Sovereignty: The Ryan Michler Interview

This post I’m doing something completely different…an interview…with someone I’ve been following and looking up to for some time now, Ryan Michler. AND, we barely scrape the surface on the topic of real estate investing, so completely different. Fair warning, I eventually loosened up but I was a bit anxious during the first few minutes of the interview. Bring in Ryan Michler….

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Ryan is an Iraqi war veteran, trained financial planner and Founder of The Order of Man. Since 2015 he has gained a massive social media following (learning how he did this is of my personal interest; reference 2018 Goals).

  • Over at OrderOfMan.com, men can engage with a brotherhood of like minded men who are interested at improving all facets of their life; manly skills to become a better father, better husband, improved leadership and improved financial status to name a few (actually that is my personal short list). Ryan hosts a weekly podcasts where he and his guests talk about their personal experiences in just about everything that it means to be a Man.

On February 1st Ryan is releasing his first Order of Man book, Sovereignty: The Battle for the Hearts and Minds of Men. Available via hard/soft cover, kindle and audio, you can download an intro chapter by visiting OrderOfMan.com/Book.

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Ryan and I connected via Facebook where he graciously agreed to give me 15 minutes to talk about his book #Sovereignty, but just as I thought we were done, he spends another 20 minutes allowing me to dive into a few business and personal questions. Had me so stocked I even used the word Solid during the interview. Ryan IS a solid guy and overall just gets it. Someone I will to continue to learn from. So, stick around after the 15 minute Closing Comments remark for the full discussion. Ryan has upcoming deadlines that I want to help him meet so I did not edit the audio, the full raw version is below.

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supreme power or authority; authority of a state to govern itself or another state



Items we cover:

  • What do you hope every man obtains from reading your book #Sovereignty?
  • What was the most rewarding aspect of the writing process for you?
  • Writing 60,000 words in 60 days
  • What is your favorite chapter and why?
  • Will there be an audio version?
  • Who are your mentors and men you look up to?
  • Financial advisor by trade, are you still active in that business and do you advise your clients to invest in real estate?
  • Best Fatherly advice you give your sons on their journey to become Sovereign Men?
  • Birds and the bees?
  • Confidence: historical baggage that holds you down (example of $1.3 million in 2017 transactions but lack of confidence in a discussion regarding a $50k property).
  • “My objective as a father, is to render myself obsolete. That’s my job.”

Action Items:

 

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How Collegiate Football Success Affects Real Estate Appreciation [case study]

“Blue 42…Hot Route – RED 7 RED 7…settttt HUT!”

In 2008 I fell in love with who is now my patient & caring wife and awesome mother to our children. She grew up (in-laws still reside) not far from Clemson, SC, so naturally she is a Tigers fan. Myself, I was blessed to be born into the Auburn tribe. Being born and raised in Alabama, you are sworn to an allegiance before your first breath of oxygen. Luckily, a Go Tigers! keeps me out of the dog house and still in the Will. Happy Wife, Happy Parents…how does that saying go?

Back to my point. Since 2008 we have attended and tailgated several football games in Clemson. Great times, joyful memories and truly exciting time to be a Tiger as they have been on a hot streak the last several years. It has been amazing to see how that city has and continues to BOOM since our first football game there together just 9 years ago. New developments, shopping, housing, restaurants, etc. With Real Estate on my mind, I can’t help but wonder if some of that booming is due to the national recognition the school has received via its football program’s success.

Side note: I met Dabo Sweeney in the Tampa airport a while back. One of the coolest individuals I’ve ever met. #ALLIN

Back again to the point of this post. With Clemson’s football success and booming economic development, does this mean real estate values also BOOM? And if so, where is the next sleeping giant in FBS Division I NCAA football? I WANT TO BUY THERE!! I thinks it’s Nebraska, but before I go off investing in Lincoln, let’s do some analyzing to see if my theory holds water.

THE THEORY:  The theory I’m trying to prove is when a school places more frequently in the Top 10 year end BCS/CFP rankings, the more appreciation yields for real estate holdings in that college city.

Another Side Note: Our current investment strategy is primarily focused on cash flow, appreciation is icing on the cake. So while I’m using appreciation for this exercise, it is not a leading factor on whether or not we will invest in a market. 

THE DATA: Before I go and analyze the 129 FBS Division 1 Football Teams, I want to focus on just the Top 10, as they fall at year end rankings. For the sake of the graphic below, which looks like a grandmother’s hand knit quilt, I used the end of regular season BCS Rankings from 2000-2013 and the CFP Rankings from 2014-2017 found on Wikipedia.

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The city and state appreciation values noted below were sourced from NeighborhoodScout.com and this list is sorted by Highest College City Real Estate Appreciation since 2000.

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MY CONCLUSION: Fifty one (51) different teams have placed in the Top 10 BCS/CFP rankings from 2000-2017.  Twenty three of the 51 college city’s listed above, experienced greater real estate appreciation vs the state in which they are located.  Twenty eight did not. So, my conclusion is…the data is inconclusive. Take for example Ohio State. Ohio State has the most Top 10 finishes since 2000 than any other school, but almost the worst appreciation during the same time period. Ruling out an anomaly, look at Hawaii. Only 1 Top 10 finish from 2000-2017 and extremely high appreciation, but let’s face it, where would you rather be?

