All Forum Posts by: Bryan Mitchell

 How has your cash flow changed after your cash out refi? I think that’s what stops some. They are happy with their cash flow per door. If you follow someone like Dion and Chad Carson or Valkeres you’ll see it’s less about numbers of doors and more about total CF in order to get to your freedom number. I’m just hesitant to add units that have lower CF for the sake of numbers of doors. More CF (per door) adds a cushion because things will happen (unexpected costs). All said, I have 11 units (sold 2) over the last 15 years. I’ll add more this year but only under the right conditions. 

Investment Info:

Large multi-family (5+ units) buy & hold investment in Salem.

Purchase price: $155,000
Cash invested: $53,000

2.7 acres with 4 occupied 1/1 cottages and one .25 acre empty (previously a mobile home on it). The featured unit was uninhabitable so we rehabbed for $20k and three months later, we have 5 units. Plenty of land to build more, so we’ll need to make some decisions in the future

What made you interested in investing in this type of deal?

Portfolio of 4 homes on same lot with a 5th unit for a value add play. Good area with very few rentals.

How did you find this deal and how did you negotiate it?

I was working with my real estate agent looking at MLS. Nothing worked and coincidentally, the property that she had under contract fell through, so it be became available and I jumped on it.

How did you finance this deal?

Commercial loan, 75% LTV

How did you add value to the deal?

Rehabbed a 5th house that was uninhabitable

What was the outcome?

Additional cash flow in top of an already cash flowing property.

Lessons learned? Challenges?

There are septic tanks which I don’t care for. I think there were issues with the septic 5th unit and that is why they didn’t bother to bring it back online. A year plus after rehabbing, I ran into some septic issues and had to spend some money. In the end, if I’d known of the septic issues, I would have fixed them up front.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

No

Welcome Dane. Florida and Orlando are great markets for that. 

Yes, but HOAs can and often do restrict or even prohibit rentals. I've personally fought to keep my SFH as a rental in a restrictive HOA neighborhood. Also, while you make some great points about the things that an HOA cover, they can severely eat into your cash flow. I've seen as little as $30 a month up to $600 a month. Usually the higher the HOA the more they provide but they don't directly add to the rents. I'd agree in some unique cases, you can bake the HOA into the rent, but you'd really need to buy the asset right to do this, remain at market rents, pay all expenses, and show a profit.Also, when I say restrict rentals, this could be long and/or short term rentals. I'd prefer my options open.

 Correct me if I’m wrong but isn’t there a $50K limit and don’t you still need to be in the service to take a loan out? I believe once a military person retires They can no longer contribute to it, and therefore can’t take a loan out against it. Stipulation was you have to have a paid back with a certain period of time at a (current bond fund rate?) interest rate. That I like, but I believe there are some significant restrictions that will prevent many from doing that.

Yes, properties with lower equity requirements are appealing. I’m taking the mindset that you can achieve this and get a great cash flowing property with higher returns/rents/yields. As for PM, I often wonder how effective a virtual assistant would be. That’s a critical part of the team with a possibly more economical solution.

Thanks KS for pointing a few things out. One thing that others didn’t mention was “turn key”. Turn key purchases most likely are bought at market value. I need to have upwards of 30% equity from day one. I’ve always thought (15 years investing in RE, 25 in stocks) this because it sets you up for success. Then cash flow must pay for maintenance and STILL give you your 10% returns. If it doesn’t, I’d definitely move on. As for appreciation, for me, that’s on top of cash flow and a metric that’s great to use for determining net worth. I guess we’ll see what happens in the next 10-20 years when I begin to pull out my 4% from my 401K. But you know, it is nice to have cash flow now in my 50s. So maybe having money today pre- retirement and money later is a distinguisher.

Zapata, I’ll add to what the others are saying. I’d recommend you network with others in the area who know the market better than you and get some feedback. I always include my PM and a contractor(s) in the discussion.