MCFA 5 | Government Funded Real Estate

 

To make it big in the real estate industry, you need to put in the time, effort, dedication, and all the help you can get. The one that’s always ready to help is the government, and once you know what to do, you can get funded for your real estate investments and be a step closer to securing your retirement. Real estate investor and engineer Victor Medina talk about his humble beginnings and how he got into real estate and is now generating positive cash flow. He shares the simple steps he took that worked for him, along with how to overcome personal fears and misconceptions that people have with real estate investing and seeking assistance from the government.

Listen to the podcast here:

Government Funded Real Estate Investing With Victor Medina

We have Victor Medina, a real estate investor, and an engineer. Welcome, Victor.

Thanks for having me, Athena.

Thanks for joining us. We want to talk a little bit about what your journeys been like going from a negative cashflow of $800 or $1,000 a month that you had before to where you were positive cashflow, somewhere around $500 a month, depending on the month probably. Why don’t we get started with getting to know you a little bit? Where did you grow up? How was your family like? How big of a family do you come from?

I’m the oldest of three boys, born and raised in Los Angeles and lived around different neighborhoods, West Covina where I went to high school, Pico Rivera, and stuck around there until I finally moved to Seattle.

Before we get to Seattle, is your family a large family? You have two brothers. Are your parents still alive?

They are. My parents have been married for more than 30-something years and cousins here in LA, Mexico, and lots of places.

What do your parents do for a living?

My dad is retired, he was a textile engineer. My mom works a part-time job down the street in San Pedro in Marshalls.

What’s her educational or economic background? Did she grow up on the right side of the tracks? Was it a meager living? What economic background do they both have?

It’s humble beginnings. They both worked in Mexico City. That’s where they met. Her education level, my mom probably finished up to high school and my dad was the one who went through and got a Bachelor’s in Textile Engineering and got a chance to travel, study abroad in England for a bit. Later on, when my dad and I took a trip out there, he introduced me to some people that he went to school with. That was fun.

Are you single or married? Do you have kids? What’s your life like?

I’m married.

You’ve never been married before? This is your first marriage?

That’s correct.

Your first and only marriage, I should say.

No kids yet, but hopefully soon.

That gives us a good picture of your background. What’s your educational background? I let the cat out of the bag. You’re an engineer. What gave you the spark to be an engineer? How did you decide? Was it your dad?

It was definitely my dad. He influenced me a lot to definitely go to school. I went to Cal Poly here in Pomona, got a Bachelor’s Degree in Mechanical Engineering and then I went ahead and got a Master’s Degree at Cal State LA because I liked it much and I kept going.

That’s a lot of work.

It’s a lot of studies and I enjoyed it. At one point, I was going to quit, initially. I didn’t like it but then I gave it a second try and went through it. I went through the whole program and graduated.

Did you get a job right away? Did you do your Master’s degree when you were in school, working already? How did you transition that?

I had a one-week break. I started right away to finish it as quickly as possible.

Living at home, you were a 100% student to get through it.

That’s right, part-time jobs here and there.

What part-time jobs did you have?

My first job was at Sizzlers.

Were you good at that?

If you put me back to be a waiter, I could get good tips.

Did you start off as a mechanical engineer? Did you start off as studying and mosey on over to mechanical? Were you always mechanical?

It’s always been mechanical. The first job was here in Azusa and working with the valves for refineries, working on those products and they eventually moved to Vegas. I moved with them. Maybe a few weeks I was working with them when they relocated and then moved to aerospace up in Seattle for the Boeing Company.

MCFA 5 | Government Funded Real Estate

Government Funded Real Estate: It’s amazing what’s available out there as far as loans. The FHA loan is an amazing government-funded type loan.

 

Do you have any extracurricular activities, sports, music, chess-playing? Do you have any interests besides engineering?

I’m into soccer. When it’s the World Cup, I tend to take more days off from work.

Are you sick a lot during the World Cup? What was your first spark in real estate? What led you to invest in real estate the first time? What made you say, “A-ha, I should own real estate.” Most people start with a 401(k).

