All Forum Posts by: Bora Yalcin

Make sure your numbers are spot on. In my market most MF deals are to expensive. After purchase price and taxes you barely break even, in addition if you’re financing via conventional methods you’ll use a lot of cash. The last main thing I can think of is that multi family properties appreciate at a slower rate and are less liquid. Again, just run your numbers and if you feel comfortable pull the trigger! 

Hi David,

If you’re willing to take a little risk you can start with as little as $50,000. Depending on the market you’re in you should be able to find a lender who can provide you with leverage and reimburse a portion of construction cost. Then you can refinance or sell the property and move onto the next one. Depending on the route you take you’ll either grow your portfolio while making back most of your cash or gain experience and substantially increase your cash on hand. 

When you watch all of the shows on HGTV you’ll quickly notice that one of the first things they do is hire a General Contractor (GC). This is a great strategy for someone with experience, or once you already have relationships in place. As a newcomer to the business you may find hiring a GC is much more dangerous than meets the eye.

On your first few projects you will just be vulnerable, that’s not to say you might not win the GC lottery. You could hire an honest hardworking GC that prices you fairly, finishes the job on schedule, and does a proper job that will last for years, but keep in mind that this is the outlier not the norm. 

When you act as the GC you get to build a network of professionals. You will meet and work with electricians, plumbers, carpenters, HVAC professionals, painters, cabinet vendors, countertops vendors, just to mention a few of the components in a successful project. This network will be your most valuable resource going forward. When you hire a GC you are at their mercy, you build no network. The GC is the only person you interact with, this they are in control, if you break the relationship with them you lose all the relationship they have as well. Take my advice, you will need this network if you plan on building a sustainable business.

The next advantage, and one that might not be as clear, is permitting. By running your own project you will learn how to pull permits, schedule and manage inspections, meet construction guidelines, etc. This will teach you what to look for and how difficult specific renovations will be future projects. Just as importantly, it will put you in charge and teach you the administrative side of rehabbing properties.

The final point that I wanted to touch upon during this post is pricing. When you hire a GC they will general give you one price with payment terms. You won’t have the opportunity [to learn what the true cost of projects are. For example a GC might say they can tile a new shower and bathroom floor as part of their overall work, which may include paint, drywall, and kitchen work. If the total cost is $40,000 you will have no idea what aspect cost what. You may be thinking you know how much a tile install costs because you looked at Home Depot and tile is $4.99per square foot...so, simple multiply that by square footage. By being your own GC you’ll learn it’s not that simple. You’ll need backer board, waterproofing, mortar, grout, and possibly other components just for tile. When you GC your own projects you learn about true material cost and true labor cost. Most importantly this allows you to correctly estimate the cost of future projects accurately and budget accordingly, giving you the ability to run a better analysis on whether a project will be profitable or not. 

I hope this helped and at least got you thinking about the possibility of being your own GC, at least for the first project or two. If you do go down that route I’m sure you will find it to be an invaluable learning experience. Best of luck!

So, being a new investor I'm always looking for ways to save money. My thinking was by doing some things myself I can funnel the saved cash into the next deal, or I can gain experience by being hands on when possible, or that thing on a project myself will help my daily cash flow. 

Using that mindeset I decided to paint my most recent project myself rather than have it contacted out. The best bid I received on the interior painting of the home was $3,200. After discussing it with my wife and brother (my partners) we decided to handle the paint ourselves...it was a mistake.

We did a good job, and we've painted before, but it was still a mistake. The project took us almost three weeks, where the professionals could have finished in just one week. We only had two days a week to go over there and do the work becauase of our full time jobs. In addition it exhausted us, because when we werent working we were thee painting.

Most importantly, it took time away from working on our business because we wee so busy working in our business. We couldn't network, analyze deals, look at other markets, arrange financing, or anything other than paint to be honest.

What we learned is that sometimes it's important to spend the money to free up time and energy to work on moving forward and building your business. Don't make the same mistake.

@Michael Facchini

My plan at the time of purchase was to keep it as a long term rental property. I wanted to have good cash flow and use the equity to leverage additional SFH purchases in the same area.

With that being said, I think of myself as an opportunist. If I were able to sell the property at the right price and parlay the proceeds into 2 more properties I would take advantage of that opportunity.

Thanks for getting the thought juices going!

If you have any other advice or ideas please don't hesitate to share!

Hi @Roy Gutierrez

So, it sounds like you got a good thing going here. I don't know how you just fall into 2 properties, but I guess that's a tale for another time.

Based on the ARV's you've provided us to look and the information on the debt you have there seems to be one obvious route to take. Take the equity you have in all the investment properties and either take a HELOC against one or all of them. The other option is to refinance the properties, especially the one that is free and clear.

Remember, you've quit your job, so now you need to invest like an investor...not a hobbyist, so be active not passive. A free and clear home is of no use to you anymore, you need to take that equity and translate it into more cash flow.

If you can refinance out a few hundred thousand you should be able to acquire 6-10 more SFH's in your area (if my assumption on your market is accurate).

Lima One Capital, Renovo Financial, and RMAC Lending will give you some initial lenders to contact since it will may be difficult to HELOC investment properties or refinance anything at all without a W2 job. You may have to LLC and transfer the properties, this way you can get commercial loans (should be easy since you already have 4 of them and good equity/cash flow).

