April 25, 2016 - Day 76
Well, a lot has happened since my last post. Both of the houses we looked at with Melinda were under contract by the time we decided to place an offer. In the last 3 weeks we have probably looked at about 10 different places. There was another one that we looked at here in Corpus that we were very interested in. We told Melinda we wanted to place an offer on the house. She wrote up the offer, but then she said that she couldn't get a hold of the realtor. It just so happened that the seller's agent was a contact of mine of LinkedIn.com. He told me that he had already talked to Melinda, and that it was under contract. Melinda never told us this, I think she was embarrassed because there were a few others before that which were under contract when we wanted to bid on them.
I have started a LinkedIn campaign in order to build a Real Estate Team. I am connecting with agents, bankers, lawyers, inspectors, pretty much anybody who I think may be able to help us out along the way. I have only contacted a couple of people, but they are there if and when I need them. This way, I don't have to stress about being able to find a handyman or accountant when I need one.
On Wednesday of last week, (it's Monday morning at the time of writing this) Melinda texted us with a property in Portland, Tx. that is an estate sale. Portland is in an area near the Port of Corpus Christi LaQuinta Terminal that is expanding and growing tremendously. It is a short drive across the Corpus Christi Bay to Corpus, and is becoming a very desirable place to live. I met Melinda at the property after work on Wednesday, Angela was not feeling well. When we got there, there was no key. Melinda was embarrassed and called the agent. The agent said she wouldn't have the key until Friday. She said she would take the listing down, and not relist it until after we had a chance to look at it. So Friday after work, Angela and I met Melinda at the house in Portland. We walked through and liked what we saw. There will be some remodeling costs and one major challenge. The back porch was closed in. The flooring of the enclosure is concrete that is cracked and uneven. It will be a challenge trying to figure out what to do with it. Anyways, we called Melinda later that night and told her we would like to place an offer on the house. The asking price is $94,900 and we placed an offer the next day for $87,000. We should hear something back later this afternoon. I'll keep y'all updated.
Although we have been a little frustrated, we are still feeling excited.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
Monday, April 25, 2016
Friday, April 8, 2016
Quitting Your Job Using Rental Properties - Day 59
Day 59 - April 8, 2016
On Monday morning, when I left for work, my truck had a flat tire. Luckily, I have my weekend truck, Rusty, so I hopped in. Rusty is a 1992 Dodge Cummins that is fixed up really nice. When I got to my exit for work, steam started coming from my engine. Turns out, my radiator blew a hole. So I called my brother who sent my dad with a trailer to come pick Rusty up. When I got home from work, I changed out the flat tire, and the next day I dropped off my truck to get new tires and an alignment. Why does it seem like these things always happen on Monday. That, along with a possible new job opportunity that fell into my lap (more on that in a later post), and the rental property activity which I will describe below, made for a busy week.
Back in December, I was doing a lot of marketing on facebook for my sign business YRL Enterprises. My plan was to target real estate agents, show them my work, and suggest to them that my signs would make great closing gifts for their clients. Very few realtors responded, and nobody bought anything. On Monday of this week while I was out to lunch, I got a facebook message from one of these realtors, we'll call her Melinda, asking about the signs in the message. I replied with the information on the signs and then said, "by the way, my wife and I are looking to purchase an investment rental property, let me know if you come across anything."
We are not unhappy with Gibo, he's just too busy to get anything done for us. He mentioned in a facebook post that he had 20 houses in escrow and 20 houses listed. At this point I am not sure how rare or hard that is to accomplish, but I have a feeling when I understand it I'm going to be surprised. All I know is, we haven't really heard from him. We never signed an agreement with him, and if he calls us with another property, we will certainly go look at it. I'm not sure, but I think as an investor, we have the freedom to talk to as many real estate agents as we want to.
Anyways, the next day, I got an email from Melinda with a list of 10 potential properties to look at. We eliminated 8 of them that didn't meet our criteria, i.e. not enough bedrooms or bathrooms, a little too high on price, one was a mobile home, etc. So that left 2 that we wanted to look at. The first one was in zip code 78412 in Corpus Christi, and within walking distance to the malls. It is a 3br 2bath single family home in a decent neighborhood for sale for $87k. It had some upgrades including paint inside and out, but needed new appliances, and new floors. Estimated monthly rent income for this house is $950-$1000/month. Preliminary number indicate that in order for this property to work out, we would need to purchase it for around $70k.
The second property is in zip code 78362 in Ingleside. Industry in the area near Ingleside is exploding, so we anticipate the need for housing to be on the rise. This property is a bank foreclosure, and needs a lot of work. It is listed at $88k and we estimate it needs $8-10k worth of work. The house needs new carpet in the bedrooms, new tile in the bedrooms/kitchen. Paint inside and out. Holes in the sheetrock patched. New appliances. And then there's the back yard. I should have taken a picture. The back yard was ridiculously overgrown. Worse than anything I have ever seen. The weeds were as tall as me all throughout. Then there was a pile of some kind of vegetation that had grown up in a pyramid shape as tall as the house. Melinda said that banks usually take longer to reply to your offer (up to 2-3 months). I think if we can get this house for around $70k, we'll be ok.
