All Forum Posts by: Ben Rhodin

Hey @Jacob Munson! Lot's of good info in here already, but the short answer is, just run the numbers. I am not familiar with the SD market, however, I do this scenario all the time for clients here in Denver. I am more than happy to provide my resources and process so you can have an objective look at what can be done with the property. 

Personally, it sounds like a hold, and get your equity out another way, I would recommend a HELOC while it's still your primary. That will give you access to it and you can use it as you see fit. Whether it's just a nest egg, or if you use it to purchase more properties.

Being in SD and being a 2/1, I would look into other strategies for renting the property. Could you do an MTR or STR in it? However, even if the cash flow is minimal, look at the whole picture, with the appreciation and loan paydown, the property should be worth keeping at least until you are about to expire your owner-occupied tax exemption on the sale.

The main reasons to sell it would be if it would be a headache for you to manage and maintain it, or if you think you could make a better return with the capital elsewhere.

Hey @Mike Primsky! That's a very fortunate position that you are in currently and congrats on the success with the Fix and Flips. As for your analysis of the Denver market, yes, if you are trying to purchase a traditional Buy and Hold with long-term renters, the numbers can be hard to make deals pencil. I would second what @Jaron Walling asked and need to understand your goals. Cash flow is only one aspect of the investing journey, and in the current market you either need to get creative (MTR, STR, or other strategies), put more down, or look at the big picture of a real estate investment. Cash flow is not what creates generational wealth. Take a look at the tax savings, the appreciation, and the loan paydown. These are all things that you'll get in excess here in Denver, vs the midwest, where you may walk away with $200 a door a month.

I still have investors creating cash flow and generational wealth here in Denver, and depending on your situation, lending ability, and so forth, your $500k can go far. One of my favorite strategies for clients nowadays is a small multifamily property, and doing a hybrid MTR/LTR strategy. We just closed a quadplex like this the other week, and that will generate a 10% COC once up and running.

Don't limit yourself by saying the Denver market doesn't work, there are numerous investors still making a lot of money in this market. and since you have the knowledge and connections here, you are in a good position to build some wealth!

Hey @Ryan Butler! Going to second most of what @Ben Einspahr said. He gave some great info on the other factors you should be looking at in terms of your house hack. Cash flow is a very small portion of REI, especially in a market like Boston.

The short answer to your question, you only have so many ways to manipulate your numbers on a deal and numbers you are in control of. Don't manipulate any expenses or fixed costs that you are not in control of. The only way to change the numbers on a deal are your purchase price, downpayment, or interest rate (either you buying it down, or the seller buying it down); and your income... if you can change strategy and increase your rental income you can increase your cash flow. What I would do is keep adjusting your purchase price down until the deal makes sense for your numbers, then you can go from there, a rate buy down will always be better bang for your buck and be more appealing to a seller. 

Don't ever fudge your expenses on the property to make the deal work, as that is a quick way to get in trouble. and as the other ben mentioned, make sure to run your numbers on when you occupy, and when you move out, as even if yu are negative while you are living there it may be worth it, as you are taking up one of the rentable areas.

Hey @Jason Strauss! As @Ben Einspahr mentioned, the large equity portion is not a bad situation to have. This is a common question and a decision that can be easily solved. I think you are on the right path with the new House Hack purchase, it will be the least capital intensive and will minimize your housing payment still. 

The first step there is to talk to your mortgage broker and see what you can qualify for, and tell them to factor in if you rent your current place. That will give you a baseline for if a house hack is even an option. If it is, then great, if it isn't then we will need to look at other options, like purchasing straight investments. From your description of the property, I would see if there is another option for renting it. If it is near a resort, you may be able to do an STR, or MTR and increase that cash flow making it a viable investment. However, even if the property breaks even, and you pull a HELOC on it before you move out, it may be a worthwhile buy-and-hold play. You can use the HELOC to continue to fund projects or properties, and you can use a new low-down payment loan to buy a new primary.

Without having all the info and all the pieces, I can't fully advise which way to go. But I think you have the right path and you just want to put the pieces in the right order. Feel free to reach out and we can dive into it a bit more!

Hey @Valerie DeFreitas! Welcome to the community, and seems there is already a ton of good advice in here. Sounds like you are in the growth stage of your investing journey and you have some chess pieces to play with. I totally understand the desire to keep acquiring and keep scaling, but it is important to take a step back and look at the overall portfolio and goals. I always say it's about an optimized and balanced portfolio more than the number of units. Knowing what your FI number is, and where you are trying to get to is the key here. 

Definitely keep connecting with people on here, and going to meetups, then when the time comes or the deal arrises you'll be ready to pounce.

Welcome @Kyle Thomas, to both BP and Denver! You'll find no shortage of friendly faces here. Congratulations on your successes and for putting yourself out there! With moving out here, and having what seems like a great new position, I would also encourage you to look into House hacking as one of your first acquisitions. Wholesaling is a great approach to building capital, but it is creating a second job for yourself. By leveraging a low down-payment loan on a primary, and offsetting your living expenses, you'll be able to accelerate your savings rate by eliminating one of your largest expenses, your housing expense. It will also provide you training wheels on investing :)

If you want to grab a drink or coffee sometime, please let me know! Always looking to talk to like minded people.

