You can, and really should, go back and read the first two parts (part 1 here and part 2 here) before going any further if you haven’t been following along. Otherwise, this post is going to confuse the hell out of you.
Now that we have the basics out of the way and we understand that the fundamental idea is to create a monthly cashflow equal to or greater than your retirement need through owned real estate assets, let’s get crazy. I have always joked that if you put a handful of real estate professionals in a room together they could, in less than an hour, come up with exceptions and loopholes to the ten commandments. This plan is no different. There are a million variables from criteria to financing to time.
Financing
You might not have the funds to get started. Alternatively, you might be sitting on a pile of cash. In today’s lending environment, there are a myriad of possibilities. To date, we have done traditional financing because we have enough to put down and because the math made sense. However, I have looked at DSCR. I have looked at flipping a property with hard money and using the proceeds to put down on a long-term investment.
Whatever you do, please don’t let the financing piece deter you from starting. If nothing else, find a great lender who knows investment lending and set an appointment to talk things through.
Criteria
Admittedly, my criteria is super rigid and old school. I don’t care because it gives me peace. You could house hack. You could buy multi-family because of the economies of scale. You could be way more flexible based on cash flow. The choices are endless and they are entirely yours.
At the end of the day, the only thing that matters is the math.
Timeline
This is where things get tricky. When I talked to my coach about this, he said I should just finance everything for the amount of time left in my working days. That would drive me insane because, as I mentioned in one of the earlier posts, I don’t like that kind of debt. It doesn’t mean his idea isn’t valid. Whether you are just starting in your investing years or close to the end, you have to work out the details of how you want the snowball to work.
Equally important in the timeline equation is calculating when you want that magic moment of self-sustenance to occur. Once you get there, everything is leverage. So, my advice is get there as fast as you can. Then you can literally do whatever the hell you want to do.
Words of Warning
Things I have learned the hard way:
- Don’t nitpick over pennies on the transaction. Just get it done and start on the path. $20 a month isn’t going to change the plan.
- If you are worried about being a landlord or don’t have the time, hire it out. Nothing is more valuable than a really good property manager.
- Don’t mom and pop shit. I am sure you are a great painter. Hire it out and get it done as fast as you can. Time is money. I have seen it time and again where that project the owner was going to do takes a year and costs twice as much in time (and usually money too).
- Protect your assets from liability. A good attorney and a good insurance agent go a long way. I’m not here to offer legal advice, but owning rentals in your name or lumping them all into one LLC is not smart.
- Hire an accountant who knows what they are doing. I say this as a straight C accounting student from a university not know for its accounting program. There are a ton of tax benefits to owning investment real estate. Make sure you are getting all of them.
Alright, that’s what I’ve got, friends. I hope it was helpful. As always, I am here to help if you need it or want it.
If you liked this series, I sometimes, though very irregularly, write other stuff here too. You can subscribe below and have those posts delivered right to your inbox if you are so inclined.
