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Old 01-04-2018, 09:46 PM
$ Saving Sixth Grader
 
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Thumbs up Advice: Ways to Diversify Investment Portfolio/Find connections/Develop partnerships

Hi Everyone,

I’m 27. I would love advice and ways to diversify my investments and/or eliminate debt. I earn W2 income ($40k full-time job, 4.7k part-time job).

I own 5 homes. 4 rentals. (Earned $18,516.00).
Home #1: Worth $162k—owe $133k, 29k equity
Home #2: Worth $148k—owe $111k, 37k equity
Home #3: Worth $120k – owe $84k, 36k equity
Home #4: Worth $120k – owe $96k, 24k equity
Home #5: Worth $78k – owe $49.5k, 28.5k equity

$117,500.00 in RE equity.

I have approximately $85,878.00 in various accounts (checking’s/savings/CD’s), and around $10k in 401k.


Great things about 2017.
- I paid off my car (around $9k)
- I paid off $5k CC debt, I owe around $19.5k (with 0% interest).
- Purchased multiple RE investments!

Two priority goals for 2018.
1. I plan to purchase a minimum of 3 rental properties this year.
2. I want to pay off $10k (credit card debt).
3. Find other investors to partner with!

I would love to hear more of ways to invest outside of RE. And, would love to connect with other savers and RE investors!
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Old 01-05-2018, 12:39 PM
$ Saving Professor
 
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How did you buy so many homes making $40k/year and qualify?
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Old 01-06-2018, 02:30 AM
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Quote:
Originally Posted by LivingAlmostLarge View Post
How did you buy so many homes making $40k/year and qualify?
Different person but my numbers are kind of close to his. I am older than him tho (42). Man If I started at his age I can only imagine where I would be now. I gross 50k a year and qualify to buy as many rental properties as I want as long as I have the down payments. They use income from my other properties to help qualify. I also have been working overtime since 2014 for the down payments. I do not use the overtime numbers on my loan application. Right now I have 2 rentals and I am trying to find 2 more. I also have no debt beside my rentals.
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Last edited by Atretes1; 01-06-2018 at 05:45 AM.
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Old 01-06-2018, 09:33 AM
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To me the personal debt is a non starter and I would go the other way till i had my cash flow in hand, ideally including the personal residence. Then restart will less leverage and higher profit margin. I'm interested to know how many cycles you have weathered?
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Old 01-06-2018, 10:27 AM
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How do you make in such a short time so much money for $170k equity. If bought in the last year then $170k is 4 years of gross income. Even saving over 10 years since age 17 then it's $10k/year which seems like a lot. Plus another $85k in checking account, $10k in 401k, paying off $9k car and $5k CC debt. Which is fine but I'm a bit confused by how you do it on $40k even keeping every penny and living at home for so $40k after SS and Medicare and no other expenses.

I guess I'm not a bank. I would probably question how you can keep buying what if a renter stops paying? Do you not need cushion?
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Old 01-06-2018, 01:29 PM
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Rather than buying more, I would start paying off the ones with lower debt. Once those are paid for, sock some away for maintenance and expenses and the rest is all gravy.
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Old 01-06-2018, 03:58 PM
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Default How I'm purchasing homes

Quote:
Originally Posted by LivingAlmostLarge View Post
How did you buy so many homes making $40k/year and qualify?
Good question. I'm licensed as a real estate agent too. I find motivated sellers and/or homes in need of cosmetic repairs and purchased 75%-80% of current value and wait for appreciation to cash-out refinance.

If I find a home for $80k (and worth $105k), pay 15% down and find renter willing to pay $1000.00, on a $550.00 mortgage it shows I am earning $200.00 monthly according to banking standards. That means I not only make $3500.00 for W2 employment but earn $200.00 from that investment. Does that make sense?
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Old 01-06-2018, 04:00 PM
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Originally Posted by LivingAlmostLarge View Post
How do you make in such a short time so much money for $170k equity. If bought in the last year then $170k is 4 years of gross income. Even saving over 10 years since age 17 then it's $10k/year which seems like a lot. Plus another $85k in checking account, $10k in 401k, paying off $9k car and $5k CC debt. Which is fine but I'm a bit confused by how you do it on $40k even keeping every penny and living at home for so $40k after SS and Medicare and no other expenses.

I guess I'm not a bank. I would probably question how you can keep buying what if a renter stops paying? Do you not need cushion?

