Ultimate Guide to Nomad™ by Proxy

Are you tired of the traditional real estate investing strategies but don’t want to move every year? Get ready to discover Nomad™ by Proxy, a game-changing strategy that’s revolutionizing the way investors build wealth without relocating.

Nomad™ by Proxy isn’t your average investment approach.

It’s a unique blend of buy-and-hold wealth building and the flexibility of Nomad™, but with someone else moving on your behalf.

Here’s what sets Nomad™ by Proxy apart:

  • Minimal personal disruption – Build your portfolio without the need to move annually. Your proxy occupant is the one that moves in as the owner-occupant.
  • Competitive financing – Leverage owner-occupied loan rates for improved cash flow, just like traditional Nomad™, but without living in the property yourself.
  • Expanded networkPartner with individuals who can qualify for owner-occupied loans, broadening your investment opportunities.

You’re building a portfolio of rental properties, each secured with a small down payment and offering strong cash flow and wealth building potential, all while maintaining your current living situation. That’s Nomad™ by Proxy.

In this guide, we’ll explore how Nomad™ by Proxy stands out from conventional strategies and traditional Nomad™. You’ll discover its unique benefits, financing possibilities, and potential challenges. Whether you’re a seasoned pro or new to real estate investing, Nomad™ by Proxy opens up exciting avenues for growing your wealth without the need to relocate.

By the time you finish reading, you’ll have a clear grasp of how Nomad™ by Proxy could fit into your investment strategy and potentially reshape your financial future while maintaining your current lifestyle.

Ready to unlock the secrets of becoming a successful Nomad™ by Proxy investor? Let’s begin this exciting journey into a new realm of real estate investing.

What is Nomad™ by Proxy?

Let’s first review the traditional Nomad™ strategy before exploring how Nomad™ by Proxy differs.

The traditional Nomad™ real estate investing strategy involves:

  • Purchasing a home as an owner-occupant with low or no down payment owner-occupant financing.
    • As an owner-occupant, you benefit from lower mortgage interest rates, which can improve cash flow.
    • You must move into the property to comply with the lender’s requirements.
    • You sign an agreement to live in the property for at least one year. Failure to move in—which lenders do verify—constitutes loan fraud, potentially resulting in fines and imprisonment.
    • Staying longer than a year is permissible.
    • During this period, you can house hack by renting to roommates or leasing other units in multi-family properties (duplexes, triplexes, or fourplexes).
  • After fulfilling your one-year occupancy agreement, you can purchase a new owner-occupant property and move into it.
  • You then convert the previous property into a rental.
  • Repeat this process until you’ve acquired your desired number of rental properties.
    • Each property is purchased with low or no down payment loans.
    • Each property benefits from lower mortgage interest rates, enhancing cash flow.

In the traditional Nomad™ strategy, you personally move into each new property annually.

With Nomad™ by Proxy, however, someone else moves into the property on your behalf, acting as your proxy.

Nomad™ by Proxy Variations

The core concept of Nomad™ by Proxy is that someone else moves into the property on your behalf, acting as your proxy in the Nomad™ strategy.

To better illustrate how this works in practice, let’s explore a couple of real-world examples.

Parents with College Kids as Proxy

Picture this: You have three kids, each two years apart, approaching college age.

You’ve given your children a wonderful life, but it’s come at the expense of your retirement savings. While you’ve managed to set aside a little, you’re noticeably behind where you should be.

Let’s set aside the question of paying for college tuition—whether through scholarships, grants, student loans, the kids’ own earnings, or grandparents’ college funds. That’s not our focus here.

As your eldest child nears college, you decide to assist with their housing needs.

You and your first child become co-owners of a student rental where they’ll live during their freshman year.

You’ll handle the down payment and qualify for the loan.

Together with your child, you’ll find roommates whose rent covers most—if not all—of the mortgage payment.

They live in the property for their first year, and you repeat this process annually throughout their college career. If they pursue an advanced degree or take an extra year? Even better—more opportunities for student rentals.

Two years later, your second child starts college, and you replicate this process with them.

Another two years pass, and your third child begins college. Once again, you implement the same strategy.

