Review my finances, what would you do differently?

Quote from 1stbuy : Whats both of your opinion about a "duplex" or "4-plex"? As a younger investor looking for passive income, in case of a single condo/apt/townhome, I'd be worried about some months not finding a tenant and suddenly being stuck covering mortgage on a property I'm not even staying in. I figure with a duplex, or 4-plex even if one goes vacant for sometime, you're still okay. Also, in case of a 4-plex OP could actually consider moving in and being an on-site manager/landlord to make sure everything is going well. That way the $450 goes towards owning the property as well. Obviously easier said than done and a lot of variables involved. Just curious to see what you guys think.

Multi-unit residential properties like duplexes, triplexes, and 4-plexes can be great investments because they offer the possibility of multiple streams of income from one single property. Yes, the property typically costs more, but it's not a linear relationship between the number of units and income produced because the first unit is the most expensive. You begin to tap into economies of scale when you get into multi-plex properties. The biggest cost is the initial structure and land. Adding additional units during initial construction is not nearly as costly. In other words, if a single-unit property rents for $1000 per month and costs $100,000, typically speaking, a relatively similar duplex will not cost $200,000 but will throw off a disproportionately higher amount of rental income.

That being said, both single- and multi-plex homes have vacancies that must be taken into account when running the numbers to see if the particular property is a potentially good investment.

With all of that being said, I wouldn't make a multi-plex property my first investment property.

If i were you I would start learning about the different asset classes. Purchase books on stock investing, real estate investing, and alternatives (like metals, MLPs, etc.). Find a list of good books to read on the internet to learn about finance and investing from different people (the Buffet books, Einhorn, Rich Dad Poor Dad book on Gold / Silver, and many other types of books). IMHO, it's good to have a balance of different things so that you can weather the storm when some asset classes go down while others appreciate. It's also good to have an understanding of the different options available and why some are better than others. Keeping up with the trends are good as well. (Current trends I see and believe in are that Large Cap Stocks with solid dividends and balance sheets are pretty good because of the issues with currency devaluation and current bond bubble. Other trends have to do with "deleveraging," "deflation," and "demographics." With demographics being the one I am most afraid of...)


It will be great to focus on one as a primary, but to also understand the other forms of investing because you won't always be able to invest all your money in one. (e.g.- 401k and IRA are not easy to move real estate into). I would say that if you are going to focus on one, I would try to find a friend or mentor in the area near where you live to provide guidance and mentorship. Then I would use the other investments to balance out volatility in your primary investing area.

You are doing well. Keep up the good work.
Get your car insurance payment changed from monthly to twice a year. You'll probably save $30/month.

Part-time landlord for 20+ years here. Before you buy a rental property, buy yourself a house that needs updating in a good neighborhood. Spend a year or two learning how to cut grass, fix toilets, clean gutters, and paint walls. Then you'll be ready to be a landlord.

Most importantly: If you don't already have one, find yourself a nice girlfriend. Go to a large church, and start attending a singles sunday school class. Lots of gals your age, looking for a guy like you.

Quote from MrCookieBar : Most importantly: If you don't already have one, find yourself a nice girlfriend. Go to a large church, and start attending a singles sunday school class. Lots of gals your age, looking for a guy like you.

How else do you think he is saving all that ca$h. Mo money mo problems...

Quote from kark123 : It will be great to focus on one as a primary, but to also understand the other forms of investing because you won't always be able to invest all your money in one. (e.g.- 401k and IRA are not easy to move real estate into). I would say that if you are going to focus on one, I would try to find a friend or mentor in the area near where you live to provide guidance and mentorship. Then I would use the other investments to balance out volatility in your primary investing area.

IIRC, you can use a self directed 401k account to buy an investment property. That way you get the benefit of tax deferment and still get the benefits of company contributions.

If you don't want to do all the work of managing the property, could also have a property manager or a company manage it for you. Sure you make it less, but don't really have to worry about managing it.

Quote from MrCookieBar : You are doing well. Keep up the good work. Get your car insurance payment changed from monthly to twice a year. You'll probably save $30/month. Part-time landlord for 20+ years here. Before you buy a rental property, buy yourself a house that needs updating in a good neighborhood. Spend a year or two learning how to cut grass, fix toilets, clean gutters, and paint walls. Then you'll be ready to be a landlord. Most importantly: If you don't already have one, find yourself a nice girlfriend. Go to a large church, and start attending a singles sunday school class. Lots of gals your age, looking for a guy like you.

Car insurance is paid 2x a year, I just broke it down to a monthly payment to be similar to my other monthly expenses.


Cutting grass/toilets and that stuff is pretty easy. I'm pretty handy so DIY repairs/improvements should be covered. My original plan was to buy a house and move in because I could use the space but I am so close to my current work and my current rent is so cheap I don't think its a good idea anymore.

On the girlfriend note, I have that covered and she's great!