It's starting to get really exciting. We could be weeks away from purchasing our first rental property.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
On Monday morning, when I left for work, my truck had a flat tire. Luckily, I have my weekend truck, Rusty, so I hopped in. Rusty is a 1992 Dodge Cummins that is fixed up really nice. When I got to my exit for work, steam started coming from my engine. Turns out, my radiator blew a hole. So I called my brother who sent my dad with a trailer to come pick Rusty up. When I got home from work, I changed out the flat tire, and the next day I dropped off my truck to get new tires and an alignment. Why does it seem like these things always happen on Monday. That, along with a possible new job opportunity that fell into my lap (more on that in a later post), and the rental property activity which I will describe below, made for a busy week.
Back in December, I was doing a lot of marketing on facebook for my sign business YRL Enterprises. My plan was to target real estate agents, show them my work, and suggest to them that my signs would make great closing gifts for their clients. Very few realtors responded, and nobody bought anything. On Monday of this week while I was out to lunch, I got a facebook message from one of these realtors, we'll call her Melinda, asking about the signs in the message. I replied with the information on the signs and then said, "by the way, my wife and I are looking to purchase an investment rental property, let me know if you come across anything."
We are not unhappy with Gibo, he's just too busy to get anything done for us. He mentioned in a facebook post that he had 20 houses in escrow and 20 houses listed. At this point I am not sure how rare or hard that is to accomplish, but I have a feeling when I understand it I'm going to be surprised. All I know is, we haven't really heard from him. We never signed an agreement with him, and if he calls us with another property, we will certainly go look at it. I'm not sure, but I think as an investor, we have the freedom to talk to as many real estate agents as we want to.
Anyways, the next day, I got an email from Melinda with a list of 10 potential properties to look at. We eliminated 8 of them that didn't meet our criteria, i.e. not enough bedrooms or bathrooms, a little too high on price, one was a mobile home, etc. So that left 2 that we wanted to look at. The first one was in zip code 78412 in Corpus Christi, and within walking distance to the malls. It is a 3br 2bath single family home in a decent neighborhood for sale for $87k. It had some upgrades including paint inside and out, but needed new appliances, and new floors. Estimated monthly rent income for this house is $950-$1000/month. Preliminary number indicate that in order for this property to work out, we would need to purchase it for around $70k.
The second property is in zip code 78362 in Ingleside. Industry in the area near Ingleside is exploding, so we anticipate the need for housing to be on the rise. This property is a bank foreclosure, and needs a lot of work. It is listed at $88k and we estimate it needs $8-10k worth of work. The house needs new carpet in the bedrooms, new tile in the bedrooms/kitchen. Paint inside and out. Holes in the sheetrock patched. New appliances. And then there's the back yard. I should have taken a picture. The back yard was ridiculously overgrown. Worse than anything I have ever seen. The weeds were as tall as me all throughout. Then there was a pile of some kind of vegetation that had grown up in a pyramid shape as tall as the house. Melinda said that banks usually take longer to reply to your offer (up to 2-3 months). I think if we can get this house for around $70k, we'll be ok.
It's starting to get really exciting. We could be weeks away from purchasing our first rental property.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
Thursday, March 31, 2016
Quitting Your Job Using Rental Properties - Day 51
Day 51 - March 31, 2016
Yesterday, Angela got a text from Gibo about a house for sale that he wanted us to look at. The seller is desperate. It had been on the market for a while. The original listing price was $110k, then dropped to $85k, and two days ago dropped to $75k. Gibo's selling points were that it had central A/C, includes appliances, and ready to rent now. He said he thinks we could get $900-$1000 a month in rent for it. I researched some similar rental properties in the area, and $900-1000 is about right for this area.
I ran some numbers on the house, and found it to have a cap rate of 14.7% and a cash on cash return of 21%. Sounds very good. The problem that we saw was that the property has an appraisal value of $44k, and the asking price is $75k. Maybe this is normal, I don't know, but I looked up the appraisal value of my current residence when I bought it on 2009, and it matched very closely with what I paid for it.
The house was vacant, and had a combo lock, so Angela, the kids and I stopped by after I got out of work. First of all, let me say that this house is in a very run down neighborhood. It is not a place that I would want to live in. We did see the potential in the house though. It did need some work. The floors would have to be completely redone. The countertops in the kitchen are not in great shape and kind of ugly. Angela wants to add a dishwasher. I want to redo the sidewalk in the front of the house that leads to the front door. On top of this, the type of tenant which this property will attract is not really something that we want to deal with. All in all, for being the first house that we looked at, I'm excited that it can basically only go up from here.