In the traditional Nomad™ model, you purchase a property annually and move into it yourself. However, with the Nomad™ by Proxy strategy involving your three college-bound children, they act as your proxies. They move into the properties while attending college, allowing you to acquire 12 student rental properties over the 8 years they’re all in school.

The agreement with your children can vary, but here’s one possibility: In exchange for moving each year and helping manage the student rentals during their college years, they live rent-free and will inherit the properties upon your death. You provide the down payment, qualify for the loans, and use the profits to fund your retirement (eliminating the need for your children to support you later).

Using the Nomad™ by Proxy strategy with a 5% down payment on each rental, you can acquire 12 student rental properties with the same total down payment you’d need for just three traditional rentals at 20% down. This approach can significantly boost your retirement savings.

But this isn’t the only way to implement Nomad™ by Proxy. Let’s explore a different scenario where you partner with your parents instead of your children.

Kids with Parents as Proxy

Consider a scenario where your parents are retired or approaching retirement.

Perhaps they haven’t saved enough and could use some assistance with their retirement finances.

They might currently reside in another city but wish to live closer to you and your family—possibly to be near their grandchildren.

You could propose helping them purchase a property—or a series of properties—that you ultimately plan to convert into rentals.

Together, you buy a property with you contributing a 5% down payment. They live in the property for at least a year, as required by the lender.

After a year, you jointly purchase another property, again with you providing the 5% down payment.

You then convert the first property into a rental.

This process is repeated until you acquire the number of rental properties needed to support both you and your parents in retirement.

Upon their passing, you inherit full ownership of the properties. This increases your standard of living as you no longer need to contribute to their retirement.

We’ve now explored two examples involving family members. But what about an example with non-family participants?

Friend As Proxy

Imagine you and a friend have recently discovered the world of real estate investing. You’re married with kids, while your friend is single and has been hopping from apartment to apartment for years.

Together, you decide to partner up and invest in properties.

Your friend agrees to move in and live in each property for a year, allowing you both to secure owner-occupant financing with low or no down payments and better interest rates. You might jointly contribute to the down payments and co-sign the loans.

You work out a fair division of responsibilities and share the profits from your joint investments.

You As Proxy

Of course, you could act as a proxy yourself, moving into properties with another family member (parents, children, siblings, etc.) or a friend.

However, for simplicity’s sake, this guide assumes someone else is acting as a proxy on your behalf.

Financing Nomad™

Financing is the key difference between traditional Nomad™ and Nomad™ by Proxy.

In Nomad™ by Proxy, you’re still securing owner-occupant financing, but you’re not the one living in the property. Instead, someone else occupies it on your behalf.

Most Common Financing

The most common financing for Nomad™ by Proxy is Traditional Owner-Occupant Loans.

Usually, but not always, you and your proxy will be on the loan and on the deed to the property.

  • Nothing Down Options – United States Department of Agriculture (USDA) and Veterans Affairs (VA) loans still offer 0% down payment options for eligible borrowers or their proxies. This means you can potentially start your Nomad™ by Proxy journey without a significant upfront investment.
  • Low Down Payment Choices – Conventional loans with as little as 3% or 5% down, and Federal Housing Administration (FHA) loans with 3.5% down remain available. These low down payment options make it easier for you to get started with Nomad™ by Proxy investing, even if you’re providing the down payment for your proxy.
  • Private Mortgage Insurance (PMI) – With down payments less than 20%, you’ll typically need to pay PMI. While this adds to your monthly costs, it allows you to start building your real estate portfolio sooner, even when using a proxy.

Remember, the key advantage of Nomad™ by Proxy is using owner-occupant loans through your proxy, which often offer better interest rates and terms compared to investment property loans. This can significantly improve your cash flow and long-term profitability, all without the need to move yourself.

As you explore these options for Nomad™ by Proxy, consider speaking with a mortgage professional who understands this unique strategy. They can help you navigate the specifics of each loan type, ensure compliance with owner-occupant requirements when using a proxy, and find the best fit for your situation.

More Unusual Methods

While traditional owner-occupant loans are the most common financing method for Nomad™ by Proxy properties, there are some less conventional approaches worth considering. These options can offer flexibility and potentially better terms in certain situations.

