All Forum Posts by: Tim Polk

@Jerry S. Did you ever invest and what area?

@Dolores Gonzalez With all the information provided what did you decide to do?

Yep, wrong link. That is a knife set model # from Christmas haha. My bad.. https://www.biggerpockets.com/topics/581324

Not sure if I copied this link from my phone correctly on another thread I read but very interesting comparison of research done between Chicagoland and IN. 1022636

@Melissa Kirchhoff Very cool, thank you! I'm going to check these out. You invest primarily in Chicagoland area? I was considering expanding my search today to include southern Wisconsin and peak over into Indiana as well..

@Richard Sherman I'm with you on keeping finances separate. Just wanting to know all my options. The part I did not mention in this plan is that paperwork is being drafted upfront to protect my assets in the event we were to separate down the road.

Hey Melissa! Thank you so much for all the details. I put Buy it, rent it, profit in my audible wish list. I’ll listen to that one after I finish up Rental Property Investing by Brandon Turner. I’ve been on an audio book bender lately and have started listening to the podcasts while at the gym. Loving the resources and free/los cost education. Especially after paying off the final $30k of student loans this year!

It’s also nice to hear that you can closely relate with a significant other who is an accountant. We were traveling listening to an audio book together and a section came up diving deeper into the numbers and she came alive. That’s her strong suite that she brings to the table. Combined with my contractor & sales background I think we make for a very strong team.

Start with an FHA and roll into conventional despite current rates? This depends. Personally, I wouldn't if I didn't have to, no reason to pay PMI if it's not necessary, but if you have to do FHA to get another loan or you don't have the money down, then I prefer it as to not getting the second property. However, I believe FHA with low down has to be owner occupied, so that might prevent you from getting another deal that isn't house hacking. So I would talk to your lender about the different options so you know what you can buy or not.

I don't mind moving is why I like the potential house hack idea. In order to use an FHA loan you do have to live in the property. The only real upside is the smaller down payment. I keep this in the back of my mind because if I were to find more than one and I'm not liquid enough I could leverage the banks money to acquire the property desired. It was easy to roll the first FHA I took out into a conventional loan but it's an uncertainty on what the rates will do..

Hang tight and save money? I wouldn't wait too terribly long. I don't want to sound like dooms day but I do think the rates will be climbing. Like I said before, I would save up maybe 2-3 months worth of expenses maybe while you're looking, just to have something to fall back on.

I’m saving as fast as possible, I have some other irons in the fire for a cash injection, so I may be able to fast track this.

7-10 years a SMART goal? Absolutely. I think it's a good timeframe. Do you know though how it breaks down, like how many properties do you want to acquire in that time? What's your plan for getting them, is it possible financially? I would look at that stuff.

I want to refine the plan and make it more granular. I just have a hard time picturing what exactly it’s going to look like when your open to multiple different opportunities. It’s easy to say I’m going to buy 10 multi-families at $350k that all have a COCROI of $1,000 monthly granting me $120k annual. But it’s not realistic, variables will always be a factor. So I agree it need to be refined, I just haven’t made the executive decision on what that is going to look like.

Leverage equity? Absolutely, if you can. If you are at 24%, that may not leave you tons, but like I said above, if the numbers work, why not cash out that extra and use toward a downpayment and skip FHA and the restrictions of it and PMI. I think FHA prevents a lot of people from buying properties with tons of hidden equity, but if it's your only option, that's a different story. Also, there's tons of 3.5-3% conventionals, so you might want to look around.

I spoke with my broker last night and he told me private equity loans were also rising. He was on vacation so I didn’t get any hard numbers but I’d like to find out more so I know what my options are.

Multi-family properties appear to be highly overinflated Depends. Again, it's a matter of looking, finding those right properties and right sellers and constructing an offer around the condition. Again that's why I prefer ones that need some love. You will always be paying way more than necessary for turn-key in my opinion (and I think a lot of that has to do with a lot of our local markets being concentrated with government loan buyers which is why I think conventional can give you a very awesome advantage!)

Agreed, I am not looking for turnkey. More focused on good value that I can inject some work/capital into and make light and bright.