If anything this exercise proves that collegiate football success over time does not solely yield a higher appreciation for real estate in that college city over the same period of time – an economic boom, certainly.  It’s obvious to me other factors are involved to produce the higher appreciations. Take for example, Washington State. The Cougars are located in Pullman, WA (approx. 30k residents) and with only one Top 10 finish during the review period, experienced 85% real estate appreciation. Compare Pullman, WA, to Auburn, AL (#GoTigers!). Auburn, AL, approx. 54k residents, experienced only 39% appreciation while the school made the Top 10 six times. This play is under further review…

Agree/Disagree?  Let me know why by leaving your comments below.

 And how did your school do? Are they winning at the Game of Appreciation?#GoTIGERS!!

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Time to Reflect, Time to Set 2018 Goals and Begin Pursuit

I love this time of year. Time to reflect and time to focus on setting goals for the New Year. I took the above photo at my parents’ over Christmas. Don’t recall ever experiencing a sunset quite like this growing up there but then again I probably wasn’t looking as a teenager. Wish the camera did it justice; “That’s beautiful Clark.”

2018 Goals

The last couple of years I have accomplished my REI goals early. Maybe the process I follow is just that good or maybe I’m not shooting high enough. This year I’ve decided to test that theory and shoot for some lofty goals. They are:

  1. Increase Annual Passive Rental Income by $2,000/month
  2. Increase Social Media Following: 10k IG Followers, 1k FB Likes, 1k Blog Subscribershelp me reach my goal! Follow, Like, Subscribe!
  3. Graduate Cardone University
  4. Knock The Dust Off The Gray Matter

A sneak peek into the process I follow, with my goals set, I now create a 2018 Playbook of drills and tactics to help accomplish them. This process takes a while as I really dive in but typically yields 3-4 pages of waterfall steps, with each step gaining granularity in detail toward a daily or weekly activity to help accomplish my goals. This year I started this process in November and used most of December to fine tune the super simple spreadsheet I create for tracking (keeping myself accountable) those daily activities. Call it batting practice or daily workouts but I’ve followed this process the last couple years and I’m extremely happy with the results. I may write a more detailed post on the process I follow soon (still refining), but for now, email me [ jay@helmsREI.com] to learn more.


Last item on the 2018 list is expand the knowledge base. Knock the dust off the gray matter. Following the lead of the most successful CEOs who read 60+ books/year, I’ve identified 8 Must Reads for 2018. I’ll consume an additional 50+ hours of real estate related podcasts over the coming year, but these books keep popping up on my radar.

8 Must Read in 2018

Ok, there’s 9 in this screenshot but Grant Cardone’s Millionaire Booklet isn’t new and is one I’ll listen to 3-4 times throughout the year. Such a simple, quick & easy read. And if the below looks like a screenshot from iBooks, it is! I hardly have time to sit down and turn a page but I make the most of the windshield time the day job brings me.

2017 Review

2017 Goals (accomplished all by September 2017):


Most Popular Blog:


Most Engaged Instagram (photo credit: Mrs. HelmsREI):


And, I wrote an impromptu Christmas poem during the first trek of our Christmas vacation:

 

Happy New Year!

How to Find REI Opportunities: Just Ask

*Repost from December 2016; as we get into the holiday season, childhood family traditions become nostalgic and lead me back to this little story…
“If you can move the house by the end of the month, you can just have the whole thing!”

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real estate investing pensacola fl
As the year is coming to an end, the sights, sounds, and smells of Christmas often remind me of those precious childhood memories. Forcing me to reflect and think about love ones who have passed and I hope those great memories stay with me forever. On that note, when thinking about real estate investing, I sometimes think about my Maw-Maw & Paw-Paw. For as long as I can remember my grandparents owned & operated what they referred to as a tenant building – low income, mid-size multi-family rental property that provided them a way of life. I hope to blog about more of those memories one day, but they lived in the house next door to their tenant building and the story on that house acquisition is amazing.
As the story goes, my Paw-Paw was in need of some spare lumber, this was late 1970s, ’78 or ’79 I think. Driving by this house, he noticed the owner was outside and in the process of removing the front porch from this 2 story, 3 bedroom / 1.5 bath, 1900 sq. ft. home. When Paw-Paw asked if he could have some of the lumber being discarded from the front porch removal, the owner simply said, “If you can move the house by the end of the month, you can just have the whole thing!”
And that’s exactly what they did. They acquired a lot a few blocks away near downtown, hired a moving company, and a few weeks later my grandparents were setup in their new home. I cannot tell this story without mentioning the power company. The path of the move required the power company to drop lines on 2 sides of the street – the largest cost of this project which had to be done on a Sunday; when most businesses downtown were closed (late 70s). I believe their all-in cost was around $25k. Simply put, an amazing opportunity.
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Paw-Paw (green hat, 2nd from the right)

We created many holiday memories in this home and my parents still own it today. Opportunities are everywhere and through this event, my Paw-Paw has certainly encouraged me to Just Ask.