Let’s explore a few of these alternatives:

  • Larger down payment conventional financing – Sometimes, putting more money down can be advantageous. A larger down payment might secure a lower interest rate, eliminate Private Mortgage Insurance (PMI), improve cash flow, enhance your debt-to-income ratio, and reduce risk—all of which could benefit your overall investment.
  • Creative financing options – All the creative financing options are still in play, but one particularly interesting possibility is loan assumption. If you find a property with an assumable mortgage at a favorable rate, you or your proxy could take over the existing loan. This can be especially valuable in a high-interest-rate environment.
  • Lease-option exits – This strategy can be a game-changer for your Nomad™ by Proxy journey. When your proxy is ready to move to the next property, instead of simply renting out the previous one, you could offer a lease-option to a tenant-buyer. Their non-refundable option fee can serve as the down payment for you and your proxy’s next Nomad™ purchase. It’s like having the previous property fund the down payment for your next property.
  • Negotiable terms – The terms of who signs the loan, who is on the deed, who provides the down payment, and who handles ongoing expenses and property-related work (whether you or your proxy) are all negotiable. Depending on your specific agreement, it may be both you and your proxy for some or all of these aspects.

Holding

Nomad™ by Proxy is less hands-on than traditional Nomad™—at least initially.

Let’s break it down:

  • Less active than traditional Nomad™ – You’re not moving annually, which significantly reduces your personal effort and disruption.
  • More passive at first – While you’ll still participate in property acquisition and financing, your proxy handles the living arrangements, minimizing your direct involvement during the owner-occupant phase.
  • Becomes more active later – Once your proxy moves out, you’ll likely transition into a more hands-on role as you begin managing the property as a rental investment.

This strategy enables you to build a real estate portfolio with less personal upheaval, making it an attractive option for those who want to invest in real estate without the annual moves required by traditional Nomad™.

Duration

When it comes to the duration of holding Nomad™ by Proxy properties, the strategy tends to favor long-term ownership, just like traditional Nomad™.

Typically, Nomad™ by Proxy investors aim to hold their properties indefinitely or for extended periods. This aligns with the strategy’s goal of building a portfolio of rental properties over time without the hassle of moving yourself.

However, your approach may evolve as your investment journey progresses. Let’s explore some potential scenarios:

  • Leveraging equity – Some Nomad™ by Proxy investors choose to leverage their equity to improve returns or take larger positions in the market. While not common specifically to Nomad™ by Proxy, this is especially common if you’ve captured forced appreciation through renovations.
  • Portfolio adjustment – As you approach retirement, you might find yourself adjusting your strategy. Some investors acquire more properties than they ultimately need and then simplify their portfolio as they near retirement.

This simplification could mean:

  • Completely exiting real estate investing (perhaps investing in something else like stocks or annuities)
  • Reducing your portfolio to fewer, but better cash-flowing properties
  • Shifting to less active investments that require less hands-on management (like away from student rentals for example)

Ultimately, your holding period should align with your long-term financial goals and market conditions. It’s always wise to regularly review your portfolio and adjust your strategy as needed.

In Nomad™ by Proxy, you have unique opportunities for sharing the utilization of these properties.

For example:

  • College-age children – You might agree to pass the properties to your kids who lived in them during college once you’ve used them for your retirement.
  • Aging parents – You could use the properties to help fund your parents’ retirement and then, when they pass, use them to supplement your own retirement funding.

These ideas are particularly well-suited to Nomad™ by Proxy since you’re already enlisting the help of others to implement this strategy.

Remember, the flexibility of Nomad™ by Proxy allows you to adapt your holding strategy as your life circumstances and financial goals change over time.

Exit Channels

While the Nomad™ by Proxy strategy is designed for long-term holding, there may be situations where you decide to sell a property. Here are the main exit channels you might consider when using this unique approach:

  • Multiple Listing Service (MLS) – This remains the most common method for selling properties, even in Nomad™ by Proxy. Your proxy occupant moves out, and you list the property with a real estate agent who markets it to a wide audience of potential buyers.
  • For Sale By Owner (FSBO) – If you’re comfortable handling the sale process yourself, you might choose to sell your Nomad™ by Proxy property without an agent. This can save on commission fees but requires more effort on your part to market the property and handle showings.
  • Auctions – While less common, auctions can be an effective way to sell Nomad™ by Proxy properties quickly. They create a sense of urgency among buyers but come with the risk of selling below market value if bidding is low.
  • Lease-Option Exit – You could offer a tenant-buyer the option to purchase the property at a predetermined price after your proxy moves out. This approach may allow you to sell without incurring realtor fees and potentially provides a built-in buyer who is already familiar with the property.

