All Forum Posts by: Benjamin Aaker

Hi Nick,

It's a tough market right now for single family and small multifamily. Their valuation is the market approach and these things are selling fast, prices continuing to go up and outpace rent amounts. You are wanting to house-hack but in this market, it'll be tough to get enough in rent to cover all your expenses. This is probably still better than just buying a primary residence, though. Maybe that is good enough for you.

Otherwise, find multifamily larger than 4 units and maybe consider changing your requirements, e.g. the garage, to be able to get started.

Don't go with the big banks. Talk to a bunch of local banks about this. You'll need to personally guarantee your loans. First, put together a small document that shows your personal income (W2 will be better here but not strictly required), debts, and any real estate income/debts.
The bank will usually want a specific property to evaluate. Take the time to put together a nice pro forma with images to send to the bank. This thing should be professional-looking and show how you intend to raise the NOI over the life of your ownership.

This is a commercial property. You should ask for a commercial line of credit. The terms aren't as attractive as a HELOC but the LOC is indeed possible. Call around to local banks to do this.

Depends on whether this is small multifamily or larger. Small multifamily will be valued based on what others have sold for in the same market. Separating utilities won't give you much increased value upon sale, but you said you plan to sell in around 5 years. The cost savings over that time might easily be more than 10k, so from a purely cost-saving standpoint you might want to look more closely.

Also, do some research to see what other multifamilies in the area are doing for utilities. If you are the only one without free heat, that will make your place less attractive, and the rent might go down.

If you have a medium or large multifamily than this is a no-brainer. To echo @Steven Nguyen's superb post, you are now dealing with the income approach to valuation. Passing the expenses to tenants (if the rent stays the same) means a higher NOI, and that NOI bump gets multiplied based on the going cap rate in your market. Separate those utilities!

Kind of in underwriting, but I'd add Market Analysis. Find out how many other apartments are in the area as competition. Find out what rents they are getting and compare that to the rents claimed by the seller.

Welcome to BP Cristos! I have to tell you that I'm not opposed to paying someone to help you learn. So many successful investors will tell you that you shouldn't be installing toilets on your own - pay someone else to do that for you so you can focus on the important things. It's the same way with education. If you can pay someone to teach you - someone who has spent countless hours making mistakes and taking risks - then you made the same trade of money for time that you did when you got that plumber to change out your toilet.

You have to do your research to find a good plumber, and you have to do your research to find a good teacher. Start small by reading. This has a high value / cost ratio. I suggest getting Gary Keller's The Millionaire Real Estate Investor first. 

You didn't mention where you are located. Deals can be found in any location, some harder than others. For your first property I strongly recommend to keep it local. You can certainly invest at a distance, but small mistakes can magnify if you aren't there. And, you will make mistakes, we all do.

I doubt you will find a bank to loan you the remaining 30k on this property where you only have $3,500 equity. These mortgages use the property as collateral and they want the property to be in livable condition before loaning you the money. You still have lots of options -
Option 1: Do you have any other property that you can use as collateral? Alternatively a primary residence you can put a HELOC on?
Option 2: Can you put in some sweat equity and maybe get this place to livable, then refinance?
Option 3: Find a wholesaler and get this place sold. Maybe make a couple grand on it.
Option 4: Find a partner and cut him/her a significant percentage of the ownership.

Don't put yourself down too much. Estimating rehab is really tough and we all underestimate on the first one. This is a great learning experience you will not receive from a book.

Hi Carlos,
Set up an LLC in the state you are purchasing. Your friend can come in as an investor using the same entity she used in the 1031 sale. You come in as whatever entity you want. The new LLC is the owner of the new property. If you are wanting to buy her out at some point in the future, put that provision in the LLC operating agreement (talk to your attorney). Keep in mind that she will continue to have the tax liability from the original 1031 sale once you buy her out. The 1031 doesn't remove your requirement to pay the tax; it just defers it. This makes her 1031 exchange less desirable for her because she will still be paying the tax.

You said you are a newbie investor. Managing from afar is very difficult and might not be something you want to get into. I usually recommend people to hold onto their property and refinance, but since you are moving away (and the market conditions are great for selling), you should consider selling and purchasing a new rental in your new city.