All Forum Posts by: Andrew West

TLDR: I just refi'ed my first BRRR with Upside (duplex) and it went exactly to plan. Pulled 100% of my investment out, and it's currently fully occupied. That's a win in my book.

A bit of backstory: @Travis Biziorek and I met here on BP and developed a friendship over the past few years. I've done a few deals on my own in and around Detroit, but I've had to dial my investing activity WAY back due  to my W2 and other personal obligations, so I'm now leaning heavily on the skills & knowledge that the Upside team brings to keep building my portfolio.

This has been a fun thread to read and I love seeing the positive rapport that they've built amongst their investors. It speaks for itself.

@Sunny Karen, I'm not sure what your investing history is, but my only caution would be to DO YOUR OWN HOMEWORK. In my opinion, good partnerships always have a "trust but verify" component, and this is no different with Travis & Nader. They'd be the first to tell you that they don't want you getting into a deal that you don't understand or aren't comfortable with. Even though they do a lot of the heavy lifting on sourcing and analyzing deals, I would never pull the trigger if I hadn't run the numbers myself. Beyond that, a healthy familiarity with the nuts-and-bolts of all things REI (market research, strategies, deal analysis, property management, etc.) goes a long way in communicating with the team and articulating exactly what you're looking for. If you've got these things dialed in, then I'd say give them a call and start the conversation. They haven't steered me wrong yet!

And whatever you do, don't trust anyone who uses Zillow to analyze deals in Detroit (sorry @Michael Smythe, but that's just bush league)

@Travis Bohling great insight. Thanks!

Hi BP Community!

I own a triplex in a C-class area, and with the territory comes the inevitable late rent payment (or non-payment altogether).....Don't worry, I budgeted for this!

I'm wondering what the opinions are out there for communication strategies in these instances. Have you found any particular approach to work well? As an owner should I reach out to the tenants in any way? Do you just leave this fully up to your PM?

My PM has a standard/automated notice that goes out in the 2-day and 7-day windows, but this doesn't seem to be very effective. I struggle with just sitting by and waiting (especially knowing the fees rack up for my tenants the longer they go without paying!).

Let me know your experience!

@Kaveh Narimani, if you're still looking for PM in River Rouge, I highly recommend Propel Property Management! They've done a great job with a relatively difficult property I have there. 

I should add that my default assumption up to this point has always been that owning our primary residence is the "smartest" way to go, and this decision is helping me challenge that a bit.

I've always subscribed to the conventional thinking that owning a primary home is a "good investment" but I've had that challenged in a few conversations lately, so I'm trying to revisit the numbers and see what makes the most sense. 

Either way, I feel good about the fact that all of my options involve keeping the equity I have INVESTED IN REAL ESTATE.....It's just a matter of whether I want that invested in my own home, or in rentals that probably perform quite a bit better as investments. 

Hoping others will chime in here with thoughts!

@Alex Tsang HELOC (on our primary residence) was exactly the strategy we used to get started in Real Estate investing! However, I would HIGHLY recommend you research and understand all the mechanics of HELOCs before using one. In general, most wise investors seem to think of them as good "short-term debt" (i.e. BRRRs & Flips) and bad long-term debt (don't use it as a mortgage....maybe not even as a down payment).

Pros:

- Relatively easy/quick access to capital (assuming you have equity in something you own)

- Flexible: You can get a HELOC whenever you want, and not pay on it until you use it. It just sits there. It's also flexible in that many offer interest-only payments for a period of time creative more cash flow when you need it.

Cons- 

- Variable interest rate. Most are SUPER high right now due to rates in the market (8.5%+)

- the downside of interest-only payments is that if you opt for that, you don't make any progress towards paying it back. Most have a "payback period" that automatically kicks in (usually around 10 years). 

Back when interest rates were low, our bank was offering a super low introductory rate period (1.99% at 6 months) which offered us the opportunity to use it for a couple quick acquisitions. 

However, now that rates are higher, we have it fully paid back and I'm too conservative to use it (9.5%, no thanks!). 

I'm sure I missed some things, but hope that's helpful. Sounds like a few great people in this thread offering to explore it with you!

@Account Closed sounds like an awesome situation! 9 STRs for $1.8M sounds like a great deal and you have some premium designs planned. How do you plan to market/rent the cottages? Airbnb? Direct booking? 

Thanks all! Some good thoughts for sure!

@Steven Foster Wilson, I'd say our main goal right now is to build cash flow in the most passive way possible. We both have W2s and are building a family, so we don't want real estate to require a lot of "active management" at the moment. We are hoping to reach ~$10k/month in cash flow in the next 6 years. 

@Corby Goade Thanks for the thoughts. We actually already have a HELOC on the primary at the moment (total $220k) (used it to creatively get the first few properties) but I'm hesitant to deploy it at the moment since it has a variable interest rate that's not favorable with the market (I think it would be around 9.5% currently). Agreed that the 2.5% interest rate is tough to give up and that the current house would cash-flow quite nicely as a rental. I'd be left with $1800/month after mortgage payment (which includes PITI), so maybe $800-$1000 in pure cashflow after expenses?

Appreciate the input all! Keep it coming!

Hey BP!

Wanted to bring a current decision I'm facing and leverage the power of this community for advice. 

Long story short, my family and I are considering moving, and I'm trying to figure out the best financial move for our primary residence. We've owned our primary residence for 6years and seen dramatic appreciation. Principal on our mortgage is $395k (interest rate 2.5%) and it's worth about $800k, conservatively. Mortgage payment is ~$2200. If we keep it, the house will rent for about $4000/month.

(As an aside, we own one triplex and one short-term rental (both out-of-state) which combined bring in ~$1500 in cash flow.) 

Options as I see it:

- Leading option: Sell the house now and roll all equity into stable, passive REI investments (what kind exactly, I'm not sure). At 12% COC return, the $400k equity could make $4,000/month in cash flow. This would leave no capital to buy our next house so we'd have to rent (Which we're not opposed to, especially since it'll likely be a new location). I expect rents to run around $3500 in a new location.

- Sell the house and roll all the equity into buying a new house where we decide to move. For ease of analysis, I'm assuming "apples to apples" with the old/new house and that anything we'd buy would be ~$800k (albeit with a MUCH higher interest rate).

- Rent it out and continue to hold it with the current mortgage as-is.

- Keep it, do a cash-out refinance to use some equity for other investments, and rent it out.

I know that everyone's situation is nuanced, but I would just love some general thoughts on how YOU would think about this! Is this a good idea? Are there risks? I've love to hear both the analytical and philisophical sides of this equation! I've done my own spreadsheeting, but hit me with your thoughts & wisdom.

Cheers!

Thanks all for your replies and insights!

It's fascinating to see the diversity of responses and that there are equal amounts of perspectives on both sides. 

As an update, I engaged my property manager in a discussion about this, and they were able to outline their process for me that happens behind-the-scenes as soon as a tenant misses a rent payment. They put a lot of time (and sometimes money) into ensuring that the rent is collected and the tenant doesn't get too far behind. This is a class C property which is makes sense would require this amount of follow up. I feel quite comfortable knowing where this late fee is going and that my PM is advocating on my behalf to get the rent paid.