 #REI  #RealEstateInvesting #HelmsREI

Does Your Realtor Analyze Deals Before Bringing Them to You?

I hear this question a lot. The quick answer is No.

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Since the World Series (Congrats to the World Champion Houston Astros!) just wrapped up, I’ll use some baseball analogies to help answer this question. Long has been the day since this 5’8, 120 lbs high school junior kept the pine warm for those starters – wow, I’ve gained 100 lbs since then…all muscle! In the real estate investing game, I’m the player and the Realtors/Brokers are my coaches. They advise me on why they like the deal, details on the neighborhood and potentially an exit strategy.  In some sense, they are also my general manager, helping to ensure a transaction or trade goes as smooth as possible. Let me explain.

Here’s why my coaches don’t analyze deals before bringing them to me:

#1 – I want the BP!  The analytical part helps me stay current on our sought after markets and helps keep my analytical skills sharp. This is me taking swings in the cage. My daily BP! That stands for Batting Practice…or Bigger Pockets! My dad’s a huge baseball fan. Huge is probably putting it lightly. Growing up, one of his many tricks to get us invested in the game involved hanging an old tire off the back fence. I remember him wanting my brother and I to throw 100 balls a day into that strike zone. I was too interested in the couch and TV (and a little fishing) at the time but I wish I would have. Learning from that, instead of throwing balls, I’m analyzing deals, daily!

#2 – I don’t want to be traded to the Detroit Tigers!  By that I mean, I have to love the deal! And for the longest I can remember the Detroit Tigers have been the worst team in  the MLB. Analyzing is only a piece of the puzzle. Love is an emotion and if you’ve been following us I suggest removing the emotion out of the deal (something I continue to work on). However in this case, loving the deal (the location, cash flow, portfolio balance, & value add) is highly motivating. Just don’t let the love emotion compromise your numbers – be willing to walk away. For example, in the last 2 months I’ve submitted four LOI’s. Two of which are still pending but the other 2 we could not come to terms.  I loved these deals but wasn’t willing to compromise on our numbers as doing so wouldn’t yield our anticipated return.

#3 – Extra Innings.  In my dad’s words, it’s “Free Baseball” but, working a full-time job, family w/2 kids, 48 units under our umbrella and currently undergoing a personal home live-in-remodel, I don’t have a lot of spare time to filter through every deal my coaches send my way. Sad to say there are probably some gems that I quickly push to the trash bin because I knew I wouldn’t have time to review and now I’ve wasted my coaches’ time to find and send it to me. The current process I like to follow is finding the opportunity and reaching out to the realtor/broker in that market and so far that has worked very well.

#4 – Pitching Change.  We started out wanting to buy single family homes that cash flowed really well, which are typically C Class properties/neighborhoods and below and we only looked in Pensacola, because it’s local for us.  While I still look at those properties our evolution of investing has progressed like this: single family in one city -> small multifamily in another county -> apartment building in another state. All within a relative easy drive, we now own assets across 3 counties in 2 states. Staying with the value add properties the size of our deals have increasingly grown in size.

#5 – I Simply Don’t Expect Them To It’s not Brent Strom’s responsibility to throw any pitches for the Astros, that’s the players job. I understand how realtors/broker get paid – when a deal closes, not when they send me a listing. I’m very conservative on what we buy and we haven’t sold anything (except our personal home) since we REALLY started investing in 2014. In my opinion, my coaches’ or realtor’s roll is to help educate & advise me, negotiate the deal and ensure a smooth-ish transaction. If they perform these things, then they’ve represented me very well.

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Purchasing Our First Apartment Complex

If you’re keeping up with us, you know we’ve traditionally purchased SFR and small MFRs, but through some hard work, late nights and leveraging relationships, we were able to step into the Apartment Complex realm and the anticipated return on this turnaround project is better than any personal acquisition yet.

Here’s how we did it…

Relationships. Without relationships this would not have been possible. Relationships with brokers, relationships with bankers, relationships with like minded partners, relationships with potential investors, and most importantly, my relationship with my wife (for accepting the early mornings, late nights, and weekends this took and will take away from our family).

Strenuously Looked, Got Lucky and Revisited the Patience Virtue. I talk about being patient for a great deal in the Purchasing Our First Duplex post. Same concept applies here, my excitement almost led us to a bad deal but with some luck we side stepped it. My first partnership on this trek was with Tim Kelly, at Kelly Housing Group. Starting close to home in Pensacola, we searched w/in a 100 mile radius looking for any property that fit our like-minded criteria.  We found an opportunity that almost hit all the marks… almost but not all. With both of us being extremely excited to dive into the apartment complex world, we made an offer anyway (mistake!). Our LOI was accepted and with a little luck we never reached an executed sales agreement (nor did we lose any due diligence monies). Continuing the search, just a few months later we are under contract and eventually closed on an asset we renamed as Citronelle Square.  It took about 6 months from the time Tim and I started working together until we closed on this 42 unit apartment complex. Many steps along the way but in the end we brought on 2 more experienced partners, Robert Preston and Jeremy Hans and a total of 9 investors. Without all of these guys we would not have closed the deal and for that, I am truly grateful.

