All Forum Posts by: John Upperman

@David Faulkner - thanks for the feedback. I agree with your assessment of putting tax advantaged assets in an already tax advantaged account. In most cases this doesn't make a lot of sense, but my motivation is not really about the tax benefit but rather the return on cash invested as well as the overall appreciation of the asset. Even with the discounted benefit of non-recourse lending I feel that REI is advantaged to the stock market and I get the added benefit of control over my asset versus turning it over to a boardroom or a CEO that may or may not align with my goals.

Okay BPers....I need some input.

First - a quick intro. I am new to REI and this will be my first investment. I will be making these purchases through my Solo 401k so the usual tax benefits don't apply and my up front cash requirements will be higher than a traditional, non-qualified purchase.

I live in the Raleigh, NC area and have spent the past two months analyzing more deals than I can remember. I have looked at numerous SFH opportunities locally and have yet to find anything that offers the ROI I require to support the cash investment (especially considering the fact that I have to discount any depreciation or tax benefits).

Here is my current situation:

Behind Door # 1 is a local Triplex with the following stats:

Purchase price $215K

Improvements $15K

Total rents (after improvements) $2475/mo

GRM 94.1

Cap Rate 7.5%

ROI w/o appreciation 11.84%

Cash on Cash 9.5%

Behind Door # 2 are 3 SFH located in Memphis, TN through a turnkey service:

Total Purchase price $249K

Improvements $0 (all improvements are part of the turkey service)

Total rents $2800

GRM 88.8

Cap Rate 8%

ROI w/o appreciation 13%

Cash on Cash 10.5%

I know all the math nerds are going to ask specifics about expense assumptions.  Being a math nerd myself, I have a detailed spread sheet that I am pretty confident captures all of the details, which is how I developed the high level results above.  

On the triplex I feel like the positives are the fact that it is local. I have driven the neighborhood and the person advising me on the purchase manages multiple MFH's in that area and has been investing locally for 20+ years. The cons for me are having all of my eggs in one basket (building) and the fact the MFH's don't appreciate as quickly as SFH.

For the Memphis properties I think the positives are a reputable company managing the rehabs and property mgmt (I have gotten references and confirmed).  The obvious downside is the fact that I have never set foot in Memphis and don't know that market.  

I would really appreciate some input/advice on this one.  Cash on Cash return is VERY important to me since there are retirement funds I need the money to GROW.  Otherwise I can just throw the money into a SPDR fund and forget about it.  I would especially like @Brandon Turnerto weigh in (although I'm pretty sure I know what his response will be). 

Thanks!

John

Alex

The fact that you're a 26 year old female means nothing.  You've got more guts and tenacity then most guys your age.  

Nice work.  I'm impressed (and a little jealous).  :)

John

Justin

As a fellow Vet I will tell you that most banks LOVE VA loans and will work with you on the employment history. If you encounter a bank that won't work with you, then go to another one and you will quickly find someone willing to work with you. USAA Bank might be a good place to start since they are very military friendly.

Also keep in mind that if you plan to go "no down payment" there is a 2.15% "funding fee" that gets charged to the amount of the loan. The good news is that this is typically cheaper than PMI (depending on how long you plan to keep the loan), and you can roll the funding fee into the mortgage. The bad news is that once you use the "no down payment" option the funding fee will go up on subsequent loans. So if you have the money now and can afford to apply it to this property, then you should "keep your powder dry" and save the no down option for a mortgage down the line which will most likely be a larger amount. This way you are truly able to leverage the power of the VA loan and get the biggest bang for your buck.

I'm in the Raleigh area and happy to meet over coffee to discuss more if you want.

John

 Thanks, Will!  Appreciate the reference.

John

 Thanks, Steve.  Great advice.  I'll send you a PM and let's set up some time to chat.

John

I'm looking for an Investor friendly Attorney and CPA in the Raleigh/Durham area.  Also need to be knowledgeable about Solo 401(k)s.  

Thanks

John

I am just starting out. I have capital to invest and am most interested in SFH & MFH buy and hold. I would really like some advice on how to focus and pair down the data. With so many listings on the market it seems overwhelming to sift through all the data and find deals that are worth the initial analysis.

I am anxious to get started, but don't want to make bad decisions for the sake of moving quickly.  

 Dawn - thanks for the tip.  I've put on my calendar and look forward to it.

Kelly

Thanks for the invitation to connect.  I actually found your site earlier today and am very impressed with what you have achieved in the Raleigh area.  

John