All Forum Posts by: Benjamin Lapidus

Hi Chaim,

He is absolutely not correct.  Duplexes and Triplexes are managed much more like single families than multi family / commercial properties so it is not uncommon for an owner to not keep his own records.  But that doesn't mean it is uncommon for a PnL to not be provided or asked for if it is not initially provided.

If a seller is reluctant to give you a PnL it may very well be because he doesn't keep any records at all and simply can't provide them to you.  If that is the case, there is a couple of things you can do:

1) You can assume a 40-60% expense to income ratio (inclusive of insurance, property management and other non-repair related items) to determine a back of the napkin profitability.

2) After getting a general inspection completed, you can send in your general contractor/handyman with the report to estimate what things may break or require repair in the first 3 years.  Assume that all of those things will break / require repair in the first year.

At the end of the day, if you do not have the information you need to feel confident about the deal, don't take it.  And if your agent doesn't support you in asking for the data you need to feel confident, find a new agent.

Good luck!

Ben

Hi Hamed,

Does the $1,310 include escrow for taxes and insurance or is that an expense on top?

By process of elimination, let me rule out #4 first.  If your goal is to keep investing, than tying up cash in the same property will not help you meet that goal.  You want to cash out as much equity as possible so that you can snowball it into more properties.  If your goal is security and wealth preservation style returns, then maybe it's worth dumping the $100k into the property - but that doesn't sound like your goal.

When did you last finance the property?  If 12 months has passed, then you can refinance at the appraised value rather than the purchase price.  In some cases it can be as low as 6 months while still getting a conventional loan.  If you refinance at appraised value, options #1 and #3 become the same thing.  And why would you not want the $140K in cash if you can get it?  That is if continuing to invest and rolling your equity over is your goal.

That said, if you do get a $140K loan, then the mortgage on 15 years will be higher than the rent, so it sounds like 30 years would be a safer bet.

Following the logic based off a few assumptions I made, it sounds like refinancing for a $140K 30yr loan would be the right way to go to meet your goals.

Good luck!

Ben

Hi Marie,

I would just be careful with trying to lower taxes if you know the appraised value of your land and property is higher than the current assessment.  Sometimes when you try to lower the taxes, they'll come back and give you a HIGHER assessment than you previously had.

Good luck!

Ben

Very helpful.  Thanks Mindy!

Hi Amy,

This is a great question that I am sure many people ask.  I definitely asked it to myself at one point.  There are so many ways to turn $20K into $100K, but first a quick PSA:

Goal Setting: Focus your awareness on the reality you want to create and the opportunities to create that reality will become visible.  You dictate the (realistic) timeline in which you achieve your goals.  Write them down, put them in front of you, and focus all of your energy on them.

I have 45 units that I have acquired in the last 3 years, and I plan on buying another 50 in the next 18 months.  Here is what I do:

1) Find a deal that resembles your model. Lock it up with a $500-$1,000 EMD. Perhaps it is a single family 4 bedroom with a $200K After Repair Value on the market for $100K.

2) Find an equity investor who will go 5x in with you capital for 70% of the deals together.  This investor should have a credit score above a 720.

3) Take your combined $120K to a hard money lender who will give you a credit line at 12-16% of $480K.  Try any of the hard money lenders on Bigger Pockets for your state.  The credit score becomes important here.  Now you have $600K.  Only $20K of it is yours, but now you have something to invest with.

4) Buy only great deals.  If you buy too high or too risky, you can get stuck with a loan charging you 12-16% and a house worth less than you paid for it.   But if you buy correctly, you will have a house worth way more than purchase price for a small cost of capital.

5) Fix & Flip OR Cash Out ReFi - you don't want to hold on to the debt for very long because the interest is expensive.  So either sell the house for a pretty profit, or refinance the property to get the cash out to payback the hard money.  You can find exit lenders that will do cash out ReFi's in as little as 3 months after purchase.  So you only have to pay 3 months of hard money interest before you refinance for a conventionally structured mortgage.

6) Now you own a house and its respective rental income OR you have a profit from the flip and you are square with your hard money lender.  They are happy with the loan experience as is your equity investor, so everyone agrees that you should take the $600K and do it again.

7) Repeat as many times as necessary until you have reached your goals.

8) Be cautious of market trends and unexpected downturns to avoid purchasing high and being under water with a project.

Good Luck and Happy Hunting

Ben

Hi Friends,

I am NYC based investor with 45 units in Virginia and 1 in Denver.  I buy and hold, syndicate deals, single & multi-family.  My super powers are financial planning, financial strategy, and creative financing. I love to collaborate with those who have other super powers, like general contractors and proven guerrilla marketers. 

I'm starting to invest in Philadelphia and looking to learn as much as I can about the neighborhoods, get introduced to property managers, contractors, insurance agents, lenders, everybody.

Looking forward to connecting!

Ben