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The Numbers.

  • Purchase Price: $700,000
  • Cost per Unit (42 Units): $16,667
  • Renovation Budget: $200,000
  • Capital Raised: $330,000
  • Return: Anticipated 20% over 5 Years

The Turn Around Plan. One of our acquisition criteria requirements calls for a value-add play. Basically, we were (and still are for our next one) looking for a run down, tired, needing some TLC property.  And we’ve found it. At 55% occupancy, this property has suffered from a tired owner/operator for way too long and we acquired it at a bargain. Our renovation plan includes the interior of the units, uplift to the buildings’ exterior, repave/re-stripe the parking lot and renovating the laundry facility and playground. While these things are in motion, we are staying in contact with the cities Economic Development team to keep them aware of our progress.Citronelle-Square_300Next Acquisition. Citronelle Square was just the start and while we are focused on the stabilization and renovation of Citronelle Square, we have our sites on recreating the process and in search of our next acquisition. I have personally submitted three LOIs in the last month – none have stuck but I’m making offers that meet all of our criteria. Practicing patience and making sure our next opportunity hits all of our investing criteria is a must!

I look forward to updating everyone on our progress with this turn around project.

#HelmsREI #RealEstateInvesting

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Results from Certified Letter to Unknown Occupant [Letter]

 

Shortly after the letter was delivered via Certified USPS mail (signature on delivery), I received a phone call. Although short-lived, I was excited to learn the current occupant was willing to sign a lease.
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Back in November I wrote a blog titled My First Tax Deed Purchase and described the situation of an unknown person living in a property I just acquired through the Escambia County Tax Deed Auction in Pensacola, FL. After consulting with my attorney, I rectified the situation by drafting the letter below. This is a copy of the actual letter I sent to the person occupying the property.

Shortly after the letter was delivered via Certified USPS mail (signature on delivery), I received a phone call. Although short-lived, I was excited to learn the current occupant was willing to sign a lease. Two months after signing the lease the eviction process began. Related Articles below go into more detail on how the evicted tenant destroyed this Pensacola property and our improvement efforts afterwards. Spoiler Alert: we rid the kid filled neighborhood of one of the most worthless human beings I’ve ever met. A drug dealer/user who allegedly was stealing his mother’s disability checks.  

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#REI  #RealEstateInvesting #HelmsREI

How To Prepare for a Residential Loan Application for REI (spreadsheet)

I’m eventually going to find the right lending partner(s) to have a long lasting relationship with and as we focus on our next acquisition, I selfishly wanted to create this punch list for my own future reference.

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In recent posts I’ve expressed my horrible experiences with a couple of unorganized lending institutions. As we invest in more and more real estate (#HelmsREI), I don’t want to keep having these stressful experiences. I’m eventually going to find the right partner(s) to have a long lasting relationship with and as we focus on our next acquisition, I selfishly wanted to create this punch list for my own future reference. I hope it helps you too.

A general list of what you’ll need to gather in order to start the loan origination process:

Initial Documentation:

  • Tax Returns: 3 previous years worth
  • W2: 3 pervious years worth (to match up with those tax returns)
  • Current Mortgage Statement (on any and all properties)
  • Current Insurance Statements (on any and all properties)
  • Pay Stubs: at least 60 days worth
  • Savings & Checking Account Statements: 60 days worth
  • Net Worth Calculator or Personal Financial Statement: If you don’t know how to calculate this, I have a spreadsheet I’ve massaged over the last few years. Email me @ jay@HelmsREI.com and I’ll share it with you. 
  • Copy of Earnest Money Deposit (EMD) check
  • Copy of your Driver’s License
  • Copies of any/all current leases for all rental properties
Closer to your tentative closing date (AND it is tentative until you have a Closing Disclosure provided by your lender) you’ll potentially be asked for more info.
Additional Documentation:
  • Copy of Bank statement showing the EMD was cashed and cleared your account
  • Explanation and bank statements showing any large deposits or purchases. Don’t make any large purchases or transfers from the time you start the loan application until after you close.
  • Insurance Documentation – a quote that will be bound to your mortgage. Be sure your insurance broker for your new property and lending institution are talking. If not, closing will be postponed. Side note: Once the insurance policy is bound to the property, you’ll need to sign more documentation for your insurance broker. 
No Surprises.  A List of Don’ts.
  • Don’t be surprised if…1 week before closing you’re flooded with information request to explain any and all transactions that accompany the above documentation.
  • Also, don’t be surprised if you have to explain certain transactions or line items 2-3 times. Even possible you have to sign official documents verifying these verbal statements that are continuously repeated.
  • Don’t make any large transfers until a day before your closing. If this shows up on a statement you’ll have to report on it which can cause a delay in closing. As with my latest experience, I moved around monies (let my loan originator know what I was doing way ahead of time) prior to having a Closing Disclosure. Those movements/transfers showed up on required statements for underwriting. These statements were requested by the “underwriter” <1 week prior to our original tentative close date. New transactions, especially big ones, require further explanation, resulting in a delayed closing.
  • Ensure your loan originator doesn’t have any PTO scheduled between now and your tentative closing date (or weeks after in case your closing is postponed) – just makes things easier.
  • Bank mergers / acquisitions create a slue of inefficiencies with new policies and procedures. Regardless of how great their rates are, if you’re in a rush to close, best to stay away from lending institutions who are going through or been a part of a merger/acquisition in the last 12 months.

