All Forum Posts by: Paul Novak

 Todd, good questions.  While this might not work for everyone this situation works for us.  I will go over the deal in further details and explain why it works for us.  My actual mortgage payments are $1,172.  Our property taxes are $2,403 or $200.25 per month.  My insurance costs are $965.39 per year, $80.45 per month.  This puts our total monthly expenses at $1,453.32 and I plan to pay $1,475 per month.  We are going to rent it out at $1,950 per month putting our cash flow at $475 per month.

My normal cashflow goal when starting out at a minimum is $500 per month to make sure I have enough cashflow to cover maintenance and vacancy.  This property was unique because I feel it's the last property we need to hit our cashflow goal to achieve FIRE.  All we need to do now is pay off our properties and we will be able to retire.  I feel this property can appreciate over time along with grow it's cashflow.  Because this was the last property we needed and we liked the property we purchased it with tighter cashflow.

Lastly we have a relatively high savings rate and save about 60% of our income.  This allows us to save about $10K per month.  With this level of savings if any maintenance repairs come up with have enough to cover them.  While that might not work for most it works in our situation. 

Ashley, I hear where you are coming from. We are trying to do the same thing. I am an investor about an hour and a half east of you in Sheboygan. We are working to build up our cashflow to $11K per month. Hopefully after expenses it equates out to about $100K per year. Our strategy, while not quick, is to track what our cashflow would be with a portfolio that is completely paid off. We only have long term rentals. We started in the summer of 2021 and now have 6 properties 8 doors. If these properties were paid off our cashflow would be around $10,275 per month. My expectation is with rent increases over time this will grow to our goal of $11K. I plan on taking the next 6 years and paying all of these properties off, at which point we will be able to make enough off our portfolio for my wife and I to quit our current W2's. This would be great timing because our oldest would just be finishing high school. Similar to you my wife is thinking about starting up a cleaning business to add a little supplemental income. I also am thinking about working at the local golf course when I retire for some additional income. What I have learned is that this is totally doable in 7-10 years with a small and mighty portfolio depending on your lifestyle. I am also assuming you can make more in Madison then you can here in Sheboygan, and STR tends to make more profits then long term buy and hold. I wish you the best of luck!

Your numbers look eerily similar to mine.  I have made this work by putting more money into my deals.  I have the exact same cashflow goals as you.  I have rentals in Sheboygan, WI about an hour north of Milwaukee.  We purchased a property just this week it was $255K but the interest rate was 8.125% which was crazy.  I ended up putting down 30% and paying $907 in fees to get the rate down to 6.875%.  This property is a single family home 4 bedroom 2 bath property.  We are going to rent it out for $1,950.  Our property taxes are $2,400 and our insurance is $965.  We will be at that $500 mark for cash flow.  I have just been putting more down to hit my goal.

Ashley, we kept it simple and did all of our branding for free.  We did pay for business cards that to be honest we hardly use.  As for marketing we only have a Facebook business page which is free.  We have long term rentals vs. short term but it sill keeps us out there.  When we actually list our properties we use Stessa, Zillow, and Apartments.com.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $255,000
Cash invested: $76,500

Single family 4 Bedrooms, 2 full bathrooms with detached 1 car garage and off-street parking located in a great neighborhood in Sheboygan. Ranch home with a fenced in backyard. Newly remodeled home fully updated with stove, fridge, dishwasher, microwave, all brand new! Basement partially finished with washer and dryer included.

What made you interested in investing in this type of deal?

Multiple things, this property was in our buy box, we liked the location, we were able to get the property for 9% under it's original asking price, and it was flipped by someone we trust so it doesn't need work. This property also had an accepted offer where the buyer backed out however they paid for the home inspection and the owners did repairs to correct any findings which we didn't have to pay for.

How did you find this deal and how did you negotiate it?

Our real estate agent owned the house, knew what we were looking for, and called to offer it to us. As long as we agreed to the purchase price the house was ours.

How did you finance this deal?

We financed with conventional financing putting 30% down. I was a bit shocked that 20% resulted in 8.125% interest even with an 800 credit score. Putting 30% down and paying an extra $900 in fees we were able to get the rate to 6.875% which was more manageable as a long term rental.

How did you add value to the deal?

With the property already flipped their is limited work to do. We put additional money down to improve cash flow. Other than that with this property our value add was limited.

What was the outcome?

This week we will be listing the property for rent and waiting to place our next set of tenants.

Lessons learned? Challenges?

I think the biggest challenge as this was a pretty simple deal was the sticker shock of the interest rates. I know they are always moving but I was estimating 7% on the high end. I am fortunate enough to have the cash to increase the down payment but if I didn't I would run into cashflow issues with this property. This deal all came together really quickly but in the future I need to find out my rate ahead of time.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with Bank First in Sheboygan, WI for financing and Pleasant View Reality in Plymouth, WI for my agent. I HIGHLY recommend both of them. They have now helped us through 7 total properties and we couldn't be happier with their service! If you are looking for a loan officer or real estate agent and are in the Sheboygan area I would recommend Wendy Conto and Matt/Nikki Kapellen!

