All Forum Posts by: Charles Moore

not an expert on these alternatives, but some sound similar to REITs - one-time investment into a fund that is a portfolio of different property types that pays dividends quarterly. Great for my paper investment portfolio, so long as it's in a tax shelter like a Roth IRA, but not very tax efficient outside a tax shelter.

maybe try @Upen Patelhere on BP?

I agree, keep looking. Local credit unions, possibly a mortgage broker. Maybe @Upen Patelhere on BP can help or give some advice?

I know some people have retired early, but maybe not quite as you describe. Let me see if I understand your situation:

You are about to pay off your primary residence and want to move out, rent it out for $1300/month, and buy a bigger primary residence to live in. Plus you want to buy 1-3 more rental properties and pay them off in just a few years, right?

So questions I have for you:

1) how much would your next primary residence cost? What would its PITI be?

2) do you have funds for your down payments on your new primary residence and the other rentals already?

3) what are your monthly costs of living? How much rental income would you need to live confortably?

4) are you willing to use a property manager to handle tenant issues?

5) will you buy rentals that need fixing up first?

I have the same goal of being able to retire early if I want, and my timeline is 4-5 years out before that can happen in a buy-and-hold strategy after much analysis on my part.

Are those the usual purchase prices for condos in your area? I know they're cheaper than SFHs, but jeez! But even so, what are the HOA dues, and how stringent is the HOA? I'm in agreement with many investors that HOAs are very irritating to work with, especially when they can levy assessments on the whole complex YOU have to help pay for. Also, if any maintenance issues come up from your unit that may affect other units (problems with shared plumbing, noise, etc.) the HOA sticks it's nose into the matter. How many renters compared to owner occupants are allowed? Condos also don't appreciate as quickly as SFHs.

Maybe wholesale or flip these units to be done with them?

normally I prefer buy and hold, but the extra risks and irritations associated with condo HOAs, I would say get it off your books as fast as possible, so either flip it or don't do the deal.

hi, @Dorian Redden!

I had the same thoughts and plans a few years ago to break into real estate - listened to podcasts, read books, even found a local mentor. However, I was still not prepared.

Looking back on it, here is what I learned:

1) Wholesaling is a 2nd job on top of one you currently have. It is crazy time intensive. You need to be willing to give up time you would have relaxing from the day job, and possibly time with family.

2) it's not cheap - buying mailing lists, envelopes, postage, a service to hand write your yellow letters...it adds up to thousands of dollars with a 1% chance of a successful deal for you. Plus any signage you make and put out.

3) it affects your taxes. Any profit you make from this is considered earned income by the IRS, just like your W-2 job. So your success increases your taxable income and the tax man can take more of it.

Articles have been written here on BP about why wholesaling may not be the best way for new folks to get started. I wish I had known about them years ago. Could have saved me time, money, and frustration.

Personally, I settled on the buy and hold strategy. More passive, more bang for the buck, and very tax-friendly - the IRS gives people more financial reward to be property investors than any other investment.

To incorporate your potential love of flipping, I might suggest finding distressed properties, fixing them up, then renting them out. Flipping them means the IRS can tax your profits like with wholesaling. You could use the BRRRR strategy described on BP, of house hack with an FHA loan with a 3.5% downpayment.

The money you use to pay for wholesaling marketing you can use toward a downpayment on your first rental project. Keep stashing away from your w-2 job, resell things on Craigslist/eBay/Amazon, sell crafts stuff on Etsy, rent out a spare room on AirBnB (if you own your own single family home), do some freelance tasks on Elance or Taskrabbit - all to accumulate funds for that first downpayment.

And all the while, attend some local REIA meetings to expand your network list.

Hope this helps!

I have to agree that by doing them a favor granting them seller financing, you're selling yourself short. Interest rates are still low now, but scheduled to go up. By the time you save up enough from their monthly payments for a downpayment on just one of the 3-4 properties you want, financing will be more expensive for you, then you have to wait another long time saving up for the downpayment on your 2nd rental. All the while you're losing out on today's cheap financing, tax benefits from multiple properties, increasing your own net worth, and the benefits of compound interest in general.

and since you should have tax returns from 2014 and 2015 showing positive cash flow from them, 100% of that positive cashflow will be counted toward your income, so it will make you even more qualified to finance your personal residence.

I am looking at pursuing the same strategy. I've talked to three recommended lenders. They're fine with lending conventional on multiple properties at once. Each property would require its own loan and closing costs. I've heard that if you've owned your previous rental for three years and had an active role in managing it, they'll consider this as successful experience on your part and take into account your projected rents from the new properties as additional income to offset the new mortgages and keep your DTI at a healthy level.