All Forum Posts by: Patrick M.

Oofhaa.... Those replacement windows didn't address the nightmare underneath.

Left from an earlier renovation (3 months before the Titanic went down):

Oh yeah baby... nothing like digging down into a +100 year old brick building.

We replaced both "decade old replacement" windows that were put in as well as the old windows. It was fortuitous of us to have a great old world mason who could address the brick wear that was hidden behind the wood paneling which was behind the sheet rock.

Framed out with pressure treated... That baby is good for another 100 easy. And it is sealed up tight with Anderson 400's- f' keeping the old stuff- I save a fortune on heat and the tenants LOVE it.

@Ian K. That is an interesting question. I don't know that I would - or perhaps a portion. My number one priority would be liquidity and the "true" passive income of an index funds. I would imagine in this climate of anti-1031's, that this might be the first to go- but something that should be looked into.

I used to be in the @Brian Bennett and others school of thought. I bring my sons down to work on our repositioned properties and explain all the benefits. I used to think, well this will be yours someday. Not any more! This is my dream. The more dinners parties my wife and I go to the more I realize that we (us on here) are the exception, the minority. We lose sight of that because we are in this awesome biggerpocket bubble. Even those who may express interest are bound to fail.

I remember the shock I had when, after prodding, I would talk about our buildings and people would say, "How do you do that!" "Oh my god, I would never want..." "I could never deal with that..." The VAST majority. And I would sit there and think- man, I get 9 checks on the 1st and all I had to do was empty the quarters in the laundry this month!

So- it really got me to thinking about my own kids, as much as this is my dream- and a great source of wealth, I don't want it to be an anchor around their neck. I reflected on my own life and I became more aware of certain things:

1. My life's decisions were severely impacted by the debt I carried from college and grad school. All while working full time. I could have done a number of other things, riskier, more exciting, challenging things. Travel, foreign assignments, etc.

2. Real Estate as much as I LOVE it, is another job. Whether I self manage or manage a management company. It is another worry in the back of my head and I only went into it as a means to an ends- and those ends are being met in spades. 

3. It is an illiquid anchor that I do not want to saddle my kids with. It also has the potential to be mismanaged by an heir- great potential!

I was blessed to learn to love the W2 I have, it is very rewarding. There are a number of people on here that hate their W2's, they are dead end, crappy jobs or they are tired of being ordered around. I wonder how many of them are saddled by debt.

- So, I endeavor to give my kids the financial opportunities and life experiences that a debt free life can provide. My kids have the ability to live and work in the US or EU, I want them to work throughout the world if they wish. Serve in the military. Take a year sabbatical to teach English in Thailand. Get in on the ground floor of a low paying but full of potential start-up...

If they decide they have done research and want to invest in a laundromat- I will be ready to financially back them, if need be. Or a hair salon or a quad-plex... etc.

By providing my children with a debt free entry into society with the potential to tap liquid funds for investment I have set them apart and I will have also allowed them the ability to be their own persons and not be anchored to my "dream."

The only additional thing I would add to generational wealth is that I have custodial index accounts for both my children. Regular, small deposits are made each month and I continue to lecture, speak and educate them on the value of time & compounding interest. We review the accounts and sometimes look to compounding calculators. They want at least half of their money from gifts to go into those accounts- and the percent keeps growing. That is a game changer that too many of us learn too late in life.

@Pat L.

Boy this article sells that FL. life!

The Market for Single-Family Rentals Grows as Homeownership Wanes - The New York Times (nytimes.com)

I don't charge a thing. I leave that to Zillow.

I have every applicant fill out a preliminary, free application. I owe it to my tenants to make sure I know exactly who will be entering my building and to any apartment. My tenants are young professionals and they have a lot of nice things, they also have a lot of nice things in the storage area. I don't want to allow someone in to case the place, or a nosey neighbor/landlord or someone who just wants to spend a Saturday shopping downtown and - "oh, how 'bout we check out this apartment for gits and shiggles."

When I have met with them, vetted their understanding of what the potential lease terms are and they wish to move forward- they will go onto Zillow to do the background/credit.

What I have found- now that my market has become white hot, is that 1. Price is weeding many out, 2. The savvy ones have paid their Zillow fees up front because they know the market is extraordinarily impatient, and they can apply them across multiple properties. This has allowed me to already know a lot about them at walkthrough and I can seal the deal on the spot (with deposit) and call off the other showings.

I am content with my 2 buildings (9 units). My wife and I have w2's. I max my 401k, and have a pension- so I am all good for life after 62. 
Our units have allowed us to travel, buy personal, foreign real estate and put our kids through private school and save for college- to name just a few.

In 5 years we will reassess. We will either pull money out or sell. We have over $1 million in equity now and have been building out our Vanguard investments. All depends on the kid's college situations.

If I can sell in 5 years and have 1.5- 2 million in Vanguard- I am out. If not I will ride it out for 5 more and bag it at 60.

I love the opportunity and I love being a landlord- but if I can trade what I work for now for real passive income- no brainer.

I have really taken to the lifeproof sterling oak in our renovations. Right now $2.99 a square foot. We have it in a few of our units and even shipped it overseas for personal units.

(+ Lowe's and HD give a 10% discount to veterans - that adds up)

@Frank S. excellent point.

As I said- compounding interest is a gift from the financial gods! And it is something that REALLY pays dividends over time. It is likely that a middle aged man criticizing it has already missed the boat.

If you invest in RE, do it for "the now" because it is a very expensive asset to maintain and it is extraordinarily illiquid.

Next @Account Closed will be directing our attention to the tulip crash of 1637.

@Jim K. great analysis and assessment on the bequeathing of rental properties. One of my "changed" views in the last 6 years.

Now I have correctly surmised that allowing them to strike out on their own (after college or trade school) debt free is a far greater benefit than I ever had.

If they see a viable investment property or business opportunity that they can "sell" me on- then I will have the liquidity to assist.

But handing them an equity rich cash flowing property is akin to handing them a lottery ticket- few would be prepared for. 

@Lauren Akins You seem to be in a unique position to evaluate this for yourself. You have a modest income from a W2 and it sounds like you are living below your means and financially literate and responsible. Kudos... A lot better then I was.

@Joe Splitrock and @Joe Villeneuve hit on some wonderful insights. Personally, I would look for that one unit which may be out there that is "really" going to cash flow and replicate as you move forward.

My views have changed a few times in the mere 6 years I have had been in the game. And owning cash generating units has also changed the way I spend money. My wife and I used to wonder why on God's earth people would pay for private school when we pay so much in property taxes... Now that is one of the most rewarding expenses I have. I used to think that I would pass the units on to my kids- now I foresee cashing out before I am 60 and dumping the proceeds into a mutual fund. You are young and you are going to want to experience all the beauty and adventure the world can offer someone who is financially secure. Kids, travel, success and failure... It is a moving target. We still have our W2's with units that bring in a healthy income.

As an aside- I would have hated to have foregone the adventures of my younger self to set the table for my older self... Sadly, he may not even show up to dinner.

Get a unit and repeat and also find a W2 that you want to do, until you don't. Best Luck