I have over $80k liquid assets (cash). Banks want 6-months worth of reserves for each property. I feel actually very secure, as if I am already wealthy. The homes I own pay my entire mortgage and I save my entire W2 salary.
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Old 01-06-2018, 04:01 PM
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Default Maintenance

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Originally Posted by Fishindude77 View Post
Rather than buying more, I would start paying off the ones with lower debt. Once those are paid for, sock some away for maintenance and expenses and the rest is all gravy.
I agree with socking some away for maintenance! I've replaced two HVAC systems and has had 2 tenants call about their heat. Thankfully, I am pretty proactive. Next year I'll focus on servicing HVAC systems, especially before wintery chills occur.
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Old 01-06-2018, 04:05 PM
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Default High Profit Margins

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Originally Posted by Benderz View Post
To me the personal debt is a non starter and I would go the other way till i had my cash flow in hand, ideally including the personal residence. Then restart will less leverage and higher profit margin. I'm interested to know how many cycles you have weathered?
Same. It seems like we think alike. I have focused on maximizing savings. Beginning this year I'll save my entire W2 income ($3300.00) monthly after taxes. I plan on buying a home by the end of the month. Needs a few things so I'll be spending thousands upfront but will cash out refinance in 6 months to earn money back and maximize cash flow. Based on the numbers I crunched, I can have $100k saved by March. That's the goal. I'm selling two homes this year and should earn around $20k each.

Do you own real properties?
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Old 01-06-2018, 04:08 PM
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Location: North Carolina
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Default Rentals/Goals

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Originally Posted by Atretes1 View Post
Different person but my numbers are kind of close to his. I am older than him tho (42). Man If I started at his age I can only imagine where I would be now. I gross 50k a year and qualify to buy as many rental properties as I want as long as I have the down payments. They use income from my other properties to help qualify. I also have been working overtime since 2014 for the down payments. I do not use the overtime numbers on my loan application. Right now I have 2 rentals and I am trying to find 2 more. I also have no debt beside my rentals.

I'm trying to have at least 20 by the time I'm 30. Its' getting difficult to find motivated sellers. I believe I have two already closing to accepting offers of mine. I need to own 12 by the end of the year. That's one of my LARGE goals. I do want a higher W2 career. I love my career but need more income to support investments. I almost had a difficult time refinancing and had to wait because my income dropped (from 48k to 40k). No more bonuses.

If you don't mind me asking where are you located and your properties? I'd love to purchase properties even outside of my state (NC).
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Old 01-06-2018, 04:09 PM
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Quote:
Originally Posted by LivingAlmostLarge View Post
How did you buy so many homes making $40k/year and qualify?
And, I earn no income during summer months....
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Old 01-06-2018, 04:16 PM
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Quote:
Originally Posted by LivingAlmostLarge View Post
How do you make in such a short time so much money for $170k equity. If bought in the last year then $170k is 4 years of gross income. Even saving over 10 years since age 17 then it's $10k/year which seems like a lot. Plus another $85k in checking account, $10k in 401k, paying off $9k car and $5k CC debt. Which is fine but I'm a bit confused by how you do it on $40k even keeping every penny and living at home for so $40k after SS and Medicare and no other expenses.

I did earn $48k before last year. I work part-time jobs (2). I have always saved part-time job incomes. I earn income from rental properties ($1450.00 monthly and should increase). I earn cash from refinancing. I saved on average $2k a month. This year because car is paid off and some CC debt, I'll be saving $3.3k monthly. I just got another part-time job (which starts at end of this month). I hope that helps.


I guess I'm not a bank. I would probably question how you can keep buying what if a renter stops paying? Do you not need cushion?
$15,354.00 is a 6-month reserve for all properties, excluding my home. Including mine, I should have $21,027.00 saved. I have over $80k saved. I feel pretty comfortable, and actually I feel like I've made it already...although I want more.
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Old 01-07-2018, 10:24 AM
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I'm still confused where did you get all this cash for down payments and cash? I mean to save $80k cash1 year you have to be saving 6k/month in cash right from your work $3300 and $2700 in rent after expenses and taxes and living expenses.

I guess I'm just confused how it all works. How do you make $40k/year and generate save double that without any living expenses?

$15k for 6 months reserves is what you pay if you had no tenants? So your entire 5 homes mortgages is $2500/month right?

So if you go from $80k in january to $100k in march in cash that's $20k. But how do you save $20k when you don't make $20k/month? I'm being seriously stupid.
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Old 01-07-2018, 12:30 PM
$ Saving Sixth Grader
 
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Default Questions answered

Quote:
Originally Posted by LivingAlmostLarge View Post
I'm still confused where did you get all this cash for down payments and cash?
Quote:
Originally Posted by LivingAlmostLarge View Post
I use my business LOC.
My downpayment is only 10% of purchase price of homes and they finance majority of renovations. From that 10%, 3% is provided back to me as my commission (I'm a real estate agent).

I then receive more funds when I refinance homes (either 90 days after being on title) or 6-months. It honestly depends if I want to move forward with a conventional loan or commercial. Does that help clear that part?

Here's a situation now: I'm purchasing a home for $70k now. The home needs around $10k renovations. I'll receive a loan around $80k. I'll pay $7k upfront (down payment) and will receive 3% back as commission. Renovate with funds given by lender and rent out. By August I should be able to receive cash out (around $10k). Which means I will have earn a few grand more than what I initially put in all the while earning a positive cash flow by renting more than mortgage amount.