Don't be scared or over analyze, do what you did to get you to your current state. Now, you have more time, so use it to build quicker. Good luck!

Hi @Austin J.,

This sounds like a good deal! 

First off the price is a really good value and the opportunity to increase cash flow by implementing lease agreements annually, as well as making some improvements seems to be there.

The question you need to ask yourself is what the neighborhood is like, and is it a neighborhood you want to own a property in. If the units are month to month I would take the whole “fully rented” aspect of the owners/agents sales pitch with a grain of salt...why are there no leases in place to protect the owner? Is it month to month because that is all the property attracts in its current state, or is it just prone to those types of tenants due to location? You need to find that out first before jumping in.

Before going for owner financing as an option you should find out if its even possible. Go to the county tax assessor website for the county and enter either the address or the parcel number to find out who the actual owner is (if its a company, trust, or bank owned owner financing won’t be an option). If the property is indeed owned by an individual or “mom and pop” investor you’re in business. 

Their personal address, they might live in the building might not, will be listed as part of their tax information. Use this address to contact them either via letter or use it to attain their phone number.

The tax accessor site should also let you know what loans/liens are on the property. If the information is populated with the term “release” then you can keep moving forward. This means the property is actually clear of debt, and the owner CAN finance it to a new buyer if they want.

Pitch the owner by telling them they’ll make more money by financing to you. Structure at a higher than bank interest rate, with a balloon payment after 3-5 years. This allows you to make improvements, put in place better tenants, improve cash flow, and put into place some forced apperception.

Once the balloon becomes due you can refinance using the rental income as part of your income. The owner will get their cash payment on the property as well as “mortgage” payments and interest in the mean time.

Create an IRR and present it to them if you get a sit down, they'll bite if you push the idea that at the end of the deal they come out with more cash then if they just accept conventional or even cash (tax purposes).

Good luck to you, and if you have any questions or want to bounce some ideas let me know. 

PS. you should be proud that your taking steps toward your goals, if you close a deal like this with just $5,000 you’re on your way to a very bright future.

Hi @Karl Lathus,

Congratulations on your first flip! Is this your first time investing real estate or have you had a role in other types of real estate deals (buy and hold, wholesale, lending, etc.)?

I recently finished rehab on my first investment property in the South Chicago suburbs market, and would love to hear more about your project as it progresses. I decided to go the rental route, as my strategy involves buy and hold and more of an emphasis on cash flow.

With that said flipping has intrigued me, I mean the payout sounds great. 

If you’re looking for some good deals take a look at Steger, Matteson, Richton Park, Crete, and Monee to name a few. You might be able to find some deals that make sense to you. Like I said, I haven’t looked at these areas from a flippers standpoint, but based on my research you can find good deals in decent neighborhoods, might be worth your time.

Hi @Michael Sobczyk,

I think this a dilemma that a lot of people have, including myself. I decided to invest in real estate in April of 2017 and closed on my first rental property in August of the same year. I purchased the property cash for $26,000 and rehabbed it for $22,000. 

I decided to go for one property all cash instead of multiple for numerous reasons, but there is one reason that is at the core of all the rest, RISK.

Since I’ve never done this before I figured having a house free and clear would be the lest risky move. Meaning, if everything went terribly (rehab, rental, being a landlord, market crash, being a landlord) I still have a paid off asset that I only need to pay taxes and insurance for. This is risk I can bear, and risk that would not ruin me or set me back years if any one of these scenarios became reality.

Another reason was cash flow. I wanted to learn the game before joining the pros. I learned about purchasing value add properties, contractors, pricing rehabs, tenant screening, legal issues, and more without the stress of making monthly mortgage payments. It allowed me to really learn about real estate investing rather than worry about making enough money quick enough to ensure payments were made on time.

When the time comes I’ll cash out the property and maybe go to a portfolio lender. I know I’m missing out on accumulating more units at a quicker pace, but my worst case scenario still allows me to play the game...with an all cash deal I can whether the storm and come out okay. I also get to learn a lot without the stress.

The best business advice I ever got was not to think about “what’s the situation you find yourself in if all goes accordingly to plan”, rather think about what happens if everything goes completely the wrong way. After doing this if you can survive that happening without ruining your personal, business, economical, and emotional well being then you should go that route, but if any of those are at risk do something else.

I hope this helps. Best of luck to you!

Hi @Nick Castrilla,

Welcome to BP!

I’m also new to the real estate investing arena, and have found BP (especially the podcast) an incredible resource for motivation, education, and idea generation. I’m located in Chicago, so I can relate (to an extent) with being in the Midwest market.

I decided to get into real estate around April of 2017, and closed on my first property in August of the same year. 

My advice to you as a fellow newbie, and as someone who made the plunge into real estate investing would be to move quickly! Don’t over analyze or tell yourself you’re not ready, I don’t think anyone is ever “ready” you just have to go for it.

In addition, it really accelerated my action once I decided on a strategy and a market to invest in. Listen to the podcasts, read books, browse the internet to find answers to your questions/concerns, and overall just be a sponge...soak up everything you can and do your best to retain it!

If you have any questions on how to get going quickly as a newbie don’t hesitate to reach out.

Best of luck to you and congratulations on taking the first step towards living the life you want!