I started saving in 401(k) while I started work. I didn’t know what it was. I said, “That’s what must be done.” I was renting a place up in Seattle. I was paying $680 at that time for a one-bedroom apartment and I didn’t think anything of it. I said, “Why buy something? I don’t plan to live up here that long.” An opportunity came up and there was a house for sale. A realtor that I don’t even remember how I met, he was showing me some places around that were close by to work and I found a three-bedroom, one bath home that was for sale for about $249,000 or $250,000 and I said, “Let’s give this a shot.” No money down, why not?

What year was this?

This was around 2005 or so when the zero down payments was available.

What was the price of that home?

That was $250,000.

It was a three-bedroom, one bath. You put zero down, which is cool. You didn’t plan to live there long but you thought this was a good idea. Why?

I figured I’m paying rent, I might as well spend that rent into something else and I figured in the future I would sell it.

When property values were going up, there wasn’t too much worry probably in your mind.

I was thinking, “I’ll wait it out for another maybe 2, 3 years and then flip it or sell it for much more.”

How much was your payment approximately? Do you remember that?

I was probably paying about $1,500 a month.

Looking for the right property manager is a test in itself. Click To Tweet

Did you know the mortgage bill, taxes, insurance, and everything?

That introduced to paying the different bills like the water bill and trash bill which were not something I thought about before when I was renting, maintenance and all that.

You were probably in your twenties when you bought that property.

I was about 25 years old at the time.

You jumped in quick to real estate. How long did you live in the house and worked for Boeing? Tell me how long that lasted because you’re back down here, so you came back sometime. When did that happen?

From 2005 to 2008, that’s when I was working for Boeing up there in Seattle. I was there for maybe two years or a year at the apartment.

In 2008, you moved back down to Los Angeles.

Before moving back down, my parents moved up there. They all lived all together with my brothers and everyone. They made the big move up there. At that point, I got a job offer in Los Angeles. I moved back down here and I said, “I’ll rent it out to my parents.”

Why didn’t you sell it at that point? Why didn’t you decide to cash in?

At that time, because my parents were there and I thought maybe I’ll hold on to it. Things are going to keep going higher and higher. The values were going up high.

You’re making money, you might as well hold on to it. Your parents wanted to stay. Why? You lived down here, but they stayed up there?

Yeah, they liked less traffic. It was nice for them. They ended up staying there for a few years. I figured I got my parents there and they were my first tenants.

When did they move out of that house? You eventually got regular tenants. This where the plot thickens.

They move back down here. I needed someone to manage the place, so I started looking for property managers and that was a test in itself. I would call many people, try to ask them many questions. What experience do you have managing properties? How many do you manage in the area? What’s your fee for managing these places? I found one good property manager that lasted the whole amount of time I was renting it.

When your parents moved out, what was the market rent you were able to get?

At that time, about $1,100 a month is what I started renting that place for.

You had to pay $1,500 for the mortgages plus taxes and insurance or was that including everything?

Taxes and insurance, but what I also did were I had a HELOC that I had taken out. I did another amount. The total amount was about, at the end of the day, $1,800 a month for mortgage and everything.

You’re collecting $1,200. Since you’re already negative, you came out of pocket for all the different repairs that would come up.

It’s from making up the payment each month. For example, one time the central heating which was maybe $3,000 expense, came up in the wintertime and stuff like that. It’s unexpected things.

Big and small, you’re paying negative cashflow, you’re paying into this property. Did you ever think to yourself, “How long do I pay this negative?” Maybe you thought you’d pay it forever and it’s okay because it’s a property that will be free and clear one day. You’re paying for your parents, that’s noble, that’s okay, but then you’ve got strangers in the house and you’re paying for them to live there. Did at any time your brain said, “Should I sell it? Should I keep it?” That $3,000 expense, you’re probably thinking to yourself, “How many of these can I absorb?” What was your thought process with that?

I was thinking, “Let me hold on to this place. At some point, the rent will be passing over the mortgage payment and over a long time maybe my payment will go start going down in the future, I can refinance.” It was probably going to be a long time before that happens.

You don’t know when it’s going to happen. You have to hang on.

What happened was everything crashed years later. Right around 2008, it went from what I originally bought it $250,000, dropped down to at one point it was even $160,000.

That road looks long. You have to hunker down and say, “I’m in it,” or you could foreclose. A lot of people back then, the time you’re talking about, they did what they call strategic foreclosures where you’re not in financial trouble but you say to yourself, “How long do I hang on to this property that’s negative?” You chose to hang on.