Remember, the best exit strategy for your Nomad™ by Proxy investment will depend on your specific situation, market conditions, and how you’ve structured your proxy arrangement. Consider discussing exit strategies with your proxy occupant early in the process to ensure alignment of expectations.

Exit Financing

When it comes to selling your Nomad™ by Proxy property, you have several options for how your buyers might finance the purchase. Let’s explore these possibilities, keeping in mind the unique aspects of this strategy:

  • Never sell – This approach aligns well with the Nomad™ by Proxy strategy. You can continue to benefit from long-term appreciation and rental income, potentially passing the property to your proxy (kid example) or using it for generational wealth building by inheriting your proxy’s ownership if they pass (parent example).
  • Traditional Owner-Occupant Loans – If you sell the property to an owner-occupant, they may qualify for owner-occupant financing. This can include no-down-payment loans (VA and USDA), conventional loans with 3% or 5% down, or FHA loans with 3.5% down.
  • Traditional Non-Owner-Occupant Loans – Investors buying your property will likely use investment property loans. These typically require a 20-25% down payment, though some options offer as low as 15% down with Private Mortgage Insurance (PMI).
  • Cash – Some buyers might offer to purchase your property with cash. This could lead to a quicker transaction, but be prepared for potential negotiations on price.
  • Rent-to-Own Transition – You could consider transitioning to a rent-to-own arrangement and selling the property on a lease-option to a tenant-buyer.

Investor/Entrepreneur

Real Estate Investors typically invest money with the expectation of earning a return on that investment. Real Estate Entrepreneurs, on the other hand, tend to invest both their time and money, anticipating returns on both.

So, how does Nomad™ by Proxy fit into this framework?

Nomad™ by Proxy leans more towards the Real Estate Investor model. You’re often the one providing the capital, while your proxy is the one physically moving into the property to secure preferential financing terms.

However, if you were to act as the proxy yourself—moving into the property—the strategy would shift more towards the Real Estate Entrepreneurial approach.

Of course, once the proxy moves out someone will need to manage the rental property like a typical rental property.

Money Required

One of the advantages of Nomad™ is that you can do the strategy with little or no down payments. Similar for Nomad™ by Proxy.

What’s common and what’s less common for money required?

Most Common

Here are the common money requirements:

  • Down Payment – You’ll need 0% (for VA or USDA loans), 3% (for some conventional loans), 3.5% (for FHA loans), or 5% (for most conventional loans) of the purchase price.
  • Closing Costs – These typically range from 2% to 5% of the purchase price and include fees for appraisal, title insurance, and loan origination.
  • Rent Ready Costs – Budget for minor repairs or upgrades to make the property tenant-ready when you convert it to a rental. In our example with college kids, this may also mean furnishing the student rental.
  • Living Costs – In some cases you’ll be helping to support the proxy living in the property. In our example of Nomad™ by Proxy with your parents, you may be collecting below market rent from them for the year they’re living in the property before you convert it to a rental. In our example of Nomad™ by Proxy with your kids, they may be living in the property for free and the rent from their other student roommates may not cover the entire mortgage.
  • Cumulative Negative Cash Flow – Due to low initial down payments and the unique proxy arrangement, you might experience negative cash flow initially. This is effectively a deferred down payment, financing a portion over time. The total negative cash flow is usually less than what you’d need for positive cash flow upfront. Setting aside this amount when you first invest is a more conservative approach. Be prepared to cover this shortfall until rents increase enough to eliminate the negative cash flow.
  • Reserves – You should aim for at least 6 months of mortgage payments and other operating expenses as a safety net.

Less Common

Additionally, there may be some less common expenses, such as assisting with moving costs for your parents or children acting as proxies.