I am closed off to looking at multi-families only in good school districts so I can get more reliable renters. Should I expand my horizons? Is this possible head trash or do you think it’s wise to stay away from lower income areas? Goes back to your comfort zone. I think you can get some in-between school districts and still get great renters (could even be a niche type thing, really nice places to rent if most of the market there isn't. You've got to have renters that are in that district but still have the money and like nice things) but if you're not comfortable with it, don't do it! Give it time to find the right deal. But try running numbers on some different stuff you wouldn't normally consider. I like to make sure I hit everything and challenge myself to see if I'm missing some huge opportunities just because they are out of my comfort zone. You should at least find that answer then sit down and see if it's something you want to pursue or not. (And there's been plenty that is good money but still something I chose not to pursue just because it didn't seem right for me. That's okay too, but you should still be challenging yourself and asking those questions!)

I will open my search. With any type of business, you must get out of your comfort zone sometimes.

Any geographic location in Chicagoland I should be putting as spotlight on due to any outlier projects such as transportation, new construction, updating etc? Yes! The smartest investor I know is amazing with this, and I try to be better. She knows locally like every little effing thing and makes moves based on them. She completely blows me away constantly with this. Like around us, there's being lots of money thrown into our local state parks and they are being expanded. She's basically gambling that this will vastly increase tourism locally (and our downtown is doing stuff to help this as well) and is investing differently based on this. You should be researching and predicting in the same way, I believe. I think those are the ways you can really make the most money. So do your research!

Who is this real estate guru you speak of? I have my eyes and ears open for anything that is going on. This should help me expand my search as well.

Any thoughts on putting my name on one property and another in my fiancés name if the right deals came along? I don't understand what the benefit of that would be, unless she's financially contributing and worried that she wouldn't have anything if there's a split, or if you mean that you can use her as another mortgage, in effect. If that's the case, sure, why not, if it's financially do-able. And I'm bleak, but I would think about the possibility of not being together and if it's still plausible. Not to say anything bad, like it won't work out, I just think planning for the worst is the smart way to go. And, again, not to be too dark, but what if one of you passes, or things like that? It's something me and my boyfriend discuss because it's important to make sure you have a plan if the worst happens, and you don't leave someone in a bad situation. Same with post-marriage, is there a plan that's manageable in situations like that? Also, again, speaking to your lender on that is a smart move, the ones I know are really good at explaining those risks and rewards and advising.

I highly appreciate your honestly and being blunt. Like you I always plan for the worst. The only reason I bring up putting a loan in her name would be if I bought another property, was not prepper for a third yet a great deal came along. I could take put her name on it and use an FHA with being liquid as she has her own income/good credit.

Hopefully this helps, also, from your list above of people on your team, in effect, I would very highly recommend a good attorney experienced with landlord and renter issues and a very good real estate attorney to use with all your future transactions.

I’ll have to do my research on the attorneys, any resources you recommend besides Yelp, google etc?

And another side note on acquisitions, do you check auction sites? I have a list of them that I go through daily, though it's harder to find multi-family units, there's lots of SFH for amazing prices. Would you consider renting SFH instead of multi? I am just a numbers girl and sometimes those make more sense (because they usually rent for more and get more of the families which can be good) and the resale is typically good. So you might be able to buy up a few SFH and either refi or sell in the future use it to buy a bigger complex. I'd still just say keep your options open and consider different options, especially if you're not finding the multi deals you're looking for.

I do not currently check auction sites. What site do you recommend? And now that I have some type of numbers system to use for rentals I would be much more comfortable looking at them vs multifamily. Going off my previous tool, the "stomach compass" always lead me to shy away from SFH.

Goal

To achieve passive income of $120k annual within the next 7-10 years and commit to full-time rental property investing.

The Why

Have always been drawn to real estate rentals. Before purchasing my first property I moved into larger rental properties and would sublet the extra bedrooms to reduce my rental costs and sometimes even turned a profit. I did this from age 20 – 30 and loved it. Met some of the closest friends I currently have today and some of the biggest wierdos I have no contact with… It is an experience I would never change if I had to do it over, except I probably would have bought vs rented… I am also friends with the landlords I used to rent from and they are a great resource. I love the challenge, the unknown variables and how everything can come together if you work hard enough and genuinely have good intentions.