The go forward plan for improvement: 
Besides avoiding the List of Don’ts, I’m a big fan of Google Docs. This year, one of my goals was to grow partnerships to help us achieve our #HelmsREI goals. As our partnership network grows, the ease of sharing information is paramount and Google Docs has been the answer. For most all the items listed above, they will live in a Google doc folder. When a perspective lender needs something, I share the link with them. Even though I have fraud protection, my paranoid side will not allow me to store anything with my SSN # on Google Docs. A small percentage of the aforementioned documents have that and to me, it’s worth the extra step to avoid the hassle.

We have two closings scheduled for next month. One is a 42-unit apartment building in Mobile, AL. I’m growing the punch list for that one as well and look forward to sharing with you guys. More to come and super excited about putting this 42-unit together!
Related Articles:

 

#REI  #RealEstateInvesting #HelmsREI

Evicted Tenant Destroys Property [video] – 6 Month Follow-Up

And now for the after….we now have properly screened tenants (which are paying rent on time), an improved property and a decrease in criminal activity for the neighborhood.

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In February I posted a horrific scene of a recent tax deed purchase in Pensacola that turned into an eviction, that turned into the tenant destroying the property [original post here]. After a few short months of demo and installing a different mobile home, we now have properly screened tenants (which are paying rent on time), an improved property and a decrease in criminal activity for the neighborhood. Let’s break down some #’s.

Our Cost Summary:

The debris, oh man the debris. The rollaway dumpster guys in Pensacola made some bank on us. We had a total of 8 dumpsters to haul away 14.9 tons of trash. This was just the trash on the outside, not to include the demo of the mobile home that was original to the property.

Nowgoing back to our Tripod of Adopted Investing Criteria:

  • Cash Flow: ✅
    • After all expenses (repair/maintenance, vacancy, insurance, taxes, property management) are considered for this property, we’ll still cash flow $375/month.
  • Cash-on-Cash Return: X
    • With $375/month in cash flow, that is $4,500/yr. Dividing our cash investment of $40,716 by our cash flow of $4,500 we yield an 11% CoCR. On this project, our clean-up and demo costs were much higher than anticipated. Although an ok return at 11%, if we had more accurate cleanup/demo costs during our napkin test, we would have passed on this property as it doesn’t yield our target of a 15% return.
  • Asset Acquired @ 20% Under Market Value:
    • This property now appraises at $57,000 and with our all in costs of $40,716, we are almost at 30% below market value.

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#REI  #RealEstateInvesting #HelmsREI

How We Used Our IRA to Invest in Real Estate

Recently I discovered how to invest in Real Estate using a Self Directed IRA, commonly referred to as SDIRA. Now that we’re a little further down the road with this one, I wanted to document our experience in hopes that it helps others. Keep in mind I’m not a legal or accounting professional and this is for your entertainment only 🙂
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real estate investing pensacola fl
So a SDIRA is just that. An individual retirement account, directed by you, to invest in other types of assets instead of the typical mutual funds & stocks associated with a traditional IRA or 401k. By other types of assets I mean, other companies, property, tax liens, etc. We used our SDIRA to purchase a couple of rental properties in Pensacola so I’ll focus this post on our experience thus far.

First off, going from a standard employee provided IRA to an SDIRA was an easy thought process for me to make. I had a Simple IRA from a previous employer that was no longer being contributed to and lost about 10% last year. I was in some risky mutual funds and quite frankly didn’t pay much attention to the IRA at all. I figured that was just money that was hopefully going to be there when I retired. After learning about SDIRAs, I couldn’t help but think my interest in Real Estate could only help me pay attention to the IRA in turn allow me to grow my retirement account exponentially better than any stock/mutual fund. Borrowing a quote from Dave Ramsey, “The more I manage my money, the more money I have to mange.” Bu really, how can I do this? Let’s just say the #’s that make up real estate investing are much easier for me to understand than those of the stock market & mutual funds. Here is how we started investing using a SDIRA:

Step 1: We found a financial institute that offers SDIRAs that could perform as our custodian. Not all financial institutions provide this service. I essentially Googled SDIRA and researched the several that came up before making a decision. Unfortunately I didn’t find any in Pensacola :(. The criteria we used for selecting were: reputation via online reviews, ease of use, responsiveness & fees.

Step 2: We started the necessary paperwork for the transfer of my old IRA funds to our SDIRA. The financial institution we worked with allowed all or some of my old IRA to transfer. Just something to keep in mind to help you diversify your portfolio. The transfer took longer than expected (several weeks) and the communication on where we were in the process didn’t happen as often as I had hoped. Nonetheless, it took approx. 3 weeks for my old IRA to transfer and my SDIRA ready to be used for real estate investments. When we started the transfer process, we didn’t have a property in mind, but we were searching the Pensacola area daily.