On the other side of the coin, if you’re serving as the proxy yourself, you might not need to contribute any money at all.

Credit Required

For the Nomad™ by Proxy strategy, someone needs to qualify for traditional “Owner-Occupant Financing” for your proxy. This is often structured with you qualifying for the loan (as in the kid example), but it could be the proxy (as in the parent example) where you’re providing the down payment and are on the deed.

Most lenders require a minimum credit score of 620 for a conventional owner-occupant loan in Nomad™. However, there are exceptions:

  • FHA or VA loans – These may allow credit scores as low as 580 for whoever is qualifying for the loan
  • Better credit scores – Higher scores often lead to more favorable interest rates and lower Private Mortgage Insurance (PMI) costs, improving your investment’s cash flow

Remember, your proxy typically needs to live in the property for at least a year, as per the document they sign at closing to secure the loan.

Some less common situations to consider:

  • Cash purchases – If you’re buying a property with cash, credit score isn’t a factor, but you don’t need a proxy in this case as there’s no owner-occupant loan involved
  • You as Proxy – In a scenario where someone else obtains the loan and you’re moving in, you may not need to qualify personally

IMPORTANT NOTE: Credit requirements can change over time. Always check with your local lender for the most up-to-date information on credit requirements for both you and your proxy. These are complex transactions and loans, so seek knowledgeable assistance from your lender about their loan programs.

While credit score is crucial, it’s just one piece of the puzzle. Lenders also consider income, debt-to-income ratio, and employment history when deciding whether to approve the loan. If you’re concerned about credit, consider working with a credit counselor or financial advisor to improve your score before embarking on your Nomad™ by Proxy journey.

Skills Required

The Nomad™ real estate investing strategy demands a specific skill set for successful execution. Let’s explore the key abilities you’ll need to cultivate:

  • Deal Analysis – You must thoroughly evaluate properties, considering factors such as purchase price, potential rental income, and long-term appreciation. This skill is vital for making informed investment decisions.
  • Finding Cash-Flowing Deals – Identifying properties that generate positive cash flow is crucial. This involves researching markets, understanding rental rates, and spotting opportunities others might miss. For Nomad™ by Proxy, you’ll need to factor in additional costs like discounted rent for your parents or kids during their occupancy. Mastering deal analysis to account for these unique expenses is essential for success in this strategy.
  • Acquisition Financing – Grasping various financing options, especially owner-occupant loans involving another party, is essential. You’ll need to navigate the mortgage process and maintain good credit to qualify for multiple properties over time.
  • Property Management– Whether you’re managing properties yourself or hiring a company, you must understand the basics of tenant screening, maintenance, and local landlord-tenant laws. This may be more involved in Nomad™ by Proxy, as you’ll often be “soft-managing” the property while your proxy occupies it.

Don’t worry if you’re not an expert in all these areas from the get-go. Many successful Nomad™ investors hone their skills over time. The key is to start with a solid grasp of the fundamentals and maintain a willingness to learn as you go.

Stability

Shane Parrish’s concept of active versus passive stability offers valuable insights for real estate investing.

In real estate, most strategies—including Nomad™ by Proxy—are actively stable. This means you’ll need to invest consistent effort to maintain your investments’ performance.

Nomad™ by Proxy is inherently actively stable. Your proxy resides in the property, and you may be responsible for managing it, especially after they move out.

Scalability

The Nomad™ by Proxy strategy offers a unique approach to scaling your real estate portfolio. Here’s how scalable it can be:

  • Acquisition Speed – While traditional Nomad™ typically limits you to one property per year, Nomad™ by Proxy significantly expands this. It allows you to potentially acquire several properties in the same year (as demonstrated in the kid example).
  • Lower Down Payments: Nomad™ by Proxy usually requires only about 1/4 of the down payment compared to traditional Buy and Hold (5% vs 20%). This makes scaling easier from a capital perspective.
  • Better Financing Terms: Owner-occupant interest rates are often more favorable, improving your debt-to-income ratio. This can make qualifying for loans easier and boost cash flow for future down payments.
  • Lease-Option Exits: Using lease-option exits could potentially eliminate the need for down payments on future properties. This strategy optimizes your return on equity as you sell to tenant-buyers and reinvest the proceeds.