Arthur, I am going to assume that you already have paid off high interest debt and are maximizing your savings rate. The question wasn’t how to save more money but what to do with the money you are saving. In my mind it comes to how long you are going to have to save. If you are going to be saving for 6 months or less I would keep the money in a high yield savings account. If you are going to be saving for a year plus I would put the money in a low cost index fund like VOO. I know the market is showing a lot of volatility right now but I made a savings calculator to analyze this very scenario. What I have found over the last 45 years is that there is a 64% chance your money will grow beyond 4%, there is a 75% chance you won’t lose money. But the potential upside out ways the risk in my opinion. The long the money can compound in the account the greater your chances of success are.

I personally would stay away from things like crypto or highly volatile investments. You are looking to save up for your first rental. Doing things that put that at risk to me just isn’t worth it. As you get more capital putting a little more risk on the table I think is okay because you have more cashflow backing you. You don’t want to invest in a manner that could wipe out your ability to invest for tomorrow. If you have more questions or want to talk further let me know. Good luck!

George, welcome to BP! As someone looking to get started you came to the right place. I have found this community a great place to network, and get questioned answered from experienced investors. I’m an investor about an hour south of you in Sheboygan. I have been at it since 2021 and have acquired 5 properties 7 doors since then. While I am not the most experienced in the world my wife and I have built a business model that works, have documented work instructions that outline all of our processes, and are continuing to grow at roughly a property per year. Our goal isn’t to create a hundred property portfolio but rather a small and mighty portfolio of 6-8 paid off long term rentals that we can retire off of, and we are only a few years away. If you have any questions feel free to reach out. Great to meet you.

Reid, first off welcome to BP and thanks for reaching out. I am an investor about an hour and a half away from you in Sheboygan. I love the area and real estate has been a great way for us to grow our wealth. As for analyzing deals I have been doing this for a while and I analyze deals every week. Because I know my market I know roughly what I can get for rents by looking at the MLS. My rent prices I generate based on location and amenities. The more deals you do or analyze the better you will become at running your numbers. Another bit of feedback is to have a strong buy box. The more you can narrow down your search results the easier it becomes to analyze. If you are looking for small multifamily, apartment buildings, single family homes, 1 bedroom properties, 4 bedroom properties, and the list can go on and on it gets hard to be good at knowing that wide range of properties. If you are only looking for single family 3 to 4 bedroom homes, in a specific location it becomes easier to become an expert at what home prices are a good deal and what your average rents should be. Once I feel confident in my rent prices I need to analyze the property. I look to make sure its in a location that I like and it's a property I would be proud to add to my portfolio. Next I look at the price I am comfortable offering. Then I break down my insurance costs, property taxes, and interest rate. Then I set a raw cashflow goal for my properties, for me that is $500 per month. I then back into my downpayment based on wanting to hit that goal. This means that sometimes I put down 20%, other times I put down 25%, 30%, 35%, or even 40%. Depending on how much money that is I make a determination on if it's worth it for me based on the downpayment amount.

I have a calculator where I run deals each week and I have saved all the data from my local market. If interested I can send you a copy as a template. If you are interested just DM me and I will shoot it over. Also if you have any other questions let me know. I am happy to help.

Kira, for what it’s worth we only do month to month leases right from the get go. This separates us from other landlords, allows flexibility for our tenants, and allows flexibility for us if the tenants aren’t a good fit. On the flip side we write in our leases that we will lock in the rent price for a minimum of 2 years from the date of lease signing. This shows a sign of good faith on our part that we are serious about getting long term tenants. We have no guarantees that our tenants will not move out in the winter but I can tell you we have taken this approach for years and it’s worked great. We rarely turnover tenants.

Hey Jaida welcome to BP! This is a great community to learn, get your questions answered, and network with other investors in your area. I am relatively new too. I got started in 2021 and have acquired 5 properties 7 doors since starting. I am invested about an hour north of you in Sheboygan. Honestly since starting to invest in real estate it’s been a game changer for our financial situation. The appreciation has really improved our net worth, the tax benefits have helped significantly reduce our taxable income, and the cashflow has allowed us to grow the rate at which we are able to invest. I feel between real estate and our W2 income my wife and I will be able to retire somewhere between 45 and 50. I am 39 now.

I will preface my feedback with the disclaimer that how I have invested isn’t sexy, it’s a long consistent process but the benefits have been great. I am not one to recommend risky moves to get into real estate. That doesn’t mean those tactics aren’t out there or won’t work it’s just not how I have invested. Being 18 my guess is that you don’t have enough capital to buy your first property. I would focus on three things, growing your W2 income, tracking your savings rate, and focus on education. From my perspective it takes capital to get into this business. Finding ways to spend less than you make and invest the rest is key to raising the capital you will need to buy a property. Starting with small sustainable amounts that you can be consistent with is key. Start tracking how much in dollars and percentage of your paycheck you can save each week. I like tracking both because as your income grows it’s easier to save more dollars but not as easy to continue to grow the percentage saved. Tracking this makes sure lifestyle creep doesn’t erode your savings. I would take that money an invest it in low cost index funds like VOO to let it grow. Next I would continue to read books like Rich Dad Poor Dad and Pillars of Wealth to increase your education. Also a great video to watch as someone looking to get started is this video from BP. It’s one of my favorites, here is the link

;list=PLqEq51SloR-XX8o2PS9ZE2C75BxxmaAkM&index=2.

If you have additional questions or would like to talk further let me know. I am here to help and love helping people get started.