to it. Pick a decent house & hire a property manager, mission accomplished. Flipping houses however is not the same thing. It's gonna take an active business owner to be able to put that together. Markets are strong, inventory is scarce & competition is at an all time high. Do you have a competitive advantage over others in the Jacksonville market? If so it may work but it appears from what I have read here you would be going into that business dramatically under gunned. I would look to save more funds the traditional way before going into a new business venture unprepared to best my competition.

Originally posted by @James Wise :
Originally posted by @Jeff Moe:

Hey all, love the site and the podcast etc. 

I am looking to get into REI and am trying to find the best avenue possible.

- I have 200k in home equity that I could leverage into a max of 140k in a HELOC(approved already)

- 100k in trust/retirement funds

- 40k in a brokerage account

-15k in cash

I am in the Portland, OR market, which has been very hot and is hard to get return on rentals(around .5% per month). Should i be looking into other markets( I like the Jacksonville, FL market a bit)? I don't want to overextend my leverage and abuse my HELOC but also don't feel like I have enough to start out with outside of that.

Should I use my HELOC to oversee a few flips to build up my equitable assets before I look to buy and hold?

 Anybody with good credit & income can buy an out of state rental property. Isn't any magic to it. Pick a decent house & hire a property manager, mission accomplished. Flipping houses however is not the same thing. It's gonna take an active business owner to be able to put that together. Markets are strong, inventory is scarce & competition is at an all time high. Do you have a competitive advantage over others in the Jacksonville market? If so it may work but it appears from what I have read here you would be going into that business dramatically under gunned. I would look to save more funds the traditional way before going into a new business venture unprepared to best my competition.

I think my original post was poorly worded. I don't intend to do long distance fix and flips. My main goal is buy and hold but if experienced investors thought that my assets were inadequate, then I would instead try to do some local flips to get some more equity. 

Hi @Jeff Moe ,

To start out in Jacksonville I would say you want about $50K if you're financing and $120K if you're paying cash. That will give you average returns of 7-11%. That's usually the budgets my clients have including renovations and closing costs/hidden fees. 

If you have any questions about Jacksonville feel free to reach out and I'd be happy to help. 

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