Quote from kark123 : If i were you I would start learning about the different asset classes. Purchase books on stock investing, real estate investing, and alternatives (like metals, MLPs, etc.). Find a list of good books to read on the internet to learn about finance and investing from different people (the Buffet books, Einhorn, Rich Dad Poor Dad book on Gold / Silver, and many other types of books). IMHO, it's good to have a balance of different things so that you can weather the storm when some asset classes go down while others appreciate. It's also good to have an understanding of the different options available and why some are better than others. Keeping up with the trends are good as well. (Current trends I see and believe in are that Large Cap Stocks with solid dividends and balance sheets are pretty good because of the issues with currency devaluation and current bond bubble. Other trends have to do with "deleveraging," "deflation," and "demographics." With demographics being the one I am most afraid of...) It will be great to focus on one as a primary, but to also understand the other forms of investing because you won't always be able to invest all your money in one. (e.g.- 401k and IRA are not easy to move real estate into). I would say that if you are going to focus on one, I would try to find a friend or mentor in the area near where you live to provide guidance and mentorship. Then I would use the other investments to balance out volatility in your primary investing area.

Thanks!

Quote from Brian1 : Multi-unit residential properties like duplexes, triplexes, and 4-plexes can be great investments because they offer the possibility of multiple streams of income from one single property. Yes, the property typically costs more, but it's not a linear relationship between the number of units and income produced because the first unit is the most expensive. You begin to tap into economies of scale when you get into multi-plex properties. The biggest cost is the initial structure and land. Adding additional units during initial construction is not nearly as costly. In other words, if a single-unit property rents for $1000 per month and costs $100,000, typically speaking, a relatively similar duplex will not cost $200,000 but will throw off a disproportionately higher amount of rental income. That being said, both single- and multi-plex homes have vacancies that must be taken into account when running the numbers to see if the particular property is a potentially good investment. With all of that being said, I wouldn't make a multi-plex property my first investment property.

Thanks, I will stick with an apartment for now to learn the ropes.

Quote from SP33DFR34K : IIRC, you can use a self directed 401k account to buy an investment property. That way you get the benefit of tax deferment and still get the benefits of company contributions. If you don't want to do all the work of managing the property, could also have a property manager or a company manage it for you. Sure you make it less, but don't really have to worry about managing it.

Interesting, but I would prefer to start having some passive income in the short term rather than all my investing be for retirement.

Quote from SP33DFR34K : IIRC, you can use a self directed 401k account to buy an investment property. That way you get the benefit of tax deferment and still get the benefits of company contributions. If you don't want to do all the work of managing the property, could also have a property manager or a company manage it for you. Sure you make it less, but don't really have to worry about managing it.

Real estate investing already offers so many very favorable tax breaks as well as other advantages that it doesn't make sense to buy investment properties inside of a tax-advantaged retirement account. If an investment property is purchased inside of a sheltered account, these very favorable tax breaks and advantages are lost. Everything in an IRA is subject to ordinary income tax, which is the highest tax rate. So, when a property that is inside of a sheltered account is sold, the money coming out of the account is taxed at the highest possible rate. On the other hand, when a property that was purchased and owned just on its own is sold, the sale is subject to very favorable capital gains taxes.

Not to mention, if someone has bought a property for mostly cash or all cash, they can't monetize that by taking out a mortgage inside an IRA. In fact, they can't free up the capital at any point.

Let's say you do decide to use your IRA as a funding source. If you do well with the property and you go to sell, the money coming out of the IRA is taxed at the highest possible rate. Contrast that scenario with one in which real estate is owned just on its own, in which case it's subject to very favorable capital gains tax rates.

Quote from jaqnabox : How else do you think he is saving all that ca$h. Mo money mo problems...

JE59377 why blow your whole load on one house? As long as you put 20% down your interest costs should be between 2.7 and 4% (depending on loan term). Rent should cover mortgage+taxes+insurance and maybe even give you some positive cash flow. Depends on your area. Anyways with such low carrying costs as long as you feel even slightly confident in the units ability to stay rented you dont need to worry about it paying for itself.

You'll also get to enjoy tax deductions on the mortgage interest. If you find them disappointing (towards the end of the loans life) theres nothing stopping you from paying the house off all at once.

Notice how he keeps avoiding the question about health insurance? One ER trip could wipe you out.

My friend who never uses doctors woke up one night and needed his appendix taken out. $36k in bills if he didn't have insurance.

Quote from shadow9d9 : Notice how he keeps avoiding the question about health insurance? One ER trip could wipe you out. My friend who never uses doctors woke up one night and needed his appendix taken out. $36k in bills if he didn't have insurance.

Quote from JE59377 : As far as health insurance goes, I am currently covered. I am covered under my parent's plan for another year. Their policy won't go down if they take me off (I have another sibling) so it doesn't make sense to do so.

He's covered.

From what I've heard, it's a good idea to start with a single, and learn the ropes. If you learn it's not for you, it's not a huge deal. If you decide you like it and you're getting some ROI, then go bigger if that's what you want.

Don't underestimate the work involved though, and the risks. You have to make sure you get things fixed, make sure your tenants are trustworthy and pay on time, and you have to make sure you have solid contracts and keep all of your paperwork in order. It's not a 40-hour workweek, but it's not completely 'passive' either. Just a thought .