All Forum Posts by: Eric P.

Living in NJ we've been looking at a few properties and it seems the 1% rule doesn't really work because of the high taxes..  Example:

$130,000 property.  Owner had cats so it really just needs new carpets to get rid of the smell but we'll say it needs about $10,000 incase there are surprises.  This property should easily rent for $1,500 a month covering the 1% rule.  The problem is the taxes on this place are $4,800.  It would still be cashflow positive but only generating about a 7% return on original investment.  

From what I've read you really wanna be like 12%+ otherwise its really not worth the headache as you could just invest in an REIT getting about the same return.

Anyone else run into this kinda thing?.. am I missing anything on the numbers?  Its seems like in NJ it really needs to be the 1.4% rule.  

Wife and I are still trying to find our first investment..  We are going to look at one this Sunday, but there is a sunroom on the back of it and I'm wondering if it was constructed with proper permits.  Is there a way for me to check to be sure of this assuming we like everything else before putting in an offer?  If there are not permits is this a deal breaker?  How much of a headache or financial pain can this be?

All excellent points..  Maybe I can do a bit of both.  Pay down the car, that would keep $300 in our pockets each month and should only take about 6 months to build back up, it might take me 6 months to find the first property I like.

I actually have 5 student loans left in total ranging from 4%-6.5%.  I could snowball and pay off the 3 that are over 3.5% that should set me back only another 4 months.

Then the ones that are left will be lower, freezable, tax deductible loans that are probably only costing me $100 a month total.. at that point maybe I should start really looking?

I'm just always worried I'll find another reason not to go for it.. like we get pregnant, or my wife moves to a new unfamiliar department, I start a new job.. who knows

My goal getting started by the way is to find a property around $100k that needs maybe $20k worth of work tops and either use BRRRR or possibly trying a flip depending on how it all comes out when I'm done. My numbers include 15% (have a lender), 6 months of expenses, and the rest for closing costs and updating. After all expenses (property manager, vacancies, cap, surprises, etc.) I'd like to be cash flowing $300 a month.

I don't know if I'd call it "bad debt".  The student loans are all federal so could be placed in deferment if they really had to and the other debt is just a used car loan, I imagine plenty of people get their start while having a car loan.  We don't have credit card debt or a heloc or anything like that, if we did I would def get rid of that asap.  

Might be worth noting my wife works in state government with a very safe job.  If I froze my student loans her income alone would just about cover all our expenses and I keep a 6 months emergency fund just the same.. so bankruptcy would have to come with extremely hard times that I may not have been able to prevent either way if it gets that bad

Its a new loan so all the interest is front loaded.  Its at $340k now I think.  We also have NJ property tax at $9,800, some student loan interest, and we make a few donations every year.  So we actually blow past standard deductions by like $15k.  

I'd love to payoff my primary mortgage as all our expenses could then literally be covered with part time jobs if needed if that was gone...  but at a tax deductible 3.5% interest its so hard to put extra payments toward it.  

Thanks!  I have a weird little system that works well for me.  Lets say I go out to dinner with my wife, I'm about to order a $6 beer and say "Ya know what, I'll just have a water instead"..  I go onto my banking app and transfer $6 directly to my savings account.  Or, if I sell an old something on eBay or craigslist I split what I made 3 ways.  1 part goes into a student loan payment, 1 part goes into savings, and 1 part gets enjoyed now.  

My wife and I are pretty frugal as well and both work so we have a fair amount left over each month after maxing our Roth.  

We purchased our primary home 2 years ago with $40k (10% down) a year later we put another $9k down during a no cost refi to eliminate PMI and drop our monthly payment by almost $400. That $400 we're saving in mortgage payments goes right into the savings account.

I have about $37,000 worth of debt between student loans and used car payments.  My highest rate is 6.5% student loan (tax deductible) the lowest is the car loan at 3%.  I want to break into RE investing with my biggest goal being monthly cash flow first, and wealth building for our retirement years (which hopefully would come sooner) second. 

I have enough cash to either clear out all my debt or invest in our first property.

Clearing the debt would save us $670 every month.  Investing would hopefully generate $300 cashflow but would also come with all the other perks.  Otherwise the loans should be gone in about 5-6 years.  

Getting the $37,000 back would probably take a year, putting our RE investing on the back burner once again.  Or I could take the $300 RE cashflow and apply it to my debts every month adding $3,600 worth of payments.  

Trying to balance both financial smarts, cash flow goals, and overall peace of mind..  Being debt free may also make the jump into RE investing a bit less stressful.  

I don't have the capital to lay out on a sheriff sale or auction.  And honestly I don't have the guts to do it sight unseen either.  But a lot of these houses seem to be very good deals.  One locally looks to be in amazing condition with a value of just over $200k that sold at auction for $104k.

I'm wondering if its realistic for me to contact the buyers (public info), and offer them say $15,000 more than they paid at auction.  It would give me the chance to actually see and inspect the property, and I'd be able to get financing.  They'd make a quick $15,000 without having to actually do anything at all to the property.  

Sound reasonable or am I dreaming?