All Forum Posts by: Assaf Arie

Originally posted by @Christina Tkacs:

I want to write the title in quotes because it's not like I had much of a strategy to start with. I bought a duplex and a turn-key SFH at a normal price for houses in the area. Both were conventional loans with 25% down because they're investment properties. All three doors are rented at the high end of rents in the area.

I can't keep paying 25% down on homes - it's cost me nearly $160,000 cash so far and of course that money is all tied up until it makes sense to refinance. 

Am I missing something, or is buying a home at appraised value an effective strategy?  It's killing my savings account.  25% down is a lot of cash.  I want to buy another house as a short-term rental, but I don't want to tie up another $80,000 in cash - I'm not that rich.

(I'm looking to BRRR at some point as soon as I can catch the deal fast enough)

 Christina: I`ll start with saying that there is nothing wrong in getting wealthy slow (originally Warren buffet told Jeff Bezos the reason why not more people are using his simple investment strategy - "Because nobody wants to get rich slow"...). So if you have something that works, and is sustainable - that`s great! You are already ahead of the 95%.  

I always recommend others to become more obsessed about value (and equity) than anything else (cash flow is important, but not more than equity under the appropriate structure). Create a mindset that constantly creates value - to your tenants and yourself. I always ask - "How can I provide additional value to increase rents by $25 / $50 / $100 / $200 / $500 per month?" and I act on it. A good BRRRR is great, but not the only method.

Don`t be afraid to become rich slow!

As was mentioned above - Relationship is key when it comes to real estate banking and financing - the ability to get a mortgage with a "phone call" is very helpful. I`m looking at rates around 5.25-5.5% for similar transactions, 5.625% seems a bit high no?

@Rupa Nair - Good luck!

As others mentioned above, be careful of where you are going to put your money. There is definitely money to be made in N. Minneapolis, however, even though that market is relatively cheaper than other areas of Minneapolis (and greater metro), I consider this as an advanced market - You really need to know what and how you are doing, because the downside potential can be huge. 

Good luck and keep us posted on how things are going!

Forecast the rental performance based on your experience to calculate the NOI, divide the NOI by the market's cap rate (that already takes in consideration the mortgage rates, expected return, etc) and you'll receive your starting point.

Some mentioned it above; I would run a full background check, looking more on rental history and criminal, and less on credit (you are adding them to a less that have been approved per your credit qualifications). Once approved, definitely add the person to the lease, so he/she can share all the benefits and the obligations that your lease provides.

Why wouldn't you take the 7.5k that you currently have, pay it against the 15k lien to parents, keep the mortgage and LOC in place as is, and re do the amortization on the15k lien (now 7.5k) so you will cash flow positive from day 1, take advantage of full tax deductions, enjoy the appreciation and avoid unnecessary commissions to 3rd parties?

I agree with the above, but would recommend to make it as "friendly" as possible, with the key point of meeting expectations- don't over promise just to get a deal done, and do talk about a reasonable scenario of loosing. I would recommend to look for a lower risk / lower return 1st deal, to get things moving and everyone comfortable with the process. (Spend a lot of time learning!!) Good luck!

 Very important in negotiations! - It shows that you take your offers/counter-offers seriously and put thought into coming up with a figure.

Even if you are going to manage yourself, you still want to run the numbers as if you are paying management... It seems as if this property is about 70k over where it should be for a class B in a good location.