All Forum Posts by: Axel Meierhoefer

Rates vary and shopping around for the best or a really good one is something anybody should do. I have not seen that you can get a deal with less than 20% down and no insurance. You should probably run a comparative calculation between the lower down payment and having to pay for insurance and paying a little more down and no insurance. I assume you are buying it for positive cash flow, so you could calculate how many months of cash flow it will take to repay the 5% difference and not having to pay insurance, which will result in that much more cash flow. Depending on the price fo the property, you might put that 5% on a short term credit instrument and repay it with positive cash flow from the property.

One curious thing I like to ask: Is the property reasonably close to where you live? If so it could significantly improve your options.

My rentals are all 100% occupied and people pay on time. I think part of this media frenzy about evictions and recession make those 85+% of people who have kept their job much more aware of how valuable it is to live in a nice place. My properties are all single-family homes that were recently renovated, are kept up as much as we can and the rent is reasonable. I think my highest is $1250/month. I see it as a win-win. I am in a 1% scenario and the tenants couldn't find better deals unless they move to lower category neighborhoods. I would not call it "on fire" but it is stable, which si very comforting for me as an investors and allows me to look for new deals to add to the portfolio

@Todd Powell The circumstances you describe at the beginning of this discussion are surely unfortunate. Many people send you positive notes about landing a new W2 job

I am curious: What are the reasons for you to remain in W2 employment and how does that fit into your overall goals and long term plans?

I use these questions in my GROWER approach and would be really interested in your answers.

I bought a house in New Mexico with a real estate contract, paid the agreed price at the end fo the 2 year term, lived in the house 2 more years, sold it and made  $100K or 35% profit on the purchase price and 400% on my downpayment. Then I bought gold from the profit and made another 35% profit in 6 months on that. 

@Gail Greenberg I agree with the steps outlined by @Shiloh Lundahl

Fundamentally I am missing two things that should play a role in any of the approaches suggested for your friends:

1. What's the BHAG *(Big Hairy Audacious Goal) that the $10K/month are supposed to allow? some people might call that the "Why". That does not mean putting the goal itself in question but the purpose can significantly impact what to do, where to do it, and what are things on the path to this nominal number that could also support the BHAG. For this, I use an approach called "GROWER" and have found that people really appreciate spending time on gaining clarity about the goal and the path to it. 

2. The intensity of desire. Many people have told me they don't have time. In reality, we all have the same 168 hours/week. If your friends, just as an example, work 10 hours a day, 5 days/week, and sleep 8 hours a day, they would have 60 hours each week left to dedicate to their BHAG. The question becomes how badly they want to make it happen and how deeply they want to be involved themselves. To follow the steps Shiloh had outlined, they might have to find 'work from home jobs' in a location where the entry price to houses is lower and building a portfolio is easier. Those aspects are influenced by desire, not so much by the nominal end result

@Joe Splitrock Thanks Joe

I know but I have such great tenants, I would not do that anyway. I actually like to teach all my mentoring clients that they should really pay attention to who they rent to or have pretty strict rules for their property management companies. I have those and it has worked brilliantly. I would rather help my tenants to get thru this time if it looks like any predicament is temporary. It's a little like a spousal relationship. Don't want to evict that either :-) but you need to select well from the start.

To me, it has always been important to have great relationships. That applies to the tenant, to the PM, to the lender, insurance, title company. It has lead to much recurring business and much better treatment when quick action was required.

@Mark H. Porter You are right about that. I am looking always from a budgetary aspect. If you read the EIDL guidelines and the SBA loan guidelines they state that one should apply the funds to advance the business. Naturally, that is not investing. At the same time, if you think about it. Unless the business is profitable, it often requires personal contributions. With the loans in place those can go into investments.

The PPP allowed me to keep the employees (at least for a while) which is the intention.

My experience so far since early March is that I have been used to payments in certain areas and some of these areas have been replaced by government programs, allowing me to save the money and maybe invest it next year when we are past the pandemic. I advocate that people, if they kept their job, don't change their saving habits, or if anything, accumulate more savings to be ready to invest when the insecurity of the crisis is fading.

We are creatures of habits and any good habits should be kept even in a crisis as we have right now.

@Joe P. I agree Joe. I am looking a little longer term. If you look at the situation as it appears to be set up right now, FHA and Freddie/Fanny have guided to add the missed payment to the end of the mortgage term. That would mean someone with some performing properties could collect the rent, pay insurance and property taxes each month, put money aside for maintenance, CAPEX and vacancy, pay for property management and still have ht bulk of income available to safe.

Sometime next year forbearance ends, the guidance is applied and the saved funds can be applied for investments while the missed payments will be paid with Dollars at valuations in 15 years or 30 years or sometime in between, but in any case at a much lower valuation than today.

I admit that this would require foresight and patience and a strategic plan. I am applying for one of my properties right now and it seems to work So far I have not had any issue and I am not applying for funds at this moment. our point about underwriting is very true.

Still, basically free money is nothing to bark about, I would say.

Since the pandemic started in March, the government has passed a number of programs, extended some, etc. I particularly am looking at student loan repayment moratorium, mortgage forbearance, EIDL loans, PPP, SBA loans, etc.

When I look at all these options and using all of them it is amazing how much funding is now available for investing.

I wonder if you re also considering using some of this money, especially if you re an investor or part of the approximately 85% of people who still have their jobs?

What have you tried so far? Are there things that keep you back from taking the first step or the next steps to really build a passive income portfolio? 

Are there terms or things that block you or make you afraid? If so, what are they? 

I learned over the years that real estate investing is similar to many other things that have the best results when you set a goal and make a plan to achieve it. Yes, the plan I made many years ago had to be adjusted a few times, but the overarching vision has always been to follow the plan and reach economic independence. Just having the freedom to decide what to do each do, what passion to live into, and what activities are generating the results I am looking for is in and off itself motivating and energizing.

I am sure many of you have stories to tell, experiences to share, and maybe questions about your plan, how to create it, and what should be in it and what could stay out.

Let's share our plans and experiences and learn from each other. I am sure we will learn a lot and gain additional insights.