Hey @Roy Gottesdiener! Already a good amount of info in here, and in short... It will come down to your goals and time requirements. If you want to be passive, and not have an active role in deal syndication would definitely be the route to go. Just make sure to vet the GPs, and operators thoroughly and always underwrite the deals yourself. Want to be extra careful putting your money in with someone you don't know.

However, if you want to be active and be the sole owner of your investment, then I would pursue some larger commercial deals. Either in the multifamily or commercial space. It will give you economies of scale, and you can have an on-site manager to handle the day-to-day. Instead of spreading that cash over 10+ smaller properties, this would limit your headaches and time consumption. Couple this with some value add, or different rental strategies and you could be well on your way to your goal!

Hey @Sankha Ghosh! Welcome to the forums, and I will say that you have one of the most flushed-out posts and strategies I have seen in a while. I would say you are well beyond the education phase and ready to dive in.

Overall your strategy is sound, but may need some final tweaks and checks, please see below for my responses.

Property:

• Does my plan pass the sanity check, or am I completely out of whack?
• Yes, overall this is a great plan, house hacking each year will get you to your property goal, and a duplex or duplex like property seems like the most suited course of action for you and the family.
• Is my price estimate and associated rent estimate appropriate for the general locations I'm considering (again apologies for the wide range)?
• For a duplex in the Denver area, you'll be looking at at least 600k for anything that is turnkey, and 700k+ for anything in a decent area. For your family's needs, you'll probably be in the upper range of your budget. Rental rates seem doable, depending on location and unit size. If it's a 2 bedroom you very well may dip below that $2k mark. 
  
  The bigger concern is your COC and Cash flow goals. If you are solely targetting long-term rentals, you'll have a tough time hitting those numbers with the current market conditions. With the low down payment and the higher interest rates small multifamilies are hard to pencil. If you are wanting to hit these kinds of numbers, creative strategies will be your best friend. Either MTR or STR.

Financing:

• Will a HELOC be difficult to obtain on an investment property? How can I find institutions that offer HELOCs on investment properties?
• HELOCS are tough on Investment properties, but not impossible. I can connect you to a few institutions that do them.
• Is asking the seller to buy down a feasible option in the current market conditions?
• Seller concessions are becoming commonplace in the market, so there are options for this depending on the property and how competitive it is.

Two other things to note, you will be limited to FHA products on small multifamilies, unless you want to put 15%+ down. And the lender will also need to factor in the payment on the HELOC, which can affect your approval, and also your cashflow and COC return numbers. Just make sure you have the whole picture when running your numbers.

Help & Resources:

• How do I find an investment-friendly real estate agent? I've heard good things about BiggerPockets finder, but I'd love to hear about your experiences with it.
• You'll have no shortage of agents to choose from, especially here in Denver. Find one that you enjoy working with, and feel like they are knowledgeable and have your best interests in mind. Finding the agent will get you access to the rest of the team (lender, contractors, PM, etc...)
• Do I need a mortgage broker/lawyer at this point?
• Would definitely get started with a lender, as lending could make or break your plan depending on where you are preapproved for.
• How can I find a mentor? What can I bring to the table to create a mutually beneficial relationship?
• A good investor agent can act as this as well. But otherwise, this is for you to figure out, as we do not know your certain skill set.
• Given my current stage in the real estate investing journey, would you recommend that I invest in joining a bootcamp or attending webinars?
• Personally, I wouldn't. You've already gotten most of the baseline learning done it seems, and the rest will be taught in the first property and by doing. Your agent and team should be able to assist you through anything that comes!

Tools:

• Most people covered these. It will depend on which strategy you choose to implement, as STRs and MTRs will need different software and resources than an LTR.
  

Networking:

• How do I find like-minded people at the same stage or further along who are willing to help?
• Meetups, and simply reaching out to people :) There is no shortage of meetups in Denver, and if you want to grab a coffee just let me know!
  
  

No problem! It is a tough thing to figure out with conflicting thoughts. Let me know if you want a second pair of eyes, or a deep look into it, I'm happy to run a quick analysis for you! Just send me a DM. Another option to consider is you could do both if you purchased a new primary that can also generate income... A house hack. Not sure that fits with your life situation, but could do a duplex, or a property with an ADU, etc. Then once you've lived there for a year, then move onto the home you want to live in.

Hey @Spencer Tanaka! This is a common question nowadays and a tough one to answer without all the variables. It sounds like you are not sure where the money is going. It might go towards a new primary or a new rental. If you are going to purchase a new rental then the question is... Could I generate a better return on what I am buying than what I am losing by doing the cash-out? If that money can generate a better return elsewhere, and your current place is at least still breaking even, then it's worth it. As you are gaining more benefits than just the cash flow.

If you are going to purchase a new primary, it will be more emotional and complex as you aren't going to generate a return with the capital, other than appreciation. So then it's a personal question, is the cashflow hit worth us getting into our new place sooner? or should we just save?

I would also look at all the options for accessing your capital on the property. Which is something I do with clients all the time.

1. Sell the property.

2. Cash-out Refi

3. HELOC or LOC on the property.