Step 3: We found a great Real Estate deal and put it under contract. The process to find a great deal that meets our investing strategy took only a few weeks. This is because we have a good realtor who knows what we’re trying to do. Every expense associated with the SDIRA asset (rental property for us) has to be paid using the SDIRA fund – this includes Earnest Money Deposit for the contract. For our custodian, this is a process that starts online but doesn’t fully process until a signed paper form is sent in (lesson learned). Regardless, we’ve made it through and are set to close in a couple of weeks.

Projections on this asset  in Warrington show a cash-on-cash return of >20%. I’m hoping to provide an exciting update in a few months on how our SDIRA property is actually performing, but these conservative projections sure do beat a 10% haircut I was taking with mutual funds/stocks.

If you have a non- or barely performing IRA or 401k, I would highly recommend looking at diversifying your portfolio using a SDIRA for real estate investing.

Related Posts:

More info on SDIRAshttps://en.wikipedia.org/wiki/Self-directed_IRA

#REI  #RealEstateInvesting #HelmsREI

Product Review: Hoover FloorMate® Deluxe Hard Floor Cleaner

When opportunities arise, we tenant proof our rental properties as much as possible. This usually means putting in hardwood or tile flooring. As properties turn-over, a hard surface floor is not only easier to maintain but should last longer (through multiple tenants). We are also finding this to be true in our personal home where we have tile throughout the first floor. We just don’t have a good way of deep cleaning these surfaces…until now! Enter the Hoover FloorMate Deluxe Hard Floor Cleaner.

real estate investing pensacola fl

Hoover FloorMate® Deluxe Hard Floor Cleaner

Why We Own It: Our house was built 10 years ago, we’ve lived in for a little over 3 years and our grout lines have turned. We’ve tried everything from bleach to vinegar/baking soda combined with a little bit of elbow grease. Nothing we’ve tried will get our grout lines clean. The heavier traffic areas are darker than the not so trafficked areas. And it’s not like we are dirty people. Our tile get’s a heavy steam bath via the Shark Steam Mop once a week.

The Hoover FloorMate Deluxe Hard Floor Cleaner has over 3,000 reviews on Amazon!

What I love about the Hoover FloorMate:

  • Lightweight; easy to maneuver
  • Price point – around $125
  • Slick look with clean lines
  • Easy clean-up
  • It ships with a 16 oz bottle of cleaning solution
  • How clean it gets our floors!

 

real estate investing pensacola flreal estate investing pensacola fl

What Can Improve: 

  • The fill tank should be flat on the bottom or balance itself. As the instructions request, and as I found out, you want to fill the tank with water first before putting in the cleaning solution. Doing the opposite creates a huge bubble bath in your tank, limiting the amount you fill or requiring your cleaning solution to spill out in the form of bubbles. Balancing a full tank of water while measuring & pouring in the cleaning solution provides some challenges.

For that, once a quarter, deep cleaning of your tile floors (or when tenant turnover happens), the Hoover FloorMate Deluxe Hard Floor Cleaner does the trick. For that daily or weekly clean, go for the lighter, more portable Shark Steam Mop.

All in all, the Hoover FloorMate did not clean our grout like I was hoping. Still impressed with how clean it left our floors, just looking for something to remove the 10 year old gunk in our grout. Next up is Amazon Home Services – Tile & Grout Cleaning. I’ll let you know how it goes.

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Real Estate Investing Terms: Cash On Cash Return

When performing the Cash-on-Cash Return napkin test, I won’t further analyze anything that is below 12%. The target is 15% and higher but if we can still hit our $200/month cash-flow minimum, we’ll consider it with a lower CoCR.

real estate investing cash on cash return

 

Cash-on-Cash Return or CoCR

CoCR = annual cash flow before taxes divided by total cash invested

The best way I understand CoCR is like this. … For the scenarios below, let’s pretend I have $50,000 in my Pensacola bank account.  We’re going to make a lot of assumptions here, but remember this is just a napkin test.

Scenario 1: I pay $50,000 cash for a 2 bedroom/2 bath single family house that yields $700/month in rent and Cash Flows $300/month. Over the course of the year (assuming 100% occupancy) my Cash Flow is $3,600 (i.e. $300/month x 12 months). So I take that $3,600, divide it by the $50,000 I spent on purchasing the home and that yields a 7.2% Cash-on-Cash Return for this Pensacola house. Compared to the return I receive on my savings accounts, this is an improvement, but not what we’re looking for on a Pensacola real estate investment.

Scenario 2: I pay the same $50,000 as a down payment on a $250,000 4-plex multifamily property (most Pensacola banks require 20% down on a rental property). This 4-plex is made up of 2 bedroom / 2 bath (just like our single family residence in Scenario 1). Each unit of our 4-plex brings in $150/month in cash-flow. Less cash flow than Scenario 1 to accommodate for the mortgage payment each month. Again, assuming 100% accuracy for the year, we now have $150/month x 12 months x 4 units = $7,200. Since we used the same $50,000 as a down payment, we divide $7,200 by that same $50,000, giving us a 14.4% Cash-on-Cash Return.

