All Forum Posts by: Marcus Auerbach

@Steve Babiak  we dont have egress window requirements here for rec rooms, only for legal bedrooms.

@Jim Peret  I am with you and I'd rather see what I buy. Personally I have no concerns with a proppertly braced wall, but a first time buyer might get scared, because they don't understand. The word foundation issue comes up in the inspection report and they might just run for the hills. Leaving some space to access the block wall will allow for future inspections and I feel it's maybe not the smartest way of doing business, but at least it's honest.

We are rehabbing a nice brick ranch in Milwaukee, WI and are planning on finishing the basement. As you can see on pictures one of the walls is braced. We don't know when the braces were installed, but I would guess at least 3-5 years ago. A lousy paint job has been applied in the last couple years (not recently) The wall seems stable, the mortar between the steel and the block does not show any signs of cracks. It also looks like the drain tile has been redone.

We are debating if we should frame right against the wall or if we should leave some sort of crawl space to allow access.  I like the idea of having access and not "covering up" a potential issue. About a third of the wall is in the laundry area and will not be finished, so the braces will remain visible there. At the same time that means to loose about 100 sqft of rec room space, so that would speak for framing right against the wall.

The basement seems reasonably dry, but (not much of a surprise) the pitch outside of the braced wall is negative, which we will correct in spring. The other question is if we should put rigid insulation behind the studs. Technically the right way to do it, but I have never actually seen it done in a house, probably to save cost. I would really appreciate your comments and thoughts!

I don't know Flint, but just out of curiosity I have checked it out on craigslist. Rents are lower than in Milwaukee - most apartments for less than 600, in the city almost nothing above $800. Some SFH in the suburbs that rent for 1000+

On the other hand I have not seen many "move in specials" with free rent etc - that would be a good sign in my book.

I recommend you do some good old research and make a list of properties on a spreadsheet that are comparable to what you want to buy (I assume that's what you are getting to), call and ask everything you want, maybe go to an open house or a group showing (be respectful and don't wast landlords time) and track how long they are on the market before they are rented.

Stephanie, securing financing for your primary residence is the easier task and I would not worry too much about it when adding investment properties. Just make sure they all cash flow and you maintain a good credit score. 

Financing a distressed property is much harder. First of all I would be surprised if the damage is only 30k based on what you describe. It sounds like you have a roof and two floors to fix, plus general rehabbing - I would have guessed at least 50-60k. Make sure you have a good estimate based on a scope of work. A contractor can help you with that, but make sure you are not biting off more than you can chew - it sounds like a project for a seasoned rehabber.

Alright, so how can it be done? First you can try and see if the owner is willing to finance for a year. If not then you will have to come up with cash for the closing. You can also ad from an unsecured credit line, a home equity line or just ask your friends or family if someone wants to partner. Same for the rehab, plus if you are comfortable with the interest rate you can use a credit cards to finance materials short term. If the numbers are good enough you can also consider a hard money lender, who will borrow based on the deal and not necessarily based on the asset - expect 2-4 points and 12-15% interest though.

In any case keep in mind that people and banks are a lot more comfortable to lend you money when you have your own money in the deal as well. This provides them with a safety cushion. If the deal goes sour first you will loose 100% of your money, before they will start to feel it. It is generally called having skin in the game. If you don't believe enough in the deal that you don't want to tie up all your money as you say, why should someone else?

Regardless how you fund the work, you should be able to get it done in 3-6 months. As soon as the rehab is finished and you have a quality asset to borrow against you can get cash out financing from a bank based on a fresh appraisal. You can then repay yourself and any credit lines or partners. Keep in mind that for a cash out you might be limited to 70% loan to value. 

Eran, as far as I have been able to find there are none in the residential lending space without an SSN and a W2. The bank wants to be able to get a hold of you (in the US) and see that you have an income.

What you can do is start an LLC which will allow you to get a TaxID and open up a bank account. You might be able to find a lender on the commercial side. But you are looking at a non recourse loan, so purley asset based and they are hard to come by in the sub-multi-million range.

The other option is to partner with someone who has a SSN and W2, but lack the funds, drive and expertise that you have.

Stacy, paying cash is not necessarily a desireable thing - at least not if go strictly by the numbers. The reason is that it takes a lot of cash to buy a property, compared to the rent you will get: your ROI return on investment will not be that great.

Lets say you buy a $100.000 duplex in great condition and you get $750 per unit or $9000 a year minus $3000 for Taxes and Insurance leaving you $6000 in your pocket for $100.000 invested: your ROI is just 6%.

Now you go and get financing for the house. The bank gives you an $80.000 loan, which reduces you cash invested to $20.000. You still get $6.000 income, but with your lower investment your ROI jumps up to 30%.

And because you have $80.000 left you go and buy four additional properties just like the first one yielding another $24.000 ($6000 each). Now your total income is $30.000 with $100.000 spent.

If you are smart you keep your job for a little longer and take save the $30.000 as a downpayment for another duplex. And then rise and repeat.

One way to start out with is to buy a duplex for yourself to live in one half. Because the bank trust you much more that you will make your payments when you live in the house yourself they will finance 95% or more. You live in one half and collect rent for the other. This allows you to save more money to buy a second one and at the same time teaches you the process and you can see if being a landlord is right for you (it's not for everyone).

Great, we have a lot of experienced rehabers around here and some good neighborhoods. Feel free to reach out if you need anything.

There is another principle you should consider - you always want to buy equity. You can start by looking into how much the lot is worth and then ad the cost of the existing development. For a situation like this I would pay no more than the lot plus the foundation.

Elisabeth is correct, you have to find out what the true reason is. It might be the permit, but it could be many other things. Also, why has nobody else picked it up?

If you are investing in real estate you are basically fixing problems, that's what you get paid for. First you have to know what the problem is, then how to correct it and how much that will cost and what the risk is. I have not come across a free lunch yet. Be careful ok.

Hi Matt, try Andrew Devlin, 262 844 3306 [email protected]

Sounds like you are running a fix n flip remotely?

Welcome on board, Erica! There are so many different ways to invest in RE and every category has its fans and specialists. There are the buy&hold guys, the fix'n flippers, the lease option specialists, tax liens, paper notes,  multifamily fans and those who prefer single family etc, etc..

You should listen to all of them and get an idea of what they are doing and then see how it lines up with what YOU want (enjoy) to do. How much you want to get involved? If you like to you can invest in affordable housing which can produce fantastic cash flow, but is also very (people) intense. Or, on the other side of the spectrum you can be an equity partner and simply fund a deal and someone else is doing all the work. What you enjoy doing and what your strengths are? How about rehabbing? Does a bathroom remodel scare you or would you enjoy gutting a smelly wreck of a house before you start putting it back together.  Find the one thing that is a match for you -  learn as much as you can and really become really good at it. Don't get caught by the shiny object syndrome trying something new every months.