All Forum Posts by: Justin Koehn

@Ian Dikhtiar it sounds like you have a lot of options - makes it hard to choose THE BEST one when you don't really know what that is. But, good work in creating options for yourself! And in educating yourself - that is a great first step. As with anything in life, answers will vary and in the end, the only one you should go forward with is the one you really understand and feel comfortable with (follow in Buffett's foot prints on that).

I slightly disagree with Ibn because it sounds like you have an amazing living situation right now. Buying your own residence doesn't really help you out right now if you can afford to live for a fraction of the cost if you are renting from a family member (as long as that is a long-term deal and not going to be terminated any time soon). Whether you live in a duplex you own or rent from a family member, you still have living expenses - the question is, what situation minimizes them? If you could be renting out your half of the duplex for 800 a month, it makes more sense to rent at $675. It seems like you are already thinking about your total income and cashflow, which is a good thing. Maximize income, minimize expenses. I do agree with Ibn that you might want to save for a little while so you have more of your own money in a deal. 

As for partnering with you mom, I'd very honestly answer some hard questions - is she ok with the risks? Do you have an emotionally mature, adult relationship with her that could survive a $45k loss? No matter what, have everything in writing for every possible outcome, good or bad. 

One thing that worries about some of the options you presented above - you seem to be looking at deals assuming that if you have the $50k needed for a 20% down deal, that means you have enough money. Don't forget to include all closing costs, possible holding costs, and any other sale related expenses that you might need to cover BEFORE you can get it rented. Also, it is VERY unwise to jump into a deal with no money in reserves. Somethings just break the first month. Be ready for a new furnace, water leaks and repairs, rats in the crawl space etc on the very first week. It could very likely happen. 

Also, you will want to start connecting with handy-men/ contractors asap who will be able to do repairs even if you don't intend to rehab the property (unless you have a very flexible schedule, know what you are doing, and live in a state where you are actually allowed to do the repairs yourself). Most states don't allow landlords to do plumbing, electrical, HVAC or other such jobs themselves unless they are owner-occupants (and some not even then). 

Personally, I like the idea of staying where  you are at, saving for a year or so, then trying to buy a 3-4 plex as an owner occupant where you can fix up units and increase rents as you have turnover. Good luck!

@Brandon Andreola, it sounds like that might be a decent deal for you, especially if you are going to live in one side and possibly fix it up a little as you live there. I think Anthony R's numbers are a little off. I don't know where he got $1600 for a monthly payment from. That is way too high unless you get a horrible interest rate. Just the principal and interest (at 5% with 20% down on $150k) should be around $650 a month. If you are able to rent out both sides for $800 each, making your gross rents be $1600 a month, that is just over a 1% deal, which is a typcial cut-off point for many investors (in other words, if your monthly rent is less than 1% of the purchase price, don't buy it!) However, with any rule-of-thumb, there are a LOT of things that can go wrong unless you have a lot of experience to guide you in using that rule. 

I think you should decide on what return you would like to see (I would ask local investors and property managers what they are seeing to get a realistic idea of this) and put this property into the BP calculators and see if it matches that return. I would also call a local property management company that is highly recommended (ask around on BP or at your local REI meetups) and get a more accurate rental number. Some people jack up their rent numbers before they sell but are actually not getting nearly as much as they claim if you look at landlord paid things like utilities or discounts.

Is this a good deal? That is a very hard question to answer because the answer varies from one market to the next and one investor to the next. I would tell you that in my market (Olympia, WA) that would be an awesome deal today. But, it may be on the crappy end of things for your area - I don't know. 

I do agree with @Anthony R. that you need to be sure to include enough in your budget for repairs and also Capital Expenditures (new roof, furnace, etc) I think @Ben Leybovich did a study a while back and found the average home in American needed about $250 in repairs per month if you really figure in everything that will eventually wear out (the entire home accept the foundation and framing). This would be more than 10% of your gross schedule income, but it's a good number to figure on. I would also recommend that you have a nice reserve account built up BEFORE you buy it, because some items don't wait for 20 years to break. How much you have set aside in reserves is also a hard thing to figure out. If you look at the big things that could break in the next 5 years that wouldn't be due to natural causes like hail, you might want $10-$15k in an account to start out with that is available IN CASE something goes wrong before you have brought in a decent amount in monthly cashflow to build up a reserve account. 

Hi Joey, Welcome!

I would repeat all of @Ken Breeze 's advice: 

Connect - There are numerous REI meetups in the Tacoma and Seattle area. If you are already going to each and every one, I would start. These people are your mentors, partners, clients, etc. etc.

Read and Listen - I would commit yourself to listening to EVERY BP podcast, yes, all 274 of them, every moment you are in the car, working out, whatever. And keep a list of all the books that mentioned more than once or that stick out to you. Buy them and read them. As newbies, we have to put in a serious investment in time to our education so that it will pay returns later in our finances. If your're not sure where to start, read Rich Dad, Poor Dad first, and start listening to podcasts. 

Questions for you:

1. What areas are you looking to work int? Pierce, King, Thurston, ...? 

2. Have you done any deals so far? 

3. Are  you only interested in wholesaling? 

4. Do you have a way to pay the bills until those deals start coming in consistently? 

@Christopher Hockenberry Welcome to BP and the investment game. I think you are in the right place, and there is a LOT to learn. For someone who is just started to learn, and not quite ready to actually invest, you will save yourself thousands of dollars, and possibly years of time, if you take a little while (a few months - time depends on you and your dedication) to learn before you jump in. Here is where I'd start:

0. Start saving money, living frugally, and read Rich Dad Poor Dad, if you haven't already.

1. Listen to the Podcasts. Every minute of your car ride, lunch, you name it, USE this time to associate with very successful investors and pick their brains - this is what the BP Podcasts do. Start with  the latest and just work your way back through all 270 of them. 