I mean to save $80k cash1 year you have to be saving 6k/month in cash right from your work $3300 and $2700 in rent after expenses and taxes and living expenses.

I guess I'm just confused how it all works. How do you make $40k/year and generate save double that without any living expenses?

I earn more than $40k. I earn $40k from basic salary (full-time) job. I am also a licensed RE agent. I am also a part-time healthcare professional (earning around $4.7k) and hold one other part-time (earning around $1.2k) annually. Part-time incomes I stash away. I also have multiple rentals and stash that cash away. I also earn money when I refinance.


$15k for 6 months reserves is what you pay if you had no tenants? So your entire 5 homes mortgages is $2500/month right?

Mortgages are $3,504.00. My personal mortgage is $1000.00. Investment properties are $2,559.00. I'm refinancing one now and will drop mortgage by $100.00 (possibly). That's not really important. What's more important is cashing out and purchasing additional (high quality) properties and securing even better tenants. Reserves should be approximately $21,500.00 for me.


So if you go from $80k in january to $100k in march in cash that's $20k. But how do you save $20k when you don't make $20k/month? I'm being seriously stupid.
-85k in January. My tenant funds haven't posted to my account yet but will they do should increase to around $88k.
-7K from purchasing property, get back 3% of purchase price. Renovate. Rental out.
That's going to leave me around $82k + savings for Feb and march ($4k each) + new rent from new property purchased ($2k). That's 92k late March.
And, finally I am refinancing a property and hope to receive $8k cash out from it. That gives me $100k. In 6-months I'll refinance the home I purchase this month and try to receive $6-8k back as well. I'm saving $3500.00 to $4000 monthly. Off on a tangent but does that help?

You are not. Those are good questions. I hope I am able to answer clearly. (review above).
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Old 01-07-2018, 10:02 PM
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I understand how LivingAlmostLarge is confused. I feel like I am reading one of those RE infomercials from late night TV. I'm generally good with numbers, but things still seem strange. We own one rental property that should be paid off in a couple of months, and no we aren't going to buy another as we are tired of tenants that seem to live by their own rules of when to pay the rent. When the city is socked in with snow, it isn't like you can run right over and post a note on the door of pay or get out. Who wants an empty property in the middle of winter? Anyhow, in the years we have had that property we never counted it as income that we could spend. Not that we haven't had to tap it a few times, but I can't even see us trying to refinance it now. Yeah we might get all the equity back out, but we wanted the income for our retirement. Not to start another round of mortgage payments.

I think the thing that is puzzling is for the most part all you ever mention is the income, never the corresponding expenses, other than the HVAC you mentioned but didn't attach numbers to it. You claim to be saving all your income which you call W2 income which is something I have never heard it referred to like that before.
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Old 01-08-2018, 03:51 PM
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how do you keep doing cash out refinances? Then you take the cash and save and live on what?
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Old 01-08-2018, 04:01 PM
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How much do you actually earn? I think that’s the missing info that has us all confused.
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Old 01-08-2018, 07:45 PM
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Quote:
Originally Posted by Gailete View Post
I understand how LivingAlmostLarge is confused. I feel like I am reading one of those RE infomercials from late night TV. I'm generally good with numbers, but things still seem strange. We own one rental property that should be paid off in a couple of months, and no we aren't going to buy another as we are tired of tenants that seem to live by their own rules of when to pay the rent. When the city is socked in with snow, it isn't like you can run right over and post a note on the door of pay or get out. Who wants an empty property in the middle of winter? Anyhow, in the years we have had that property we never counted it as income that we could spend. Not that we haven't had to tap it a few times, but I can't even see us trying to refinance it now. Yeah we might get all the equity back out, but we wanted the income for our retirement. Not to start another round of mortgage payments.

I think the thing that is puzzling is for the most part all you ever mention is the income, never the corresponding expenses, other than the HVAC you mentioned but didn't attach numbers to it. You claim to be saving all your income which you call W2 income which is something I have never heard it referred to like that before.
Interesting-- investors call it W2 income and my 'go to' lender does as well.

My tenants aren't calling me any and all times of night. I screen tenants thoroughly. And, before any tenant moved into properties I had inspections completed and fixed problems beforehand. Just an FYI*

I understand you aren't interested in another round of mortgages but that's you. It's paid off for me and I hope it continues to do so.

I recommend re-examining numbers presented and trying again. If that doesn't help feel free to send a PM.

Last edited by ndwilli6; 01-08-2018 at 07:57 PM.
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Old 01-08-2018, 07:47 PM
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how do you keep doing cash out refinances? Then you take the cash and save and live on what?
I think you should reach out to a lender that's great with investments if you honestly don't understand out cash out refinances work. You buy the properties low-renovate-and receive 75% or 70% of new appraised values. This isn't new. Many people just don't know...

And as I said before the lender paid off my car and many CC's when I refinanced my primary home. I can't get anymore clearer.

Last edited by ndwilli6; 01-08-2018 at 07:56 PM.
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