All Forum Posts by: John Blackman

If you can take them down to 0% equity you are going to be at risk of being upside down during vacancies.  I answer a lot of questions this way, but I will do it again.  Make a spreadsheet with multiple options.  Run them out for the full length of your timeline until you think you might sell.  Create a spectrum of options, and choose the one that matches the level of risk you are willing to take.

Also consider what those refi's will do to your end of year tax position.

Make a spreadsheet with both possibilities.  Make one row where you pay off your credit cards month over month and accumulate cash until you can purchase a property. Each column would be an additional month. Estimate what that property will cost in the time it takes you to pay off your cards and purchase the property.  Run your model out for another 3 years.  What will your net gain be at that time?

Do the same thing on another row where you buy the property now and pay off your credit cards later, but have increased cash flow.  What will your appreciation be?  You will have to do some estimating.  Use conservative numbers.  One model will certainly be higher than the other (I suspect the second scenario) but will come with more risk.

Both can be viable, but if you are credit constrained life's surprises can knock the whole thing apart.

Don't get anxious to get into a deal.  You make your money on the purchase, so you will have to look at a lot of deals to find the diamond in the rough.  Austin is growing and prices keep going up.  Every year I look back and think, wow I should have bought that lot when I thought it was overpriced back then.  So building works well in growing markets because there is tight supply.

For buy and hold, I will echo @Rick Pozos.  Find the motivated seller.  This is where you will make your margins.  If you just go shopping on the retail market you can still grow over time, but it will likely take longer.

Pull up the flooring, clean it the best you can with odor neutralizers then paint the floor with latex paint which will trap the odor generating urine.  You may need to replace some baseboards too.

The black light was a good idea too.

Capitol City Insurance does builder's risk and flood insurance well, is priced well and can turn around a policy quickly.

This may sound against common wisdom, but you may have to live with a lower personal credit score while building your business credit if you want to use personally guaranteed debt.  I have kept a very high credit score for most of my life, but once I started doing Real Estate projects that required capital gaps, I would run up business and personal debt for short periods to make deals work.  They all had an equity asset behind them, so I didn't consider them bad debt, but my score did go down to the low 700s.

Even with a lower score, the utility of that debt has more than paid for it.  If you have already secured your home loan when you have high score as well as your car if you choose to have a car note, then taking a small (100 point ish) hit on your credit is not that bad for the business utility it provides.

Just make sure the debt can be recovered and is applied to a project where there is plenty of equity.

All of the aforementioned strategies can work quite well.  Considering your situation that $35k is not something you can afford to loose on trying your hand at Real Estate.  Many first deals don't make money or even loose money simply due to inexperience.  Mitigate your risk by participating in a deal as a minority partner or lender with plenty of equity to recapture if things go south.  By tagging along in a deal at a smaller portion of the deal you will learn a lot as well as reduce your risk dramatically.

Profitable deals like doing your own flip require a substantial amount of time.  Managing Real Estate assets is a job.  If you want to maintain your free time and just put your money to work, consider buying a passive investment with a strong performer who has a long and consistent track.  You won't make as much, but you will get the best yield on your time.

Hey, that's Mercury Mambo.  The 21st is a good day, but 10am is right in the middle of the work day.  I'd love to go, but alas I have a conflict.  :(

New builds close to Austin are getting much harder to do.  The land prices have gone up so much that you have to build exits above $500,000 to make them work.  There is money to be made in the luxury market, but it's riskier of course with the smaller buyer pool.

Excel sheets get lost and are prone to human error.  Try an online solution that links directly to your bank to save you the busy work.  I like xero.com.

Buyers are very strong for modern style homes in the city.  We wouldn't build them if we weren't hitting our margin targets.  A lot of the additional cost per foot is in increasing vendor pricing because the construction business has come back full swing so folks are busy, as well sewer tap fees which can be as much as $12,000 per new door.  The city uses developers to pay for new infrastructure.  We've also been spending more on better builders.  Good, fast, cheap, choose two.  We're discovering that fast and good is better than cheap and good.  Slow hurts more than you would think.