Our First Real Estate Investment Deal!

Posted Leave a commentPosted in Finances, Investing, Real Estate

This blog post was also my introduction post to the Bigger Pockets forum.  I have been a part of a few different groups and have tried many different methods to generate passive income.  I have owned different websites, I have also done the drop shipping thing (with some actual success, but couldn’t keep up with it).  I was always interested in real estate (and I will probably get back into blogging once this takes off to talk about my real estate adventures).  My only other experience with renting property was when I rented my first house before I sold it in 2012.

My uncle has multiple rental properties in upstate NY and he planted the seed in my brain a long time ago.  The big sticking point was convincing my wife that this is indeed the right move to make.  Before doing that, I had to change my mentality first.  Wanting to invest in real estate is one thing, but if I am not mentally ready to commit 100%, how can I convince her?  So, we linked up with some good friends who are also stationed out here in Hawaii to talk about their portfolio.  They have been doing this the past 6 years and at the time where closing on their first commercial property.  When they showed my wife the numbers, she looked at me and I knew she was ready to do this.  As to changing my mentality, I have a list of books I need to read staring with “Rich Dad, Poor Dad” (just finished this book recently).  I plan to burn through a bunch of those books soon after I finish something else I am working on (will discuss later in this post).

I linked up with a good realtor, property manager, and general contractor back on the east coast because that is where I wanted to invest (thanks to my friend for linking me up with great contacts).  I was stationed in the Norfolk/VA Beach area for 15 years, so I am very comfortable with the area and the market.  Thanks to the Navy having the largest Naval Base there, it is an extremely good renters’ market.  Now the hunt begins…

My real estate agent set me up with an MLS list and updates it daily.  It has all the criteria I asked for and would only show me properties that met that criteria.  So now we are searching for our first deal.  So, what would happen when we find this deal?  How will we pay for it?  I talked with my friend about this because I knew we could afford it, but wasn’t smart on the requirements on buying investment properties.  We didn’t have a lot of liquid assets to use so we had to be creative.  I took out a very large personal loan and let it settle for 2 months while looking for “the deal.”  The first 3 places we were really interested in where “no go’s” for us after our contractor went and looked at them… Then BAM, we found it!  A duplex in Chesapeake, VA listed for $160,000.  It was on the market for 2 months and was getting no bites.  I was able to immediately tell from the pictures it was due to the outside of the property.  It looked a little dated and could really use a total paint job.

My contractor went and inspected the property and the current tenants where very happy and they wanted to stay.  The hot water heaters for each unit where probably on their last leg and the roof needs to be replaced soon.  Everything else looked pretty good.  So, I put in an offer.

There is some back and forth discussion and I submit the offer for $149,000 and they pay closing costs.  Deal is accepted and we start moving forward.  While all of this is going on, I link up with other real estate investors in Hawaii.  There were two different meetups that I went to and met some great people (this is also when someone showed me bigger pockets).  Can you say mind blown?  Wow, so I start listening to podcasts, reading the forums and seeing what everyone else is doing.  I am so pumped at this point.  I get my wife to start watching some of the bigger pockets YouTube videos and she is getting pumped.  She’s not quite as gung-ho as me, but I blame my military mindset for that.

Ok, the blood is flowing, I am hungry and I am wanting so much more.  I linked up with a good real estate mentor out here from one of the meetups and I am currently working on getting my real estate license (which is why I am not reading any other books until I finish this).  I am learning so much from the course I am in and I am super excited to keep pushing forward on this journey

Now, let’s move past all the fun motivating stuff and get down to the nitty gritty.  While all of this is going on and I am so excited, motivated, and hungry… I hit some major roadblocks with the property I have an offer on.  I push through many of the minor obstacles, no problem… Well, the day before I am supposed to close, my loan officer hits me up and says, hey, your loan is cleared and you are good to go… but there is a problem… Problem?  What is it?  I asked.  Well, we submitted your loan request with you putting 15% down and you were going to have a slight PMI, but we messed that up… since this is a multi-unit property, you need to put 25% down.  That’s not a problem is it?  Well, yes… yes it is… because I was already tapping myself out to get the 15%.

