All Forum Posts by: Chad Olsen

Welcome! Sounds like you are doing some good things already. Congrats on having great credit, high lines of credit and rentals in different markets.

Let me know if I can help in any way!

Welcome! I went to CSU and have fond memories of Ft. Collins. I really miss the foothills and mountains of CO. I now live out in CA with my family and travel back to CO to see my parents. If you have questions please reach out! I'm happy to help.

Welcome! Congrats on making the decision and taking action to become financially free! I agree with @Simon Shih to listen to the podcasts and write down your goals and a plan to achieve them. Make sure that you know where you sit right now financially and where you want to be at your goal. Knowing where you start is key to any goal. Good luck and keep us posted!

Congrats on getting your first deal done! That is a huge first step.

I'm sure you've heard it before, but partnerships are like marriages. Don't just jump right to moving in together on the first date. Make sure that you "date" for a a little bit, check up on them and make sure that you can work with this person. Ideally, they would have skills that compliment your weaknesses and have a good working rapport. Not everyone with money will be a good partner, or a good partner for you.

That being said, business is a team sport. In my experience, I've not come across a massively successful business person who did it all themselves. If you want to grow and expand you will always have to have a partner or partners. But you may have to "kiss a few frogs" so to speak. ;-) And a good partner is going to do the same due diligence on you. So make sure you have a solid track record and proven results. One success is great, but a trend it does not make. I don't know your full situation, but it may behoove you to get up to 3-6 deals without a partner to show this track record.

Good luck! Keep us posted on how things go.

@Calvin Thomas all good points. And I think that @Dan Vleck made a great point, different strokes and all that. That being said, my wife and I go through this discussion about once a month on what is a better way to acquire rentals, or even a primary residence. I'm more in the camp of intelligently use leverage/mortgages to maximize our investing dollars and she is more in line with using leverage, but smaller leverage and use more investing dollars on a given asset. And it's different every time we talk because the situation is different. So even if you have a given strategy that works, it may not work in every situation.

That is where knowing your criteria and pertinent information about a deal is key. As our mentor keeps telling us, the asset is either a good deal or a bad deal all on its own. The numbers have to work out first. Then you place financing around the asset. Financing doesn't make a deal good or bad, it just amplifies the deal whether good or bad. So knowing your reserve needs, DCR, BER, demographics, vacancy and other important factors about a given rental property (if you are in other assets know the keys there) for good or bad. If those numbers don't pencil out before hand, it won't matter what the finance stack is like, it will always be a bad deal.

But this is where a good deal can also become a great deal if you have the right kind of finance around it. Using all cash is powerful for getting the great deals quickly while they are there, after all cash is king. But then you have large amounts of liquid capital tied up in a property for at least a few years if not forever. So without a mortgage of some kind that money will be poorly utilized long term. Getting a HELOC on those properties or getting a blanket mortgage for say 50% of the value of your portfolio can really be a powerful way to redeploy that capital. Say you had 5 properties, all cash, valued at $500k (easy #'s). If you got a blanket mortgage on it for $300k, you would have 60% of your capital back, with a huge buffer for market fluctuations and redundancy with 5 doors paying a single note. So your vacancy volatility is reduced. Now you can take the $300k and either buy more properties all cash or repay your LOC on your portfolio and search for the next great set of deals. Then rinse and repeat.

The only downside that I have, personally speaking, is that I don't like using a loan (personal, LOC, HELOC, etc) as my down payment. The down payment is the riskiest money in real estate and the first money to disappear when the market dips. Which is why the banks want you to put a bigger amount down. This further protects their position in the mortgage. So when you have a loan for the down payment, and the market dips, you now are not only upside down on the property, you also owe money on a position that is no longer there. Big down side risks. This is where a strong partnership comes in. Someone has to put the down payment down, I just would rather partner with someone and further mitigate my risk in a deal. I can bring value to a deal in many ways, through management, deal finding, even down payment, but I feel that MY money is better utilized elsewhere. Again, this is my opinion. Sometimes it works, sometimes it doesn't. Depends on the deal.

The hard thing is that many times these concepts are competing and you can do one OR the other. Sometimes you can find some common ground and do a mix of both. And this is where the debate usually goes for us, and looks like this community in general. Hopefully I didn't muddy the waters too much.

@Calvin Thomas No worries. I totally get it. The best analogy I've heard is that debt is like a fast car. You may know how to drive a car, but not a fast car. Not everyone can be an F1 driver for instance. So thinking you can drive really fast with your debt when you don't know what you are doing, can be very dangerous. I'm sorry that your family has had some hard times with their debt. That is why BP is such a great place to learn about what do and don't know so that you can get better.

I would be very interested to know more about your history with business lines and how you got them and utilized them. We are working to build up our personal credit more so that we can move into building our business credit. A slow and difficult prospect.

@Calvin Thomas, you have a really nice reserve fund so that is really good. I've been working on building my reserve fund up this past year and am nearly complete on that task so kudos to you.

The not wanting a mortgage on your credit is likely actually hurting your credit more than it is helping. There are things that really need to be in your credit profile in order to be desired by the banks to give out more credit. And a huge part of that is how well do you already treat other people's money, ie loans, mortgages and credit cards.

Your comment about not wanting to be rich is confusing. If you don't want to be rich, or even wealthy (have free time to do what you want b/c your passive income exceeds your expenses) then why would you be buying rentals or doing anything in the market at all? I'm not afraid to say that I want to be wealthy. I want to be wealthy, so wealthy that I can buy back all my time and spend it as i see fit, not doing what I "have" to do.

There are non-recourse loans out there (no personal guarantee), but you have to have a track record or some other factor that can offset not having a history of treating banks money well. Going after the non-recourse loans is good, I'm working in that direction too. But that doesn't happen overnight and you have to show a good history.

I would recommend two things:

1) Get a copy of the Value of Debt and read it and think about it

2) Reach out to CreditSense.com. The education alone is worth the time to understand what you don't know about your credit profile. I've had the education and am convinced that a strong credit profile is key to getting credit.

Congrats on joining the community and being in the Bay Area!

Hello BiggerPockets community! I'm very happy to be here and learn and help others learn more about real estate investing. I'm not a full time investor, but have a number of rentals in my portfolio and looking to acquire more. I also am a private lender helping investors put their money to better in real estate.

I love to each others about finance, real estate and science! Being an engineer by trade I love to learn new things and help others to learn new things as well. My wife and I are growing our rental portfolio as well as family. We are working towards our goal of generating $10,000/mo through passive income. From there hopefully we will be in a great position that we can continue growing and be able to do investing full time and spend all our time with our young children.

I look forward to learning from everyone here! Thanks!

Be careful in how you ask your family member for the money. Also, rather than getting a loan from them, which could make permanent financing harder down the line, and Thanksgiving dinners as well, consider bringing them on as an equity partner. You would be the person doing the work, but they would be the "money guy" behind the deal. Make sure that you have detailed business docs/agreements in place so that they know that this is a business deal and not a family deal. Then give them part of the deal for their money stake.

When you do this kind of deal, make sure that you are thinking about more than just the purchase price though. Think of the operating costs of the business, maintenance, utilities, reserves, etc that also need to be funded. Better to show a good deal and over raise the money than show a home run deal and have to go back or out and look for more money to keep the deal a float.

Good luck!