We did find another house online today that we are interested in. It is in a much nicer neighborhood. The seller is selling as it for $90k. The initial value online is around $116k. I'm pretty sure we could rent it for $1200 or more. Angela sent Gibo a text last night telling him that we looked at the house he recommended, and that we were interested in looking at this other house. We'll see how he responds.
I'm still very excited and optimistic about quitting my job with rental properties.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
Yesterday, Angela got a text from Gibo about a house for sale that he wanted us to look at. The seller is desperate. It had been on the market for a while. The original listing price was $110k, then dropped to $85k, and two days ago dropped to $75k. Gibo's selling points were that it had central A/C, includes appliances, and ready to rent now. He said he thinks we could get $900-$1000 a month in rent for it. I researched some similar rental properties in the area, and $900-1000 is about right for this area.
I ran some numbers on the house, and found it to have a cap rate of 14.7% and a cash on cash return of 21%. Sounds very good. The problem that we saw was that the property has an appraisal value of $44k, and the asking price is $75k. Maybe this is normal, I don't know, but I looked up the appraisal value of my current residence when I bought it on 2009, and it matched very closely with what I paid for it.
The house was vacant, and had a combo lock, so Angela, the kids and I stopped by after I got out of work. First of all, let me say that this house is in a very run down neighborhood. It is not a place that I would want to live in. We did see the potential in the house though. It did need some work. The floors would have to be completely redone. The countertops in the kitchen are not in great shape and kind of ugly. Angela wants to add a dishwasher. I want to redo the sidewalk in the front of the house that leads to the front door. On top of this, the type of tenant which this property will attract is not really something that we want to deal with. All in all, for being the first house that we looked at, I'm excited that it can basically only go up from here.
We did find another house online today that we are interested in. It is in a much nicer neighborhood. The seller is selling as it for $90k. The initial value online is around $116k. I'm pretty sure we could rent it for $1200 or more. Angela sent Gibo a text last night telling him that we looked at the house he recommended, and that we were interested in looking at this other house. We'll see how he responds.
I'm still very excited and optimistic about quitting my job with rental properties.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
Wednesday, March 30, 2016
Quitting Your Job Using Rental Properties - Day 50
Day 50 - March 30, 2016
So, we received our LLC paperwork on March 10th, 2016. I also applied for and received our EIN tax number from the IRS. It is a very simple process. Just go to IRS.gov and the process is very simple. You will get your EIN immediately. Do not pay legalzoom or anybody else to obtain your EIN number. It is a very simple process.
On March 21st, Angela and I went to our local Prosperity Bank to open up a business checking account. We chose the account which is free as long as you keep $3500 minimum in your account. We had about $750 in cash from a garage sale that we had and from my side business facebook.com/yrlenterprises. We pulled the rest from out savings account.
We then asked to speak with a banker. The lady we talked to, we'll call her Trish, was somewhat helpful. I kind of got the feeling that she was more trying to feel us out for what we knew than actually interested in helping us. Well, we're new to this, so we don't really know anything. I basically wanted to know what type of loans they would offer for a business, and how to qualify. She asked me if we were interested in a commercial loan, or a business loan. I still don't know what the difference is, but I said a business loan. Trish said to qualify, we would need to send in the last two years' tax returns as well as a financial statement. She emailed me an excel form to fill out for the financial statement. The financial statement basically asks about your finances (imagine that). Like how much money you have in each account that you own. How much your house is worth and how much equity you have in it. The value of your vehicles. How much debt you have. etc. Surprisingly, Trish did not ask about a credit report, or what my credit score is. She said the terms of the loan would be:
-80% LTV - this means that they will loan us 80% of the value of the house.
-5.9% Fixed - Interest rate
-15 yr term - 15 years to pay off.
I think these terms are very doable.
So on March 23rd, Angela called our realtor, Gibo, and told him we were done with our homework. We had formed an LLC, opened a bank account, talked to a banker, and we are now ready to buy a rental property. Gibo told Angela that he would begin searching for us, and let us know when he found something.
Also, I set a goal of quitting my job on July 4th, 2021. That gives me 5 years to grow my empire to where my passive income will support my family and lifestyle. If I can get my net passive income to around $100k in five years, I will have succeeded. According to my simple calculations, that will take about 20-25 rental properties. So to achieve this in 5 years, I would need to purchase 4-5 properties a year. I do expect my plan to change along the way, but the end goal will not. I want to be free to spend time with my family, and pursue the many hobbies which I have. It's not that I don't like my "real" job, I just don't want to waste my life slaving away at work every day. This past weekend was Easter. We had lots of family over to celebrate, eat, and have fun for the kids. The thought kept crossing my mind, "man, I have to go to work tomorrow." By the end of the day, I was tired, the house was a mess, and there were broken cascarones all over the yard. If I didn't have to go to work, these kinds of things would not bother me, or stress me out. But since work consumes all of my time, I have to look at things differently. I will probably never clean up the cascarones from the yard. Just mow over them and eventually they will go away. I want to be able to say, I'll clean that up tomorrow. I'm not sure if this example explains how I feel. I just want a life that is not consumed by work.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
So, we received our LLC paperwork on March 10th, 2016. I also applied for and received our EIN tax number from the IRS. It is a very simple process. Just go to IRS.gov and the process is very simple. You will get your EIN immediately. Do not pay legalzoom or anybody else to obtain your EIN number. It is a very simple process.
