All Forum Posts by: Andrew Varney

Hey all,

I love Audible books to listen to while I'm doing everyday activities and running errands. Audible has a 2-for-1 sale for members right now and 'Simple Path to Wealth' is one of the options. Couple others in there are often recommended on the BP podcasts often: "Rich Dad, Poor Dad,"  "Richest Man in Babylon," "The One Thing," "10x Rule" and a few others.

Definitely recommend Simple Path and the One Thing!

Cheers,

Andrew V

I still haven't received any rent from my two tenants, nor have they communicated any hardship.

I've been in touch with both through April without any sign of disruption, so hope it's not an issue. I have reserves ready if need to, but hope I don't have to touch them!

If you're a single guy with some flexibility, check out house hacking. Craig Curelop's book here on BP is great. I know you mentioned duplex so one side can help pay your rent, but if you own a single family and rent out individual rooms, you can do just as well, or better, and have more options.

I have a wife and daughter, and my wife isn't down with the idea, but when I was younger that is what I did and it paid for my housing and living all though college. I had a friend in Cincy that did the same and rented to some of his friends and completely paid for all his home expenses and savings for years.

Just another idea!

ASV

ZIllow, Hotpads.com, and craigslist are my go-to's.

Hey BP,

I've come across a seller with a portfolio of cashflowing properties. He has seven separate properties (each a duplex or triplex) priced between $250 - $280K. Four of the seven would have solid cashflow and are in a growing community / region so I feel comfortable with potential for future appreciation as well. I have enough cash on hand that I could afford one of them with the standard 25% down down for small multi-family, but couldn't afford more than that. If you wanted to explore picking up all four, what would you explore?
- Long term seller financing?
- Seller financing for a short period with the expectation to refi out over the next couple of years if the seller wants more up-front capital?
- Could a commercial loan cover multiple small-multi properties instead of a true 5+ multifamily?
- Could a portfolio lender offer one large loan for all four properties?
- Portfolio lender offering four separate loans, one for each property, with 5-10% down on each?

Are any of the above worth looking into, or do you have suggestions on how to eat this elephant?

ASV

Hey Kyle,

You're probably correct. The BRRRR method has some great advantages to it, but it might eat into your monthly cashflow in the short term. I think the best benefit of BRRRR is that you can control real estate for little to no money out of pocket. It's possible these deals cashflow, which is a huge bonus, but I think you get more benefit from the other pillars of RE wealth building: appreciation, mortgage paydown, and tax depreciation. If you could have $0 into a deal for a $300K home after refinancing out and it only 'cashflowed' $15 a month, but you had a modest 2% annual appreciation, had a standard 30 year amortized mortgage, and could depreciate your annual wealth creation would look like this:

Annual Cashflow: $180

Annual Principle Paydown (1st year): $4128

Annual Appreciation: $6000

Wealth Generation 1st year: $10,308

So you'd add $10,308 to your wealth on the first year - in addition to any equity you captured on the acquisition and rehab, which would only accelerate with compound interest on the appreciation and amortized schedule paydown, AND BEST OF ALL you'd have your cash out of the deal to do it again and add to your portfolio, accelerating your growth even faster.

If you listen to some of the more recent podcasts, David and Brandon have started talking about cashflow more as 'defensive' as it helps protect your investments and pay all of the monthly expenses to control the property and let it grow, but the real wealth generation is through appreciation, paydown, and rent increases over time while you control it.

Hope this helps and others may have other thoughts on the method!

Cheers,

ASV

Only two tenants right now, but both have paid. I was worried because I inherited these tenants and they've both had challenges paying in the past as we took over. All caught up and April paid for!

@Craig Curelop

I'm nearly finished with the book, and haven't come across an answer to a question.

I understand the need of living in the property for a year to fulfill the primary residence portion of the loan and avoid mortgage fraud, but I've had two lenders recently tell me that even after a year, I need to have a reason to move if it is in the local area, or if I'm downsizing. I'm currently in a 3/2 Pool home and the multifamilies I'm looking at are mostly 2/2s, and the 3/2s are sans a pool and smaller. My two brokers have said it's frowned on for a young, growing family to downscale and the underwriters may have a concern.

Have you or anyone else run across this? Is this the brokers being conservative, or is there a legal concern anyone knows about?

Cheers!

ASV

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $209,000
Cash invested: $61,200

I found two adjacent Duplexes owned by the same seller. He wanted to sell them as a package, but I couldn't get the numbers to work for both. He took them off market, but I told his Realtor to give us a poke in the future if they had someone that wanted to buy one and not the other. A few months later they called and said they had a buyer for one property and wanted to know if I was still interested in this one.

What made you interested in investing in this type of deal?

The SFR prices in the area are still a little hot and the cost vs. Rent hasn't made a lot of sense. There are a lot of seasoned flippers in he area as well, and I didn't want to compete with them on my first deal. Duplexes seem to have solid returns vs. cost in my area and appreciate well over time.

How did you find this deal and how did you negotiate it?

We found this on the MLS, but it had gone on and off multiple times. The owner was trying to sell a package all at the same time for a 1031, and was having trouble getting someone to acquire both. We had let them know we were interested, but walked away until something could change. When they had another single buyer, they came back to us and we were able to lock up one of the buildings.

How did you finance this deal?

Conventional 30yr Mortgage with 25% down

How did you add value to the deal?

It was relatively turnkey. There needs to be some minor updates and electric work, but it is in operation as is.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Realtor in Sarasota area: Courtney Tarantino

@Niels Bjørn Toppenberg

Thanks! I thought about buying one and asking for seller financing on the 2nd until I could refi out in November and take it over wholly, but the answer to you other questions prevent it.

The owner is a long term investor and has moved 3-4 hours away. He self manages, so he wants to sell these in a 1031 exchange and buy a multifamily property closer to him. So he has to sell them both at the same time, and can't carry the note long term.