All Forum Posts by: Paul Balyoz

I like this question.  My end-goal is to be out of the "rat-race" by 12/31/2024.  Start the year 2025 with no job, and no need for one - for the first time in my life! I am on track to reach that goal. My current cashflow covers about 54% of my expenses now, with a number of rental properties and other investments, and a plan to add 4-5 more single family home rental properties next year. I have an Excel chart on my wall of my monthly cashflow I've been building over the past 7 years, and a projection of what I need to do for the next 4 years, graphed out visually.  It's inspiring to look at it and realize "I'm on track!" I mean, if I made it half-way out of the rat-race, I can get the rest of the way out! Right?

Realizing that real estate investing is so much fun, I'm sure I will keep at it after retiring. It just frees up my time to do more service work that I really want to do, instead of spending the best hours of every work-day working for someone else's business.

One strategy my wife and I use is to get HELOCs on other properties we have, including our personal home. A Home Equity Line of Credit is a way to get checkbook-access to your equity. We have 1 HELOC now, and 2 personal lines of credit (PLOC), and are planning on getting 1-2 more HELOCs in the upcoming year. When you pay the HELOC back fully, it's $0/month cost to keep it around. You only pay interest on the portion you withdrew and haven't repaid yet. Sometimes there's an annual fee, but ours don't have that. So you just borrow the amount you need, when you need it, cash, to buy the next property. You can be the awesome cash buyer that way. We always work closely with a mortgage lender to make sure we will be able to refi it within 1-2 months, to get the mortgage put on it later. So we're only paying the HELOC fees for 1-2 months. Alternatively, you can do that with Hard Money - though the fees are a lot higher that way.

Yes it's more risky than a loan-contingency, in the sense that you may not get the mortgage after you bought it -- but we've done this multiple times, we have a good relationship with our mortgage lender, and actually have a number of lenders now who can help us with this. We always let them know the next deal we're trying to get as early as possible, and verify we can get more mortgages thru them - we haven't hit the "ceiling" yet. They keep all our paperwork from the last time (6-12 months ago), so they know our incomes, debt ratio, all that stuff.

Worst case scenario - you can't get the mortgage after buying it - so the property just becomes a flip! Before buying it you calculate that it could work as a Flip or Hold -- and can tell roughly how much money you'll make both ways.

If you can't get the mortgage after all, (1) figure out why you didn't you see that coming, find and fix that part of your system: no fear, no self-abuse - it's your system, you are fine-tuning it to work better in the future; (2) sell the property right after fixing it up, so you get out with some new cash left over that helps you with buying the next property.

In the early days we had some scary moments, but now we are pretty good at judging roughly how much we'd make either way, and we don't lose money any more on deals, unless something completely side-swipes us unexpectedly (which hasn't happened for a few years now).

By having a full-time job, luckily, I am able to get those juicy low-interest rate mortgages. My wife and I are so grateful for that. Lender told us we can probably get "3 more like what we've done in the past," so all is good for now.

We crushed our goals this year, exceeding my target increase in cashflow of $1500/month gross (Stretch goal $1800/month) by a large amount - we will have increased it about $3200 very soon. We did 2 things that contributed to this: We are completing a 1031-Exchange from a large house in Sedona AZ to 8 properties in the midwest (this investment is half-owned by someone else); we bought, fixed, and rented a house in a 55+ community in Peoria AZ which is cashflowing about $450/mo gross. It was not easy to find a renter for the 55+ house during Covid (no surprise!) so after 1.5 months of trying, we hired a management company who has a much better pool of potential renters (at the cost of the first month's rent).

I am so happy with our overall outcome this year because my wife and my goal is to retire by 1/1/2025, and we're on track to do that. We also just bought a house in Tucson AZ last month, and (despite my usual plan of "shutting things down for December") are driving back and forth overseeing repairs, to probably lease-option it in February next year. So I'm not counting any cashflow from that one until next year. The 1031 Exchange was planned out last year, but the other 2 properties were surprises when they appeared. The 55+ house we found on a REO auction site, we just kept bidding the max price that worked for us, watching other people bid higher, then fall out when they didn't pay up; this happened over and over, until we won the bid. Non-emotional bidding was hard, but it worked! The Tucson house was a complete surprise when a friend told us that their father had passed, and her and her siblings just wanted to sell it and split the money. We calculated what price would work for us as a buy-and-hold or as a flip, and we made the offer, which they accepted. Title made sure all was straight with ownership.

We tend to work on 1 property at a time, paying all-cash by borrowing from HELOCs and 2 personal LOCs also, then re-fi into a mortgage at a low-low interest rate to repay the LOC's. We have a good relationship with the lender, having used them for many properties over the last few years. All this, while still working full-time at our "job" jobs. Can't wait to retire in 4 years, to work on real estate and various service projects full time.

Here's the interesting thing: Covid shut down our vacation rental that was bringing in $12K-14K a year which we usually used to buy a house around end of year (along with other money). BUT, Covid allowed us to get early access to some retirement funds we don't normally have access to, enabling us to buy that 55+ property early! When one door closes, sometimes another opens - you just have to keep your eyes open and stay tuned in to what's happening around you, and let all your family and friends know what you're doing, buying houses that need a lot of work, at great prices. My IRA money has grown so much better under my self-directed control than when it was managed by an investment service company suffering at the whim of the stock market.

The "snowball effect" is real. 

If you have done flips before using Hard Money, then you have that paperwork to start from. If not, talk to other investors in meetings about getting a copy of paperwork that they've used when they borrowed Hard Money. Those forms can be a starting point to develop your own Promissory Note and so forth. Definitely have a lawyer look over any forms you modify for your own purpose, to make sure you have everything covered. Remember that as a Hard Money lender, doing your due diligence on the investor property and repair efforts is important, to feel confident they are buying it at a good price and are planning reasonable repairs before eventually selling the property or refinancing it. I currently always require 20% down unless I've worked with the investor on many properties in the past. If you loan everything and the investor came in with nothing, they could be motivated to just "walk away" when repairs get difficult, leaving you with a house that you've paid too much for; you have to think thru scenarios like that. I like to look at the project as if I were doing it; does the flip make sense to me? I have to understand the neighborhood and type of tenants in that area, to feel comfortable loaning money on the project. That's how I got started with Hard Money lending.