On March 21st, Angela and I went to our local Prosperity Bank to open up a business checking account. We chose the account which is free as long as you keep $3500 minimum in your account. We had about $750 in cash from a garage sale that we had and from my side business facebook.com/yrlenterprises. We pulled the rest from out savings account.
We then asked to speak with a banker. The lady we talked to, we'll call her Trish, was somewhat helpful. I kind of got the feeling that she was more trying to feel us out for what we knew than actually interested in helping us. Well, we're new to this, so we don't really know anything. I basically wanted to know what type of loans they would offer for a business, and how to qualify. She asked me if we were interested in a commercial loan, or a business loan. I still don't know what the difference is, but I said a business loan. Trish said to qualify, we would need to send in the last two years' tax returns as well as a financial statement. She emailed me an excel form to fill out for the financial statement. The financial statement basically asks about your finances (imagine that). Like how much money you have in each account that you own. How much your house is worth and how much equity you have in it. The value of your vehicles. How much debt you have. etc. Surprisingly, Trish did not ask about a credit report, or what my credit score is. She said the terms of the loan would be:
-80% LTV - this means that they will loan us 80% of the value of the house.
-5.9% Fixed - Interest rate
-15 yr term - 15 years to pay off.
I think these terms are very doable.
So on March 23rd, Angela called our realtor, Gibo, and told him we were done with our homework. We had formed an LLC, opened a bank account, talked to a banker, and we are now ready to buy a rental property. Gibo told Angela that he would begin searching for us, and let us know when he found something.
Also, I set a goal of quitting my job on July 4th, 2021. That gives me 5 years to grow my empire to where my passive income will support my family and lifestyle. If I can get my net passive income to around $100k in five years, I will have succeeded. According to my simple calculations, that will take about 20-25 rental properties. So to achieve this in 5 years, I would need to purchase 4-5 properties a year. I do expect my plan to change along the way, but the end goal will not. I want to be free to spend time with my family, and pursue the many hobbies which I have. It's not that I don't like my "real" job, I just don't want to waste my life slaving away at work every day. This past weekend was Easter. We had lots of family over to celebrate, eat, and have fun for the kids. The thought kept crossing my mind, "man, I have to go to work tomorrow." By the end of the day, I was tired, the house was a mess, and there were broken cascarones all over the yard. If I didn't have to go to work, these kinds of things would not bother me, or stress me out. But since work consumes all of my time, I have to look at things differently. I will probably never clean up the cascarones from the yard. Just mow over them and eventually they will go away. I want to be able to say, I'll clean that up tomorrow. I'm not sure if this example explains how I feel. I just want a life that is not consumed by work.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
Tuesday, March 1, 2016
Quitting Your Job Using Rental Properties - Day 21
March 1, 2016 - Tuesday Day 21
Yesterday, we finally went ahead and started the LLC process. I used LegalZoom.com to start the process of forming an LLC. The name of our business was picked by Angela. It is JAMC33 Enterprises. The process to use Legal Zoom is very easy. There are 3 different plans that you can buy. I chose the cheapest one which was $149. The filing fee in Texas is $301 and the shipping for the paperwork and stuff was $9.95. I searched for a coupon code and found a $10 discount online. The other plans were more expensive, and offered things that I don't think I need at this time. Things like a company seal and binder, and 20 extra "membership certificates" which I don't need. They also offered to set up my EIN, but from my research, that process seems very simple. The more expensive plans did offer expedition, but I don't really need that either. The time frame for the plan I ordered is 30 days.
One thing you will need to do is find a "Registered Agent." This is an entity that will be served papers if you are sued. It does give you the option to use Legal Zoom as your registered agent, which I did, for a price of $159/year. That cost will be charged to your credit card once your LLC is officially formed.
As you go through the process of setting up your LLC on Legal Zoom, the questions asked are related to the following:
Yesterday, we finally went ahead and started the LLC process. I used LegalZoom.com to start the process of forming an LLC. The name of our business was picked by Angela. It is JAMC33 Enterprises. The process to use Legal Zoom is very easy. There are 3 different plans that you can buy. I chose the cheapest one which was $149. The filing fee in Texas is $301 and the shipping for the paperwork and stuff was $9.95. I searched for a coupon code and found a $10 discount online. The other plans were more expensive, and offered things that I don't think I need at this time. Things like a company seal and binder, and 20 extra "membership certificates" which I don't need. They also offered to set up my EIN, but from my research, that process seems very simple. The more expensive plans did offer expedition, but I don't really need that either. The time frame for the plan I ordered is 30 days.
