Real estate investing as a muse?

[sinje]

Hi all

Has anyone done or heard of anyone using real estate investing as a muse? I know that given the right scenarios and property a positive cashflow is possible (with capital growth as an added bonus).

I realise that it's probably not the best use of resources or adherence to the creed but wondering if anyone has been able to (un)successfully integrate this with their 4HWW.

I read a book a while back about generating a stack of cash flow by owning numerous properties and if you get the right ones you can have $100,000 p/a (that's, of course, with MANY properties)

Cheers!

[TimWieneke]

Sinje,
I'm working on it. The subprime fallout has created opportunities where I've been able to buy properties for about 10k, put 1-2k of work into them and rent them out for $575-600 a month. Go with cities that are about 150,000 people in size and you can avoid having to do this in high crime areas. I also "live" in one of those houses so my housing costs are really only about $1,000 a year in taxes. The plan is to make that physical address where I base my travel out of.

The hardest part of these houses is the beginning when you first get them - getting them rennovated and getting the first tenant in them and the first month when everything in the property goes wrong. After that, having created the list of contractors I can count on, I've got it about 60-70% autopiloted. I also recommend sticking with single family houses over multi's. Multi's make more money but not per unit and require a lot more management per unit. The real advantage to multi's is your leveraging and depreciation opportunities but that's something that's beyond me and I really don't care about. Give me 30 of my little sfr's and I'm fine. Income with passive losses is a beautiful thing.

Tim

[jakediddy]

I read a book a while back about generating a stack of cash flow by owning numerous properties and if you get the right ones you can have $100,000 p/a (that's, of course, with MANY properties)

That book wasn't "Multiple Streams of Income", was it? Just like 4HWW changed my perspective on life and time, that book changed the way I looked at money.

[DaveinHackensack]

I'm starting to think of stock investing as a potential muse. I've been crushing it on a couple of picks recently.

[jakediddy]

Dave -

I'd personally start a different muse to feed my investing. Haven't tried the approach, but I like the idea of whatever is left over as profit (from said designated muse) going straight into an investment portfolio.

I would hold customers' payments in an account for at least 120 days though, just in case of refund requests or unforeseen expenses.

[djp]

I'm starting to think of stock investing as a potential muse. I've been crushing it on a couple of picks recently.

Not to be negative, but stock funds are up about 50% since March. Winning in this market doesn't mean a whole lot on the face of it.

[DaveinHackensack]

Not to be negative, but stock funds are up about 50% since March. Winning in this market doesn't mean a whole lot on the face of it.

I mentioned three stocks on someone else's blog (http://alephblog.com/2009/09/04/tickers-for-the-latest-portfolio-reshaping/) last month. If you want, you can pull up the charts on them since then. The one that's up the biggest is about 40% of my stock portfolio. I'm also still in the black (albeit, slightly) on two short positions I opened recently.

YMMV.

[TimWieneke]

Do any of you invest in tax lein certificates? Auctions on those are going to be held soon in Indiana. Basically you bid the interest rate you will accept on a tax lein and the county government enforces that the person who's tax lein you are holding MUST pay you back your investment (tax lein amount) plus the interest you bid or they will forfeit their property to you. These have intrigued me heavily as I think to what I will do when I sell off all my property. The idea of a legally enforced return is interesting.

[DaveinHackensack]

I've never done the tax lien thing, but I remember reading about it years ago in a Sonny Bloch book. It seemed like a great idea at the time. Here's a muse idea for you, gratis: instead of just investing in them yourself, why not try to put together a mutual fund that does this nationwide (or, at least, in the states that allow the highest interest rates)?

[TimWieneke]

Not a bad idea, though I believe there are some significant costs to setting up a mutual fund (the SEC will certainly drop by and say hi). I'm certainly not an expert on that. You got me thinking though. I could go for private loans at lower interest rates, buy the liens at higher interest rates and keep the spread.... I believe that by advertising for accredited investors only I won't run afoul of the SEC.

[DaveinHackensack]

Not a bad idea, though I believe there are some significant costs to setting up a mutual fund (the SEC will certainly drop by and say hi). I'm certainly not an expert on that. You got me thinking though. I could go for private loans at lower interest rates, buy the liens at higher interest rates and keep the spread.... I believe that by advertising for accredited investors only I won't run afoul of the SEC.

There's actually a book you can buy on Amazon about how to start your own mutual fund. In order to make it cost effective (i.e., to make enough in asset management fees to offset the fixed regulatory costs) you probably need several million dollars under management. There are also companies that will handle all the back-end regulatory stuff for you for a fee. I don't know, maybe there's a way to get in that has a lower regulatory hurdle.

[roe_g]

I have a friend who I would consider a partial member of the N.R. He does 2 things. He started buying and selling rare books. He outsourced the eBay listing and shipping which left him to do the buying (the fun part for him). He is now buying real estate. He had enough money to buy properties, get mortages with low payments and is renting them out. If you treat good tenants good, they may stay longer. He hired an assistant to call plumbers, etc. He makes decent money after mortage, taxes, insurance, etc. The trouble is you need to be able to aquire the properties in the first place.

[TimWieneke]

Having examined a few other folks' muses on this forum and taken a hard/critical look at what I've assembled over the past few years I've identified a few elements that may make traditional real estate investing unattractive as a muse:

1. Upfront capital investment. Tim got a site to make 40k a month from an upfront initial investment of $6,000.00. To realistically hit that kind of monthly cash flow in real estate will take a minimum investment of 5 million dollars worth of real estate. Assuming you pulled a miracle and got a 90% ltv loan, you would need half a million dollars up front for a down payment and your monthly cash flow would be less than 40k as you will now have 4.5 million dollars of debt service you are responsible for. And you are responsible for it no matter what happens to the economy.

