All Forum Posts by: Nick Barlow

@Giselle Black you’ve got a lot of great advice already. The only comment that I haven’t noticed yet, that normally surfaces on this topic, is the question “if you’re not comfortable buying now, when it’s relatively safe/easy, will you really be able to buy in the heart of a crisis?”

I most definitely thought 3 months of reserves was sufficient pre-COVID, and that number is substantially higher for me now than then, and grows with your portfolio. In my opinion, for your first property, if you have at least 6 months reserves of all expenses, the deal cash flows after all expenses, and you find a property that meets your specific criteria, you’re ok.

Good luck!

@Carol Burns Yes-our Property Management Company has limitations based on breed, which is their insurance companies’ limitation. It’s usually breeds over 50 pounds and like Rottweilers, etc., but I don’t have a full list.

If you want to call your insurance provider and confirm their limitations, that is a good first step.

@John Mckee I have one LLC, 5 properties, and 3 accounts at 2 banks.

Two of the 5 properties are out of state and in different cities, so I have an account at one bank that has a local branch in both cities and my hometown. Branch locations across all 3 cities needed for this bank are the primary driver for this account.

I then have a checking and savings account at a different local bank for the remaining properties in my home state. This is my preferred lending institution.

Depending on your states rules, you usually have to keep security deposits on hand, so a generic guideline I’ve adhered to is one account for operations-rents are deposited here, and bills paid from here, etc…while having a savings account for security deposits and reserves.

There’s not “right” or “wrong” answer in my opinion, as long as you’re following all local laws with your setup.

I’m not a banker, attorney, nor CPA.

Cheers

@Alicia Marks thanks for querying the community.

To David Greene and other podcast hosts:

For the folks in the middle-not newbies, and not full time RE, grinding away at 9-5 and investing in RE on the side, what are your go to strategies to maximize Cashflow?

Beyond the simple solutions like “do repairs yourself” or “Refinance to lower rates”, etc. What are some more experienced solutions to the cashflow equation? Are there any hidden gems out there?

Thanks for your time and sharing knowledge.

@Gabriel Craft like @Leslie Pappas said, REITs are taxed as ordinary income. The dentist you have as an example could be better served with depreciation to reduce tax burden, where a syndication could be better.

A small business owner controls their expenses, so they may not care about that, and if investing in a solo IRA, they're not taxed-in either situation.

Which is most appropriate for this situation?That answer, in my mind, dictates the recommendation.

Good luck, and happy investing

@Sarah Kartsher usually getting HELOCs on rentals is more restricted than primary residence. If this credit union will do it, great for you.

When you’re in acquisition mode, don’t forget to keep healthy reserves. Costly turnovers and potential evictions like to spring up when you’ve already committed to roofing projects or foundation work, lol, so don’t let yourself get overcommitted. Only you know the comfort zone there.

Congrats on property #2! Happy New Year!

@Mitch Vogatsky I would suggest a Roth IRA "IF" you want to continue to put new money in the market or want a bond fund.

I don't personally want to invest in the market in late 2021 as I feel it's substantially overvalued, but do plan to invest the annual IRA maximum into the market if it drops 30%+.

The advantage to a Roth is you can pull out the amount you contributed tax free. This is not simply a theory for me- I pulled all Roth IRA contributions out in 2017 for down payment on a triplex, with no tax consequences.

If you are not familiar already, I recommend you read “The Power of Zero” by David McKnight (has a podcast, same name). Tax rates, mathematically, HAVE TO GO UP to meet the obligations made presently/in the past. The details are there, and for me, I choose NOT to invest new money in tax deferred plans.

TL:DR-solid analysis on your end. I agree with you.

@Jim K. I’ll go for the riddle. The logical second best outcome is they do the same bang up job you’re expecting, working across morning and evening shifts, resulting in complaints from tenants in both units that the roofing replacement is ruining their lives and hurting their ability to work and rest, so they need a hotel provided to them for the duration of the roof job for the betterment of mental health.

Cheers

@Lieren Schuette good question, but I think this question is over hyped in our investor minds.

When you run a ROI calculator for 2-5 years, presumably the length of time one is saving for RE from a W2, at risk free return rates, the return is largely immaterial to the principal, and the risk of capital preservation is substantially higher than the value of the interest received.

In my opinion, anywhere you are willing to save for your personal emergency fund is as good a place as any to save for your REI.

My 2 cents.

I agree on not putting large sums of money into banks at the current time, but I think $100,000 was the threshold for bail ins when they happened in Greece, so unless you need to save for a 25% down payment in a high cost area, I generally think the “lost return” from a saving vs investing decision is immaterial.

Good luck, and do what’s best for you.

@Canesha Edwards I agree with you on too much govt spending, but rate raises aren’t an option this time around-debt is too much. We can’t afford higher rates.

The San Francisco fed published a paper a few years ago: The total return of everything. It looked at data back to 1870, and found interest rate norm was paltry, like 1.7% over the last 2 centuries. the high rates of the 80s (Paul Volcker) was the historical abnormality.

I saw a figure that if rates hit 3%, govt is out of money. When you consider non discretionary spending that is required by law (Medicaid, Medicare, Social Security), with the higher interest on the debt, every penny is spent avoiding default.

What to do? In my opinion, invest in hard assets: RE, metals, maybe art or something tangible. Food/commodities?

What’s next? I don’t know, but I also agree with you that 3 cap deals aren’t the answer, and that certain commercial loans, like the ones you’re alluding to, are not the place I want to be.