One thing you will need to do is find a "Registered Agent." This is an entity that will be served papers if you are sued. It does give you the option to use Legal Zoom as your registered agent, which I did, for a price of $159/year. That cost will be charged to your credit card once your LLC is officially formed.
As you go through the process of setting up your LLC on Legal Zoom, the questions asked are related to the following:
- Which State your business will operate in
- The type of business you are opening
- Are licenses required
- Will you have employees within 12 months
- When will your fiscal year end
- Your Business address
- Your Business name
- Who are the owner and manager
- Do you want Legal Zoom to obtain your EIN (Tax ID #)
- Would you like a free tax consultation
- Will you operate a vehicle over 55,000 lbs
- Will your business involve a casino or gambling
- Will you sell Alcohol, tobacco, or firearms
- Are your goods subject to an excise tax
- What is your contact info for the IRS
- Legal advice
- Tax advice
- Business licensing package
- Forms
- Business checking account through Bank of America
- Business credit card
- Website domain name
Thursday, February 25, 2016
Quitting Your Job Using Rental Properties - Day 15
2/24/16 Wednesday - Day 15
So Gibo finally called Angela back yesterday while she was getting her nails done. She couldn't really talk, plus she doesn't know much about finances, so she couldn't really answer Gibo's questions. So she texted me his number to call him.
Gibo asked me some questions about where we were planning to buy and if we had already talked to a bank. He said he would send me his email address so that he could go over our preapproval letter. He also mentioned that you should never use any of your own money when buying a rental property. I'm not so sure that I understood what he was saying, but it sounded like this - he just through some numbers out there:
The last thing he mentioned was that the first thing we need to do to get started is form an LLC. So Angela and I have been working on figuring out how to do that, and thinking of some names. I like "La Tierra Dorada"; "El Dorado"; and "El Camino Real". Angela is coming up with some dumb names. The easiest way is to use Legal Zoom to form your LLC, but I think we can do it ourselves to save money. Angela has contacted some of her former colleagues from when she used to do legal work to see if anybody can help us out. So, we'll see where it goes.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
So Gibo finally called Angela back yesterday while she was getting her nails done. She couldn't really talk, plus she doesn't know much about finances, so she couldn't really answer Gibo's questions. So she texted me his number to call him.
Gibo asked me some questions about where we were planning to buy and if we had already talked to a bank. He said he would send me his email address so that he could go over our preapproval letter. He also mentioned that you should never use any of your own money when buying a rental property. I'm not so sure that I understood what he was saying, but it sounded like this - he just through some numbers out there:
- Buy a house that's worth $80k for $60k
- Put a down payment of $12k ($20k)
- Your mortgage balance is $48k.
- Immediately refinance the home for the $80k that it is worth.
- Pay off the $48k, leaving you with $32k cash
- Pay yourself back the $12k down payment.
- That leaves you with $20k for repairs/profit.
- Rent out the house.
The last thing he mentioned was that the first thing we need to do to get started is form an LLC. So Angela and I have been working on figuring out how to do that, and thinking of some names. I like "La Tierra Dorada"; "El Dorado"; and "El Camino Real". Angela is coming up with some dumb names. The easiest way is to use Legal Zoom to form your LLC, but I think we can do it ourselves to save money. Angela has contacted some of her former colleagues from when she used to do legal work to see if anybody can help us out. So, we'll see where it goes.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
Friday, February 19, 2016
Quitting Your Job Using Rental Properties - Day 10
February 19th Friday - Day 10
Yesterday, my wife and I had a phone meeting with our financial adviser, Scott. I just wanted to see if he had any advice four our new endeavor, and what his advice might be. Or if he would be for or against investing in real estate. If he is adamantly against it, then it may be cause to reconsider.
So we started off with some small talk regarding choosing an accountant to do my taxes, and how I am not concerned about the recent decline in the stock market, since we are in it for the long haul. Then I ran the idea of investing in real estate by him. He said investing in real estate is a great idea, and the only reason why it is not feasible for him is because he lives in Austin where property values are ridiculously high. He went on to do a quick assessment of our financials either mentally or what he had in front of him. He warned of the risks of not being able to pay the mortgage if the place is not rented. Then he said that although it is our money and we can do what we want with it, he didn't think we were in the position to proceed with buying a rental property. I said OK, and proceeded to explain to him the research I have done and why I think it is a perfect time to invest in real estate in Corpus Christi. Once Scott realized that this is not just something that I am just jumping into, he commended me on the research that I have done and said it looks like we are headed in the right direction. He even offered to put us in touch with a mortgage broker who can search and find banks willing to lend us money at the best rates possible for us. I definitely plan on using him.
Our plan is to proceed with purchasing our first rental property. I told my wife Angela to go ahead and contact her cousin, who is married to a realtor. At this point, we do not have any problems with working with a family member. That may change later on. Angela contacted her cousin, we'll call her Elsa, who said that they did not have a problem working with family members either. So we are expected to hear from Elsa's husband, we'll call him Gibo, to see if we can meet with him and hire him to be our realtor.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
Yesterday, my wife and I had a phone meeting with our financial adviser, Scott. I just wanted to see if he had any advice four our new endeavor, and what his advice might be. Or if he would be for or against investing in real estate. If he is adamantly against it, then it may be cause to reconsider.