Actually, if this were a real world scenario, Scenario 2 is within range of passing the napkin test and would continue on through our Tripod of Investing Criteria It doesn’t hit the $200/month cash flow # just yet, but more due diligence will reveal if we can increase rents or add another source of revenue from the property to bring those #s up.

To compare, let’s say I just keep that same $50,000 in my Pensacola savings account. The current APR is <1% but sticking with easy math, let’s pretend it is 1%. My return on that “cash” is 1%, or, very horrible…only $500. Considering inflation rates, my return would actually be negative, but that topic is for another post.

Cash-on-Cash Return (used in another way):

I recently changed insurance providers because of this one property and scenario. My insurance was coming up for renewal and thought, what the heck, let’s shop. Sure enough it was worth it. Once my, now new, insurance provider reviewed my policy and last home inspection, he came back with amazing news. If I installed Hurricane Clips on my roof, my premium would go down approx. $394/year. Cost to install the Hurricane Clips = $965, yielding a Cash-on-Cash Return of 40.8%. I’ll take it! More details of this scenario coming out in a future post. Stay tuned.

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Evicted Tenant Destroys Property [video]

The more time I spent at the property, seeing the # of kids riding their bicycles through, I’m happy we got him out and giving us a chance to clean up and improve the neighborhood.

Evicted tenant destroys property

In a November 2016 post titled My First Tax Deed Purchase I talk about just that and the unknown tenant living in our new Pensacola property. What started out as the best case scenario resulted in an eviction just 2 months later after signing the inherited tenant to a lease. As in most cases I’ve heard about, an eviction typically results in the property being damaged, or in my case, destroyed.

The property was in bad shape when we purchased it off the tax deed, but nothing like is shown in the photos and video here. As I’ve spent some time with my clean up crew at the property, I’ve been able to confirm with a couple of the neighbors this individual was real trash. Squatting on this property for the last 10 years, I knew he was trash but wow, what a piece of work. Supposedly he’s been stealing his mother’s disability checks and even baking meth in the back storage unit. Worst house in the neighborhood – we got it!

The more time I’ve spent at the property, seeing the # of kids riding their bicycles through, I’m happy we got him out and giving us a chance to clean up and improve the neighborhood.

Once we have the property stabilized, I’ll be sure to do a follow-up post with some #s, figures, etc.  Enjoy the video – off to clean up the trash’s trash!

Evicted Tenant Destroys Property Videohttps://youtu.be/S9L9AS6_qOY

Photos:
Evicted Tenant Destroys Property PensacolaEvicted Tenant Destroys Property PensacolaEvicted Tenant Destroys Property Pensacola

Evicted Tenant Destroys Property PensacolaEvicted Tenant Destroys Property PensacolaEvicted Tenant Destroys Property Pensacola

Evicted Tenant Destroys Property PensacolaEvicted Tenant Destroys Property PensacolaEvicted Tenant Destroys Property Pensacola

Evicted Tenant Destroys Property Pensacola Evicted Tenant Destroys Property Pensacola

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AH BANKS! Pardon My French – Part 2

 

#REI  #RealEstateInvesting #HelmsREIGiven that it has been 2+ years since we went through the process of purchasing our primary residence (and the Pensacola real estate market seems to be recovering), I was optimistically hopeful dealing with banks wouldn’t be as painful this time around…boy was I wrong!

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real estate investing Pensacola

In AH BANKS! Pardon My French – Part 1 I discussed our primary residence purchase and the struggles of doing business with our chosen lender. Below is a recap of our conventional loan process to purchase a long-term duplex rental property in Gulf Breeze.

Given that it has been 2+ years since we went through the process of purchasing our primary residence (and the Pensacola real estate market seems to be recovering), I was optimistically hopeful dealing with banks wouldn’t be as painful this time around…boy was I wrong!

Our Gulf Breeze Long-Term Rental Property Purchase:

  •  Down Payment of 20% (check)
  •  Credit Score of high 700s, low 800s (got it)
  •  Pre-approved with a regional Credit Union with a large local presence and really good interest rates (check)
  •  Occupied? Yes, both units of this duplex are under long term agreements with no indications/desires to leave.

A side note: while many Pensacola realtors require you to be pre-approved before showing you a house, you can certainly find realtors who don’t require this proof. Just know, obtaining pre-approval shows the realtor you’re serious about buying and typically is painless (mostly just a credit score check by your lending institution).

