Landlord to 4HWW

[TimWieneke]

Hey Folks,
New to the forum. I'm in process but nearly free. I came to 4hww on a recommendation from a friend who seemed to think I would benefit by applying some of its principles to real estate. I currently live in Indiana, where I own 8 rental properties and work just part time as an independent insurance adjuster (contract work). I'm on track to double up my rental holdings next year at which point I can stop adjusting and be a full time landlord (I'll be 34). I deal only in being a landlord and only in buying single family houses as they seem to be the easiest management. Believe it or not, this current market is fantastic for land lording as you can buy property for so cheap because no one's really buying.

As it stands now I only need to be in town for a couple days a month unless I'm working on a property I've bought to get it rent ready. I'm just about to the point where I can manage these by afar most of the time. I have my contractors I use for almost any kind of conceivable emergency (being an insurance adjuster I've seen them all).

I won't lie to you though. The objective was to eventually sell these all off at about 2-3 mil and move to totally paper assets like tax lien certificates or off-shore CDs (yes it's legal as long as you report all your earnings). Then I'm going to buy a sailboat and solo circumnavigate the globe then sail over to Tahiti and drink rum from a coconut while planning my 3 continent safari in Africa, Asia and Australia. Huge Peter Hathaway Capstick fan here.... He was a Wall Street slave who left to become the most famous hunting guide in Africa, mostly because of his books he wrote on it.

Anyway, this was a 10 year plan but frankly after reading Tim's book....I may be able to pull that off faster. Or at least do certain elements of it now and perhaps even profit from those while planning other elements of it for later.

What are you folks doing? Are you starting with a passion and building the business around it? It seems like you're starting with a general passion and then nicheing it down to a specific passion and creating a business within that? Am I right? I would really appreciate folks' input. It's new wrapping my mind around this

[djp]

Congratulations on where you find yourself at now.

Question for you as someone with experience: what do you think of outsourcing the rental management?

I own a home and am considering renting it out instead of trying to sell it. I will be out of the country indefinitely, so I plan on having one of the rental management companies handle it for me.

[TimWieneke]

Question for you as someone with experience: what do you think of outsourcing the rental management?

Thank you very much. As to this question....it's great when done right for your individual situation and this is where I'm headed and like anything it depends heavily on the quality of the management company. One difference you and I have is you will be out of the country and renting out what I presume was a primary residence, while I have to rent out enough houses to eat. For me, I have to accrue enough rentals as a business to cover management costs and I'm getting there over the next year. Management costs in my area are 10%. My individual situation is I would use a management company to collect and deposit rent checks and eventually show properties as well. I have my repair contractors already and would certainly have at least the first tenants in place before I turned them over to management not so much to nit pick who's going into my properties but to make the point to the management company that these properties can be tenanted as I hand them over to management.

Your situation is you need the management company to do everything soup to nuts....but you don't necessarily rely on this to eat (correct me if I'm wrong). Another thing to consider is these houses don't mean a thing to me beyond profit and loss figures on a spreadsheet. They are also all "rental condition". I don't slum lord but I don't put in new Kohler faucets either. None of them are my "home" - not even one I would be away from for an extended period of time.

Are you in a destination city? Have you considered keeping it furnished and finding a realtor/management company that specializes in vacation rentals? It's higher management costs, higher cleaning bills (usually passed on to the vacationer) but it is also higher rental income to balance it out. The biggest thing is every tenant from vacationers to long term tenants has about a 3 month "honeymoon" period during which they take the best care of a property. If you can keep "honeymoon" tenants in a house nice enough to be your home you'll probably have less cares about any real repairs to your property beyond cleaning.

Hope this helps.

Tim

[TimWieneke]

Not to zombifiy a "dead" thread but as I talked up real estate a year and a half ago as a possible muse, I feel a duty to recommend against it after what I've experienced the last year and a half. Basically I've had to reinvest every dime of cash for the last year and a half into the properties due to a series of events, most occuring to the properties while they were vacant and thus exempt from standard insurance coverage. Real estate can either make decent cash or cost an indecent amount. When it's making a decent amount, it's awesome. When it's costing an indecent amount, you can't "bail" from it quickly like you can from a muse or even a business that can shut it's doors and bk. Sure it's still making equity during that time but a muse is about cash, not equity. I won't lie to you though - to see where I thought I was going to be cash flow wise and to hit the realities of it....and admitting to it publicly is humbling and heartbreaking. However, I firmly believe Rocky won not because he was the better technical boxer but because no matter how much he was beat down he could always take a little more and keep going so that's what I'm after now. Getting back up and keeping on going.

Don't get me wrong, being a landlord is a great way for building "wealth", "equity" and "leverage" but for that monthly cash that is the central structure of a muse, it's just not an efficient vehicle and having seen muse structures here I can't recommend it as a muse. I can highly recommend it as a place to store excess muse money. Once I finish closing out and start making money in other businesses I'll do that but I need a better cash business in the interim.

