All Forum Posts by: Andrew Freed

@Gerard Aliberti - I think the concept Joe is trying to exemplify is utilizing the appreciation and equity of his current properties to leverage into more property. Joe sells his assets and transfers the equity into new properties. I follow the same mythology however I take a different strategy. I utilize HELOCs and lines of credit on existing property to leverage the equity into buying more properties. Properties buy more properties. And the effects compound over time just like a stock portfolio. That's how you scale, its a slow game over time. 

@Cody McVay - Limited partner, only provided cash but was a really good learning experience. Also when you are borrowing at a 2.25% rate to get a 14% cash on cash return, it makes total sense lol. 

@Cody McVay - I am in a similar situation to you. I completed by first house hack in December 2020 and am looking to complete another house hack. The thing holding me back right now is having to live in the property for a year due to it being a FHA loan. I am just as eager as you to complete another house hack but am being held back by financing options.

Regarding what I have done after house hacking, I invested in a 132 unit apartment complex syndication which should provide about a 14% cash on cash return. I funded this via a HELOC on my first primary residence prior to house hacking.

I am at a crossroads myself. I want to go 100% into real estate investing and get my next property but need to pay down some of this debt that I borrowed to purchase the last two deals. I want to buy buy buy, but don't want to overleverage myself at the same time. I'd love to hear peoples thoughts on what a good level of leverage should be.

Regarding best practices for house hacking, having a strong screening / rental criteria and sticking to it is key to success. I would rather let my unit sit vacant for a few months if it means getting a qualified tenant or filling it right away with an unqualified tenant. Being paid consistently, on time, and keeping the unit is a good condition should be your top priority. It'll save you countless headaches down the road. 

@Thomas Rodgers I think the question is can you make more money being a real estate agent or doing what you are currently doing? Being an investor and a real estate are two different skills. One is identifying good deals, financing them and managing the asset properly. The other is networking and sales. Sometimes having a W2 job is more important, you have accessibility to conventional financing which makes closing on deals a whole lot easier. Additionally, if you are not a real estate agent full time and you facilitate your deals, you simply haven't ran enough reps to be competent and may be costing yourself thousands of dollars in missed opportunities. As an investor, having a real estate agent working for you and putting in the grind everyday sometimes makes total sense. It allows you can focus on the lead measures associated with being an investor, which tend to differ from an agent. You have limited time in the day, find the most efficient use of your time. 

Hi BP,

Just a heads up, Kidde is recalling more than 200,000 smoke alarms. I know I have purchased a bunch of Kidde alarms myself. Check out your units and replace these if you're affected. You definitely want your smoke alarms to work lol. The article is below:

https://www.cnn.com/2021/05/07...

@Levertis Brock - I agree with some of the recent sentiment. Don't walk away from a solid deal, they are hard to come by in this market. I would recommend doing your math for the cost of an eviction and request a seller credit. A seller credit would be more valuable in the short term as a result of getting cash now to deal with this issue rather than it being encompassed in your mortgage payment. Below is a table showing the benefit. Take the cash and either do a cash for keys or evict, whatever you think makes more sense but whatever you do, definitely keep the deal. 

@Kasey Destache I screen my applicants ahead of time by telling them my rental criteria up front. When they don't pass the criteria, I mention that they fail to meet the criteria and will most likely be denied but I am happy to show the unit anyway.  That has eliminated 99% of all applicants that don't meet the criteria prior to them even seeing the unit, which saves me a ton of time. Just be transparent but be willing to complete the process even if they fail the criteria. If they are willing to pay an application fee even though they know they will be denied, so be it.

@Michael Lyons It would be minimal, maybe 20 to 30 bucks more per month however you are getting cash now. I would rather borrow an extra $10K at 2.5% interest over 30 years and have the $10K in my pocket now as opposed to having a loan $10K lower and not having the cash now. With interest rates at historic lows, its a no brainer. You can get a better return in the market, e.g. S&P returns 7-8% on average. 

@Corbin Lane - To your point, the best option would be to raise the purchase price by, lets say $10,000, and request a seller credit. Then your out of pocket cash would be dramatically lower. The below table gives a nice visual of this concept. Otherwise you are correct, FHA loans do have high origination costs that bump up the 3.5% down payment requirement.

@Nathan Gittinger - Surely you can save at least 3.5% down on your first property. FHA loans allow a 3.5% down payment on a property which you can utilize as your first house hack. Also, what's great about being a new college grad is mortgage companies view schooling as business / company experience so you should quality for a loan once you get hired at your first job barring you have decent credit and no crazy amount of debt. Your parents can also co-sign for you if your credit is not that strong. Once you get your feet wet in real estate, it'll be easier to convince investors to partner on deals.