All Forum Posts by: Boruch Leivi Bartfield

@Michael Le - Thanks for taking the time to comment, and help out a rookie!

I hear your point about my equity split being high for a rookie. I'm definitely open to reconsidering the 70-30 and 50-50 structure.

The thought was, that at the 70-30 split, I'd be giving over 8% COC returns to investors in years 1&2. Once I upped the rents and refi'd I'd be giving about 5-6% (after the higher debt costs) with no skin in the game. I figured it's essentially a 2 year loan at 8% with upside. (The game plan is to take the current NOI from 40k to 61k).

Great idea for the proof of funds and the pre-approval! I can (easily) get that done :)

@Cody L. - I have seen many of your comments here on BP. Thanks for your input!

I was thinking 75% LTV from the bank at 400k that's 100k. Plus closing costs and $ in reserves for the updates to up the NOI I'm thinking I need about 150k from investors for the deal plus 30k of my own.

Great point I can always get the T12 in DD as you mentioned, Thanks man!

@Joe Hughis  Thank you for weighing in! 

That's a great point about being able to guestimate the proforma!

My thoughts for wanting the T12's are to be able to present to my investors the contrast of the current returns and the upside potential for when we put in the work. I want to be as pragmatic as can be about the ability to up the NOI for the refi.

I understand the brokers push back and I can certainly respect that as well. However, I am looking for a way to get around that and make this happen. 

Thanks again!

Dear BP,

I had a quick question:

I see a few 10 unit buildings that have a 10 CAP (at advertised) asking between 450-500k and NOI's of between 40-50k. On paper they have great value add potentials (mom and pop ran with below market rents).

Being that I'm butt naked broke (I only have 30k). My plan is to raise all the capital for the down payment, closing costs, and renovations. I want to up the rent to market value and then refi and hold.

I want to syndicate the deal at a 70-30 split, (70 to investors and 30 for myself). Once I refi and all the initial capital is returned to my investors the plan is to swap to a 50-50 split. 

I have raised about 200k in verbal commitment. (I wrote up a detailed executive summary and business plan to get the verbal commitments before locating the deal(s).

However, the brokers have given me push back asking for proof of funds and for pre-appoval from the bank before they agree to show the listings and give the T12s. All I have are the proformas.

Does anyone have any advice for how I can get around this temporary obstacle?

Thank you!!!

@Christopher Phillips I agree as well when you say. 

"You have to work out the numbers. There is the possibility that after all the debt servicing and expenses you won't initially have anything substantial in your pocket, but once you rehab the place and refinance it to pay your initial investors you'll be able to to enjoy the proceeds"

I'd need to figure out how to survive those 2-3 years before I profit.  Perhaps, I will do a mix of both larger units while not profiting initially and smaller duplexes that I can use my own capital for to survive on till I pay off my investors.

Thanks for the advice!

Hey Anthony, 

I apprecaite your advice and insight. I especially agree with your advice to not improve the property all at once. Instead, I should try to improve the property slowly ultimately with the goal of doing a refi and paying them off.

I have found difficulty finding 20% COC deals on larger units, I have seen 20% on duplexes. I did not want to build my portfolio on a bunch of duplexes because the fixed costs are the same no matter how small or large the units are. Also, any small mistake or capital expense makes a HUGE differences when you're netting only 6-7k a year.

However,  I made need to rethink my goals and game plan in order to pay off my investors while cash flowing.

Thanks Anthony!

Hi all,

I'm ready to start buying my first investment properties. I have the properties and my investors lined up and ready to go. The numbers pan out for a 10-15% return. Everything is ready to roll.

The problem I'm struggling with is how to pay my investors back.

The main thing all my investors want to know is when will they receive their principal back. Most are requesting to recoup their initial investment in 2-3 years and don't want to park their money in the property long term. I am willing to move and self-manage but I am struggling to answer this question.

How do I pay back my investors and still turn this into a profitable business in a market that barely appreciates? Part of my dilemma is how to orchestrate the returns for my investors. I was thinking of two options

1. To offer them 8% guaranteed return. And take the money as a loan. The problem is how to get the principal out of the property? (I was thinking to offer to swap out their investment with new investors when the time comes and they want their principal back.) 

2. To offer equity in the deals. To be completely candid, I am unsure how to make this work.

In essence what I'm asking is - how can I start a real estate business without supplying all the capital and still make room for myself?

For a point, of reference here are the numbers on one of the deals I am looking into now:

- Purchase price $150,000 - 8-units

- AGI $48,300 (currently fully occupied)

- Total expenses $20,317 (including 10% for vacancy, Managment, and R&M)  = $33,174

- NOI: $15,126 =10.1% CAP

- Annual Debt costs: $7,892 (my mortgage lender offered 75% financing at 5% rate, amortized over 25 years)

- I assumed $20,000 for construction (we walked through the property, it needs much less than that)

- 6% closing costs ($9,000).

-Total out of pocket expense: 25% down = 37,500. 20k construction and 9k closing = $66,500

- Leaves me with a very conservative $7,234 NOI ($15,126-$7,892 = $7,234) and a 12% Cash-on-cash return. ($7,234 / $66,500 = 11.8%)

Any leads or assistance will be greatly appreciated! I would love to chat with someone personally for some guidance.

Thanks

Hey Alan,

I am looking to do rehab work on a 3 unit I recently purchased. 

Thanks,

Leivi

Hey Y'all,

I'm from Brooklyn NY and have have just bought my first property! It is a 3 unit BRRRR in Nanticoke Pa.

I have a PM and contractor in place for the job but I'm not 100% sure how I feel about using them. If anyone has any recommendations that would be greatly appreciated!!

Leivi

Hi y'all,

I appreciate everyone's responses! (I am even more ignorant than I thought, the more I learn the more I realize how little I know about investing in real estate).

@John Hickey Thank you for sharing your story with insightful details. It allowed me to get a more pragmatic understanding to the different expenses associated with rentals .

@Adam Giles I love the idea of using a self made spreadsheet to build formulas to calculate Coc and NOI returns!

@Adam K Thank you for taking the time to respond and clarify everything.

1) That the 50% rule and the 200k suggestion doesn't apply in NYC. 

2)That 10% CoC is unrealistic in Brooklyn.

3) I do understand real estate is a "get rich slow" play. I know I said "quit my 9-5", but it was more of a sense of shifting my focus from just my 9-5 to investing as well.  I want to be at the point where eventually (thanks to real estate) I will be able to quit my 9-5 way down the line. I will not be quitting my 9-5 any time soon. However, I would still like to make a move whilst I'm young and not "bogged down by life".

4)I do have a partner and other investors to help fund the down payment would you still suggest an FHA loan?

One Love

Hi Arpan,

Thank you for the swift response! I appreciate you clarifying the 50% rule for me. I am (evidently) A complete rookie. 

3-4 units is definitely doable in my area.

Thanks for the tip about using the BP calculator, I'll give it a whack.

Best,

Leivi