I feel a bit lost and overwhelmed - information overload
Member since 2021 · 20 posts · 8 votes
I'm a new RE investor and I've been absorbing as much content as I can from Bigger Pockets. I love the work you do, and I love the podcasts as well. As a result, I bought my first rental property last month (SFR in Huntsville, AL). I quickly see that I want to scale up my property ownership, but this is where I get lost.
I'm 50, I make a great salary (7 figures), I have a large stock portfolio, but I don't keep a ton of cash. I have no debt other than my mortgage (with a ton of equity). How do I build a portfolio fast??? I hear about all these folks that went from 0 to 20 properties in 2 years, and I can't wrap my head around it. Where do I go from here. There is so much information that I get info overload. I need to be pointed in the right direction. Any help would be appreciated!!! Thanks in advance
If you really make 7 figures, you could just buy 20 homes off the MLS over the next year, and then get a local PM company to manage them. The only thing that people usually need to figure out is where to get the money to buy the houses, but if you already have it, there's not really any problems left....
A 7 figure income is impressive and definitely lays down a solid foundation for acquiring RE, but your net income is probably the more important number. Out of all the things you mentioned investing into how much is going into the market outside of your retirement accounts? That is probably the most liquid place to reallocate funds unless you can cut other expenses that are making you feel like there isn't much left.
I saw you considered syndication, but wanted to be a GP rather than a LP. This is my opinion, but I think syndicators should understand their niche pretty well because you're dealing with other folks' money and the additional overhead involved (legal entity, structure for payback, underwriting, raising funds). Joining a syndication as an LP can help you understand the process and get you RE returns while limiting your risk and time spent. Potentially consider it a tuition with a return.
I think it largely comes down to what your goals are for RE. I saw you'd like to replace your 7 figure income with RE. You could calculate what you'd need to do that and make that your goal. For example you said you had a SFH in Huntsville that you were renting out. You could do some quick math to see how many SFHs in Huntsville you'd need to hit that 1M mark. Maybe that will help inform what strategy you want to learn more about.
There's definitely a lot to absorb, but don't feel like you need to rush into things. Take stuff one topic at a time and you'll start to see overlapping themes that will help accelerate your understanding.
@David Stelzer as @Account Closed said, something doesn't add up. You are making 1 MM$ per year and want to get into wholesaling and flipping? Really? I would expect someone earning that kind of money via a W2 job to be bright and capable of picking up real estate fundamentals in a matter of days - there is no rocket science or quantum mechanics going on in real estate that even someone on the dim side can't pick up. By the way, I saw your other post where you described how 20% IRR for a seven year hold leads to an equity multiple of less than 1. I would really like to know what kind of job pays such a salary - not because I earn half even though I can do middle-school math faster but because I'm truly intrigued. Is it a W2 job or some trust fund or some family business handed down over generations? Sorry for coming across like this but I may have similar reaction if Trump announces that he wants to run for the mayor of some town in Puerto Rico.
@David Stelzer with that kind of income I would suggest avoiding wholesale and flipping. A) those are both active jobs for yourself so they won’t create the passive income to eliminate your W2 - they will just create a new W2 like job for you and B) with your current income you will get crushed on taxes since both of those are active income and subject to employment taxes and short term capital gains.
I would strongly suggest reading Tom Wheelright’s book on Tax Free Wealth or Amanda Hahn and Matthew Macfarland’s books on tax strategies. They will help you pick a niche like larger multi family or commercial properties that you can buy and take bonus depreciation on to help reduce your 40% taxes that you mentioned paying. You could refi your primary residence to pull cash out or use some cash from your after tax brokerage accounts.
If you don’t think you can leverage the depreciation fully then consider investing passively with a syndicator or trying to partner and become a GP on a syndication deal. Your high income leads me to believe that you may know others with income like that who may be interested in investing with you. Check out people like Joe Fairless, Darin Batchelder or dozens more to learn more about that path.
@David Stelzer Huntsville is a great market. Nice choice. Invest near employment (and out of the snow). Even if the future is more remote work oriented, this is still a good move.
It’s not about growing fast. Things will snowball. What’s your rush? Great deals come up and those with funds can capitalize on them when they do. Buying turnkey new construction 2+ units is probably the fastest way to scale today and actually cash flow enough.
@joe splitrock . Thank you for the response. I'd love to get a sense of where to find large properties and portfolios. For now, I've been putting most of my extra money into retirement and the stock market. I wouldn't mind partnering on large buildings and portfolios, but my local market (Seattle) is just too overpriced for good cash flow. I've been focusing on Alabama and Georgia for now and not sure how to network out of town.
Check out short term rentals as a way to scale (10% down second home loans). My family and I have several in the southeast (Blue Ridge, GA, Smoky's, TN, and Miramar Beach, FL). I operate in Blue Ridge, GA as an agent and am seeing clients deploy capital on multiple properties through various financing strategies!
Is the source of your w2 income the family business or publicly owned / someone else's?
If it's the family business (or you have that kind of pull) and there are sufficient cash reserves to lend, write yourself a mortgage. You can repeat a standard freddie/fannie backed mortgage process 10 times and on a rate term refinance (no cash out) they will go up to 95% LTV. Assuming you haven't gone crazy in the lifestyle department, I'd think you could handle the debt to income ratios handedly. Once you own ten, scoot them off into an LLC and refi all your freddie fannie backed loans into a portfolio or commercial loan package and start on the next batch. Depending on how much you can borrow up front (if any), you can skip the whole middle step and just go direct to commercial financing, although our experience has been you should plan for 70% LTV on those options. We soften that blow by building some equity for ourselves in value add.
We built our portfolio on debt (impatience expressed financially) but got past 20 a couple years after we adopted a growth strategy.
Hi @David Stelzer. You might want to start by going after the 40% loss to taxes. Tom will write has a book about tax free wealth. Robert Kiyosaki has the cash flow quadrant. They teach ways to combine W-2 income with passive real estate investments to use the depreciation losses from the investments to offset your W-2 income.
Maybe I missed this above, but have you considered getting your wife involved and getting her to qualified real estate professional status? That could make a massive difference. Good luck!