All Forum Posts by: Robert Leonard

www.nreinsurance.com

I'm another satisfied customer! :-)

@Sheree H. 

Congratulations on your fast start!  You've got lots of good advice already.  I'll just add a tool that you can use like a "personal financial score board" to track your progress:

http://www.richdad.com/Resources/Tools.aspx

You want to download the free personal financial calculator (it's just a spreadsheet).  It's not exactly what I use, but it accomplishes the same thing.

@Karen Lee I definitely wouldn't attempt this transaction "in reverse" like this.

The attorney who was part of the mandatory legal consult when I set my SD-IRA up with an LLC and checkbook control is Frank Selden.

http://www.frankseldenlaw.com/SD-IRA.html

I set mine up through Guidantfinancial and they had a very impressive educational component of their account establishment process.  Unfortunately, they sold that part of their business and I am with iDirectLaw (http://idirectlaw.com/) which is somehow affiliated wth Providenttrust and since my account was transferred, I'm not sure how the account setup process goes?

If @Dmitriy Fomichenko or I aren't convincing to you, maybe Mr. Selden can offer you some advice you'll find helpful? For me, the  custodian set the account up and the attorney was there to provide legal counsel for the account setup process and questions about use of the account.

@Jennifer T. 

It's about being a "community property" state more than it has to do with Napoleonic Code Laws.  Unless you keep all of your money separate and you don't mix any of your income after marriage with the funds you use to pay for the mortgage, you both own the property.  It's called comingling of funds.  Once comingled funds are used to pay for an asset in a community property state, the assets are no longer separate.  I'm not an attorney, but that's the way it works.

I think the term you are looking for in place of "assessment" is appraisal.  Lenders require an appraisal when they loan money on a property.  The parish (county other places) tax assessor assesses property values for property taxation purposes and it's similar to an appraisal, but not the same thing.

@Karen M. 

I have to say, I love Dave Ramsey.  I think he offers some of the best personal finance information available today with one exception; he is way too extreme toward debt. Of course it's prudent never to overextend yourself, but to do everything with cash as he recommends is extremely limiting.  Can it be done, yes, but if you have the discipline to follow all of the basic fundamental ideas he teaches to manage your personal finances, you have what it takes to use debt responsibly. 

I know you have to do what allows you to sleep well at night, but it is a totally missed opportunity when you give back (payback early) the extremely cheap money available to you when you have a mortgage at today's rates.  It makes perfect sense in a higher interest rate environment, but if you are young and need money to invest for the future, we have a huge advantage.  You can find plenty of arguments here on BP about this issue, so I'll drop it and let you read through those conversations rather than stir it up here.

You've already decided against this deal, so I'll offer some food for thought on the next one you consider.  Two options come to mind: crowd-funding and Home Depot's "Project Loan."   Dawn Anastasi mentioned using a Lending Club.com loan to fund a rehab of one of her properties in her podcast.  I think they offer up to 35k?  This one requires a first lien position, which would work if you buy the property with cash.

http://www.biggerpockets.com/renewsblog/2013/08/01/bp-podcast-029-peer-to-peer-fix-hold-dawn/

The other, that I have used (I'm on my second time now!) is the Home Depot "Project Loan."  It is based on your personal credit and not a loan against any specific property.  You go to their service desk and you can get approval in 5-10 minutes if your credit is in order.  It is extremely easy and the terms are awesome!

http://www.homedepot.com/c/Credit_Center

@Dave Foster  and @Bill Exeter are absolutely correct, no need to get into the complexities of a 1031 exchange for a personal residence.  My thinking went down a rabbit hole in the wrong direction on that one!  I stand corrected - thanks guys!

@Alex Agafonov  I would recommend going to Memphisinvest.com's website and for the price of your name and email address, you will get access to Chris Clothier's video tutorial on "how to build a bank book."  (Be prepared to take notes, it's gold.)  This is what will set you up for success when you want to deal with a portfolio lender.  I would do that in about a year after you can show some proof of your ability to manage tenants and then you can begin to have the conversation with portfolio lenders to establish the relationship(s) that you'll need when you are ready to pull the trigger.