I was tempted to let it go, but I held on and not ruin my credit. Let me go ahead and hold on.

It’s when you moved to Los Angeles that I met you. You worked with my husband. Maybe it was 2009, 2010 that I met you or maybe it was 2008, maybe 2009. That’s when you thought of buying another property even though you had this experience or a little bit tough at times. You decided to buy another property. What made you decide to buy another property when you move down here?

When I moved down here, I started renting a regular apartment close by to work in San Pedro and it was talking to your husband, my co-worker, Tom, that I was introduced to multifamily unit properties. I didn’t know what these things were, a duplex or a triplex. My head was going to be in the future to buy another home.

Repeat what you already did, buy another house, live in it, and maybe rent it out.

Wait it out until the value would go up. I came to talk to you at your office and was introduced to Michelle Velasco, a real estate agent. She went ahead and showed me some places and I found this triplex that was for sale and I saw and it was empty.

MCFA 5 | Government Funded Real Estate

Government Funded Real Estate: Consider getting an umbrella insurance policy to make sure your assets are protected. You want to make sure that everything is protected for any lawsuits or things that could come up.

 

No tenants at all.

It’s in a rent-controlled area. I did not know anything about what all these terms were and what the laws were. I went ahead and that’s how I was introduced to buy something, I said to myself, “Why to pay rent if I can live in one of the units which are almost like living in an apartment anyways?” Finally, I also started learning there’s a lot of tax benefits too. Why not rent out the other units?

Do you remember how much you paid for the units? How much down payment did you put? What was the transactional part of that?

I paid $492,000 for that place back in 2013 and I didn’t have the money for the down payment.

Where did you get the down payment from?

I talked to you and you let me know that I can take money out on my 401(k) and that’s something that I also learned. I got an FHA loan and it was about maybe $22,000 for the down payment, something like that. That’s all it took to buy the place.

What was your mortgage payment total? Do you remember approximately how much it was?

The mortgage payment hasn’t changed much. It’s $3,200 a month.

Hopefully, that’s going to go down when the PMI goes away.

Two more years, the PMI, which is about $500 a month, that’s going to disappear and go away.

You’re down to $2,700 then. When you first moved in, because FHA requires you to live there and you wanted to live there. How much were you collecting from the other two units? First of all, what was the unit mix? What bedrooms and baths are in each unit?

It’s a two-building property. The front house was a three-bedroom, one bath. I did some minor repairs and work with there and then in the back, it’s another building, a two-storey building. The bottom unit is a two-bedroom, one bath. I decided to move upstairs to the smaller two-bedroom, one bathroom unit so I can maximize how much rent I can get from the other places.

They were empty. You chose your own tenants or did you hire a property manager? What did you do to get those things rented?

I went ahead and hired a property manager at M&A Management here in Lomita, they know well and I talked to them. They went ahead and did an analysis in the area for the market rents, how much they can rent these places out for. It was good that they were empty because you can start at a price and you are not locked down at a low rent which can be discouraging for properties that are in rent-controlled areas because you can’t raise the rent. Fortunately, they were empty and we started renting. The two-bedroom, one-bath started being rented out for $1,250 a month. The three-bedroom, one bath in the front started being rented for $1,450.

You are getting $2,700 a month and your PITI, PMI is all in payment for the mortgage taxes, insurance and all that. That was $3,200. You are living in the third unit for $500 a month, whatever expenses come up. Your total payment is $3,200 and you’re collecting those rents. You’re living in the upstairs unit or at the back unit. Have you been able to raise the rents? You said rent control makes it hard for you to raise the rents. You’ve been able to raise the rents anyway?

I’ve been able to raise every year depending on what the Los Angeles housing department allows for rent control in those areas. It’s about 3% to 4% each year. Eventually, as time has gone by, the rents have gone up without even knowing about it. Little by little, they raised slowly but eventually they get up to market rent.

You’ve owned that property a little over five years. What are the rents that you’re collecting on those units? Are you up to $1,600? Do you know what the rents are?

The front unit is going for $1,650 a month. The two-bedroom, one-bath is rented for $1,450.

You’re getting $3,050 or even closer to your $3,200. Once that PMI goes away in a couple of years, you’re definitely going to be positive cashflow. Do you still live there? How long did you live there if you moved out?

I moved out thereafter I got married. After my parents came down, they seem to be always following me for some reason.