Again, I hate to resurrect an old thread but occasionally I see someone on here ask about real estate and I feel I have to post my thoughts based on experience here.

[rmcl26]

Tim,

Reading your thread struck a cord. It was like reading something I would have written. Real estate was my plan as well, and has been for some time. I have a few rentals, but primarily renovated and remodeled for a profit (i don't call it flipping because i actually add a lot of value the homes i've own prior to selling them). Like yourself, I too was hoping to generate enough funds then diversify into paper while outsourcing the management of the remaining rentals. Really I'd like to just sell them all, but that wouldn't be easy to do these days.

I spend a fair amount of time looking at sailboats, including at a boat show this past weekend, and also dream of that circumnavigation. Not sure about the solo part though. I would rather allow friends to come and go as they please; sailing different legs of the journey then flying home to their lives.

I stumbled upon FHWW in an airport simply looking for something to read on the plane. I then got into a conversation with the young lady sitting next to me, and never read a page. Nearly two years later and I finally got around to reading the book. Man, do I wish I would have read it on that plane. It had more impact than she did.

Now I'm in search of my muse. I've found the sailboat I'm going to buy, and decided on the route of my first six months aboard. All I need now is my muse and a small amount of automated income to bring it all together.

Ryan

[djp]

Thanks for the update.

I posted in this thread before, and I came across it again as I've popped back in to this board.

I have my own real estate pain. I own an underwater home which I've had to rent out as about my only option. Luckily we found a renter and a good company to manage it, but it still slowly sucks away money, and who knows if the renter will stay another year. I'd much prefer to not have to worry about it.

[TimWieneke]

Thank you for the feedback guys. Since my last update in March, I have offers pending on almost half the portfolio. Some will sell at a loss, some at a profit. In the end, I should end this free and clear with a little cash in my pocket. While this is going on, I got a huge opportunity to handle a 10 million dollar claim in Chicago for a fire in a skyscraper. It has been a lot of "work" but I love investigating catastrophes like this to figure out what went wrong. The money from this gig is also helping close up the real estate adventure well. A huge plus from this is the company that is handling this claim wants to hire me to travel the country whenever they have a catastrophe and take care of it. It's a great "job". I never report to an office. I work from whatever cafe is nearby. They pay all my travel expenses and aside from a few scheduled meetings (usually phone calls) I have total autonomy as to what my schedule is. I'm getting what I wanted from a muse with some work headache but hey I'm German and I'd go nuts on a true four hours of work a week only.

I put out a thread for feedback on the concept of buying a muse already in operation on another thread. I have a buddy who did this: http://www.extendtoday.com/ and from what he tells me, he's at the point of bringing in more than his bar does. I'm just going to to this claims handling for a little while to make the scratch to buy a muse and hit it from that angle.

[TimWieneke]

Wait a minute. I just realized that posting my buddy's link may look like a plug. I...uh...can't endorse his product because...uh...I've never felt the need. Yeah, that's it. :D Lol.

[officer_dibble]

Thanks very much for posting the updates, Tim. I've been wondering how those using real estate as their muse have been fairing. I think it is still just about viable in the UK - providing you got in at the right time. But I'm starting to see a lot of evidence of people bailing out in the UK.

To be fair though - your day job sounds like you've got the liberation bit worked out well.

[martyall]

I think that they are really looking for a good investment. It is surely nice to bail out in UK. :D

[zaphodX]

Haven't had any experience with cash generation, but real estate is great for long-term financial security and planning.

On my dad's advice, I bought some land in my home country in Asia couple of years ago with my spare money. Turns out the surrounding land has growth to become a technology and trade hub.

And as of last year valuation, my land has grown 60 times in value. This does not generate any cash for me today so is not my muse. It does feel good to know that I can rest a little easy for my retirement as my retirement home, funds and kids college has been taken care of.

[dave222]

Hi

Just found this post, im into property in the uk and usa, someone said 'property isnt good for a muse' and they are dead right i thought the cashflow would be passive income, but when the boiler breaksdown or the tenant does a runner etc... it swallows all the cash, my solution is get a muse for cashflow and buy property/realestate for longterm wealth, what about being a property finder for investors? i know people who are doing this in england and make a massive amount of money, but work long hours witch i dont want to do but theres good opportunities in england and usa now is near rock bottom for property (uk) and massive opportunty to buy below market value. If anyone wants property in uk 20-30% below its current value or any detroit property deals please message me as i have some great deals from my investor friends below is a deal i did in uk

Liverpool england

value £95,000 My price £75,000 (vendor wanted a quicksale due to emigration)

Rents for £525

Good location near hospital

I just need to create a muse, information products related to property is where im heading, any ideas what products i could create? again would gladly do a J.V with someone

Dave

[TimWieneke]

Zaphod,
What you are referring to is real estate speculation. If you hit it right at the right time you can do well at it, just like buying any commodity at the right time. It's not necessarily long term security so much as it is a matter of bubble security. Sell at the peak of the bubble and reinvest in another nonbubbled commodity.

