All Forum Posts by: Andrew Davis

Thanks @Charles Carillo - great advice!

Hey BP,

Tapping the collective network here to find a great commercial lender. I purchased a serious value add 12 unit apartment building in Indianapolis in April of 19' and spent the last 9 months completely turning it around:

- Over $150k in renovations: new roof, completely updated common area, most units renovated and turned, new furnaces, plumbing and electricity updates.

- Went from 9/12 units occupied, mom and pop managed and  all well under market rents and most not paying on time. Now we are 100% occupied at market rents with higher quality tenants.

If you're a great lender or know of one, please comment or message me directly. Looking to get started on this refi ASAP.

Thanks BP!

@Yonah Weiss - that's awesome! Thanks for sharing.

@Orlando Goodon - I think you're confusing good debt with bad debt. This distinction was really illuminated for me when I read Rich Dad Poor Dad.

If your credit score has been at 580 (no shame in that btw - good for you for working to get it up!) then you've most likely taken on bad debt - debt on depreciating items (cars, credit cards, consumer purchases, etc...) Banks look at that debt very differently than debt (mortgages) on real, appreciating assets: houses, apartments, commercial buildings, etc...

And, if you're renting them out, they count a chunk of the rental income towards your overall income when calculating your credit worthiness. 

To your earlier point, you don't want to be holding a $600k mortgage on a single family home when there's a correction. But a $200,000 mortgage on a duplex that throws off $500 a month? If you've put 5% down that's a $10k cash investment on your end, $500 x 12 = $6,000 a year in cash flow - so that's 60% Cash on cash return. 

Even if that investment is under water (temporarily worth less than you paid for it) as long as you hold it and keep cash flowing, you're golden.

@Orlando Goodon - house hack!

Don't know a thing about your market, but you can buy 2-4 units and they're treated as a SFR from a lending perspective so you can put as little as 3% down.

Live in one - rent out the other three.

If (when) a crash or correction happens, you'll be in a sweet spot as your largest expense is covered by rental income from the other 3 units.

Look for some margin, so if you have to drop rents to appeal to more tenants you're not coming out of pocket.

You can actually do this once a year, so in 5 years, if you bought a 4plex every year, you could own 20 units.

A lot of people have posted about house hacking, there's podcasts about it and @Craig Curelop wrote a book about it: https://www.biggerpockets.com/store/house-hacking-ultimate

I wish you well!

Interesting, we faced a very similar dilemma and after some soul searching decided to keep the home as a rental, put down less on the home we were purchasing and deal with the higher mortgage payment.

We've been fortunate to experience significant appreciation, and as rates have lowered, we're now refinancing our primary and our mortgage will be roughly what it would have been had we sold the rental and put 20% down.

Obviously we've benefitted from favorable trade winds over the last 18 months, but I strongly recommend keeping it. The equity paydown, cash flow and future potential to leverage it into more assets are all compelling reasons to make some short term sacrifices. (Just my opinion)

@Justin Vermuth - agree with @Shawn G., @Sean Myers is a great contact for commercial RE in Orlando, if it doesn't fit what they're doing he can certainly point you in the right direction.

Amen @Frank Rolfe - great to see you here on the BP forums!

Hey @Greg Eftax - we're in a similar situation with an A class rental with nice equity.

I guess the real question is what would you do with the equity? Your return on equity as a rental wont be great, but, there's something to be said for owning in a high demand, appreciating area with high quality tenants.

I own or have owned A, B and C class properties and A's come with the least headaches by far. 

We've held onto ours because the area is developing like crazy and developers and other investors are basically forcing appreciation on our home. It cash flows decently and I don't have a great place for the equity at the moment.

Hope that's helpful and a future welcome to Florida!

@Ali Boone they're usually B- to C class areas and hit the 1% rule almost exactly. Obviously cash flow is not huge but there's a strong tenant pool and they usually do a decent job fixing the big ticket items so capex can be ratcheted down a bit. However, there are certainly not as many as the MW.