If you’re making money out of a property, you might want to think about holding on to it instead of selling. Click To Tweet

You give them a free place or low rents. I would follow you too.

I drew the line though. That’s it.

You don’t live there anymore, but your parents live in your unit is what you’re saying.

I’m renting it out. Between my brother and my parents, I get about $1,000.

They’re getting a discount but not too bad.

We all win. I still get some cash and they’re not paying this huge amount of rent than you would pay in here in Los Angeles.

You’re collecting then $4,050 between your parents, brother and then the two stranger tenants, the non-family tenants. You’re positive cashflow $800 a month depending on what repairs come up or vacancies. Have you found that you’ve had a lot of vacancies? People are afraid that they’re going to have a lot of turnovers when they own real estate. Do you find you have a lot of turnover at your property, the Los Angeles one?

Before in the beginning. The tenants that have been there, they’ve been there for a long time. The tenant that’s in the front unit, he was living in the back of the unit and eventually moved to the other side. He’s probably been there for about six years in total. He likes it and he takes great care of the place. The people in the back, it’s a nice family. We get along great. They get along great with my parents there.

That’s good. That one’s humming along. You said you moved out of your triplex there because you got married. You’re a renter again.

I am renting now, my wife and I.

That must be different for you to have owned your own place and then become a tenant again. That must feel strange a little bit.

It does. I’ll have to play by their rules. We have a little puppy with us. Within 4 or 5 hours of moving in, we were getting complaints that our little Chihuahua was causing mayhem there.

They’re killer dogs.

They’re monsters of the area. It was a big transition going back to being a renter.

You have the three units there and then what was your next real estate purchase after that?

I was talking to Tom, my co-worker, and he mentioned that he was buying property out of state in Florida. I would hear him about his purchases. When you guys went out there and bought places, I started listening in or trying to learn more what all that was about.

MCFA 5 | Government Funded Real Estate

Government Funded Real Estate: Tax benefits are a great thing you can use as a retirement and live off of aside from other investments.

 

When did you think it was scary sounding that he was going all the way or that we were going all the way to Florida to find a property? Did that sound weird or risky? What did you think when you heard that?

I thought, “There’s no way I would ever buy something far away. I would stay locally here.” At that time, I still had a house in Seattle. I was already used to owning property in other states and renting it. The key is having a good property manager.

Without a good manager you’re in trouble, don’t you think?

It’ll make a world of difference.

Seattle is close but Florida is not. If you have to go check on your property, that’s difficult. You didn’t think to maybe buy more in Seattle? Why did you decide to follow the Florida story? What made it seem a good idea?

I was introduced to your team, Rosa Delgado and Dave out there. I started to get some interest out there to say, “Let me see some listings. Let me see some properties.” They started sending me duplexes, triplexes. I was already used to the idea of owning multi-family unit properties and I found one. It’s maybe about an hour away from Miami. I put it in an offer because the prices compared to what the rents are out there are amazing.

Are you about an hour north or south of Miami?

It’s about an hour north in the West beach area.

What’s it called? Riviera Beach?

Yes.

Walk us through a little bit of the numbers. How long did it take you to buy, the process that you went through to buy this? Did you fly out and see the property right away?

What happened was I got the listings from the realtors and I started going through, looking and doing the numbers, seeing how much the rents were for these units, what was the price. I started doing calculations of what the payment would be compared to how much rent that would be received. I found this place that was being sold or listed at $175,000 for a duplex. It was a two-storey building, two-bedroom, one bath for both units. I went ahead and saw that if I offer less, I can make this work. I went ahead and offered $150,000 and got the place for $150,000.

What rents does the property get? We always say, “You need to at least get 1%,” the 1% Rule. If you pay $150,000 you should at least get $1,500 per month in rents to make the numbers work. What are the numbers like in Florida?

One of the units, it’s going for $1,100. The other unit is rented for $1,050.

Is $2,200 a month your gross?

It’s about $2,150 to about $2,200.

Way above the $1,500. That’s good. How much down payment did you put? What are your expenses on that property?

The down payment, I did the same trick again.

It’s a wash, rinse, and repeat. How does that work?

The 401(k), I figured, “I could wait until I’m 65 and start taking advantage of it, but you could take loans out of it.” I took out a $50,000 loan and used that as a down payment.