So we started off with some small talk regarding choosing an accountant to do my taxes, and how I am not concerned about the recent decline in the stock market, since we are in it for the long haul. Then I ran the idea of investing in real estate by him. He said investing in real estate is a great idea, and the only reason why it is not feasible for him is because he lives in Austin where property values are ridiculously high. He went on to do a quick assessment of our financials either mentally or what he had in front of him. He warned of the risks of not being able to pay the mortgage if the place is not rented. Then he said that although it is our money and we can do what we want with it, he didn't think we were in the position to proceed with buying a rental property. I said OK, and proceeded to explain to him the research I have done and why I think it is a perfect time to invest in real estate in Corpus Christi. Once Scott realized that this is not just something that I am just jumping into, he commended me on the research that I have done and said it looks like we are headed in the right direction. He even offered to put us in touch with a mortgage broker who can search and find banks willing to lend us money at the best rates possible for us. I definitely plan on using him.
Our plan is to proceed with purchasing our first rental property. I told my wife Angela to go ahead and contact her cousin, who is married to a realtor. At this point, we do not have any problems with working with a family member. That may change later on. Angela contacted her cousin, we'll call her Elsa, who said that they did not have a problem working with family members either. So we are expected to hear from Elsa's husband, we'll call him Gibo, to see if we can meet with him and hire him to be our realtor.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
Tuesday, February 16, 2016
Quitting Your Job Using Rental Properties - Day 6
2/15/16 - Monday
I finished reading the 2 Million in Real Estate in a Year book over the weekend. I really enjoyed it. I learned some things, but a lot of the info was familiar. Which makes me think I am ready.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
I finished reading the 2 Million in Real Estate in a Year book over the weekend. I really enjoyed it. I learned some things, but a lot of the info was familiar. Which makes me think I am ready.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
Friday, February 12, 2016
Quitting Your Job Using Rental Properties - Day 5
February 12, 2016 - Day 5
Today, I heard back from Jessica. I'm approved!! Jessica's bank approved me for a $120k loan at 5% interest rate. I will have to put down 20% minimum. That means I can afford a house for up to $146k.
I had to fill out a "General Authorization Form" which allows the mortgage company to gather personal information from my bank (which happens to be the same entity). I also had to e-sign a "Uniform Residential Loan Application" and a "Notice to the Home Loan Applicant Credit Score Information Disclosure"
I had to sign, scan, and email the "General Authorization Form" back to Jessica. When I did, I asked her what my next steps would be. I did not hear back from her.
I sent an email to Hank letting him know that I was preapproved by another bank, but I still want him to continue to try and get me approved. I'm not sure if this was a good move or not. I thought about it, and just went on my instincts. I'm not sure what advantages or disadvantages an email of this type has. I also told him that there were a couple of reasons why I would prefer working with his bank. I didn't tell him the reasons, but they are 1)They are local, and I can sit down and have a conversation with him if I want to, and 2)It is the same bank that I used to finance my primary residence, and I enjoyed the experience I had with them.
The great new is, I'm approved!!!.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
Quitting Your Job Using Rental Properties - Day 4
2/11/16 Thursday
I hadn't heard back from Hank yet regarding my pre-approval, so I called his cell and office right before lunch. He didn't answer, so I left messages. Around 1pm, he called me back. I told him that I was just wanting to follow up and see what the status was. He said he was actually reviewing my stuff at that moment, and he would let me know something by the end of the day.
He called me back at 4:30pm. He said he ran my information through an automatic approval system, and I did not qualify. He said the reasons were likely due to:
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
I hadn't heard back from Hank yet regarding my pre-approval, so I called his cell and office right before lunch. He didn't answer, so I left messages. Around 1pm, he called me back. I told him that I was just wanting to follow up and see what the status was. He said he was actually reviewing my stuff at that moment, and he would let me know something by the end of the day.
He called me back at 4:30pm. He said he ran my information through an automatic approval system, and I did not qualify. He said the reasons were likely due to:
- Derogatory Items on my credit.
- Length of employment at my current job (7 months)
- High debt/income ratio with a second mortgage (48% - normal max is 42%)
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises
Thursday, February 11, 2016
Quitting Your Job Using Rental Properties - Day 3
2/10/15 Wednesday
Day 3. Today, I did some research into the advantages of leveraging. I currently have about $50k in equity on my primary residence. I have read several articles that state that you should try and use as little of your own capital as possible. With the simple calculations that I did, it seems more advantageous from a cash flow perspective to use your own capital as a down payment. I still have some homework to do though.
