All Forum Posts by: Eric Schultz

House hack first, especially if you don’t have kids yet. You can take advantage of the FHA loan at 3.5% down with a 580+ credit score. If you buy right and place tenants, you can reduce your personal expenses, save cash faster and gain landlord experience all at once. Then transition to out-of-state investing if it still appeals to you.

Kwikset SmartKey locks are the way to go. Rekeying takes 30 seconds or less per door, and all locks on the unit can then be keyed to a single key. Tracking keys is simplified and no need for a locksmith.

Originally posted by @Kris Wong:

Each property manager will have their own cost structure, but I have typically seen:

• 8 - 10% of collected rents/other income (late fees, laundry)
• 75 - 100% of first months rent for a placing a tenant
• Some charge a lease renewal fee of $100 - $300
• 10 - 15% for maintenance and repair work that they manage

This will change if you start moving into larger multifamily, or commercial. Some property managers have also started moving to a fix cost fee structure, instead of a percentage of monthly rents.

These are good numbers for PM services.

There are several other terms that come with an agreement between you and a property manager, but the main fees are the monthly management, leasing and lease renewal. For example, one of my PMs charges 10% monthly, 50% of first month’s rent for placement, 25% for lease renewal and no markup on maintenance & repairs unless it’s above a certain threshold for cost of work and/or 3 or more contractors are involved.

In regards to cash reserves, it's probably a good idea to keep at least 2 - 3 months' PITI and another $1k - $3k on a 3/2 single family home. I typically carry $5k in available reserves for each property. This is very subjective as it all depends on the initial rehab efforts and any deferred maintenance or capex that you may have before placing the first tenant. A private loan or HELOC are certainly options for your "cash reserves", but be careful with the lending approach.

If you intend to hold the property long term you may want to factor in property management costs. Make sure you are realistic on vacancy rate in a rural area. One month vacancy per year may be a good starting point, but do some research. After all acquisition costs, make sure to have an initial cash reserves set aside. What if you have to float the PITI and utility bills for the first couple months until you get it rented? What if you have a $2K repair expense surface in the first couple months of ownership?

@Brandon Turner @David Greene Hey guys, love the podcast! If you had to choose only one sector / type of real estate investing for the next two decades, what would it be and why?

Why Houston? Invest in something like AHP Servicing for 10% preferred return while you continue to self-educate and save up more cash to buy a first property.

It appears you plan on self-managing this property. You may want to consider factoring in property management costs if you plan to hold long term. Depending on your initial rehab efforts, you may want to take a closer look at your capex and repair figures. Think through the realistic exit strategies and run some figures before you take on the deal.

There has been a lot of great advice so far. Here are a few more ‘big’ concepts to consider as you head out on your journey: Make sure to establish a strong “why?” so you can maintain that burning desire to achieve even when things don’t go as planned. Leverage is the key. Leverage other people's money, expertise, efforts and relationships. Find a mentor and/or establish a partnership. If you are headed into a dark cave, take someone with you that has been there before. Invest in people, not deals. Work with people you know, like and trust. Marry a partner who has a similar financial blueprint as you do. Divorce is a sure way to lose half of everything you have worked for. Start tracking your net worth. Look into the “infinite banking” concept, which involves a cash value life insurance policy specifically designed for investing. It is best to establish something like this when you are young and healthy. The compounding interest and dividends over time will serve you well.

It may be a good idea to survey a couple local property managers on this topic if your intent is to hold the property for a while. If your kitchen doesn’t have the basic amenities as other rentals in the area do at similar price point, than there is potential for longer vacancy periods. You may want to run the numbers thru a few scenarios and see how it could impact your ROI.

Turbo Tax / HR Block are great if your income and overall financial situation is simple. When you start adding investment accounts, rental properties, side hustle income, etc. its a good idea to turn things over to a CPA...preferably a CPA who has real estate investor clients and is also a real estate investor themselves. For true realization, try this: 1.) prepare your taxes on one of the mentioned softwares and pay the fee so you are able to save & print the documents, but don’t file just yet. 2.) take your self-prepared tax filing into the CPA for review (along with the last 2 years’ tax filings). A seasoned CPA will be able to look things over in 20 minutes or less and tell you what was missed or could be amended to save you money. In most cases the CPA’s tax prep fee will be less than the savings they can bring you, not to mention setting you up in better position for the following year’s taxes (deferring loses, etc). Good luck!