Now I want this to happen and I want this property… I talked with my wife and she had a minor freak out but I brought her back in and went over the numbers and how we needed to look at the bigger picture.  Not I need to come up with another $18,000.  So, I am scrambling.  I was able to take out an $11,000 loan on my Thrift Savings Plan (it’s a military 401k).  As I pay it back, the interest I pay is also going back to me, so this was not a bad route to go.  Ok, still $7,000 short, I put a $7,000 cash advance on one of my credit cards to make it happen.  While this purchase was a lengthy and somewhat painful process, it was also a great learning experience.  I know I said lengthy, but things are moving very fast since we got serious about this adventure in life.

Now here we are… We closed on the property and we are collecting rent.  We also just locked in a 2.75% interest rate interest rate reduction loan with a $10k credit from the lender on our primary house in Hawaii.  This rate reduction will save us about $330 a month on our mortgage payment.  Now we are recuperating from all of this craziness, getting our finances back in order, and getting ready to start searching for our next deal.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike is building a community for people to come together to learn and build their wealth.

Real Estate Investing, Scary? Yes! Fun? Yes!

Posted Leave a commentPosted in Finances, Investing, Real Estate

So, as I mentioned in the previous post about inbound content, I want to share with you where we are at right now.  The thing I am most excited about is the Real Estate Investment company we started.  Yes, we opened an LLC named Compass REI Properties, LLC.  We bought our first rental property and it is actively making us a passive income.  My next blog post will outline the story of how we rented it.  It is also one of my introductory posts to the Bigger Pockets forums.  I am not being paid any type of commission to mention them, I am just super excited about that community and talking with like-minded individuals.

After such a big break on the blog, how the heck did we get here?  Well, let me give you some of the background and a sneak peak into the next post.  I have always wanted to invest in real estate.  At least for over 10 years.  I bought my first house when I was 21 (ok closed after my 22nd birthday) when I was a Petty Officer Second Class (E5) in the Navy.  This was in 2007.  Well what happened in 2008?  Yeah, you guessed it.  The housing bubble burst… When I transferred from my command in 2009, I was unable to sell the house.  It was on the market for 9 months before I rented it to a very close friend of mine.  I was eating a loss every month because the rent prices for the area were so low.  When my friend transferred in 2012, I was unable to keep up with everything and had to short sell the home.  It was a very tough experience.  I bought that house with a VA loan and thought I would lose my VA loan eligibility forever.

Well, luck was on my side.  The lender filed the paperwork after the cutoff date for the short sale and was unable to tough my VA guarantee.  Phew.  Well, needless to say, a short sale will TANK your credit score.  We weren’t buying a house for a while.  I rented for a few years and moved into base housing after I commissioned because the house was right by my job.

When I got orders to Hawaii, my wife and I knew we were ready to buy again.  We also knew this market was really good and if you weren’t paying full asking price plus closing, there is no way you were getting a home.  We lost the first 3 homes we tried to buy in bidding wars.  Finally, after living in Hawaii for two months, looking at about 97 homes, putting offers on 4 of them, we purchased our second home.  At the time the rate was 4.65% on an $800k home.  Yes, that mortgage payment was rough.  $4,442 a month (taxes and insurance included).  Yowza!  Thank goodness we saved a lot of money up and became debt free before moving here.  About a year later, we refinanced with an Interest Rate Reduction Loan (IRRL) and got our rate down to 3.5%.  This was significant savings.  We lowered our mortgage payment to $3,944 a month.  Rates are so low right now that we are actually doing it again (will discuss in the next post).  Remember the debt free thing I mentioned before moving to Hawaii?  Yeah, it didn’t last…

