All Forum Posts by: Andrew Freed

@Guenevere F. - Simply put, no. Real estate is expensive to own and to go into a property with low reserves or not enough money is a recipe for disaster. What is your roof goes, a heating unit.... you're credit card debt could build up quick as a result of this putting yourself in a bad situation. You definitely want at least $15-30K in reserves after the down payment and stabalization costs. Otherwise you may be put into a situation where you have your back is against a wall and you have no way out. Just my two cents. Best of luck with building your rental portfolio. 

@Brian Larson - Are you asking how to assess rental demand in any given market? A good indicator of this would be analyzing the HUD Fair Market Rents year over year. These are the rates established by the government that support housing assistance vouchers. You can look it up here: https://www.huduser.gov/portal/datasets/fmr.html

More or less, if you see the HUD Fair Market Rents increase year over year in a given area, that is indicative of rental demand. For instance, in my market, from FY 24 to FY25, the HUD rents increased by 11% (Worcester MA) signifying significant increases in demand vs. other areas where it may stay stagnant or lower which would signify the opposite. Hope this helps!

@Sue Burriss - Jersey City is definitely a challenging area to invest, low class C or D in my opinion. I personally like to invest in Class B or nice class C areas. @Jonathan Greene invests and works in the Jeresy area, he might know of other multi markets to invest or have other recommendations to help you on your journey. 

@Jonathan Greene - Thanks for the introduction. @Paul Brady - Doug Mercurio out of North Reading is a really good investor focused attorney. Happy to make a warm introduction if you need it. He does all my stuff and I've completed over 50+ transactions with him. Good guy! 

@Chirdeep Bhutani - In my area, Worcester Massachusetts, with interest rates coming down, cap rates have gotten better and values have increased. Interest rates and cap rates are definitely correlated. If interest rates come down, cap rates tend to compact increasing values on properties. Think about it, if you are buying something at a 5% cap rate, but interest rates are 6%, the debt payment exceeds the income. However, if you purchase at a 5% cap rate and interest rates are at 5%, the property can support the debt payment. Hence you can see how interest rates play a large role in determining cap rates in a market in my opinion. 

@Sarah Rhee - Sorry to hear about your troubles, but it sounds like you are in a good position networth and equity wise. If you are looking for cashflow, the key is to transition the equity you have into assets that provide a higher return on equity (ROE). As of now, it sounds like you had a ton of equity locked up and it is not working hard for you. 

You have a couple ways to access that equity.... you can 1031 your orange county property into a large multifamily and create cashflow that way. You can also HELOC your primary residence or RELOC the orange county property and transition that into cashflowing assets. Or you can even cross collatorize the properties to purchase other properties. Nonetheless, I agree... with your mortgage rate being so low, it seems like it makes sense to access the equity via other methods beyond refinancing.

Nonetheless, I implore you to do an exercise. If you grabbed equity from the orange county property via a HELOC and your current mortgage, what would be your blended interest rate taking into account both mortgages? And compare that to simply refinancing. You might find out that you have so much equity in that orange county property that the blended rate of the HELOC and current mortgage is higher than simply refinancing it and accessing equity that way. At the end of the day, I understand you want to keep a 4.5 or 2.5% mortgage however if you come to find out that by accessing those funds via a second mortage, your overall payments would be higher, it actually might make sense to refinance and use those funds to invest.

@Jonathan Greene - Great post, I totally agree. These are all common pitfalls I see people when doing flips, BRRRRS or even multifamily. I personally think proactively addressing these items is best practices across all of real estate. 

On additional reason I would say is not doing their full due diligence. That means, if the seller tells you something, you verify it. Seller's make claims all the time.... you can build up to 12 units on this land, you can subdivide this into another parcel, rarely are these true if you call the city and do some legwork. Verifying these claims of "value add" potential is critical to ensure the investment goes as planned. 

I vote for HELOC or retirement funds first. Playing with credit cards is dangerous.

@Jordyn Gegg - No I think you are overcomplicating this. Also, this is why you pay for a good real estate and business focused account.... so you don't have to try to figure out something that is not your expertise or specialty. 

@Jordyn Gegg - I have a PM company that oversees all of my individual LLCs. The LLCs pay the PM company anywhere from 7-8% of the revenue and the PM company oversees the assets and employees my staff. I personally like having a separate PM company for many reasons since it clearly separates staff and other resources into one bucket. It also allows you to grab debt from bank easier since there is more revenue and expenses going through this compiled LLC vs. each individual LLC. That is just my take.