All Forum Posts by: Brandon Russell

Hello,

I'm in the DMV area and looking to acquire my first investment property. I have two partners who I will be investing with. We want to form an LLC but I need help creating the operating agreement and associated structure to purchase this property and others. I work with a lawyer now for another business I own but he doesn't seem to be too knowledgeable on best practices for Real Estate investing. Are there any lawyers out here who can help me get situated and help me get things situated so I can purchase this property with a good structure in place?

Thanks!

-Brandon

Working on the analysis for my first property and as I'm looking for BRRRR deals I'm finding trouble find anything that meets the 50% rule. I know interest rates have made it more difficult right now but I'm curious about the actual application of the rule even in a better climate.

I know it's not a hard and fast thing but I see folks like Thach Nguyen and Brandon Turner constantly talking about how they won't even look at a property if it doesn't meet that rule. I'm able to find deals that provide cash flow after PITI is paid but taking into account expenses I'm not sure how that's possible.

Say a property the PITI is $1000. Following the 50 percent rule does that mean i'd need to rent out at least $1500, correct? When people say it's cash flowing "$300 over" is that after the $500 needed for the 50 percent rule bringing the total rent to $1800? This is what has me confused.

Any insight would be appreciated.

 Hi @Charles Carillo,

Thanks for your response.

I would not be contributing money to the deal. I will check on the second position issue, and be sure to ask lenders this question. I'd imagine i'd want this person to be there. In my scenario the hard money lender would be funding the repairs as well in this scenario. I'd want to factor in holding costs as part of this, which essentially would also increase the down payment from the partner as well, right? Also i'd want to work the deal so there is enough space so that the funds can come from the new 75%-80% LTV. But interesting you pose this scenario because I guess it's something i'd need to be prepared for. I would have some access to money if needed but it'd probably be 10-20k at most, but i'd prefer to not use it.

Lastly the refinance thing is interesting. I think now i'm beginning to realize that in order to get the cash back out i'd have to do "cash-out refinance". Definitely missed that little nugget in all of my months of reading. A standard refinance would not work as I would not be able to get my cash back. It'd be at least a 6 month cooling period before I could do this, correct? Also I live in the DC area and while I make good money, i'm not sure that a standard lender would work as I currently own a home. 
I imagine I'd need a DSCR loan as it's unlikely i'd qualify if the home was 600k or up like many homes in this area can be. I currently have my own home and I couldn't pay the mortgage on this other property without a tenant in place.

All of these "gotcha's" are things i'd want to make sure I can discuss with my partner so they understand these risks. Perhaps they'd be willing to step in and handle some of them for "a fee". And i'd want it to be discussed upfront so they aren't surprised if they come up. 

All this upfront research is really to get a handle on this before beginning to work any deals.

Hello All,

I'm just starting out on my real estate journey and I'm starting to gather information to structure my first deal. Right now I'm interested in doing a multi-tenant BRRRR deal. In the scenario I'm working I'm trying to use other people's money for the downpayment. I have a partner who is interested in contributing but I'm trying to figure out how to structure the deal to make it lucrative for them. My thought is that I would work with a hard money lender who in turn is going to ask for 20% down. This partner would bring the 20% to the table. In exchange, i'd pay them interest on their payment (12% sounds like it's pretty standard). But here is where I begin to get confused. I'm figuring i'd offer them 12% which would be amortized over a year and I'd pay them when once refinance occurs (am I doing this right?). So, if the project took me 4 months to complete i'd pay them at that 12% for 4 months.

Essentially I'm looking for them to be a passive investor without doing much and just bank on that. However, in my head that does not seem like it's lucrative enough for them. Perhaps I could offer them a percentage of equity in the home after refinance. How is that generally structured when people do that? Are there any other scenarios that may work to help make it more lucrative for them. Not sure if someone could help me out with a math example here of how this would work. 

Lastly, I'm open to this person being more involved but in exchange for perhaps more money or some of their time, i'd be willing to offer more incentives. 

I'm curious how some of you guys handle this with partners. 

Thanks!

P.S. One more thing. Brandon Turner talks about not operating with an LLC in these scenarios as then you can't buy a property with a conventional loan or you'll get higher interest rates. How do I protect my partner's interest while not operating under the protection of an LLC?

Hi All,

I'm looking to purchase my first investment property. I'm hoping my first property will be close by so I can learn the ropes. I'm primarily interested in BRRRR properties but I'm just starting my research, so I'm still trying to get the lay of the land.

I live in the Silver Spring (Glenmont) area and I'm aware the pricing out here makes it difficult to find a deal that works for the BRRRR strategy. However, I notice there are lots of condos in the downtown area that are around the $250k mark. These would be more turnkey but I am curious about their viability. I've lived in the area for some time and it seems many of these places are newer and have not appreciated in value. See this listing: https://www.zillow.com/homedet... This particular property is near the train but it is a new construction and seems to always have units for sale. In fact, this one is cheaper than it was in the past. Sounds like something like this would be bad for equity but could be good for cash flow due to its location downtown. Do any of you real estate moguls in the area know why the prices seem to remain flat? Also if I go for a condo how would I check the owner-occupancy rate and see if the building has any restrictions on rentals?

Thanks in advance!

I wish I had saw this. Will have to make the next one. How did it go?

Thanks for all the insight everyone. Any idea where to look? I like the Petworth area but it would need to be something close to the main line. The more downtown the better for me. Previous property I was looking at was on Park RD NW between 16th and 14th.

Hi All,

I'm in the process of purchasing my first property. I live in the Washington DC area and am looking at properties in the city. I've just recently put an offer on a condo in an up and coming neighborhood (Columbia Heights) that I felt was the right choice. After winning out in a bid situation against a cash offer and another that wanted help on closing costs my offer won. I'm attempting to finance the property using a 5% LPMI option. Everything was going fine until after reviewing the condo docs we found out that the property had a 45% delinquency rate for the tenants on condo dues. I also discovered that the seller owed $2000 on their condo dues as well. I'm not sure why they didn't take the cash offer as no one will really be able to finance this property with that delinquency rate. The seller won't bail out the other owners which I expected. So I have to back out of the deal.

The issue is this, I really like this property and feel it could be a good investment. My goal is to owner occupy the property for a few years do some renovations, then possibly rent or sell. My goal is to help use it for cash flow so I can buy my next property. However, now the lender won't finance the property due to Freddie/fannie 15% restrictions on delinquency rates. I know the high delinquency rate is a bad sign for the condo association, but I'm guessing all the owners are upside down and the condo association hasn't made the move to foreclose on the properties (which is difficult in DC as of late). At some point this WILL happen and I will have missed the opportunity. Due to the location of this property and price of comparable homes in the area I feel it's value would greatly appreciate if the building and condo assoc were in better order. I'd like to affect that change but I guess I can't without cash.

Do I have any other options if I don't have the funds to by in cash? If not any suggestions on what I should look for in my first property. I'm interested in something I can live in but it needs to be close to amenities and the downtown area. I only can afford about $280,000k with financing. I don't intend to stay in the area forever but I'm looking for something that can be downtown and accessible for someone who is single living in the area. I'm not so interested in Single Family Homes as I'm priced out here in the city and I also feel condos can actually yield more than investors speculate in Washington DC. DC has the highest ratio of single to married individuals in the country and I think condos here are a bit more popular in such a transient area such as this. I know SFH are much more lucrative but I simply can't go that route as I can't afford it at the moment.

Any opinions?

Thanks!