You created your own zero down. You borrowed money from here, borrowed money from a bank, put that together, you didn’t put any of your checking account money in there.

It was all from what was sitting on the 401(k). You pay it back, but the nice thing with the 401(k) is the interest you’re paying is going back to yourself.

You don’t have the Seattle property anymore. Did you say that or you said when you got married you had both properties? When did you sell the Seattle property?

It was after the Florida property. I said to myself, “Let me see what else I can do here.” The Seattle house, to make up about $800 a month didn’t make any sense to me. We were losing money there. It was going to take a long time before we started making money at that place.

You mean the cashflow for it to put money in your pocket instead of taking it out of your pocket.

It would take a long time to get positive cashflow so we decided to go ahead and sell it. We talked to a realtor out there. Everything was sold, there was not even a need to go visit the place. Everything was sold remotely. We sold it and we went ahead and listed it and sold it. It was some investors that bought it and we sold for $325,000.

You bought this property in 2005, some might say at the top of the market or close. It went down to $160,000, which sounded bad to me when you said that. You decided to hang on and not trash your credit, ruin your credit. It started coming up maybe when you bought your triplex or somewhere in there. You were probably breaking even, you were back to even probably, back to $250,000. Something’s going on in Seattle to where it jumped up all of a sudden.

It did. As long as the price went up higher than the original price it was okay to sell, but I kept holding in until I decided it was time to get rid of it. I made a good profit from that. We made about $60,000 that we’re hoping to use for another investment.

There never is the right time to buy. The right time can be now. It all depends on the numbers. Click To Tweet

You’re paying yourself back for all those years of negative, $500 to $800. That’s $10,000 a year you were losing on that property. You were able to stop that bleeding but also give yourself some money back. That sounds like that was a good move. You had a lot of activity. You bought the duplex in Florida there. You sold the Seattle property at a profit. Do you have any partners in your properties? Did you buy all of these on your own? Did you have a friend at work chip in with you or contribute or give you money or anything like that?

It was all on my own. My wife and I are a team, but no partners. It’s amazing what’s available out there as far as loans. The FHA loans, that’s an amazing government-funded type loan. You could put 3.5% down and that helped at least for the big triplex here in San Pedro.

Your other option on three units, you would have had to have $100,000 for a down payment, 20% on $500,000 or whatever you paid there. That’s a lot of money. To be able to get in for about $20,000, that sounds awesome. Some people say, “FHA is a terrible loan program. I hate paying PMI. That’s only for poor people. That’s only for poor neighborhoods.” I hear all these things. You sound like you’re an advocate or you’re happy about FHA.

It’s a great program for people that don’t have a big amount of down payment and they want to own something. It’s a good way to get in. There are, for FHA loans, some restrictions. If you find a good property and the way it’s helping you to make sure that you’re buying a good property that’s safe, it’s in good condition. With as little as maybe $20,000, $30,000, you can get your foot into a nice place and maybe a multi-unit family.

A lot of people don’t realize that they can buy multi-units with the FHA.

It’s a good program.

I asked this to every investor that comes on to our interview series. Do you own your properties in LLC or entities or anything like that? Are they all in your name?

They’re all in my name. I did get an umbrella insurance policy to make sure to protect these assets. I am considering putting the Florida property into an LLC to protect your other personal assets.

As you grow your portfolio, that’s probably coming to mind more and more. If you have more to lose, you think about these things more.

You want to make sure that everything’s protected for any lawsuits, things that could come up.

What’s your next step? It’s funny, you’re a landlord for others but you’re also a tenant. What do you think your next step is going to be in the building of your portfolio? Do you have a plan? Do you know how people do financial plans? Do you have a plan of how many properties you want to own? We teach in Cashflow Academy knowing your number. How much cashflow do you need before you don’t have to go to work anymore? Do you have a plan or an idea of what you’re aiming for as far as that goes? If you don’t, it’s okay. I’m always curious to hear if people have a plan of action.

As many properties as possible are what my answer would be. I know people that have a lot of properties that they’re cashflowing, they’re taking great advantage of the tax benefits. It’s a great thing. You can use that as retirement and live off of that aside from other investments, but real estate is a great investment. Our next plan, hopefully, we have a baby. We are looking to buy another triplex. We’re doing the same thing.

