All Forum Posts by: Bo Goebel

@Ashley Wolfe
First off, the biggest win is that you are looking reinvest the earnings from your last deal. You need to decide where you spend your money based off of your goals, but I would definitely set aside some of the profits to work on education. Invest in yourself early.
All of my answers should be vetted by a professional...but I'm trying my best.

It is not necessary to form an LLC to do a lot of REI business activities. If you are purchasing another rental, I would establish that rental in an LLC. If you are serious about REI, I would also recommend getting it set up early to start building your "brand" and add credibility. This also depends on how active/passive you are....

A trust is not redundant and you need to discuss with your lawyer, who you need to seek out sooner than later. Most people wait until they exceed a couple of million dollars to establish trusts, but there is pros to doing it sooner.

Money in the bank is important, so are IRAs, college-funds, diversification, paying down debt, etc. (and of course, real estate) 

If you have large taxable income, then the tax advantages of actively investing could be much more beneficial. However, for most beginners (or average people), I think tax advantages should be seen as icing on the cake, not the primary reason to invest. 

At this stage, Ashley, I would focus on finding trusted partners and building the team out. Networking and educating. Surround yourself with really smart professionals, and you will do well.   

@Gloria Sheridan

On the refinance, I wouldn’t pursue unless the value (on an appraisal) can be raised significantly. Several reasons-

1. You have better terms that you could get under a commercial loan, which is necessary if your LLC is on the title and not you.

2. The appraised value being lower than purchase price will force you to bring more cash to the table... or you can wait and have the benefits of loan amortization and (possible) appreciation raise your equity.

3. As @Jay Hinrichs mentioned, owner financing doesn’t come up on any debt/income ratio. This will (potentially) give you more lending options on the next deal.

4. Perhaps most importantly, in my humble opinion, is you struck a contract with a person. Without knowing his situation, I can’t speculate what impacts a refi would have on him, but it is definitely a conversation I would have before considering it. Putting him in a bind for a slightly better loan policy is bad business, and may save you a couple of dollars but could ruin a relationship. 

At the end of the day, the seller could be perfectly fine with it though, just something to consider. 

Building up capital (cash), is an excellent way to prepare for any downward movement in a cycle. Following the premise of "buy-low, sell-high," saving money to prepare for when prices drop is an important part of an investors portfolio. Cash is the most liquid form of currency there is, and the best tool to have when purchasing power goes up.

@Gloria Sheridan

Good work! Thanks for the share and congrats. I hope you are able to get the additional $150 you seek in a rent bump. Way to make seller financing work as well. 

You have some solid points about value-add and "repositioning units." @Brandon Turner made BRRRR famous, now it seems it can be some of the only ways investors will buy. Sometimes you just go with a good deal.

A few things I'd like to ask/comment on:

1. Please touch on the cost/process for separating the water meter?

2. I agree that 8% is conservative on the vacancy (for multifamily), but I would much rather have conservative underwriting than underestimate a December move-out and a unit that sits vacant for several months.

3. I noticed you do not include property management as an operating cost, which is what a lot of investors (and self-managers) do. You are not wrong, I just prefer to underwrite the cost in there and effectively pay myself.

4. What were the terms of the seller financing you came to? 
 
Most importantly, good job reassessing the deal after some time. It will lead to further success, as you mentioned.

Congratulations on finding BP! With your background, @Joy VanAssche, you will have a competitive advantage in whatever market you decide to work in, I'm sure you will discover excellent ways of leveraging that.

Do you know where you want to buy? Are you looking for residential or commercial multifamily?

@Luka Milicevic
 I'm sorry to hear about your permit being revoked. That is a tough loss...I know first-hand the hard work that goes into figuring out how to legally operate a STRP in Nashville. Navigating the regulations alone are tough enough, let alone all the efforts it takes to start and operate a business. Definitely not passive.   

Your issues with the law is ridiculous. I've heard of horror stories, but never anything about honorable judge protecting his own interests.  Nashville pays the big hotels millions every year in order to "subsidize" nightly rates, and yet the city cracks down on individuals or groups trying to find a solution for the market.  

I still believe that STRPs are a viable investment opportunity, in Nashville and other places. Investors have to be willing to purchase at much higher prices and compete with institutional money. (to include entire apartment buildings run by Airbnb and Niido). I was putting syndicating to purchase a building of townhomes near downtown, but am not pursuing it anymore due to (amongst other things) uncertainty of what the market and competition will look like in 5 years. Maybe I'll follow up with a little piece on what happened with that project....

Good luck with everything else you have going on, Luka.

I’d do right by my family first, which means a detailed conversation with my mother that focuses on her situation and her wants and needs. If she truly doesn’t care, weigh your options. Are you going to use the money to invest further? Is the ROI of this investment worth the risk of using someone else’s money. Be a good steward of her money, and have her best interests at heart. There is no black or white answer- only a decision to make. I would error on cautious side (pay her back) when family is involved, but that is me.

@Stephen Thomas

What's the projected time frame and amount you are needing to fund?

@Justin Holley As long as you are purchasing in your name and not in an LLC (or any other commercial entity), it can be purchased as a residential loan. With the residential loan, though, you should expect to put down 25%.

You could use a commercial loan with a local bank/credit union and expect that at least some of them will lend to you with only a 20% downpayment. 

There are obvious pros and cons to either situation.  

@Josh Ledbetter The only concern I would have for this type of short-term rental would be how you are going to find the tenants/how the tenants will find you. 

If you have marketing systems in place to locate this very specific group of people, (and there is a demand for this type of rental at your location) then go for it. If not, I would just take into account the risk of higher vacancy or a longer "start up" period.