2. Keep a list of what book recommendations you hear repeated in the famous four, or search this site for book lists and start buying and reading!

3. I would try to connect with a few local real estate agent/brokers and a good property management person who already work with investors. I would question them specifically about what types of investment they see happening in your local area (flipping, buy-and-hold, whole-sale-ing, ) and where most deals come from. 

4. Go to your local meet up and ASK QUESTIONS! Meet folks who are doing it and ask them what they are doing, why, and how they started. You may also ask if there is anything you could help them with that they don't like to do. 

5. As @Josh Caldwell mentioned, there a lots of areas to get into. You need to choose one, at some point, and just dive deep into that area for a little while until your comfortable enough to get started. 

Best of luck to you. Real Estate is a long game that will need a lot of work and learning. Mentally prepare for that.

@Stefano Grottoli I think it depends on two things - 1. condition of those three based on inspection (and the amount of repairs possibly needed) and 2. what is normal in your area? 

One big question that I have, that may effect your thinking, is what are you buying them for? Long term buy and hold? If that's the case, I would be very careful about my CapEx budgetting to include major repairs on these items in the future. If it is a flip, see below.

I have bought a house with an oil tank in an area where EVERY house in town had an oil tank. In that case, it is not a big deal. The one exception to this is under-ground oil tanks. If these ever leak, or need to be replaced, I have heard that it can become a HUGE problem, possibly involving the EPA because of a toxic spill. I'd stay away from under-ground tanks, but above ground tanks are pretty common and easy to deal with in many areas. 

Septic and wells are similar. Some areas have ALL septic and wells, and as long as it is the standard of the neighborhood/community and they check out in inspection, I wouldn't worry about it. However, if they don't look good in inspection wells and septic can have huge costs to fix (like $10,000+ for septic and probably similar for wells). 

@Raffaello Cervera It looks like that could be an ok deal, but like @Christopher Phillips said, you need to really be careful of your numbers. You have a HUGE range of rents that you listed. Are you sure the rents are within that window? Those numbers are 20% different (%2500 to $3000). I would call a respected property management firm that works IN THAT AREA and get a really good idea of vacancy rates. Sometimes the 50% rule is too thin and you should really use more like 60% - depends on the area, vacancy, etc. 

5.8% doesn't sound like a home run to me, even if that is good for the area. If it really is good, why hasn't it sold in the last month? I would be very careful to not miss something that has caused other investors to pass on this one. I think in this market wisdom, self-control, and REALLY THOROUGH due diligence are critical. Good Luck!

Car Crash in 2018?- Likely. Probably a few million.

Plane Crash in 2018? - Possible, but as likely. 

House Crash in 2018? Can't see how that's possible.

@Laura Srocki Sorry to hear that one didn't work out. From what I have been seeing (in Washington state) if it is anywhere near as good of a deal as that one looked like, it will be gone within a few hours. 

If you come across another one I would....

1. Work with an agent that is able to show you properties TODAY, not later in the week, or this weekend. Good deals are gone to full cash offers in hours in most markets in 2018.

2. Be REALLY critical of your numbers - Don't trust Rent-o-meter. It is an OK first guess, but be very careful to trust it. I would do your own research on the area based on Craigslist rent adds (or whatever is the most used online site for rents in your area) and then call a reputable Property Management company. I have found them to be VERY knowledgeable and very willing to help you understand what it would really rent for in that neighborhood - they are trying to help you so you'll bring your business to them, which you might want to after you have a few units. If you're going to be doing a lot of investing, I think the cost of a BP Pro membership is worth it just to use their calculators (unless you are an Excel junky :) Use the BP calculators and try really try to get good numbers for each sectoin. A few % off on a vacancy number can take out a lot of your cash flow. 

3. As a new-investor, you should probably follow @Brandon Turner's advice and double your rehab budget until you have a really good sense of what rehab actually costs in your market. This SHOULD leave room for some pretty major mistakes in estimates. 

4. Go to your local BP meetup and try to find another active investor who would let you shadow them on a deal (go to look at properties with them, etc) even for only a day or two. This could be the most valuable time you have ever spent learning about investing.

Good luck!

@Mike Timme I moved away from Colorado two years ago, to the also-expensive West coast. I agree with everything @Allen Maris said above. The average deal in many (if not most) markets today is not a great deal, especially in high priced areas like Aspen. That is a very specialized market that makes money for very specialized types of investing - think new developments of condos, etc, but these require massive capital and experience, if they are even possible. I do have friends who are investing in mountain towns in Colorado, but they are looking at more "secondary" mountain towns, those without ski resorts in them, like Grand Lake. They are looking for tourism but not a crazy ski industry and they are not doing normal long-term rentals. They are making it work with AirBnB and other short-term vacation rental strategies. One thing that those ski towns have going for them is a pretty established maid/cleaning industry so nightly turn-overs might not be too bad to get done. However, the number still have to work and with short-term vacation rentals, there is always a chance that the city will pass a new code that prohibits it. There is definitely risk there as well. 

If I were going to invest in the mountains of CO, I'd be looking for smaller, non-ski resort towns that have a lot of summer traffic and are within 1 hour of a ski resort. Grand Lake is good for this because you can get to Winter Park and there is a lot of traffic from Rocky Mountain National Park through there. I'd look at places like Salida, Buena Vista, Leadville, Grand Lake, etc. Good Luck!

@Yuriy Skripnichenko I was planning to do exactly what you are doing. My only problem has been that Google Voice doesn't have any local numbers for my area code left. Any ideas how I could get a number through another service (free if possible) and then set it up to work through GV? 

Thanks for your help in this!