Working on your numbers and working on where this property would be even though you love one particular property. Tell me about the neighborhood. Also, people have a lot of misconceptions about LA that we have a lot of crime, that there are no safe neighborhoods, the rent control obviously doesn’t help. You are looking in Los Angeles because you’re renting there. Tell us a little bit about the neighborhoods in Los Angeles that you feel have potential now that you’ve been searching as a fresh home buyer. Where do you see potential, whether it’s the zones or the name of the neighborhood?

We’re looking into the West Adams area. It’s a prime place for gentrification. There are a lot of upcoming little shops and restaurants that are coming in that area. It is considered South Central. Talking to people in the neighborhood, we’ve gone to the property many times at night, my wife and I, to get a feel for the place. You got to go there during the day, go there during the night. Get a feel for the area. If you feel safe and are able to walk around at night and you’re planning to live there, that’s an ideal place. My wife was commuting when we were living in San Pedro. After we got married, we rented a place. Her commute was up to 2 hours. That’s one way.

From San Pedro to Los Angeles, whereabouts does she work?

She has a big project in Chatsworth. It was quite a drive. It was like a Las Vegas trip every day for her.

You decided to move that way so she’d be close to her jobs.

Close to her, close to Torrance where I work. The commute is important and that’s where we’re planning to stay. We like the area where we’re looking at.

West Adams for a long time had a rough reputation or crime reputation. It sounds like things are turning or changing in that neighborhood. They have all those mansions over there. They’re beautiful properties, but for some reason it had issues.

They do have a lot of Victorian homes in the area, a lot of nice places. It’s cleaning up. Right there in La Cienega and Jefferson, there’s a big huge TLC project. They’re making a big huge shopping center. You’re minutes away from Culver City. Culver City used to be a bad area in the past but now it’s a nice downtown. This area that we’re looking at is close to Culver City as well.

MCFA 5 | Government Funded Real Estate

Government Funded Real Estate: The biggest hurdle that you have to overcome is the psychological factors of moving forward and making the big purchase.

 

We visited Culver City, Culver Hotel, it’s a beautiful hotel. It seems a cute little area there. The next plan is to buy another triplex. Are you going to buy more out of state, maybe a different state? Do you have any ideas about that?

I was going to after I sold the Seattle house. We were planning to take those proceeds, those gains and go to Florida. We talked to my wife and me, and decided, “Let’s stay here instead. This is our chance to use that money instead and buy something here.”

As a buyer, how do you feel the prices are? You’ve bought in the highs, the lows, but at the height of the market in Seattle, you bought at the low of the market or close to the low of the market in Los Angeles, medium for Florida. As a home buyer in Los Angeles, a lot of people feel like, “Maybe we’re at the top of the market, I should wait. Maybe I’ll wait two years before buying.” You’re in it and you want to own something. What are your thoughts or feelings about whether you should wait or do it now, inventory-wise? What are your thoughts on that?

I like real estate much that I got my real estate license. I am a realtor. For any followers out there, throw in the plug out there, if you’re interested you let me know.

What are your thoughts about the market, whether you should be a buyer in this market, at least in Los Angeles? We can’t speak to other markets. In this market, what do you think?

I would say that prices have started to settle down. If you look back in history, “When is the right time? I should have bought.” These many places back then, they were cheap. There never is the right time. The right time can be now. It all depends on the numbers. You have to run your calculations and your numbers. Does that make sense? Do the numbers make sense? If they do, then it’s the right time to buy.

Why do you think you’re comfortable with real estate? What was your biggest fear about real estate to begin with? What did you have to get over in order to buy the real estate?

It was the misconception of people. I would hear a lot of people say, “You don’t want to stay tied down in a house. You’re going to be there for 30 years.” That was my greatest fear. I didn’t want to buy something and have it permanent. Be there for 30 years and you can’t do anything else until then. That’s not the case. I bought the triplex in San Pedro. I was out of there after 1.5 years. That was my greatest fear. I didn’t want to get stuck in one place but you don’t. You can move around, you can either sell or if it makes sense, keep it, rent it out and move on to the next one and jump around and start building your real estate profile.

You’re saying if there’s cashflow covering the payment then you don’t have to worry about being tied down to that payment. You’re free to move on and someone else pays it for you.

Someone else pays it, it’s your little business and you start, I like to call it planting little trees in terms of property in many locations.