Risk Exposure

While the Nomad™ by Proxy strategy offers many unique benefits, it’s important to understand the potential risks involved. This variation of the Nomad™ strategy has a medium risk rating, just like traditional Nomad™.

Here’s what you need to know about the risks:

  • Amplified returns – The small down payments in Nomad™ by Proxy can lead to amplified returns, both positive and negative. This means your potential gains could be higher, but so could your losses.
  • Increased likelihood of negative cash flow – With smaller down payments, you’re more likely to experience negative cash flow, especially in the early years. Think of this as a form of deferred down payment. You might also see negative cash flow while the proxy is living in the property.
  • Market volatility – You’re exposed to the risk of price declines during ownership, which could impact your equity position.
  • Rent fluctuations – There’s a risk of rent decline during ownership, which could affect your cash flow and overall returns.
  • Credit risk – Your credit is at stake with each property you finance. Late payments or defaults could significantly impact your credit score, even if your proxy is living in the property. If you’re on the loan and the proxy is responsible for making the mortgage payment, your credit is at risk if they fail to pay.
  • Property management challenges – You’ll face typical tenant and property management risks, including potential property damage, vacancies, and maintenance issues. These can be more complex when dealing with a proxy occupant while they’re in the property.
  • Relationship risks – Since Nomad™ by Proxy often involves family members or close friends as proxies, there’s a potential for strain on these relationships if disagreements or financial issues arise.

Remember, while these risks exist, many can be mitigated through careful planning, thorough due diligence, and proper management. It’s crucial to have clear agreements with your proxy and to maintain open communication throughout the process.

Profit Speed

When it comes to Nomad™ by Proxy real estate investing, understanding the speed at which you can generate profits is crucial. This strategy offers unique advantages in terms of profit speed.

Let’s break down the primary returns you can expect from your Nomad™ by Proxy investment property:

  • Appreciation – The increase in your property’s value over time, which you benefit from even when someone else is living there
  • Cash Flow – The monthly income you receive after covering all expenses, which may start sooner than traditional Nomad™ if your proxy pays rent
  • Debt Paydown – The reduction of your mortgage balance as your proxy or eventual tenants essentially pay your loan
  • Tax Benefits – Advantages like depreciation deductions that can lower your tax liability once the property becomes a rental

In addition, you have the return you earn on the reserves you’ve set aside for the property while it is in savings or invested in something else.

Now, let’s dive into how quickly you can start seeing these returns with the Nomad™ by Proxy strategy.

Speed of Returns

With Nomad™ by Proxy, you’ll start benefiting from appreciation and debt paydown almost immediately. By purchasing the property, you’re already building equity through these two avenues.

Cash flow can potentially start right away if your proxy is paying rent or contributing toward the mortgage payment. However, full market-rate cash flow and tax benefits typically kick in after your proxy moves out and you convert the property to a full rental.

This strategy allows you to potentially acquire multiple properties in a shorter timeframe compared to traditional Nomad™, accelerating your overall returns.

Size of Returns

The size of your returns is often calculated as a percentage of your initial investment. This is typically expressed as Cash on Cash Return on Investment (ROI) or Capitalization Rate (Cap Rate).

An interesting aspect of Nomad™ by Proxy is the potential for higher returns due to faster scaling. By acquiring multiple properties more quickly, you could see compounded growth in your real estate portfolio.

The Cash Flow from Depreciation™ still applies in Nomad™ by Proxy. This can provide you with extra cash flow through tax savings, either with each paycheck or at the end of the year, once the property becomes a rental.

Depending on how you structure your Nomad™ by Proxy agreements the benefits might be shared. Document your agreement in writing—perhaps with the help of an attorney.

Finding Deals

There are some common methods of finding Nomad™ by Proxy deals and some less common, more unusual ways. Let’s explore both approaches to help you find the perfect property for your proxy.