Portfolio

Chicagoland suburbs

First and only property I own is a two-unit side by side duplex I house hacked in 2015 and still live in.

Bought with 3.5% down using an FHA loan

Purchase price $345k

Rented out one side immediately for $2k and still have the same tenants, current rental income $2150/month

2017 I refinanced into a 30yr fixed conventional loan @ 4% with an appraised value of $370k which I believe was low as there was not a good selection of comps.

Since then there has been a handful of much better comps and with the renovations to the property I'm expecting it to appraise around $425k which I will have done in January 2019. If my numbers are accurate that appraisal will put me at about 24% equity removing my $89/monthly PMI.

Finances

I did run a rental property report through bigger pockets and showed cash flow of roughly $500, or $250 per door. It sounds a bit light to me but I did include 11% property management which I’m not currently using as I’m living there.

Current income from Sales job $140k annual

Fiancé, is an accountant @ $75k annual

All personal debt paid off in 2018 outside of the mortgage.

No current savings outside of 401k @ 75k combined

Able to save $3k cash monthly to put towards my future rental investments

I'm approved for another FHA loan, good credit/decent income

Target markets

Geographically I’m in Chicago but open to relocation

I am targeting multi-families until I can get into larger apartment buildings/commercial spaces. All depending on where the highest yield will be. I will not shy away from qualifying any opportunity.

I have no problem doing another house hack, it seems to be a desirable option at this moment.

On top of that I am engaged, not married. We are in this together and if I found two different multi families that were desirable I could put one in my name and another in my fiancé’s name.

Rental property knowledge

Up until recently I have relied on my gut as a compass to navigate the rental world. Did not read any books, blogs, articles etc. I conducted my own market research through Craigslist, Zillow, personal network etc. This along with previous renting experience is how I determined the juice was worth the squeeze on my first investment property. One in which I’m proud of and despite it not passing the 2% rule, I’m confident in my decision.

I recently discovered bigger pockets by looking for an audio book to educate myself further on the rental property market, so I can begin expanding in an educated manner. I am continuing my education and have dedicated an hour a day toward continued growth/education. Although I’m finding myself getting more and more excited which means going over that hourly allotment of time pretty much daily 😊

Team

Fiancé – Very supportive, also an accountant. Aspiring CPA

Lender - Does not specialize in multi units/does have okay knowledge on them, however; is motivated and has done several loans for people in my personal network, not investors.

Real estate agent – I made this mistake of allowing a dual agency on the first purchase and it was a nightmare. Need an agent

Lawyer – I have a good property tax lawyer, I do not have an attorney for evictions or any of the setbacks I have not been exposed to yet.

Insurance broker – Is not going to be on the team for long. Looking to replace for a more motivated and educated member.

Mentor – Small business owner/uncle, very success and great values. Keeps me honest and provides fantastic life advise. Huge advocate of me running my own business.

Feedback that would be useful

Any and all

Another house hack?

Start with an FHA and roll into conventional despite current rates?

Hang tight and save money?

Go big, stay small?

7-10 years a SMART goal?

Leverage 401k funds?

Leverage equity?

Move to a hotter yielding rental market?

Am I in a hot rental market and just haven’t found the right 2nd investment?

Multi-family properties appear to be highly overinflated

I am closed off to looking at multi-families only in good school districts so I can get more reliable renters. Should I expand my horizons? Is this possible head trash or do you think it’s wise to stay away from lower income areas?

Any geographic location in Chicagoland I should be putting as spotlight on due to any outlier projects such as transportation, new construction, updating etc?

FHA Clarity – I was told while buying my first house in the Chicagoland area it could only be 2 units and it had a capped lending amount?

Any thoughts on putting my name on one property and another in my fiancés name if the right deals came along? 

@Jason DiClemente Awesome, thanks again Jason. I'm still planning and saving before my next purchase which will be a minimum 6 months thus offsetting the cost of the appraisal. When I have my rough plan outline I'll post again for feedback.

@Jason DiClemente Just wanted to make sure I wasn't being inpatient by reappraising now versus after the improvements in March.