My current plan is to buy enough rental properties to replace my current income of $90k a year. When I do that, I will quit my job. Simple calculations to accomplish this include the following:
I figure I can collect $1500 a month for rent. I estimate monthly expenses (including mortgage) to be $1000. $90k/12 is $7500/month. $7500/500 = 15. So I will need 15 houses to replace my current income. My goal will be to buy 2 houses a year minimum. That makes this a 7 year plan. Then, as the mortgages are paid off, that's more monthly cash flow for me. This is an evolving plan, and something for me to look back on in the future and see how my plan has evolved.
I also continued reading 2 Years to a Million in Real Estate.
Still waiting on responses for pre-approval from the bankers.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises.
Day 3. Today, I did some research into the advantages of leveraging. I currently have about $50k in equity on my primary residence. I have read several articles that state that you should try and use as little of your own capital as possible. With the simple calculations that I did, it seems more advantageous from a cash flow perspective to use your own capital as a down payment. I still have some homework to do though.
My current plan is to buy enough rental properties to replace my current income of $90k a year. When I do that, I will quit my job. Simple calculations to accomplish this include the following:
I figure I can collect $1500 a month for rent. I estimate monthly expenses (including mortgage) to be $1000. $90k/12 is $7500/month. $7500/500 = 15. So I will need 15 houses to replace my current income. My goal will be to buy 2 houses a year minimum. That makes this a 7 year plan. Then, as the mortgages are paid off, that's more monthly cash flow for me. This is an evolving plan, and something for me to look back on in the future and see how my plan has evolved.
I also continued reading 2 Years to a Million in Real Estate.
Still waiting on responses for pre-approval from the bankers.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises.
Wednesday, February 10, 2016
Quitting Your Job Using Rental Properties - Day 2
2/9/15 Tuesday
Today is the second day on my road to retirement with real estate. The goal is to replace my current income with income from rental properties. I continued reading 2 Years to a Million in Real Estate. The book has a ton of useful information.
I heard back from the online banker who lives 400 miles away today. We'll call her Jessica. She sent me an email that simply said, "With your credit score of 640, you will need to put 25% down." Then she asked for the same documents that Hank asked for yesterday. I got the feeling from the tone of Jessica's email, that she was not really interested in working with me. I sent her the info she requested anyway, because it's not about what she wants, its about what I want. We'll see how she responds.
I also sent Hank all the information that he requested yesterday. I asked my wife yesterday to gather all the documents that Hank had requested. She gathered them nice and neat on Sam (that's what we call the table near our front door) and left me a note. Well me being the oblivious male that I am, walked right passed them on my way to work and didn't see them. So, on my lunch break, I hustled back to the house and picked them up. I used my work scanner to scan them in and sent them off to Hank. He said he would review everything and let me know if he needed anything else from me.
And that's pretty much it for the second day. I'm still excited.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises.
Today is the second day on my road to retirement with real estate. The goal is to replace my current income with income from rental properties. I continued reading 2 Years to a Million in Real Estate. The book has a ton of useful information.
I heard back from the online banker who lives 400 miles away today. We'll call her Jessica. She sent me an email that simply said, "With your credit score of 640, you will need to put 25% down." Then she asked for the same documents that Hank asked for yesterday. I got the feeling from the tone of Jessica's email, that she was not really interested in working with me. I sent her the info she requested anyway, because it's not about what she wants, its about what I want. We'll see how she responds.
I also sent Hank all the information that he requested yesterday. I asked my wife yesterday to gather all the documents that Hank had requested. She gathered them nice and neat on Sam (that's what we call the table near our front door) and left me a note. Well me being the oblivious male that I am, walked right passed them on my way to work and didn't see them. So, on my lunch break, I hustled back to the house and picked them up. I used my work scanner to scan them in and sent them off to Hank. He said he would review everything and let me know if he needed anything else from me.
And that's pretty much it for the second day. I'm still excited.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises.
Tuesday, February 9, 2016
Standard Questions your Mortgage Banker will Ask
Here is a list of questions that will be asked by your banker:
3. Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?
4. Are you a party to a lawsuit?
5. Have you been obligated on any loan which resulted in foreclosure, transfer of title in lieu of foreclosure, or judgement?
6. Are you presently delinquent or in default on any Federal debt or any other loans?
7. Are you obligated to pay alimony, child support, or separate maintenance?
8. Is any part of the down payment borrowed?
9. Are you a co-maker or endorser on a note?
10. Are you a U.S. citizen?
11. Are you a permanent resident alien?
12. Do you intend to occupy the property as your primary residence?
13. Have you had an ownership interest in a property in the last three years?
14. What type of property did you own? Principal Residence Second Home Investment Property Principal Residence Second Home Investment Property
15. How did you hold title to the home? Sole Ownership Jointly with Spouse Jointly with Another Sole Ownership Jointly with Spouse Jointly with Another
1. Are there any
outstanding judgements against you?
2. Have you been
declared bankrupt within the past 7 years? 3. Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?
4. Are you a party to a lawsuit?
5. Have you been obligated on any loan which resulted in foreclosure, transfer of title in lieu of foreclosure, or judgement?