So yeah… about the debt… Shortly after purchasing our home in Hawaii, we were plagued with issues.  We wanted to do some updates to the kitchen.  It was a big job that became even bigger.  We wanted to replace the cabinets, countertops, and appliances.  We did… However, while doing the renovations and ripping out the old cabinets, countertops, and sink… we found black mold… A LOT of it!  Now we had to rip out all the drywall and treat the beams.  Not only did that happen, but the contractor that was ripping out the countertops dropped the old countertops on my tile floor and cracked in in several spots.  We couldn’t find that exact tile so we had to now replace the entire floor.  It was a fight and they wouldn’t pay for the new tile.  We did however get the company to pay for installation… Sheesh!  Then the contractors we hired to work on our downstairs bathroom started getting really slow with their work… I was paying them by the hour… They finished the bathroom and then started working the backsplash in my kitchen.  Not only was the job starting off sloppy, but with how slow he was going, he had to go.  We fired him and hired a new “tile guy.”  The new guy came in with a much cheaper rate and had to rip out what these other guys started.  He did a great job so we hired him to tile our upstairs guest bathroom.  He tiled the floor and the walls, it was awesome!  But overall, the cost was not so awesome.  We went from having $15k in the bank after we bought our house to a $25k loan and about $10k in credit card debt.

Why did I give you this wall of text about what we went through with our homes)?  To show you where some of our fear stemmed from…

Like I said earlier, I have wanted to invest in real estate for a long time… My wife was not onboard with the experience we had with our first home as well as all of the additional costs we took on with our new home… A very good friend of mine saw what I was doing with the 3 different websites I built and products I was selling.  He said he saw how much of an entrepreneur I was and suggested I look into real estate investing.  I told him that he is speaking my language, but I am not the one to convince, I need my other half onboard.  So, my friend invited us over for lunch to show us their real estate portfolio and how they were doing it.  Of course, pregaming this, I was already trying to get my wife onboard.  She was actually really excited and started searching for properties herself.  She found two awesome deals and we brought those with us to ask my friends opinion.  When she saw what they were doing as well as the encouragement we received from the deals we found, our wavelengths synced up.  This was the beginning of something new and exciting for us.  Something we would do together and something that will create a passive income.

My next blog post will go into the details of our first deal.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike is building a community for people to come together to learn and build their wealth.

Content Inbound

Posted 2 CommentsPosted in Finances, General

So it’s been a while since posting.  There is a lot going on in the world of Average Joe Finances.  WE made a few websites (jumped on the Raid Area 51 Bandwagon and sold some merchandise), had a T-shirt store up and running, and most recently started a Real Estate Investment company.

I am excited to share the journey as we go along… Stay tuned.

Back to the Basics

Posted Leave a commentPosted in Finances, General

So here we are again working on our savings.  My wife and I have been trying to figure out what we want to do after I retire from the Navy.  We are less than 5 years out and we have been messing around with where our money should go.  I think we have come to the conclusion that we are going to buy a sailboat to live aboard and travel.  We have been toying with this idea for a long time and just never thought it could be a reality.

So, where have I been?  I have had some unfortunate medical issues that have kept me away for a while.  During those times, I was also working on another side-hustle by creating a few websites to sell.  That didn’t really work out to well so I decided to focus back to the basics.  What do I mean by back to the basics?  Well, we are focusing on our budget and watching our debt.  We had some renovations done to our house and we are paying off the loan we took out to pay for the work.  Normally, we would stop investing and just focus on the loan, but we have such a low interest rate on it, that I would actually lose money paying off the loan faster versus investing that money.

I have been thinking about different sure things to do on the side here in Hawaii.  The real estate market is really good.  I was thinking about getting my real estate license or work on my CFA certifications.  Sometimes I feel like I need to be doing something else to supplement my income even though we are doing just fine.  I keep feeling like I want to put more away for the future…  It’s honestly not a bad problem to have.  We have this goal of buying a sailboat, but we don’t want to sell the house.  Getting into real estate is something I have wanted to do for years.  I have some friends who own multiple properties and they say it’s not that hard.  It’s about the effort you put into it.  However, effort costs time, and I already spend enough time away from the family thanks to the Navy.  So, these ideas remain ideas and float for a while.

