All Forum Posts by: Matt Cariello

Thank you Kyle Hipp, that's exactly what I'll do.

Ed Lee - With that scenario and 50-60k per year to invest, I would just assume buying (with financing) 4-5 properties per year - Even if I were paying some interest on the properties at Jerry's example of $135 per property and coming out at $240 per door... $240 per door X 5 properties is $1200 per month vs. paying straight cash for 2 properties and making $375 per door... $375 X 2 is $750.

Am I on the right track here?

Jerry W. - You said no it's not part of the 50% but Ed Lee, you say it is. I mean I guess what difference does it make in the end (it's still money going to the bank and not to you), but it would be nice to know the correct answer so when I'm evaluating properties I know which side to put the interest on for comparison purposes.

Thanks guys!

And if you DID finance and didn't pay all cash, you'd throw the interest payment into the 50% as well I'm assuming?

Kyle - No I have not spoken to any property managers. Another local investor told me that MIGHT potentially save some money by them only going to a few larger complexes versus a bunch of small… This is something I will obviously have to look into a bit more.

Lastly, in that 3% per month example from above is that the amount of monthly rent or is that the amount of money taken home by the investor after all expenses, maintenance, taxes, interest, etc. are paid? (i.e. the surplus)

Thanks much!

Ahhhh okay I gotcha. And that $30,000 you mention... Is that YOUR investment (with the rest being financed -- i.e. $30k down on a $100k home for example), or is that the price of the home? I understand it's just an example but if you could clarify I'd really appreciate it - thanks!

What do you mean a "3% deal". Are you talking about 3% cash on cash return? If so, that's not that good!

Thanks in advance

Thank you Kyle -- all of what you just said will be looked into and certainly taken into account. I liked your example of crime rates and whatnot affecting a large property type vs. lots of smaller ones spread about... Definitely something to consider! I guess I was more focusing on property management being cheaper on a few larger buildings than a lot of smaller properties (single family houses for example). There is no way with my career that I have time to take care of properties... Paying someone 10% to take care of that for me is beyond worth it (so this is another expense that I strongly need to take into account).

Thanks for the advice - I sincerely appreciate it.

Kyle - thank you for that detailed reply. Great information!

In regards to only having property worth $575k after 10 years... That would be the total of my INVESTMENT, not necessarily the property value (i.e. I plan on financing and using leverage to my advantage). Also, in regards to your point of needing to replace things like furnace, carpet, flooring, etc... That's why I'm looking into commercial property and larger multi-family properties that way I don't have 50 SF/2-4 unit properties that all need a furnace and a dishwasher, wash machine, and flooring within the same year. Economies of scale.

I agree though, starting out small and getting a grasps on things is what I am going to do. "Sharpen my teeth", as you say!

Also important to note that I work in commercial real estate (as a broker), so I will be aware of the deals out there and have plenty of colleagues to point out what the "good" and "bad" deals are in our market.

Annette H. - not trying to disagree with you, but at least in my market (Wisconsin), our commercial real estate sales are WAY up compared to the last 2 years. We are on pace to beat our last years results by 17% (obviously varies state to state). But I sincerely appreciate your input and agree wholeheartedly on using financing to my advantage!)

ANISH TOLIA - I see that now... It doesn't have to be one or the other. I will slowly ween into bigger projects after getting my feet wet with some of the "smaller" stuff. Thanks!

Kyle Hipp and Kevin Young -- Thank you for the reply's and the great posts. As far as doing what's enjoyable... honestly, all real estate is enjoyable to me (as my living and as an investment opportunity). I might add, I have been pretty involved (and have done pretty well) in the stock market up till this point in my life so that is also something I want to continue to pursue.

My plan is this: If every year I can add $50-60k into real estate investments (using a mix of leverage from financing and some all cash deals (sheriffs sales are really hot right now in my area)), by year 7 I should be making an annual surplus from rents (after all expenses, management fees, interest, repairs, etc) of ~$60K (assuming I find deals that will get me 20% returns) with a good amount of property in my portfolio. If I stay at that pace of investing in real estate, every year I should be able to add an additional $8-10k to my 'income' (again, assuming I get 20% returns)... i.e. year 8 is now $70k of income, year nine of $80k income, etc. I will obviously save some of that surplus to go towards major renovations/repairs, but I will reinvest a good chunk of it into the stock market (diversify my investments). Using a compound interest calculator I have found that taking $50k every year out of my surplus money from real estate earnings (after it gets to that point; around year 7) and putting it in the stock market (at 8.5% return), after 15 years it's now up to $1.5M.

So at this point, after 20 years:
1) I would have my original investment in the physical real estate (if not more due to property values increasing) (original investment total of $1,200,00)
2) Yearly cashflow on those properties (adding ~$10k per year in cashflow with the adding properties. By year 20 ~$1,600,000 AFTER taking out $50k/yr to fund point number 3)
3) After year 7 or so, taking out $50k per year and putting it in the stock market (totaling $1.5M)

(Not to mention that none of this money is going towards funding my life (food, cars, entertainment, etc.) - All of that type of stuff is being funded by my lucrative job - which is what also allows me to invest 50-60k per year! Good thing I went to college!)

With my calculator in hand, on the low side, after 20 years; points 1,2, and 3 from above total roughly $4,331,600... Which would grow every year there after due to more cashflow from added properties AND from compounding my interest in the stock market. Does this make sense?

Obviously this is all assuming that lots of things fall into place correctly... this is sort of a "best case scenario".

Matt