I wanted to see what you want to accomplish in REI over the next year. It’s always best to have set goals and have them written out so you can revisit them and see how you’re progressing. Are you hoping to continue educating yourself on REI or will you take action and start doing deals over the next year? Do you already have multiple properties, but will be adding more? Are you going to flip some houses next year? How are you going to grow your business and make it better?
Hopefully we can keep updating our progress here and look at what others are doing as motivation for ourselves.
I would like to buy 10 more units (multi’s or SFHs) by the end of next year to hold long term. I might even try rehabbing a couple places and putting them on the market. If they don’t sell, I can always rent them out. Now might be a good time to explore a L/O on a place like this. I’m hoping to become more well rounded with more experiences than just buying all 10 units from the MLS. Hopefully I can find some good REOs or short sales to buy.
My goal for 2009 is to get a bailout! Bailouts are the new gold rush in the United States! I’d like to have the government lower the interest rate on all my real estate loans to 4.5% and reduce my principal by half (just for starters). While they’re at it, I’d like $10,000,000 in cash. Opps, I changed my mind. I’d rather have $10,000,000 in gold instead of cash. I don’t have a good reason for needing a bailout, but the government didn’t ask the Wall Street Fatcats for a reason either.
That’s my new wealth building plan. Ask the government to simply give it to me! What do you think?
Jason - my goal for 2008 was to learn and buy 2 properties to hold long term. I bought one. Although I didn’t meet my goal, I am still feeling that I accomplished something and I am happy.
My goal for 2009 is to buy 4 properties to hold long term. All SFH. One in each quarter. I figure that after I complete my first rehab I will have more experience and will be able to do the others quicker.
For each property, I am planning to get a private loan for 80-90% of the purchase price + rehab costs. After the rehab I will refinance out of the private money and take most of my money out so I can use it again for my next deal.
My goal was to by 2 and keep for rent, I bought one the rehab took a lot longer than expected due to me doing it myself. But I learned a lot of what to expect. The good news is that the Rehab is far below my estimates.
Goal for next year is like Jdias to purchase 1 in every quarter, this time someone else will be doing the rehab unless it is a complete cosmetic redo (Paint and floors), I can do them myself.
The Bailout sounds like a great goal! I think you are too modest in asking for only $10,000,000…I think you should request at least $10,000,000,000. Tell them that with the downturn in the economy if your real estate portfolio falls it will bring down the entire financial system even more. Therefore, it is absolutely vital for you to receive your bailout ASAP. Just think of the poor tenants that will be on the streets. I’m counting on you to give the FED a real Dog and Pony show…one for the history books!
2009 Goal: Increase my net worth by 5% over the previous year.
I like that goal and think (with your permission) that I’ll steal it for my own! In fact, as I was thinking about your post, I was wondering if the principal paydown alone will do the job? I’m going to take a look at my financial reports from 2007 and see what percentage the principal paydown on my loans will add to the net worth!
In fact, as I was thinking about your post, I was wondering if the principal paydown alone will do the job?
Depends upon the number of loans you have, and, how seasoned those loans are. My problem this year is that the market value of my real estate holdings fell this year. My net worth declined faster than debt reduction could keep up. I have had the same goal since 1994. This year is only the second year that I have not met or exceeded my goal. This year is the first year, I had negative growth. The other year was 1998 when I only achieved a 0.6% increase.
If you will meet a 5% goal with debt reduction alone, then you may want to shoot for a higher number.
Dave/Mike - I have a question on the “paying down debt to increase net worth” goal. Why when you pay down debt you increase net worth? If you keep the cash would that also increase your net worth? Paying down debt would only transfer from cash to equity. Am I missing something here?
I can’t speak for Dave, but my banker would get quite upset if I didn’t make the principal portion of my loan payments each month! I don’t see how I could keep this money, since I signed a note with the bank promising to make my debt payments each month.
I also plan on adding to my inventory of rentals in 2009. I will be looking to buy right after the holidays as I’m wrapping up my most recent rehab. Although I don’t have a specific number in mind, I would expect to add multiple properties as prices continue to fall.
Would like to see 100% occupancy for 2009! :biggrin
You are absolutely correct. You have the same equity whether you keep the cash in your bank account or use it to pay down your debt. You certainly have a valid question.
My thinking is that paying a few extra dollars against your loan balance now saves you quite a few monthly mortgage payments later. If you have a $100K mortgage, 6% fixed for 30 years, your monthly debt service is $600 per month. Paying an extra $50 each month toward the principal balance will retire your loan in 24 years and 7 months. That is 65 monthly loan payments you won’t have to make, or $39000 that you won’t be giving the mortgagee.
In the early years of your mortgage, most of your payment goes toward interest. By paying a little extra toward principal from the beginning of your loan, more of your monthly payment goes toward principal – increasing your net worth even faster.
If you want to look at it differently, by adding an extra $50 to the first 295 monthly loan payments, you save the money you would have spent on the last 65 loan payments. Just makes sense to me to spend $14750 now ($50 x 295) to save $39000 later.
The long term effect is that you own your property free and clear faster, increase your net worth faster, and have more free cash flow sooner.
BTW, I chose 5% because it should still be achievable in a recessionary economy. However, it is not the number that is important. I could have set my goal a lot higher, and many years my report card made me look like an over-achiever. What is important is the process. The end result of setting your goal, determining your objectives, and then defining the action steps you need to take to meet the objectives that achieve your goal, is a focused investment plan.
For the rest of the year, you work the plan. At the end of the year, check progress against your goal. Figure out what works and what did not work and make adjustments to your plan as required.
My goals are to purchase 3-4 MFHs (reo’s) and rent them out to hold. I am also looking at buying some small SFs to rent and hold. I am looking to close my first deal within a month. I have learned so much here and will use the knowledge to build a nice passive (sort of) income and increase my net worth. I am up to my eyeballs in credit card debt and I hope to have my future tenants pay it off for me by 2010, unless Obama bails me out first!!!
Mike - I am not talking about the regular mortgage payments. I was referring to the extra payments that Dave mentioned. I couldn’t see how transferring $100 extra from cash to equity would increase your net worth. That is why I asked.
Dave - your answer made me think… Actually if you accelerate payments on the mortgage, each new payment will contribute more to principal (equity) than if you didn’t accelerate. So making extra payments do help you increase your net worth. So your net worth does not increase because you transferred an extra $50 from cash to equity, but because of the extra dollars that went to principal after that extra payment… THANK YOU! I was not thinking that way.