That’s a great analogy. It sounds like you do like the numbers, you like crunching the numbers.

As an engineer, you have to be good with numbers. You apply the same principles here. You take up the calculator and you start crunching numbers, see how much you gain, your rate of return. There are a lot of terms that I didn’t know about and I’m still learning every day and whenever I can. I’ve taken your courses. You have your Cashflow Academy. A lot of people would benefit a lot from that for doing numbers, crunching numbers, how to do it properly, how to make sure that you take into account all your expenses correctly, take note if it’s the right place or not to buy.

I’ve asked the questions I want to ask and it’s all about me. This is about people getting to ask you questions so I’m going to throw it out there. If anyone has questions for Victor either about how he bought, where he bought, what he would suggest, anything you’d like to ask him about real estate, I’d like to open it up to the people who are with us. If Coleen or Mr. Hicks, if anybody would like to ask a question now would be the time.

How are you? This is Jamil, the mailman. Do you remember? Long time no talk to you. My question would be because I’m in a spot where I feel like I got a decent down payment. I feel like I got all my ducks in a row in my credit and so forth. One of the things you stated was the right time and one of the things that worries me the most is get jumping in and the unexpected. It’s something that I’m looking forward to doing. My wife and I talk about it all the time, we want to be homeowners. We want to own something. What would you say was the biggest hurdle that you had to overcome to go ahead and jump in and do it? Were its numbers? What was it that was the biggest factor that kept you from doing it at one point and that later on, you said, “Let me jump in.”

Being tied down with a property is one of the people’s greatest fears that prevents them from investing. Click To Tweet

The main thing is you got to prequalify. That is good that you’re working on your credit. Make sure you get that credit as high as possible, that’s going to affect to get a good interest rate. The biggest hurdle that you have to overcome is the psychological factors of moving forward and making a big purchase. This is going to be the big purchase that you will probably make in your entire life, so you want to make sure that you get over the fear of that. Look at a lot of factors at the property. Look at the neighborhoods in the area, the schools, and safety. Is it going to be safe for you and your family? The hurdle is getting over the fear of going ahead and making that big purchase.

Victor, do you have a tip for him to get over the fear?

I don’t think it’s so much a fear. I’m getting closer and closer to it. I got to come down to your office and we talk again because, since the last we talked, some things have changed. It’s about time for me to step into your office again.

To get over the fear, first of all, imagine yourself having done it already and looking back. That’s why I love talking to people like Victor and other investors who are starting because usually when you look back you go, “I’m glad I did that.” When I ask people, “What would you do-over? What would you do differently now that you know what you know?” They almost always say, “I would have started sooner. I would have bought more.” No one ever says, “I would have waited.” Even people who have been through downturns never say, “I would have waited.” The lost time of paying down the mortgage, even if you paid 6% or 7% on your mortgage, you still are paying something down.

The other thing is if you could imagine that if everything goes wrong, those tenants are paying your payment. How bad could that be? The fear usually is you don’t want your whole family to take because you made a bad decision. Our worst fear is we drag down our whole family and have nothing left or our hard-earned savings are wiped out because we made a bad decision. That’s what I would say. What do you think, Victor?

That’s true, Athena. Another thing that helps to cross over that hurdle is if it’s a fear or something like that, for me, at least that’s what it was because I was hesitant to move forward. Once you learn and you move in, your house value goes up and the tax benefits that you get. Let’s put it this way, the fear went away right away because there’s a lot of tax benefits from the mortgage interest, all the stuff that you write off. Looking back at your home value climbing more and more, it’s great.

You mentioned the West Athens area. I live in Gardena and that’s one of the biggest areas that I’ve been looking at because of the railroad system they got moving. You look at the whole park area around is gentrified. This exactly like you said. I foresee in the next few years, it’s going to go along the same route as Inglewood has gone. I’ve been looking in that same area. That’s the area that I’ve been interested in. It’s the heart of the city.

You’re close to all the areas there. You’re close to the freeway. You have the new Jefferson station right there in La Cienega. In Inglewood, you have the Rams stadium that’s coming up in the next few years. That’s going to bring up the properties up. They are already starting to raise the prices and values in that area. It’s a good plan to move in.