I always keep my eyes open for different opportunities.  Eventually, the right one will come along be it in real estate or finances, and I will jump on it.  Right now, the focus is on the budget and keeping our eyes on the prize.  The recent medical issues have highlighted some service-related medical problems from my last deployment to Iraq.  This has been an unfortunate turn, but we will make the best of it.  Between my Navy retirement and possible disability pay (thanks Navy), we will be in a better place than originally thought.  So, we’ll see what the future holds.  We have out five-year plan to stick with, but there is always room for change, especially if the change is better than the current plan.  This post probably reads a bit rambly (not a real word), because I am rambling in my head as I type.  Well, that’s it for now.  I’ll try to keep up at this blog.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike is building a community for people to come together to learn and build their wealth.

Side Hustles

Posted 1 CommentPosted in Budgeting, Finances

So, you want to make some more money and work from home?  Well, there are many people who will try to sell you different ways to make money online without working.  They sell this dream of passive income, making millions of dollars online.  While it IS possible to make a good amount of money online, it is also important to understand that it takes WORK (hence the term HUSTLE).  There are many different “side hustles” out there, so, choose ones that work.  Here are a few “side hustles” that I have done… some worked, others not so much:

I designed some T-shirts to sell online with Teespring… that didn’t really work out.  However, it cost me nothing to make and what the heck, if you want one, check them out here https://teespring.com/lifting-is-fun or https://teespring.com/plant-powered-fitness (They are vegetarian and fitness based)  I opened a Shopify Store and it was actually doing quite well.  I was making an additional $1,500-$2,500 a month, but I couldn’t keep up with the orders and inventory due to my day job (thanks Navy).  I tried to show my wife how to do it, but she didn’t have the time either (thanks homeschooling).  It’s all good though.

Now, I focus on investing my money in my retirement accounts and my other portfolios to have my money make more money.  I do enjoy watching it grow and enjoy collecting my Real Estate Investment Trust (REIT) dividends.  I am hoping that one day this blog will generate another small income that I will use towards other investments.

Other “side hustles” that word is affiliate marketing and even writing online.  It doesn’t necessarily have to be a blog like this.  There are other websites you can write for or even write blog posts for blogs owned by someone else.  Some bloggers will pay for someone to write an article for them.  Writing To Wealth is one that I am looking into now.  You can sign up here: http://bit.ly/2L4DGoZ and start browsing 1,000s of writing jobs.  If you can dedicate one hour per week, you can make some decent money.  Fivrr is a great way to do some work online by offering “gigs” for sale.  You can check them out here http://bit.ly/2NBPUrf and make an account.

Another “side hustle” is one I just did above.  That’s called affiliate marketing.  With affiliate marketing, you basically promote someone else’s already made product and get a commission when someone makes a purchase off of the link you provided.  It can be time consuming depending on how much you want to make, however, it’s a method that works.

If you are just looking for another job either from home or at a physical location, it is important that your resume is strong.  Having a LinkedIn profile is a great start and can even generate a free resume for you to use as a start.  If you want to make that resume pop to get more calls for interview, you need to have a good cover page.  Here is another affiliate link you can check out that can help you with this cover page.  http://bit.ly/2JgMshx

There are so many more “side hustles” out there that are legit and can make you some decent money.  It’s important that you put forth the effort to make those “side hustles” work.  That means you need to work.  If something seems too good to be true, it probably is…  I hope this post was helpful and that you were able to get a little something to take away from this.  Thank you for continuing on this journey with me.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike is building a community for people to come together to learn and build their wealth.

Budgeting

Posted Leave a commentPosted in Budgeting, Finances

So here we are again, continuing the journey… Budgeting… for some reason, the word budget can strike fear into any man, woman, and family.  Are budgets scary?  Absolutely not!  They can certainly be intimidating and downright overwhelming, however, a proper budget is the first step to get you in the right place financially.  I’m not so strict with my budget and always give myself some wiggle room.  I do sometimes lack discipline when it comes to my budget…  Some people cannot do that in their current situation, but that’s ok.  Those who cannot afford to have wiggle room, need to have a tad bit more discipline.

So being in the military, I get paid twice a month.  I split my budget into two paychecks and sort my bills out based on that.  My mortgage payment can be a bit overwhelming, but I split my payment up.  I pay half on the first paycheck and the second half on the second paycheck.  I like to split the bills to leave room with each paycheck.