6. Are you presently delinquent or in default on any Federal debt or any other loans?
7. Are you obligated to pay alimony, child support, or separate maintenance?
8. Is any part of the down payment borrowed?
9. Are you a co-maker or endorser on a note?
10. Are you a U.S. citizen?
11. Are you a permanent resident alien?
12. Do you intend to occupy the property as your primary residence?
13. Have you had an ownership interest in a property in the last three years?
14. What type of property did you own? Principal Residence Second Home Investment Property Principal Residence Second Home Investment Property
15. How did you hold title to the home? Sole Ownership Jointly with Spouse Jointly with Another Sole Ownership Jointly with Spouse Jointly with Another
Quitting Your Job Using Rental Properties - Day 1
2/9/16 Monday
I had been researching, thinking, and contemplating getting into real estate for a couple of years now. My parents own rental property, my wife's parents own rental property, so it just seemed natural for us to follow. Yesterday, I took the first step. I contacted a couple of bank mortgage officers to get pre-qualified to buy a rental property.
The first person I contacted was an on-line banker who works for the bank that I currently have my checking and savings accounts with. It is a small bank, so the nearest mortgage banker is at their corporate headquarters 400 miles away. Anyway, she emailed me a form to fill out, which I did. I have not heard back from her. I will update on future blogs when I do.
The second person that I contacted was a local banker, we'll call him Hank, who works for the same bank that loaned me the money to purchase my primary residence back in 2009. I was able to reach him by phone and got better response. Hank asked me a few questions to estimate my income, debt, and assets. He also asked me some standard questions which you can find here. Then he asked for my SS# to check my credit, which I expected he would do, so it wasn't a problem. The problem was after Hank checked my credit. I knew there were some bad marks on there. I had been monitoring my credit for about a year through Experian, in anticipation of this day. Experian said my credit score was a 690. A little low I thought, but I had no doubt that I would be able to raise it over 700 before the time came to purchase, so I was ok with it. To my surprise, when Hank called me back, he said my FICO scores ranged from 640-670-690, and they have to use the middle one. I may need to do a little more work on my credit before I proceed. I will find out soon and let you know on a future blog. So, my advice would be to know ALL 3 of your credit scores before you contact a banker. You probably already know that the higher your credit score is, the lower your interest rates will be, or possibly less money to put down up front.
After explaining over the phone the reason for some of the delinquent items on my credit report that have or have not been cleared up, Hank sent me an email in which he requested hard proof of some of the things I estimated during our very first phone conversation. Below is a list of what he wanted:
And that's pretty much it for the first day. I am excited about this endeavor and will be posting blogs in the future as I continue.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises.
I had been researching, thinking, and contemplating getting into real estate for a couple of years now. My parents own rental property, my wife's parents own rental property, so it just seemed natural for us to follow. Yesterday, I took the first step. I contacted a couple of bank mortgage officers to get pre-qualified to buy a rental property.
The first person I contacted was an on-line banker who works for the bank that I currently have my checking and savings accounts with. It is a small bank, so the nearest mortgage banker is at their corporate headquarters 400 miles away. Anyway, she emailed me a form to fill out, which I did. I have not heard back from her. I will update on future blogs when I do.
The second person that I contacted was a local banker, we'll call him Hank, who works for the same bank that loaned me the money to purchase my primary residence back in 2009. I was able to reach him by phone and got better response. Hank asked me a few questions to estimate my income, debt, and assets. He also asked me some standard questions which you can find here. Then he asked for my SS# to check my credit, which I expected he would do, so it wasn't a problem. The problem was after Hank checked my credit. I knew there were some bad marks on there. I had been monitoring my credit for about a year through Experian, in anticipation of this day. Experian said my credit score was a 690. A little low I thought, but I had no doubt that I would be able to raise it over 700 before the time came to purchase, so I was ok with it. To my surprise, when Hank called me back, he said my FICO scores ranged from 640-670-690, and they have to use the middle one. I may need to do a little more work on my credit before I proceed. I will find out soon and let you know on a future blog. So, my advice would be to know ALL 3 of your credit scores before you contact a banker. You probably already know that the higher your credit score is, the lower your interest rates will be, or possibly less money to put down up front.
After explaining over the phone the reason for some of the delinquent items on my credit report that have or have not been cleared up, Hank sent me an email in which he requested hard proof of some of the things I estimated during our very first phone conversation. Below is a list of what he wanted:
- Copy of the last (2) years tax returns along with copies of all W-2's.
- Copies of the last two most recent pay-stubs - with year to date information
- Copies of the most recent bank statements for all deposit accounts
- Copy of Social Security Card
- Copy of Driver's License
- Mortgage Statement - A copy of my most recent mortgage statement for my current residence
- Insurance and Taxes - A copy of both homeowner's and windstorm coverage along with a copy of paid property taxes.
And that's pretty much it for the first day. I am excited about this endeavor and will be posting blogs in the future as I continue.
Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises.
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