My favorite plan is you buy 3 or 4 units minimum down, move in, get that cashflow going for you then buy another duplex, move in, do it again. Do that 2 or 3 times and then buy a single-family home. Once you have a single-family home, that payments all on you. Even if you rent out the house, especially in Los Angeles, the rent will not cover that mortgage payment, probably won’t cover that mortgage payment. It’s much better at least to live in two units so that you’ve got a back unit or front unit helping you. There’s plenty of time to own a single-family home and but finding units for straw is a little tougher especially nowadays many investors are chasing these units.

No matter where you are in the country, people finally realize you’ve got to own real estate to have the cashflow to be safe. We don’t know where social security is going to be for us if they’re going to push it off or they’re going to cut it down by the time we’re all able to benefit. Fewer people are being born, so who’s exactly going to pay this? Who knows? It’s all those questions. It’s better that you don’t depend on any government. No offense. He works for the government as a mailman. You don’t want to depend on the government.

I see how disorganized everything is and I would not want to leave these people in control of my fate when my golden age comes.

What I love about you, Jamil, is you’re out there, you’re the actual boots on the ground, and the actual boots are on the ground delivering the mail. For me, you see all the opportunities out there. You’re walking the neighborhood. You can see things going on that we in our car would zip on by.

It’s unbelievable. I’ve been working in Redondo Beach for a few years. You cannot believe the number of houses that have been bought by investors in an area that is coming in there. Now I’m placed in between three family townhouses.

Maybe you need to ask for a switch to a neighborhood you want to buy in so you can be door-knocking your own people. Victor, you were afraid it would only be a short conversation. This is never a short conversation.

This is good.

The passion behind real estate is awesome. When you get a group of like-minded people together, we could probably talk all night long. Mrs. Hicks, a famous skateboarding coach. Did you have a question? Mrs. Hicks doesn’t have a question?

What’s interesting, she’s taking a real estate course to get a real estate license.

That’s awesome. Good for you. That’s great. Mr. Hicks does the door knocking and Mrs. Hicks will be listing the property. That works out well. That’s a smart business person who gets someone else to do the door knocking for her. She’s a smart gal. If we don’t have any other questions then, Victor, thank you for sharing your time. It’s a busy day. You’re a busy guy. I loved hearing your story and how you did all this. Do you have any advice before we go? If you could share your contact information for people to reach you?

My advice would be to look at your expenses, go out there. If there’s hesitation or anything to buy something, go for it. Get pre-qualified first. Make sure to figure out how much you’re pre-approved for. If you have any other questions, you can give me a call. Let me give my number out. It’s area code (562) 639-7158. I work for the real estate professionals here in the Torrance area. My advice is to look for something that you see yourself living there even for a short time, a long time. Enjoy the benefits of real estate. It’s a great business.

MCFA 5 | Government Funded Real Estate

Government Funded Real Estate: Make sure you get that credit as high as possible because that’s going to affect your chances to get a good interest rate.

 

Thank you, Victor. Thank you, readers, for joining me. Next time, we’re going to talk about ADU, which is Accessory Dwelling Units. I have a friend who’s a house flipper. She went through the process and got an ADU built on her own property. She’s going to walk us through what is an ADU. Who can build one? What does the process cost? She’s good at that because she does 40 house flips a year. She’s good at the numbers, the budgets of flipping homes and construction. She’s going to share that with us and then who should do that. Can everyone do this? Who exactly could do an ADU? Keep in mind, every city has its own rules, so she’s going to share the ones from her city. LA County is pushing big on people building more housing because we have such a huge shortage of housing.

There are some calls coming up and if you missed any of them, they’re all going to be on my YouTube channel. If you missed any, you’re more than welcome to look there. Also, Cashflow Academy has some special calls. We have our realtor in Indianapolis who will be sharing that market with us. If you have not joined the community, you might want to do that because it’s an excellent way to learn.

We interviewed a realtor in Pittsburgh, next will be Indianapolis. He’s going to walk us through not only his experience. He bought 200 homes and managed them. Tyler is going to share his experience of being not only a realtor, not only an investor, not only a property manager, but the market in Indiana. If you’d love to hear those special calls, we will release them on our YouTube channel. If you want to be part of the conversation, you do have to join Cashflow Academy. You can go to the website www.MyCashFlowAcademy.com and learn about the program. That’s it. Thanks for joining us. Victor, thank you for sharing your story and your time with us.

Thank you.

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