Timeline (the boring details):
  • February 24: Pre-approval received from chosen Pensacola credit union
  • February 27: Entered into contract with a 30 day close date. Escrow provided to closing agent and copy of contract sent to our chosen Pensacola credit union.
  • March 7: Loan application process started (YAY!!)
  • March 14: I followed up with the CU to see how things were processing and promptly received “We are all set for now.” Hearing this during AH BANKS! Pardon My French – Part 1, my internal warning sirens start to go off.
  • March 22: paid for property appraisal through the CU
  • March 28: received confirmation that all initial qualifying documents were received and will now go through pre-underwriting process. Unfortunately this was accompanied with a need to extend the closing to May 9th. of which the seller did not want to do. Thanks for a great realtor for making this happen but my internal warning sirens are starting to get louder.
  • April 1: my loan application is transitioned from the Loan Officer to now the Loan Processor
  • April 12:  no communication in weeks, I receive notice that my loan processor is working toward final loan approval.
  • April 21: where the real fun begins…the loan processor comes back to ask me for previous years tax statements (which I’ve already supplied) and to let me know the appraisal has not come back yet. Since we’re 30 days past from when the appraisal was ordered, no sign of it being completed was frustrating. What’s even more frustrating, the Loan Processor didn’t know what to do. C’mon man?! I immediately sprung with questions like: Who ordered the appraisal within your firm? What’s there #? Who’s your boss? Who can we escalate that to? Give that to me and I’ll do it!
  • April 27: ONE WEEK LATER! The appraisal was finally received, but WAIT, there’s more! We still need your most recent tax return!  Ummm….no you don’t. I’ve uploaded to your portal twice now and receive the thumbs by your boss twice now Ms. Pensacola Loan Processor. Here I’ll upload again for you, just so you don’t have to look for it. There, you see the date of today’s date on the document in the portal? That’s it. Click on it and tell me if that’s what you’re looking for! Needless to say I was pissed.
  • May 1: I start daily calls to the Loan Processor and to the Branch LO Manager to receive status updates. If they don’t answer, I leave them voicemails and start emailing them, CC’ing their bosses. Not to mention my Pensacola realtor and his team start dialing their way up the CU’s corporate chain.
  • May 7: after a week of daily phone calls, emails, and borderline harassment for someone to take my business, I finally receive the good news my loan application was approved. However, “due to new regulations…. there is a 3-day seasoning that has to happen, putting your close date on May 10”. Again, here is where having a great realtor on your side helps. They kept this deal together.
  • May 10: Closed. Two and half months after going under contract, begging this credit union to take my business, we finally closed.

If you’re exhausted from reading this, I don’t blame you. I let a couple months go by before typing it up and I’m just as exhausted reliving this horrifying lender experience. At one point during this process, I felt like Mr. Regional Credit Union was enjoying messing with me. They wanted to show me who had the power.

Now that I can sit back and non-emotionally reflect, part of me still believes that, but part of me really believes the process is just that broken. I feel for the branch managers and loan processors as their lives are more stressed from guys like me because their system is broken.

Bottom line is this: If this is the new norm for lending institutions, then our buy & hold strategy is going to be a gold mine. Even with continued lower rates, banks and lending institutions are continuing to make it more difficult to do business with them.
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Product Review: Nest Learning Thermostat

I wanted to save money, she wanted the comfort. Another DIY that solved a problem.

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Real estate investing pensacola

Why we own the Nest Learning Thermostat: It bothers me to leave the HVAC running when we are not at our primary residence in Pensacola. Not as extreme as my dad, but I am focused on turning off our unit when we go out of town. I used to turn the thermostat up to 82 degrees in the summer and in the mid 50s in the winter. It is Pensacola, temps don’t get that extreme, but my wife on the other hand, hated coming home from a trip and having a “freezing cold” or “extremely hot” home – I could just think of the money we were saving :).  The Nest Learning Thermostat makes us both happy. An Amazon #1 Best Seller with over 8,600 reviews!

What I love about it:

  • Happy Wife, Happy Life – on our way home from those long trips, using the Nest Learning Thermostat’s app, we can turn our HVAC unit on from our phone when we’re about 1.5 hours from our house and the comfortable environment awaits as we pull up.
  • Money Savings – going into Eco / Away mode allows us to set desired temps while we’re away to prevent unnecessary usage. The Nest claims to save a couple hundred $$$ yearly in energy costs. When I first read this, I thought yea right! I’ve been keeping a close eye on this an since we installed ours 7+ months ago, we have saved approx. $150 on our energy bill. Essentially this home improvement will pay for itself in 18-24 months.
  • Airwave Mode – the Nest also measures humidity. Pensacola is very humid but as long as the humidity is below a certain % inside, the Nest will enter into Airwave mode and just circulate the air inside your home to cool it. Limiting the outside compressor usage saves even more money. Happy Husband…man on a island. 🙂
  • Set your temp schedule – we used to adjust our thermostat 4-5 times a day. Now that we’re able to set our temp schedule, the Nest auto adjust as the day goes on and the nights roll in.
  • App – Allows you to see usage history, turn off/on your HVAC, set your temp schedule and more. Best part it costs nothing.
  • Options, remote access, the interface (thermostat & app), tons more.

What can improve on the Nest Learning Thermostat: I did install this myself – never replaced a thermostat until now. The instructions are pretty straightforward, and the only constructive criticism I have is on the installation instructions. I highly recommend taking a photo of the wires connected to your existing thermostat before unplugging anything. Otherwise, if you have 1 or 2 misplaced wires, you could end up with nothing but hot air blowing out – coming from experience 🙂

If you’re concerned about installing yourself, you can always check out Amazon Home Services to find a licensed HVAC or electrician to do the install for you.
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