[TimWieneke]

Hi Dave,
I know you wrote this a month ago but I've been very busy since about June travelling and working catastrophes. I've been doing about an 80 hour workweek to clean up my mess from real estate investing. ;)

I did that property locating for a while. Here we call it "bird dogging" real estate. I found it very quickly becoming a job and the reality is I discovered it's basically unlicensed real estate brokering and discontinued once I found that out.

Also, not to be rude but the rent figures you are presenting are not a sustainable rental income for the management of the asset in terms of my experience. I require a minimum yearly gross rent that is over 2% of the purchase price of the property in order to give it a second look. The one you presented is at .07% at your cost. We can get these prices in the current economy. Heck, I've exceeded 3% consistently lately. Your property would have to have some other sort of "sizzle" to attract US rental income buyers.

[officer_dibble]

Tim - I think you would have to times dave's figure by 12 as it's a per month figure. Even so - the yield looks quite low given the risk. A £75K house in Liverpool is likely to be in one of the poorer areas (and attract poorer/problem tenants). One way of guaranteeing payment might be to have a tenant who is on welfare ie the tax payer is paying the rent.

Real estate is a totally unlicensed area in the UK. Basically anyone can become a broker (or estate agent as we call them) - and they have. That has led to all kinds of abuses - including some of the BMW (below market value) crowd. Basically you try and find a smuck who you convince is getting a property under it's actual value through dodgy valuations or playing on their gullibility in some other way. The worst excesses actually charged people a fee for specialist seminars or to find the BMV houses.

I'm not saying dave has fallen for this but it's certainly a risk for others.

[dave222]

'Also, not to be rude but the rent figures you are presenting are not a sustainable rental income for the management of the asset in terms of my experience. I require a minimum yearly gross rent that is over 2% of the purchase price of the property in order to give it a second look. The one you presented is at .07% at your cost. We can get these prices in the current economy. Heck, I've exceeded 3% consistently lately. Your property would have to have some other sort of "sizzle" to attract US rental income buyers.'

Hi Tim

To answer your question, firstly you guys do indeed get a higher yield in the states iv just rented my first house in the states and i get $670 but could have got as much as $800 im looking at detriot for further opportunities. Back to the question im not bothered about %'s as such all i want to know is ROCE (return on cash employed) as when i have this back my investment is paid for. with my liverpool house i bought it BMV (below market value) and used a very clever system for purchase so i paid just £3,000 to buy. please see below

Market Value £95,000

My purchase price after discount £75,000

So i get a mortgage for £95,000 and borrow the deposit £20,000 from an investment fund ('the system') set up by property investors who get a return on there money invested.

when the sale completes the sellers solicitor receives £95,000 but has signed a legal document saying he only gets £75,000 and the remainder £20,000goes back to the investment fund

All i pay is legal costs and 'system costs' total outlay to buy this house £3,000.

A very very clever system, i know investors who bought 20-150 houses doing exactly this, the best part is the bigger the discount you get the less you put down and in some cases get cashback!!! imagine if i had say agreed to give seller £60,000 for quicksale i would have got £15,000 cashback on completion!

I here many questions to follow but one big question iv heard so so many times is 'if its so good why havent you bought hundreads?' well i got in right at the end of it now its classed as fraud (even though banks knew it was happening and even did the same in a slightly different way with gifted deposits)

But that hasnt stopped us investors im looking at detroit like i said as iv made some great contacts and see great cashflow, as for the uk lease options are the next big thing!

Real estate is a totally unlicensed area in the UK. Basically anyone can become a broker (or estate agent as we call them) - and they have. That has led to all kinds of abuses - including some of the BMW (below market value) crowd. Basically you try and find a smuck who you convince is getting a property under it's actual value through dodgy valuations or playing on their gullibility in some other way. The worst excesses actually charged people a fee for specialist seminars or to find the BMV houses.


Ok there are crooks out there and i got scammed for a lot of money by one in particular check out 'rapidpropertygroup' a highly respected property professional took an up front fee to build property portfolios for investors he was good and clever offered guarantees etc... and lots of people invested money with him, i lost £8,000 and im sick to this day the worst part is it was my grandads inheretance, iv not told family members as im so emabarresd, he took a total of £3million off people and has vanished i know one individuel who has lost £500,000 to him!

So back to the question yes i learnt a very big lesson, i think though you have the BMV genralisation wrong, ALL properties bought and sold had to use RICS valuers (unless cash buyers) and also it was pretty hard to scam someone because you dont have control of the valuation its down to the lenders they send there own people out and you cant corrupt these guys because they are liable!
My house is in an ok part of liverpool and rents all day long as its next to a hospital, again iv had problems had to evict tenants etc... but i love property and talking about it, the sky really is the limit.

Im currently doing J.V'S with cash rich people, sourcing BMV properties, and trying to buy more assests.

So many of my contacts are expanding MASSIVELY as we are at the bottom of the market maybe a slight bit more to drop but watch what happens in 7-10 years what will you be worth? buy property/land and wait

:)