• 03:08:42 am on June 4, 2009 | 12
    Tags: , ,

    Onward!

    Photo credit: Maggie’s World

    This is the last of our transition posts!

    IMHO – where H = humble as well as honest 🙂 – it starts to get VERY exciting / challenging – interspersed with long periods of boredom 😛 – from here …

    …. so, let’s make this a last-but-best post: Mark knows his path (i.e. real-estate and small businesses). How do we help him on his way? C’mon, be creative!

    ___________________

    Onward! That reminds me of my former co-worker. He is a happy go lucky guy who is very smart and he is currently in his 3rd or 4th retirement now.  How that works? Work really hard a few years, save some and spend carefully, hit a jackpot with a start up and retire temporarily. I might adopt some hybrid approach in the near future, hopefully. Too much of either one; work or retirement, is not healthy.

    We have just concluded a bunch of MM101 exercises. Most of them are really helpful; I’m particularly fond of the 20% Rule and the 25% Income Rule. Maybe because I like numbers and I got an elephant stamp out of that exercise with my old home. I do need to rework it for my new home. Nevertheless, the other MM101 exercises are equally important.  It is MM101 principles that got me here at this point.

    Like a few of the 7 millionaires in training, I started some MM201 activities like converting my old home into a rental property and making attempts to launch a mall business. The rental is not cash flowing a whole lot and I’ve made some significant improvements on the property. The way I look it is the experience that I’ll gain from this activity. It will help me in my future real estate acquisitions too.

    Let’s review my original number and date here. It is $5 million in 10 years and the required compound growth rate is about 40%.  I should be looking at:

    Real-Estate together with Stocks and Small Businesses

    So far, I’ve started on a small rental. I’ll be launching a small business soon investing in Tax Liens and that will bring in more real estate exposure. I did hire an accountant to help me draft out a business development plan and I’m happy with the outcome. The next steps are flawless execution according to the plan. How do I do so far? I must say, I’m not moving forward enough! My current obstacles are my home, assembling furniture and furnishing the new home;  and a very busy social calendar – trips, concerts, parties. It is time to make a choice. I can still do it all but there will be some sacrifices.

     

Comments

  • Scott 6:21 am on June 4, 2009 | #

    Mark, I think you’re off to a good start by converting your house to a rental. I know how daunting it can be faced with the bug to furnish your new place. We’ve have the same challenge since we converted our first home to a rental and bought our farm last year.

    We decided to cushion the spending blow(and cut out as much temptation as possible to go wild furnishing the new place) by giving ourselves a “home improvement” monthly allowance. This is money that can be used to both do renovations with(some have to be saved up for however!) or used to purchase needed furniture(we never bought any furniture in the 7 years we’ve been together, most of the stuff we own are old things that were passed down, picked up at yard sales, or dirt cheap and low quality, etc…but we owned nothing nice).

    We figured that the whole process of both getting our new place finally furnished the way we desired as well a completing the needed renovations(which will increase the value of our property tremendously)will be spread out over a few years so that our money can mainly work for us right now to achieve our number.

    We felt like if we just dove in and used all of our monthly savings or “war chest” money, sure we may have a beautifully finished and furnished home, but what would that cost us in getting to our number now?!

    Good luck!

  • Josh 4:32 pm on June 4, 2009 | #

    when I finally get my own place, I plan to stalk Craigslist for some quality used furniture for cheap and buy one piece at a time. Will take a while, but I’m in no rush, my friends will just have to get used to sitting on milk crates in the mean time.

  • Adrian 11:20 pm on June 4, 2009 | #

    @ Scott – Great idea; what do you think, Mark?

    @ Josh – Ditto; Craigslist is a wonderful resource for this sort of stuff.

  • Mark 2:52 pm on June 5, 2009 | #

    @Scott – That is a great idea. I’m quite low maintenance so I have been waiting on the sidelines until I spot a deal. I don’t do renovations so my only furnishings are cheap furniture.

    @Josh – Yes, I sell my stuff on craigslist. So far the furniture I got a decently priced (ala Walmart / Big Lots). I haven’t got furniture off craigslist yet.

  • Adrian 7:08 pm on June 5, 2009 | #

    @ Mark – I think it would be useful – either in a comment (here) or in a separate post – to give the 7m7y Community an overview of the “business development plan” that your accountant helped you to put together.

    Also, re the tax liens: are you looking to invest in lien states or deed states i.e. some states sell the lien over the property (it’s then up to you to foreclose, in the unlikely event that the owner doesn’t eventually pay up), while others basically auction the property subject to payment of the lien.

    It’s been a while since I’ve looked at liens, Mark. Have I got this correct? And, what’s your strategy here and, what stage are you at?

  • Mark 9:08 am on June 6, 2009 | #

    @Adrian – I’ll be focusing on lien states. Deed states like NC and TN will need too much capital. I’m looking at states around me and expand every year. Starting with SC, MD and then GA and FL.

  • Adrian 6:52 pm on June 6, 2009 | #

    @ Mark – Yes, Liens seem easier (like in IL) but also seem to be well-contested. Also, to me, Liens seem to be a ‘financial instrument’ (one that you buy to gain a nice ‘interest rate’) whereas deeds are (potentially) a way to buy an investment (i.e one that you can buy/hold) cheaply … what’s your take on this?

  • Mark 8:44 pm on June 7, 2009 | #

    @Adrian – Yes, it is well contested. I participated in an online auction in MD and got out bid many times over. The main aim is to gain control of a good property which is about 1 in 10. The interest is just a nice to have but still better than savings interest rates. Deeds requires too much capital tied into one single property. There is more risk if you did not do sufficient research. You spread the risk a little with tax lien with the same amount of investment capital.

  • Jeff 9:10 pm on June 7, 2009 | #

    Mark – Thanks for the further insight on the Tax Lien/Deed world. I’ve just started learning about them as a way to try and gain control (cheaply) of additional properties.

    I’m not sure I understand fully where you are going with your efforts. Are you using the liens purely for the interest rate? Or do you see it as a cheaper way then the deeds to get in a position where you may be able to gain the property but will benefit from the interest?

    I’ll be watching your experiences closely and hope to learn much from you on this topic.

    Best of luck…Jeff

  • Mark 6:44 am on June 9, 2009 | #

    @Jeff – The main goal of Tax Lien investing is not the interest but the ability to gain control of the property with relatively low cost of entry. You make money if you are able to go through the due process which is different from county to county. If you are chasing interest rates, you should be looking at Iowa (up to 24%). But you gain most if you are able to secure the property and then fix-up, flip it or convert it to a rental. There is a lot of due diligence involved and it is definitely not like trading stocks.

  • Adrian 10:17 am on June 9, 2009 | #

    @ Mark – In that case, I would definitely consider moving into Deed States, as your hit rate (of property converting to ownership) is, by definition, much higher.

    From my research, the most likely lien to ‘convert’ to ownership is vacant land … but, I could be wrong.

  • Mark 3:13 pm on June 11, 2009 | #

    @Adrian – Deed States like NC and TN will need significant capital. That is quite a barrier for the limited capital I have. You are right about vacant land but there are some sweet spots where the conversion rate for residential are reasonable. Definitely not upper middle or middle class homes. Usually, middle or lower middle class residential homes can be converted.


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