All Forum Posts by: Benjamin Aaker

Depends on the lease. You will need to get a copy of that. These usually survive the sale of a property. If you are trying to house hack, you want to have a tenant though, so this seems like a great deal, unless the tenant is using the whole place. Your offer could be contingent on the seller getting the tenant out if you really want to go that route.

Depends on the location in Atlanta. AirBnB has been hit hard. I have 4 units in a motel that I was short-term renting on AirBnB and during the pandemic that dropped way off. I moved to what I call medium-term rentals - people who want to stay for a few months but not a year. The place is doing better this year than it did pre-pandemic! Make sure your zoning allows for that though. These units are furnished, but I realize that there is a big cost to buying all that stuff.

Not sure about local because I don't know where you are located. BP is a great place to network even if you're not in the same area. Welcome to the website! I'd suggest asking a few more questions in the forums about your real estate interests.

You didn't say how big a property this is. If it is small, then it might be better to get a loan from this investor. It's usually better to avoid having a partner if you don't have to.
For bigger properties, I recommend syndication. I've done two now and my investors are limited partners. They are looking for an investment without any of the day-to-day work in the property. This way you retain control, using your expertise, and you are compensated for all your work. If you are interested in learning more, I recommend reading Apartment Syndication Made Easy by Vinney Chopra.

Hi Maya,
I recommend first to look at the landlord / tenant laws in the areas you are interested. Southern California is very tenant friendly in my understanding. Also, housing values are through the roof and not keeping up with rents. I'm sure you can find a deal there but it'll be tough to find a good one. Congratulations on the sale(s). Talk to your 1031 service to see if you can exchange two properties at once. I'm not sure that is allowed.

For SFH the prices are usually based on the comparison approach. The market is hot right now with inventory low and interest rates very low. People are able to pay more for their shiny new house because their monthly interest rate is less. They rarely look at financials beyond that. Sellers can jack up the price and still get multiple offers. If you've ever bought a house for yourself, you probably didn't put together a spreadsheet of all the costs of home ownership (if you did, you're way ahead of the rest of us) - a SFH doesn't normally produce income, so it will always be in the negative.
Rents have sadly not kept up with SFH prices so a landlord will likely be under water in most retail deals at least until the eviction moratorium ends. Rents tend to go up, but slowly, so it will be a while before they get to a level that justifies the high price paid for SFH. Don't bank on rent increases.

Hi Dustan,

Cash on Cash is the percentage of how much return you get for your money you have to risk. You usually will want to calculate Cash on Cash return for each individual deal rather than across deals. This aids in comparison between deals. If you are pulling out cash from another property by a refinance or line of credit, this amount plus whatever cash you have will be what you are putting 'at risk' to make the deal happen. You should use $350,000. Good luck with the purchase!

Since you are looking to BRRRR you might consider looking at other metrics than just the cap rate. On smaller properties (at least right now), they are being valued from a retail eye. This uses the comparison valuation technique. Since these properties have high demand and low supply, the prices keep going up. As you know right now, rents are pretty flat. Cap rates will be very low. This might deter you from purchasing anything at all. You will still want to look for the good deals, which can be found despite low cap rates.

Originally posted by @Brandon Pace:

@Benjamin Aaker Thanks for your advice. I am beginning to see the scalability advantage of 5+ units. Do you have any specific tips or steps  for me as a new investor having only  purchased 3 townhomes as rentals to prepare for the opportunity to scale by acquiring my first 5+ property?

I sure do:

Take some extra time to interview commercial lenders in the area you plan to invest. There is so much variability in knowledge and experience and a great banker will help you out immensely.

Start putting together a personal financial statement and a debt schedule if you haven't done those already. You will also need 3 years of prior tax returns.

Form an LLC specifically for your commercial investing.

Hold on to your current properties rather than selling. Banks want to see consistency. That doesn't mean never sell; if the price is right, go ahead.

Interview insurance agents and find one experienced in the commercial area. This can save you a bunch of time later when you are in a hurry.

Get to know a good commercial real estate agent.

Of course, there are many more, but these are the top ones on my mind. PM me if you want to talk further. I have nothing to sell. I just like teaching.

Sounds like you have your numbers figured out. Good luck with the offer!