2. No triage. You can't outsource the contracting of repairs and maintenance to your properties overseas to virtual assistants overseas because your real estate exists where it is. You must pay the local scale.

3. Property taxes. On top of my income taxes, my portfolio that makes at peak performance 4300k gross per month has a yearly property tax bill close to $8,000.00. That's more than it cost Tim to start his business.

4. Liability. I have huge liability exposure owning the places people live and do stupid crap to hurt themselves in. The insurance for that costs me another 4 grand per year.

5. Geographically trapped. My whole business is trapped to the performance of this country.

Now there are plus sides. I've been able to create a lot of equity and I have a nice portfolio I can now sell. I can also take passive losses on the depreciation of my property to limit my tax liability. I've also been able to leave my 9-5 and work from home part time so I have quite a bit more freedom.

However, this is not a muse. It is an investment. I've invested dollars for the cash on cash return of dimes. Not a good way to "start". Make your money in a muse and think of real estate as an investment to perhaps hold some of the excess income from your muse. I do have a real estate related muse, www.reievents.com, that is under development but the act of being a landlord is not a muse. Having spent the last few weeks examining this, the verdict for me is I'm developing some true muses and selling the investments. I may reinvest later but investing really comes after the muse. Don't put the cart before the horse.

[gasull]

This article from an iTulip says that the housing market will decline until at least 2011 or 2014:

http://www.itulip.com/forums/showthread.php?p=15004#post15004

Beware that iTulip predicted the economic crisis years ago.

[TimWieneke]

A market decline is a good thing for a real estate investor who focuses on rental property. The less upfront capital investment the better. Rental rates are EXTREMELY slow to change, much slower than market prices.

[Tom84]

I think property is great as a side investment whilst you build up your muse, I bought my appartment for 220k 3yrs ago and now the evaluation is about 280. In terms of rental yields if I rented it out today it's cashflow positive. $360+ per week rent which gives me a couple of hundred residual per fornight on my repayments. Mind you I had the bare minimum wage and deposit when I purchased it.. now I'm laughing and my other Gen Y mates are struggling to get places in this tight rental market in Aus.

It all depends on where you buy - do research on immigration, median growth, coucil development plans etc etc and it can be easy money but more of a longterm investment.

[LazyHammock]

What a really good question - and my answer would be if you use virtual assistants to set up and manage your real estate investing business - then yes, that could be your muse.

Back when I read the Four Hour Work Week this last winter, it really inspired me to create a muse. Well I am really interested in real estate investing, plus I have a high tech product management background working for the largest real estate website in the US, so I decided to create an instruction program to teach real estate investors on all the important steps they need to follow to find hire and manage virtual assistants, I even created templates to help them automate some of the real estate investing tasks you would need them to do for you. I haven't launched my muse yet - but the goal is to have it launched by August. So my muse combined my love of real estate investing and my fascination with virtual assistants into an information product muse.

As I wrap up my program, I am looking for quotes from real estate investors who are already currently using virtual assistants for their investing. If anyone is interested in letting me interviewing them, or filling out a survey so I can get these quotes for the program, I might be willing to trade a free copy of the program for your time.
Feel free to reach out to me at HollyAHansen@gmail.com OR you can go this survey link I set up on Survey Monkey and fill it out. https://www.surveymonkey.com/s/WFKZGNZ

BTW when I launch I will also be setting up an Affiliate Marketing program for anyone who wants to send me business referrals :-)

I just want to end by saying - I didn't have the knowledge or courage before I read the Four Hour Work Week - Thank you Tim for being my muse!

Cheers!
Holly Hansen
Lazy Hammock Investments, LLC
:cool:

[LazyHammock]

Hi TimWieneck,
I'd like to take a stab at answering your reply:

"2. No triage. You can't outsource the contracting of repairs and maintenance to your properties overseas to virtual assistants overseas because your real estate exists where it is. You must pay the local scale."
Holly: But you can have your virtual assistant do research on the contractors, check references and even schedule their work

3. Property taxes. On top of my income taxes, my portfolio that makes at peak performance 4300k gross per month has a yearly property tax bill close to $8,000.00. That's more than it cost Tim to start his business.
Holly: You can hire a virtual assistant to do your bookkeeping, accounting and financial planning, and maybe they can research legal ways to reduce your property taxes. Right now in this market with lower property values, they could get paperwork filled out to you to request the state to reduce your property value on their books and get them to reduce your property taxes :-)

4. Liability. I have huge liability exposure owning the places people live and do stupid crap to hurt themselves in. The insurance for that costs me another 4 grand per year.
Holly: Yes insurance is necessary - but you could have your VA do research to find better and cheaper liability insurance :-). You could also hire a VA attorney to write better legal releases in your rental contracts.

5. Geographically trapped. My whole business is trapped to the performance of this country.
Holly: This one is my most favorite to answer! - You can purchase investment property anywhere in the world - so yes you will have to outsource property management, yes you will have to use virtual assistants to coordinate stuff for you when you can't be there, but it really is all about the power of delegation :-)
I also like the idea of hiring a virtual assistant to be your operations manager and they come to you with monthly reports of how your properties are doing, and they can even manage your property managers!

Would love to still chatting about this!
Have a great day!
Holly