Most Common Methods

Here are some of the most common methods for finding Nomad™ by Proxy properties:

  • Multiple Listing Service (MLS) – This remains your go-to resource. The MLS provides a comprehensive database of properties listed by real estate agents. Set up alerts for properties that match your criteria, making it easier to spot potential Nomad™ by Proxy opportunities.
  • For Sale By Owner (FSBO) – Actively Marketed – These are properties that owners are selling without a real estate agent. Look for these listings on FSBO websites or by driving around neighborhoods.
  • FSBO – Hidden – This category includes properties that aren’t actively marketed but whose owners might be willing to sell. To uncover these hidden gems for your proxy, you’ll need to do some legwork:
    • Marketing – Send out mailers or run targeted ads in areas you’re interested in. Your message could be something like, “We’re looking to buy a home in your neighborhood for a family member. Are you thinking of selling?”
    • Networking – Talk to people in your target areas. You never know who might be considering selling their property.

Remember, persistence is key when searching for Nomad™ by Proxy deals. Don’t be discouraged if it takes some time to find the right property. Your perfect Nomad™ by Proxy opportunity could be just around the corner.

More Unusual Methods

One less common but potentially valuable way to find Nomad™ by Proxy properties is through wholesalers. These are individuals or companies that find off-market properties and sell them to investors.

Wholesalers often have access to deals that aren’t listed on the MLS. They may find motivated sellers or distressed properties that could be perfect for your Nomad™ by Proxy strategy, especially if you’re working with a proxy who’s handy and doesn’t mind some improvements.

Remember, while wholesalers can provide unique opportunities for your Nomad™ by Proxy strategy, always do your due diligence. Verify property conditions, values, and potential returns before making any commitments. Your proxy will be living in this property, so it’s crucial to ensure it meets their needs as well as your investment criteria.

Analyzing Deals

The World's Greatest Real Estate Deal Analysis Spreadsheet™

When analyzing Nomad™ by Proxy properties, we highly recommend using The World’s Greatest Real Estate Deal Analysis Spreadsheet™. This powerful tool is designed to work for all Nomad™ variations, including Nomad™ by Proxy, making it an invaluable resource for your investment journey.

You can download this spreadsheet for free at:

https://RealEstateFinancialPlanner.com/spreadsheet

It’s a comprehensive tool that allows you to input various property details and financial parameters to get a clear picture of your potential Nomad™ by Proxy investment.

Here’s why it’s particularly useful for Nomad™ by Proxy:

  • Return calculations – The spreadsheet shows you various return on investment and return on equity calculations, helping you understand the potential of your Nomad™ by Proxy strategy.
  • Long-term tracking – You can track your investment performance over time, not just at the point of purchase. This is crucial for Nomad™ by Proxy as you transition from proxy occupancy to rental property.
  • Customizable inputs – The spreadsheet’s intuitive dashboard is simple to use, yet extremely powerful. You can override almost any value for any year in the overrides tab, allowing you to account for various proxy scenarios.
  • Future projections – It provides long-term projections, giving you a clear view of your Nomad™ by Proxy investment’s potential over time, including after your proxy moves out.
  • Split returns between you and proxy – In the overrides tab, you can split out the returns to see what each person involved gets. Do you get all the cash flow and they get half the appreciation? You can split it out however you prefer.

Download the spreadsheet for free and use it to analyze your Nomad™ by Proxy deals. It’s an essential tool for making informed decisions in your unique investment strategy.

Market Conditions

When utilizing the Nomad™ by Proxy strategy, market conditions play a crucial role in your success. Let’s explore both ideal and challenging market conditions to help you make informed decisions about this unique approach to real estate investing.

Ideal Market Conditions

In the best-case scenario for Nomad™ by Proxy, you’ll want to look for markets that offer:

  • Strong cash flow potential – These markets allow your properties to generate positive cash flow from the start even with your proxy in the property and even with a smaller down payment (see kid example with student rentals). This can make the arrangement more attractive for both you and your proxy.
  • Robust appreciation – Look for areas where property values are steadily increasing over time. This helps build your equity faster, even when someone else is living in the property.
  • Healthy rent appreciation – Markets where rents are rising can boost your cash flow and overall returns once your proxy moves out and you convert the property to a full rental.
  • High demand for rentals – Areas with a strong rental market can help ensure consistent occupancy and income after your proxy’s occupancy period ends.
  • Favorable local regulations – Some markets have landlord-friendly laws that can make property management easier, which is especially important when you’re not living in the property yourself.

