All Forum Posts by: Mike Dymski

Nice work. Not crazy about the post-rehab holding period return but that happens when your rehab and refi is so successful....your total IRR is huge.

Looks like Shaw Kitteredge Fog flooring.

Credit score = 700+

Bankruptcies = none

Foreclosures = none

Net worth > loan

Liquidity = 9-12 months of debt service coverage

Leverage on all real estate < 75%

some REI experience (or you have a great balance sheet or low LTV)

These will vary by lender and loan size.

install a bunch of washing machines because you will have some laundry to do

There are financing options that include the rehab.

Many investors on BP are contracting 100% of the work, especially the ones with full time jobs or the ones with large portfolios.  I work 60+ hours a week and have always contracted out the work.

Rehabbing houses takes work and if that is not feasible or desirable, that is totally understandable.  Not being able to add value will slow your pace of acquisition but that is totally fine as well.

Absent adding value, my vote is for #3, with #1 not far behind.

Before getting to which investment, you may want to take stock and address other fundamentals first.

Ensure that you have adequate umbrella coverage for the new (and existing) net worth and amounts above that.

Get a will.

Maximize tax deferred retirement contributions.

Ensure that kids education is taken care of and take advantage of tax deferred accounts.

Make sure that you have adequate life insurance, if applicable.

Pay off any high rate debt.

Make sure your mortgage is at a market rate and, if not, refi.

You may have an allocation of your savings among various asset classes (stocks, bonds, real estate, other).  This inheritance will alter that allocation; so, you will likely want to reallocate your total savings based on your goals and abilities.  This can take some time.

Part and parcel with that last item, you may want to reallocate your savings among taxable and tax deferred accounts differently.  For example, if you decided you wanted to allocate some of the $800k to bond funds, you may not want to do that through a taxable account created from the $800k.  You will want to reallocate your tax deferred accounts to include a greater % of bonds (ordinary income) and have more of your tax efficient assets (capital gains assets) in taxable accounts.

Regarding REI, sounds like you have a good plan to slowly acquire a stable cash flowing portfolio. That gets you started, insures against the risk of this potentially being a high market, insures against the risk of the market not being at the peak and keeps 100% of the funds from not sitting idle. Hope this helps....good luck!

4) Buy a property that needs some work, rehab it, refi and get your cash out and repeat.  This eliminates the challenge above and accelerates the pace of acquisition.

On a side note, I'm not a fan of #2 above if the goal is to accumulate properties.  Closing costs will eat up profits and you are adding interest rate risk.  Cash is king in accumulation mode.

Nice work looking ahead.  That pays huge benefits to your pace of wealth accumulation.

You will need cash for the down payment on the new property.  Your equity will not help unless you refinance or put an equity line on one or both of your existing properties when you need the cash for the next purchase.

Stock market days like today make me feel blessed to have allocated so much of my family's personal savings in cash flowing real estate.

Taxes on primary residences are low in SC; so, the investment property taxes are essentially a subsidy for that.  It's the buckle of the bible belt too...promotion of home ownership.

Note to sellers of investment properties in SC...the attorney is going to prorate taxes at closing based on prior year taxes.  If those taxes are at the investment rate and you are selling to an owner occupant, make sure you have the buyer sign an addendum at closing that the they will settle up the true taxes with you when they are paid at year end (at the owner occupant rate).  Or get the attorney and buyer to prorate using the owner occupant rate at closing, if you can.

@Account Closed providing a bathroom is not benevolence.  There are also deductibles for renters insurance.