If you are in a place where you can put money into savings, treat your savings as a bill.  One of the recent changes I have made with my budget is adding in a joint mutual funds account that I treat as a bill.  I have to pay all of my bills as well as pay my savings account and joint account before I give myself any money to “splurge” with.  Treating your savings and investments as a bill is IMPORTANT!  You are able to give yourself a mental “check in the box” when you pay your savings bill.

Now, if you have debt such as credit cards, loans (besides car payments and mortgages), or owe money elsewhere, pay off debt first before you start to save.  I like to refer to this as consumer debt.  I recommend having at least $1,000 in your savings before you start “snowballing” on your consumer debt. 

What is snowballing?  Glad you asked.  When you snowball your debt, you are paying off one bill at a time.  You will make your minimum payments to all of your bills, and then you will take your leftover funds (whatever you have left after paying all bills) and dump it into the credit card or loan with the highest interest rate.  You rinse and repeat these steps until you pay off all of your consumer debt is paid.  Once all of that is paid, you can decide if you want to pay off the car note early or start saving.  Now, if you have a low interest rate on your car, just continue to make payments and start saving your money.

Once you save up to at lease three months of living expenses (not pay), your emergency funds will be funded.  It is important to have an account for emergencies.  After you have that put together, it’s time to start saving your longevity.  This is when you start building your wealth and set yourself up for your future retirement.

This is the basic start to getting your financial future in order.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike is building a community for people to come together to learn and build their wealth.

The Beginning…

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Welcome to Average Joe Finances.  This blog will be all about budgeting and investing for your everyday “Average Joe.”  This is something that I have recently become very passionate about.  I always thought saving money and investing was too difficult to comprehend.  Trust me, it still is…  But there are some simple ways for your everyday average person to save, invest, be comfortable in life, and possibly even get rich…

This blog is not the place to come if you think you can get rich quick.  That is not what this is about.   What I want to explore with all of you are the different ways you can utilize your current income better, make your income stream higher, budget to save more, and investing your money for growth. 

I am hoping that I can share my experiences, but successes as well as failures to help you not make the mistakes I made and to make good financial decisions.  I am not certified as a financial advisor or anything like that, however, it may be something I do when I retire from my first career.

Here is a little about me.  I am 35 years old and have served in the military for almost 17 years.  I enlisted in the Navy at the lowest paygrade back in 2002.  I have worked really hard to rise through the ranks and am currently an officer.  I am not trying to brag or anything, I am sharing my successes as well as my failures… I am planning to retire from the Navy in 5 years when I am 40 years old.  I will most likely start another career until I am 60 when I plan to permanently retire.  Maybe I will retire before that, but maybe not.  I tend to plan my life five years at a time (and will talk about this in future posts).  I am now in a place where retirement from my first career is part of my five year plan.  It’s scary!  I just started using a financial advisor because I wasn’t happy with where I am at financially just yet.  After sitting down with my advisor, I have come to the realization that becoming a millionaire by the time I retire is not only a possibility, but IT WILL happen.  It made me think… I just really starting being aggressive with making my money work for me at the age of 35, what if I would have started 10, or even 15 years ago?  Well, what ifs don’t matter much when the time has already passed… However, there is some “what ifs” that are worth talking about…

What are these “what ifs” you ask?  Great, I’ll tell you.  The “what if” I am referring to is…  What if this blog reaches out to someone who is in that age range?  What if this blog reaches out to someone in my age range and helps them realize it’s not too late?  What if this blog reaches out to someone who is a bit older, but helps them even slightly live a more comfortable life in retirement?  That is what I want this blog to do.

Again, I am not a certified financial advisor or planner or anything of the sort.  I have taken a few finance classes and I have my own financial advisor that helps me with some of my decisions.  I try not to take what my advisor gives me as gospel and I try to do my own research.  I am just your everyday “Average Joe” that is trying to make a better life for himself and leave a legacy behind for his children.

I would love feedback from those of you who will follow this blog and would love to share some of your stories with the community as well.  I am looking forward to hopefully helping some of you take control of your finances and set yourself up for a comfortable future.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike is building a community for people to come together to learn and build their wealth.