All Forum Posts by: Jacob Phillips

@Kase Knochenhauer thank you for tour input! I plan to run them separately. So I have six months of personal finances all saved up (a prerequisite for moving on with my real estate pursuits).

I thought I’d maintain a 6 month minimum cushion in the business before moving on to (and saving for) the next property. So one $500 mortgage requires $3000 in the bank, before saving for property two. Once I have it, a second $500 mortgage would require $6000 saved up before the next and so on. The troubling part is ultimately that’s just not that much money. Sure I have the available credit, but like I said, I’d hate to lean on that too hard.

I’m just curious how other landlords address this topic.

I’m a new investor and just this week, after about a year and a half of saving and learning, have just put my first property under contract (fingers crossed)! It’s no homerun but it will cash flow and has me thinking on to the next, and I have arrived at the following question:

How much cash do you keep in your emergency fund?

I tend to approach this with the standard personal finance rule: build a 6 month safety net. So, as I acquire more properties, from that perspective, I would keep enough cash on hand to cover 6 months worth of each mortgage.

For context, I live rent free in my rural market thanks to my job, so I set aside $500/mo from my W2 income for real estate investing. I’m this will be my first property, so I don’t have any equity to tap into. I have about $9k in available credit to tap into, but for obvious reasons, that’s a last resort.

So, as an example, the mortgage for this current property will be about $460. By budgeting in repairs, CapEx, vacancy, and property management (which I'll do myself for a while), plus pumping the cash flow back into it, I will fill my 6 month emergency fund in about 4 months (not counting my W2 savings). Obviously I would continue to set money aside for Repairs, etc, but that in reality even 6 months of mortgage could be wiped out pretty easily if the right thing went wrong. So at what point do you feel safe buying the next one or two? I'll be perpetually setting aside a percent of the rent for repairs, CapEx, etc, but at what minimum amount do you draw a line? 6 months per property? 12?

I’m not sure I’m articulating this well, but the basic question is: how do you balance safety net with wanting to expand? Expand too quickly, your emergency funds are not nearly large enough. Expand too slowly, and you have cash sitting idly. I’m not afraid of idle cash if I know I could cover virtually any emergency, but I also want to grow as quickly as makes sense. I know the answer varies from person to person and situation to situation, but I’d love to hear your approach and how you try to achieve that balance.

@Jeremy A. I’m sure this has been stated but my gut reply is to tell you that I’m fairly certain alcoholism is considered a disability which is a protected class. Tread lightly!

@Shane Braunworth

I am in your shoes, although it sounds like we are in much different markets, and I’m not looking at student housing. However, I can totally relate to the feeling of just wanting to get a property. I’ve found that it really helps to spend that energy in making connections in your community. Talk to banks, talk to agents, talk to other investors. Look at properties. Talk to all the people you may eventually use as you get your business going. My aunt is a realtor here in my town. She’s on my side looking for me, but that hasn’t stopped me from connecting with two or three others as well and letting them know my criteria. I’ve also connected with property managers who now know my criteria. This will take some time but in my case has allowed me to see a lot of properties, get familiar with expected rents, save a lot of money and wait for my year end bonus, and it’s allowed to me to find the right bank. I’d say I’ve been actively “looking” at properties and finding connections for the last 6 months, and it is astounding to me the roll that has developed in the last two months now that all these people know what my goals and criteria are.

Be patient, use the calculators, key in to all the these “rules” mentioned above. In a matter of a couple months I’ve gone from hearing “no way” from the banks to today having one immediately send me a prequalification letter upon hanging up with him (on the phone he said he’d have to take it to the board in the morning first). In this particular case the banker has seen me progress over the last few months and seen how I’ve remained diligent but refined my criteria. I know it played a roll in him immediately qualifying me once I found what I believe may be “the one.”

The more you look the more you’ll refine your criteria and recognize the good or potentially good from the bad. I don’t think either of us needs a home run for our first deals, but I definitely think you should value cash flow over appreciation.

Good luck!

@Jaysen Medhurst thanks Jaysen. Felt silly asking it but I wanted to be absolutely certain that I understood it correctly.

I don’t know all the terms of the refi yet, so i don’t know the rate. To be frank this was all conversation I had with the assumption that wouldn’t qualify for much. First lender I spoke to who I’ve done most of my banking from. Small town bank, few branches in the state, nothing too big. And keeps loans in house

Ive been turned on to a deal in my town for two 3br/1ba houses, neighboring each other, for $69k total. They are older homes, and one for sure has space to add at least a second half bathroom. My agent (who happens to be my aunt) ran comps on the area and we believe both could appraise between $60-70k. I've spoken with a local bank and they will let me do 10% down at 5.75%, AND will refinance me 80% of the ARV with no seasoning period.

My silly, rookie question is, how much does that cash out value equal? Is it the 80% ARV minus original loan? I've run numbers with the $60k ARV, making the total $120k and refi of $96k. Is there something I'm totally missing here? Still working to make my first deal happen but this sure seems like one to learn more about.

For context this is a larger rural town in mid MO, my hometown, and good starting point for me

@Joseph Firmin thank you for your tips! Does Cozy provide the option to also collect rent?

Is there a checklist of items that may be second nature to you but that I should know about as I get closer to having a tenant? Bases to cover, etc

Good evening, BP. This Sunday I'm hoping to look at a pair of houses neighboring each other that were brought to me off market. My hope is to be able to BRRRR them, and they would be my first real estate purchases.

My question revolves around the rental side of things. I'd like to know what would be your checklist for a first time landlord who is hopefully a couple months away (after rehab) from acquiring tenants? 

I'd like to know your go-to tenant screening resources, for instance.  I'd also like to know if anyone has Missouri real estate attorney recommendations. I've gone through the landlord forms provided by BP, but I'd still like to hear your suggestions, if you have them. I'm reading and listening and doing all the research I can, but as we all know at some point I just have to act, so here we are.  I intend to self manage to begin with in order to learn and familiarize myself with the processes, but I will be contacting property managers in the area to glean what information I can from them, as well.

In a nutshell, if you were talking to your younger, less experienced self, what things do you wish you'd had more established whenever you began acquiring your first tenants?

@Ana Klein as far as properties go, I’m learning so fast that it’s all about relationships. I asked an old high school classmate about a property she had listed and when she found out what i was interested in doing she connected me to an older guy in town who’s in the process of dumping off his properties. Not sure they’re gonna work out for me, but that connection happened so fast. Same thing happened when my realtor-aunt found out what i was trying to do. Now she’s got pocket listings that may come at a small deal for me.

Im learning that the more I talk about it and people in my area see my interest and passion, the more they’re interested in helping.

As I mentioned in my other post I'm still working on getting into my first deal but I've heard a lot about the 70% rule for flipping. If you haven't already heard that, it means buying the property at 70% of its After Repair Value (ARV) or less. By using that guideline alone I'm able to evaluate properties and know whether or not that particular property fits that business model.

@Aaron K. @Ana Klein by no means an expert here—still working on getting into my first deal. This is my busy time of year so that’s slowed down a bit.

However, I listened to episode 258 today, which coincidentally talks about this very thing. The guest on that show converted his 401k to a self directed IRA and that was how he was able to use that money for his investments. I'm by no means a CPA, but it sounds like you at least might have the resources to figure out if that's the right thing for you guys!

Hope that helped some!