All Forum Posts by: Eric Schultz

The high fees that come with borrowing from a 401k are usually not worth it, especially with the time horizon for retirement mentioned. Stay away from hard money in this situation. Cash out refi in the larger home to generate a down payment for a smaller home is an option, but the closing costs for a “jumbo” loan in this case would probably be too expensive for the numbers to make sense. HELOC on the larger home to generate down payment for a smaller home is an option, but there should be a solid plan on how to pay it down with rent cash flow from the larger home and other income streams or savings. Reminder, HELOCs come with a variable rate. With all that said, it may be a good idea to make this transition from the larger home to a smaller home now while one of the in-laws still has some predictable income over the next few years before retiring. This would allow for a tenant to help pay down the remaining mortgage balance on the larger home over the next few years, which could pay off the mortgage by the time the in-laws reach full retirement. Then it sounds like cashflow from the larger home would double and be a more significant income stream in retirement. This strategy assumes self-management and it would be good to gain this experience being a landlord while there is still some financial runway with the working years left. If push comes to shove, the in-laws could just sell and move out of state. Use the funds from the sale to pay cash for a smaller home and be mortgage free in a lower cost of living area. It’s great that you are able to advise your in-laws on such a big decision! Good luck!

Sounds like this property and location are a C- at best? You might want to evaluate deferred maintenance some more and how you will handle property management with this tenant class. Exit strategies may be limited too, such as investor buyers only.

An experienced CPA that works with real estate investors should absolutely know what an accredited investor is and have a template letter ready to go. You might be able to find a CPA thru a local REI meetup.

It is common for many lenders to use a maximum DTI ratio of 43%. Focus on actions that lower your DTI, buy in your personal name for more favorable financing, then transfer title to the LLC. This is not considered a "sale". However, it is best to discuss this approach with your lender up front.

It does depend on the size and type of project for the initial draw. Paying for materials upfront is justifiable; 1/3 of the quote is a good rule of thumb. It is good practice to draft up at least a 1-page work order outlining a scope of work and payment schedule. Include the estimated work duration as well. For large projects, request the contractor to provide a schedule of values before starting work; pay based on % complete weekly, bi-weekly or monthly.

Around $150 - $200 / door net cashflow in a Midwest B-class area is considered solid these days. This factors in vacancy, PITI, PM fees, capex, repairs, etc.

One tip on insurance shopping: bundle. If you are able to use the same carrier as your primary residence and rental properties, you will save a lot in premiums (aka higher cash flow). I’ve been using Safeco for a few years now. At some point you might look into an umbrella policy once you start acquiring several assets.

3/2 at 1,200 - 1,550 sq ft is a sweet spot rental for most Midwest markets.

Here are some ideas on how to invest $25K in real estate: 1.) Invest in a syndication deal as a limited partner. There are proven general partner/sponsor/operators all around the country: A. If you are an accredited investor, you can participate in a SEC Reg D 506c offering as a limited partner. Some offerings have a minimum of $25K investment. B. If you are not accredited, you can participate as 1 of 35 non-accredited investors or “other purchasers” in SEC Reg D 506b offering as a limited partner. This option allows you to invest along side accredited investors. Some offerings have a minimum $25k investment. 2.) Buy another single family investment property. With a $100k purchase price, 20% down, 5% rate on 30-year fixed conventional, you will be right around $25K cash-to-close in several Midwest markets. Rehab costs and cash reserves being separate, of course. 3.) Invest the $25k in AHP Servicing (Google it) for a 10% preferred return while you make bigger plans for that $25k. With all of the paths you can go today, it can be tough to choose. Good luck!

Wow, what a great opportunity! To add on to what others have already shared... Do some research on his background and business so you aren’t wasting time asking questions on information available via his company websites, LinkedIn, Google, etc. Chances are good that he has many stories to share. You could ask questions to provoke some lessons learned. Some ideas / topics to craft your questions around: First real estate investment deal Example of a business-related failure and how it was handled Time management Leveraging other people’s money, expertise and efforts Book recommendations What would you have done differently in the process of getting to where you are today, knowing what you know now? What kept you motivated all of these years? Hope this helps.