All Forum Posts by: Michael Hastings

Hi @Alexandra Holmes, congrats on taking the first step to Real Estate Investing which is learning as much as possible and asking questions along the way.  In reading your passage, I can tell you are anxious to get started investing and seem to be trying to find a path to get started and flourish.  I agree that this can be a very rewarding endeavour both personally and financially, but requires that you build a solid foundation to last.

You mentioned that you are working on your RE license, which is what I am doing as well, but I want to do this to make a career in RE Sales.  Are you interested in that?  As note you will not need to have that to become an investor.

Secondly, you discuss house hacking, which I am sold now IS the way to get started in investing, as it addresses what is usually your biggest expense, monthly living, and offers a path to possible cash flow, an introduction to landlording, helps you with tax benefits and could help you gain some equity and improve your financial position due to property appreciation over time.

So, if I may suggest, focus on continuing to scour the forums here on BP, getting information. Use a lot of the free information you can get here and continue to ask questions about REI. Get your RE license, if interested in Real Estate Sales, and continue to improve your credit. Pay off as much debt as you can before investing and then find a multi-family property that you can live in with your husband.

If you accomplish just this, you will be way ahead of many other younger adults, and will have learned enough to know what your next steps will be.

Hope this helps, and stay hungry!

@Ryan Rowe, I like the approach which is a blend of the information @Scott Trench provided above, and the "it depends" answer posted by @Chris LumLee.  Why you ask?

Because I have the pleasure of having many colleagues who are Attorneys, and their Law School Student Loan Debt is in the 6 figures (Some over 200K). They also want to get into REI as a retirement supplement vehicle, but are paralyzed by what seems to be a difficult situation to overcome, which is fully paying all debt down (Student Loans, C/C, Car Loans, etc.) before starting their investing. Dave Ramsey would unconditionally state that you need to pay off ALL debt and THEN purchase real estate for CASH and avoid mortgages. Although I love his work and follow many of his teachings, I find this to be an extreme path to follow, and for my high Student Loan brethren, suggest an approach similar to that of Scott, with a minor adjustment:

1) Pay off the credit card debt (anything with a revolving balance), continue paying vehicle loans and student debt,

2) Pay off vehicle loans (and never get another one, ever), continue to pay student debt,

3) Invest in real estate using mortgage as leverage, as an alternative to traditional retirement investing (401K / IRA, so lower those investments at work, just to enough to get your employer's 401K match if offered which is free money)

4) Continue to pay down the Student Loan Debt aggressively.

Paying off # 1 and # 2 will free up some cash for investing, and once investing (via a House Hack, I suggest initially, so you should be able to reduce your housing expense and recapture more money to pay student loan debt).  Plus there are a lot of tax benefits to property ownership which will increase your annual take home pay come filing time.

The "it depends" part of this equation assumes that you have student loan debt of $40K or more (like many do). If your student loan debt is under 40K, then I would consider that to be equal to a vehicle loans and may suggest it is paid off BEFORE REI, that way you are debt free going into your new adventure (possibly with the exception of your living expense if you already have a mortgage). If your student loan debt is higher than 40K, then you have to continue to pay it and push it down under your initial REI goals when getting started. This way, you could use some of the cashflow to help pay down the student loans (those student loans are just plain evil), and hopefully see some equity gains over the next several years.

I think the answer to your question here can be varied, as this also depends on your credit situation, current job status, income, willingness to get out of debt, real estate market, etc.

Hope this helps!

I agree that the term "POF letter" is a term used generically, but it's meaning depends on what your needs are.

I know of both "POF" used to mean preparation of a letter prepared by my bank to show that I have proper funds in the bank to cover a CASH purchase or an agreed deposit amount (which accompanied my RE offer) and "POF" used to define a letter generated from the lender (mortgage provider) verifying my pre-approval for financing needed to close the deal.

At my bank (Wells Fargo), I went to the New Accounts Representative in my local branch and they helped with the POF letter for the cash offer.  The lender who approves your financing (mortgage) can provide the "POF" letter needed to accompany offers for real estate that include financing.

Hi @Sam Guarnieri, this is an interesting assertion. To research this, I looked at a report from the Apartment Association of Denver, which has average rents and vacancy rates in Denver for the past 60 plus years. Denver rent prices have been on the rise the entire time in a consistence cadence, and reflecting possible RE bubbles and deflation periods of the early 80's (high inflation), late 80's (Savings and Loan crisis), early 90's (Resolution Trust, massive REO's) and the 2007-2008 financial debacle, there were no unusual spikes reported in monthly rental cost (per unit) as a lagging factor of these activities.

What the report does show is that rents have been strong and rising consistently in an orderly fashion through all of these RE bubble periods (which is what we would expect as the rental prices are keeping pace and somewhat tracking upwards with inflation).  

What does fluctuate however, is vacancy rates.  Those definitely DO improve for landlords (as there are obvious declines in vacant units), as it appears that demand for rentals go higher after these periods of real estate value declines.

Currently, Denver as a whole is seeing about 5.7% vacancy rates as an average citywide, which is really good.  I think this is in correlation with the amount of people moving here on a monthly basis.

@Angel-Ty L., are you going to grade and select your new potential city on weather, population, outdoor activities and home prices? Not sure if you are just asking from a quality of life perspective, or seeking a great place for REI (or both)?

@Phil T., I know this is an old thread, but I would beg to ask why you believe you must invest out of state to get started? I follow a few investors here on BP, and they are in the Washington market and seem to be able to find some pretty sweet deals (and note I live in Denver and I am from California, so I know high prices and markets which seem to be over inflated). There are so many ways for you to get started in investing, like buying your first home to start the equity clock, investing in a multi-family and living in one, using your SFH/rental as AirBnB, etc, that I would suggest exhausting your local opportunities before looking elsewhere (especially as a newbie).

Find a local agent, wholesaler or investor who can answer your questions on the local market. I tried that here in Denver and was surprised at what is out there and available, when I was sold that there were no deals. Don't rely on the MLS.

@Account Closed gave an example of a new acquaintance he met who is renting beds to Pilots with layovers, and I just read here on BP about a guy who brought a house (5+ bedrooms) and is renting out rooms on AirBnB (similar to commune living environment), to the tune of 3-4K per month in profit at peak.  I see no reason why you could not do something similar.

You, like I, was skeptical about getting started here in Denver with investing based on all the magical stories I read on BP about low price points and boat loads of cash flow in other areas (the prices make me salivate), but I after researching the market and learning more ways to get started with investing here, I am sold on the opportunities.  

Hope this helps.  Let me know if I can answer any questions.

@Chris Lopez, so much of this is perspective, isn't it?  Long Beach vs. Denver vs. Cleveland (or KC, or Indy or Columbus, as an example).  Totally different RE markets!  You have a good point however, which is about investing goals (cash flow versus long-term appreciation) .  I know I can get better deals with respect to cash flow in midwestern markets, but Denver is just so sexy for real estate investing now.  The place has become really hip and I am going to dig in and be patient.  With correct analysis and investigation, I do believe there are still some great deals here.

Hi @Chad Gaither, at this point, we are staying put in Denver, the family just loves the place. 

Hi @Chad Gaither, I spoke with another investor here in BP, @Grant Anderson, maybe he can help you with some insight if time permits.  He did this same thing, and offered me some good suggestions when I mentioned that I was interested in pursuing this strategy.