I have no affiliation with the company or website I mention here. I just find their information helpful and I'm sharing my opinion. :-)

@Tony Leighty As I do more and more networking, I'm getting mentoring requests more and more frequently.  To avoid appearing like you want to be spoon fed, do some things that will show that you are willing to make a personal contribution to your learning by doing the things that are easy to do on your own.  Here's what I recommend.

HOMEWORK

Start getting to know your market.  People in the RE industry spend a lot of money on marketing and that makes a lot of information available to you for free.  Pick up every free RE related publication in your area.  They are full of market intelligence that will help you start to learn values in your area.  You will soon know what areas are hot and which ones are not.  Do you think knowing a little about your market will allow you to engage in conversation a potential mentor might be happy to discuss?

Start reading books from the REI recommendations that are abundant. If you listen to the BP podcasts, there are 2-3 recommended books at the end of every podcast. There's also a list found here:

http://www.biggerpockets.com/renewsblog/2013/04/14/best-real-estate-books/

I would start with "The Millionaire Real Estate Investor" by Gary Keller. Do you think a mentor might enjoy discussing how Gary lost 100k on an REI investment?

NETWORK

Get out and do some networking and build relationships. Avoid the tendency to go for the jugular with something like "Hi, I'm Tony, I'm looking for a mentor?" Consistently being there at a regular REIA meeting and engaging in the conversation of the day will go far to show your commitment to the business. I'm in two REIAs and you would be amazed at how many "one and done" newbies that you never see again. Do you think someone who has a active business would be smart to commit to mentoring someone the first time they meet them?

FINANCES

What's your personal financial picture look like?  If it's in order, great!  If it's not, what are you doing to get it in order?  There's a whole lot you can do to position yourself to be able to invest.  If you have limited financing options, you have to use more of the strategies that are long shots and that means you will be a challenge to mentor.  With your finances in order, you can start establishing credit accounts with vendors like Lowe's or Home Depot that can help you accomplish renovations of properties.  Having your finances in order is also something that allows you to offer the possibility of being a finance partner on deals where you bring the financing and the mentor, brings the know how.  Just some things to think about.

If you do these things and are prepared to talk about what you've done and show some evidence of your effort and willingness to take action, it will go a long way toward giving you some credibility as someone who's serious about getting into this business.

Sorry this is so long.  I started my response this morning and got distracted by a football game.  I just realized I never finished/sent my response. :-)

@Jeff V. 

My cash on cash and cash flow targets are pretty similar to yours.  I follow different strategies that are market specific for those metrics.  I look for higher returns to justify investing in slower/smaller markets to compensate for the added travel expenses and longer DOM for filling vacancies. I think your $200/month target is very realistic and may be a little low per door.

Those new developments in the Lake Charles market are very impressive as far as real estate demand they are creating!  I'm just looking to get a piece of the action.

@Cierra Seay the only one of the two you mention with a real number to evaluate when considering a purchase is cash flow.  You can clearly calculate it when you know the expenses.  If you don't know the expenses, use the 50% rule to "ball park" the expenses and get an idea if you are likely to generate positive cash flow.

Appreciation is only a projection/estimate and any number you put on it is a pure guess.  Unless you have a crystal ball, then it's a different case! ;-)

@Alex Agafonov I have to say, I think you overspent if you're at 44% with your current mortgage.  If that 44% is not made up of some other debts that you can eliminate before the end of that 2 years, it appears that you put yourself at a disadvantage by overspending.

A way out might be to plan for a 1031 exchange.  If your income goes as planned and you experience a little appreciation (or even a flat market), you could plan to sell this high cost property after a year or two and move to another one that isn't such a burden on your borrowing ability.  You may have some difficulty keeping your room mates once you put the property on the market, but it will be part of what's necessary to lighten your financial load. 

The goal would be to take any proceeds from that sale and roll it into another property that doesn't saddle you with debt that leaves no room for other leveraged investments.  Otherwise, you can start learning alternative financing methods that don't rely on your personal credit availability.