All Forum Posts by: Wes S.

@Austin DeBoer welcome! Overland Park is a great area to get started. That area had the highest percentage appreciation last year, but still looks to have good opportunities for cash flow. Here are some first steps

• Check out the local forum for Kansas City and see who's posting
• Setup notifications for Overland Park, Olathe, Merriam, Kansas City
• Start contacting other local investors to meet and discuss the market

Good luck!

Jason, for Orlando, I strongly recommend Orlando Realty and Property Management. I did some research on the options about a year ago and they were the best. So far, they're continuing to be on top of everything and doing a great job managing a tricky tenant. They charge 9% monthly, but their annual fee structure is designed to incentivize them to keep tenants more than one year. Most places do a flat fee for move-in...which means they'll make more money by getting annual turnover.

As for other areas of the country (like Washington State), it's often 100% of first month's rent plus 10% monthly. So, while the price of yours might look good, it's worth getting a better company that you pay a little more for. 

@Carl Fischer Ah thanks -- I had confused a 401k loan with an early withdrawal. I agree, the taxes aren't ideal with it. Unfortunately TSP is fairly restrictive on what it seems invested in , and it's limited to a mix of five funds.

But investing with my IRA is an option as well, so I'll examine that a bit more.

@George Blower thanks. Yes, the tax implications are trickier, as they aren't clearly stated. The "interest" is not tax deductible, correct?

@Lynn McGeein that's true; I'm looking at an investment, so it's a 5-year repayment. At the max $50K for example (assuming for a moment someone's TSP is at least $100K not including employer matching), that comes to about $410 every TWO WEEKS. So that needs to be accounted for in the investment return. Still, for a BARRRR or equity investor it can work.

And I'll look into the government shutdown concerns -- great point!

Good morning BP. I've been considering using a Thrift Savings Plan (TSP) loan to help finance my next investment. As I've looked into it with some caution (after all, EVERYBODY* says "Max out TSP! Don't touch it!"), to me it looks VERY appealing. I'm looking for feedback on what I'm missing.

The pros of the TSP loan:

-There is no 10% IRS fee (unlike 401k)

-The fee to process the loan is $50

-The loan does not count as taxable income so long as it's repaid

-The current interest rate is 2.375%, which is paid back to my own account and not a bank

The cons:

-No TSP earnings from what I withdraw (but it will ideally be earning a much higher return from real estate, but it's worth stating that there is a risk if the investment isn't good)

-The loan interest does not appear to count as an expense for any investment, so it would not be tax-deductible

-Some "Ifs"; IF I leave federal service, I have to repay it all in 90 days. IF I don't pay on time, it triggers it as taxable income.

So I'm waiting for the catch. Because this sounds far better than a HELOC or the 401k options. What am I missing here?

@Steve Vaughan very interesting idea on that! Thanks for the tip.

@Stephanie J. Valme If you've been studying investing/finance/real estate in college, I would guess you have a strong foundation in the fundamentals of how to do this as a business. Others may have experience in construction, or plumbing, or networking. As long as you are bringing something to the table, you can make this work -- so long as you back it up with persistence and a positive attitude.

An oft repeated line is that if you can find a good deal, you can find people who want to invest in it. Keep in mind not everyone wants to invest in someone else's project -- but some people do. Yes, it's harder than using your own money -- you need to network, build credibility, learn how to present the deal in a reasonable way. And be ready forrejection. But that persistence and positive attitude will let you push through. You only need to find the first good deal once -- then you have "experience" from which to keep moving forward.

@Tuan Tran Some of that will depend on the local market, some will depend on the company. 

But first, the biggest two things you need to look at are ratings and fee structure. You'll probably do a good job researching the PM, but ask for references from current clients and ask around.

Fee structure - this is where PMs can disadvantage you. Many will charge half of the first month's rent for new tenants to offset advertising fees. Some may do that EVERY YEAR. Then you'll deal with monthly 10% management fees (varies by location). Think about the worst case, that the PM is trying to milk money out of you. Are they incentivized to change out tenants annually? Do they lose money if the house isn't rented? Do they get a 10% management fee added to all maintenance, even when their in-house handyman does the work? These are things you need to account for.

Liability insurance - The PMs I've used across three different states have not had to be co-insured on liability, only the lender. The PM should have their own insurance.

Terms - this will be up to the company. If you go month-to-month, you may be dealing with less-motivated and flighty tenants. That will cost you more money -- then add to that the PM's extra costs advertising the property, more vacancy, etc. It can be a headache, so my experience is most PMs want to stick with 12-month leases.

Cancellation fee - varies by company. The ones I go with don't have much of a cancellation fee, if any. Try to avoid this, as it could be a red flag of a bait-and-switch.

@Stephanie J. Valme Great questions and I expect you'll see a bunch of different answers. First, you do not need a real estate license, although there are several blog posts and articles on BP about the pros and cons of that. Bottom line it's a big time investment IMO. Rather, there are internships, probably, or the informal internships you make yourself. Reach out to investors near you and ask how you can help them. Maybe it's ride along to a job site, maybe it's just meet and talk. Or offer to do some of the less glamorous work the investor doesn't want to do.

Your question about getting rid of debt is a big one. It may be difficult to get your name on a loan with that...but it doesn't mean you can't be an investor. There's a book all about investing with low or no money down, focused on how to craft creative deals using partners or other methods. It's worth checking out, or use the free option of reading a bunch on creative deals on BP forum. Bottom line -- you don't need to wait and pay off your debt. That could take a while. Use real estate investing to help pay off your debt faster.

@Sean Durham my first house was across the street from a cemetery! I was able to get a roommate to pay half the mortgage with me as rent. When sold the property last year, it sold in a day at above asking price.

The effect on price will be difficult to estimate, but you could look at the effects of other homes that border the cemetery. Or, look for other nearby cemeteries.  However, I think there will always be people interested in the property regardless of the spooky neighbors. It may not have as big a dip in price as you'd think.