All Forum Posts by: Daniel McNulty

@Lanny Ray Ballard

Welcome to bigger pockets. Unfortunately, there is no law that requires them to disclose ALL their investments. If the sponsor you are looking at invests in a single property at a time, there is nothing stopping them from only showing the good ones. 

The exception would be if the sponsor invests in a fund structure with multiple properties all collectively owned. Only showing the good ones and misstating the partnerships collective performance would be illegal. However, they are not required to show you other fund structures that have not done well.

The burden falls on you as the potential investor to sniff out sponsor BS. 

Ask for audited financial statements from a independent accounting firm that you recognize the name of. Then calculate the return yourself. If they do not have audited financials, walk away.

I would also ask how many total deals they have done. They are likely going to give you an honest answer or over-exaggerate. Either way, you will know that more deals exist, so ask for those as well (and the audited financials). 

Ask for references for each of the sponsors leadership team and ask for investor references. If they are unwilling to provide them, walk away. If they do provide them, well now you have another pool of people to ask about prior deals and their track record.

I would also explicitly ask about their worst deal. If they have never had a bad deal, they haven't done enough deals, so walk away. Everyone at least has a break even or something with mild returns that just pays the bills. It is much more important to hear how a sponsor worked out a disaster and saved a deal than it is to hear about their home runs. You don't do diligence to find the home runs, you do it to avoid the train wrecks. 

There is certainly a TON more to do on the diligence side, but hopefully that's a good start on sniffing out any BS.

@Sharon Ho 

1. Have 3 - 6 months cash emergency fund for personal and similar reserves for RE. Lack of liquidity can sink anybody in a pinch. Its literally the easiest way to combat every major hurdle. Job loss, health problems, broken hvac on your rental... adequate cash can cure it all. Do it first. 

2. Save / invest / reinvest > 20% of your gross income and you'll be ahead of most people. Its just a rule of thumb, but it gives you a target to hit and that is half the battle. 

3. Pay off high interest debt or refinance down to the terrific rates available today.

Its a mixed bag after that.  If your employer has a 401k match of some kind, that is basically free money and would be my #4. 

As far as whether to max out roth vs 401k vs after tax just depends on how much flexibility you want and where you think you might end up from a tax standpoint at the end of the day. In my opinion, Roth of any kind is especially attractive in light of the historically low tax rates today and the likely tax increases in the future to offset today's fiscal and monetary policy. 

A few other random things I like are the triple tax benefits of a HSA / high deductible health insurance plan. If an HSA is an option, you have tax deductible contributions, tax free compounding if its invested and tax free withdrawals for all health related expenses (which can be a ton later in life). I also appreciate the dave ramsey debt snow ball (look it up) for those people that have an aversion to debt. Its not my cup of tea, but its straight forward and helpful for many. 

Hope this helps. 

@Blake Jones

I would find an independent agent whatever you do. All you really need is someone you trust to pull a half dozen quotes with sufficient coverage. 

In my neck of the woods, a number of my clients have worked with Insurance Brokerage Alternatives (ibalternatives.com). I would be happy to connect you if you don't have someone in your area you prefer. 

I am relieved to hear that this has a happy ending. I was admittedly afraid of loan doctor....Its all a matter of perspective on risk I suppose.

Some online banks are offering 1-2%. Not half bad.

Ultrashort ETFs can boost you up a little bit further past 2, but comes with added volatility.

Bond market is precarious these days with terrible rates outside of the high yield market. Frankly the high yield market is about the only place worth looking, but its certainly not comparable to a savings or CD from a risk perspective. 

Structured products are on the rise as they offer equity like returns with downside barriers. Again though, not necessarily the same as a savings account that can be liquid in days.

I'll keep an eye open for anything comparable...

@Dan Beaulieu

You are correct that many people that applied, did not qualify. Ignorance of the program rules / requirements is certainly not in any ones best interest. Please do not misconstrue my statement that the program exists as advice... The program link is below.

https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service

Your points about mindset as it pertains to debt, side hustle, etc. are all fair points. I was merely pointing out that the program exists.

@Jack Perfett

Common wisdom would say diversify and do all of the above. Create some different "buckets" of money that are destined for each goal. Real estate is a fine asset class, but so are public securities over a long horizon you are no doubt facing. 

As long as you are setting it aside and not spending it, your options will remain open to pursue whatever avenue makes the most sense for you. 

@Eric L Conry

I would base it on your cash flow NEEDS, not wants. If you need the cash flow to live on and it will improve your lifestyle, then go for it. If you don't need it and or are still working, you'll make far more in the long run leaving it invested.

@Zach Henson

All the info above is solid. I wanted to drop a somewhat unrelated knowledge bomb on you as a potential public servant. Many nurses qualify as public servants and qualify to have their student loan debt forgiven after 10 years. There are some nuance to these programs, specifically what type of job you accept. For instance, my wife (also a nurse) works at a not-for-profit hospital and qualifies. Working at a doctors office may not.

Something to consider. 

@David New

If your time frame is only 8-12 months, your options are somewhat limited.

There are many ultra short ETFs that hold commercial paper and treasuries that could push your yield above that savings account. It is in essence what your bank does with your money anyways. However, it is still going to have some volatility and may not add enough alpha to make it worth the bumpy ride. 

Technically speaking there are a plethora of other debt or debt like instruments that would yield much higher, but I would not say the risk is comparable to your Ally account. 

@Account Closed

All options above Pro: An opportunity to passively invest with expert operators. Cons: Often have minimum wealth requirements and can require anywhere from 50k to 1 million to get your foot in the door.