Challenging Market Conditions

On the flip side, some market conditions can make the Nomad™ by Proxy strategy more difficult:

  • Significant negative cash flow – Markets where properties consistently produce negative cash flow, even with reasonable down payments, can strain your finances and make it less appealing.
  • Stagnant or declining property values – Areas with no appreciation or even negative appreciation can hinder your long-term wealth-building goals.
  • Flat or decreasing rents – If rents aren’t keeping pace with inflation or are declining, it can impact your cash flow and returns once you convert the property to a full rental.
  • Oversaturated rental markets – Too much competition can lead to higher vacancy rates and lower rents after your proxy moves out, potentially affecting your long-term profitability.
  • Strict local regulations – Some areas have laws that make it challenging to be a landlord, potentially increasing your costs and risks.

Remember, no market is perfect, and conditions can change over time. It’s crucial to thoroughly research and analyze potential markets before investing in a Nomad™ by Proxy arrangement. Your success with this strategy often depends on your ability to navigate these market conditions effectively, even when you’re not the one living in the property.

Accessibility/Availability

The accessibility and availability of Nomad™ by Proxy properties can vary depending on market conditions and your specific situation:

  • MLS Listings – In many markets, you’ll find plenty of suitable properties listed on the Multiple Listing Service (MLS), giving you and your proxy a wide selection to choose from.
  • Careful Selection – Some markets may require more careful sifting and sorting to identify the best deals that align with your Nomad™ by Proxy strategy. Consider factors like potential rental income and the property’s suitability for your proxy.
  • Cash Flow Challenges – Challenging markets might make it difficult to find positive cash-flowing properties, especially if you’re planning smaller down payments. In these cases, you might need to consider deferred down payments in the form of initial negative cash flow.

Interest rates play a significant role in determining whether properties will cash flow in a Nomad™ by Proxy scenario. Keep in mind:

  • Owner-Occupant Rates – Your proxy can still take advantage of owner-occupant rates, which can provide an advantage over other strategies requiring non-owner-occupant (investor) financing.
  • Local Regulations – Always verify local regulations regarding proxy occupancy and eventual rental conversion before purchasing a property you intend to use for Nomad™ by Proxy.

Using Retirement Account

You cannot rent a property owned by your retirement account to certain individuals, known as “disqualified persons.”

These include:

  • Yourself and Your Spouse – You and your spouse are considered disqualified persons.
  • Your Children and Their Spouses – This includes your children, grandchildren, and their spouses.
  • Your Parents and Grandparents – Your lineal ascendants are also disqualified.
  • Your Fiduciary – Anyone providing services to your retirement account, such as a custodian or trustee.
  • Entities You Control – Any corporation, partnership, trust, or estate where you own 50% or more.
  • Certain Business Partners – Business partners where you hold a controlling interest.

Given these restrictions, it’s challenging to use a self-directed retirement account for Nomad™ by Proxy investments where your proxy is a family member.

Alternative Approach

While you can’t directly use retirement accounts for Nomad™ by Proxy with family members, there’s an alternative strategy to consider:

  • Early Withdrawal – You could potentially access your retirement funds by paying the associated penalties and taxes to use them for a Nomad™ by Proxy investment.
  • High Returns Potential – The potential gains from your Nomad™ by Proxy investment might outweigh the penalties and taxes incurred from early withdrawal.
  • Careful Analysis Required – It’s crucial to run the numbers and consider all factors before making this decision. Consult with a financial advisor to determine if this approach aligns with your long-term financial goals and risk tolerance.

Conclusion

Nomad™ by Proxy offers a unique and exciting opportunity to expand your real estate investment portfolio. By leveraging the power of owner-occupied financing through a trusted proxy, you can accelerate your wealth-building journey.

Remember, success in this strategy requires careful planning, diligent market research, and strong relationships with your proxies. Stay informed, be adaptable, and always prioritize clear communication with all parties involved.

With the right approach and mindset, Nomad™ by Proxy can be a game-changer in your real estate investing journey. So take that first step, start exploring your options, and unlock the potential of this innovative strategy today.

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