All Forum Posts by: Brad Jacobson

Hey Bryan,

Congrats on the success and I hope the next steps prove successful as well!

First, if you are going to refi your current house, make it a rental, and purchase a new home to live in, definitely do that while you're still on a W2 salary because you're right in thinking that banks will make it much more difficult when you become self-employed at first.   I'd do that immediately.  Hopefully the spike in interest rates doesn't hurt too bad.

Second, when you're purchasing fix & flips, you're not really going to ever need bank financing unless you plan to hold them long term.  You're best bet is to buy these flips with hard money and only hold them for three to six months or so.  Make sure you're networking with the right lenders and folks who will help you find deals!

Good luck!

@Drew Sygit, @Account Closed,

Thank you so much for all the insights!  This was exactly what I was hoping to get from this thread.  I especially appreciate the insight on asking about their vacancy rates, percent of units behind on rent, and details of the company's processes.

Appreciate you all!  I'll be using these ideas in a few calls today.

Hey BP Crew,

What are your go-to questions and tactics for interviewing and vetting property management?  Aside from the cost, how do you determine how well a property manager will perform?

I've gotten a few referrals from other investors in the Jacksonville area and have a few calls scheduled with PMs today and I'm curious what your best strategies are.

Thanks in advance,

Hey Chad,

Love the question!

1. A good real estate agent does far more than simply write an offer.  A good agent is able to see through the list price and determine actual market value for a home, negotiate concessions based off due diligence findings, connect you with the best inspectors/lenders/title and ensure you're getting the best bang for your buck and are able to transact successfully, write far more competitive offers than inexperiences agents, compete for you when confronted with multiple offer scenarios, get creative when needed, teach you the benefits of owning real estate and how to make your home an investment, etc. etc. etc.  There are SO MANY advantages to working with a pro that it pains me to think that many retail clients think all agents are the same.  

2. When you find a great agent, they'll walk you through the tax benefits and benefits of opening an LLC. Your main tax write offs will be mortgage interest and office space for a personal residence. If buying an investment property, a good agent will show you how to buy the property in an LLC and/or trust to limit liability and will then show you the basic tax advantages starting with standard straight line deprecation all the way to a cost segregation.

2(a). If you're asking about your own personal S-corp or LLC, instead of using a CPA once per year, you need to hire professional tax planners that will help you set up the proper tax structure for your business. You'll become an employee to your own LLC and will need to start tracking your expenses, miles, office space, Augusta, and even look into rental property cost sets to wipe out your earnings as an agent.

All in all, it's foolish to roll the dice with an agent paying for leads from an online service like Zillow or Realtor.com.  Wise clients will get advice on the right questions to ask and then qualify their agents accordingly.

Hope this helps!

Hey Frosso,

I agree with Eric completely but would like to expand on his comment a little bit.

Your ARV will be driven almost completely by the rents and cap rate so your focus will need to be on bringing the proper value to the property that will increase rents. If you can add bedrooms, bathrooms, central air, updated kitchens, new carpet and/ or paint, etc. do that. Once rehabbed, get top dollar rent with a professional photoshoot.

Once you've got all the units looking great and rented out for top dollar, you'll see a big value increase with any appraiser.

Good luck!

Thanks a million Jeff.  This summary is exactly what my brain needed to digest these options.  

If I may, how would you pursue personally?  Would you trust a shorter term variable rate on a commercial loan or do I just bite the bullet on three separate loan originations and put myself in a superior long term hold position?

Hey Fellow BP Fans,

I've had an opportunity arise in which I may be able to purchase a set of three 4plexes in a bundle.  The seller isn't interested in any sort of wrap or seller finance so I would like to purchase them with a good long-term financing.

What's the most effective way to go about financing the purchase?  I know I can get three separate investment loans, one for each 4plex, but I'm curious if there's a way to wrap up all twelve units in a single portfolio loan or something along that line.

What's the best path forward here?  If I can wrap them up in one loan, what's the advantages and/or disadvantages to doing so?

Thanks in advance,

Hi Ray,

You always need to have a lease in place because a lease does more than just keep the tenants in place for a certain time.  A good lease outlines and enforces the rules of the property and adds a slew of legal protection for you as the landlord.  

Moving forward, I would still recommend keeping longer leases but just do a better job of vetting the tenants.  Make sure you're using a website that processes applications with a credit check, background check, and that you're contacting prior landlords for their honest take on the tenants.  The goal is to get great tenants in with a strong lease and try to create a scenario where they'll want to stay well after the lease expires!  I was so sad to hear when my last tenants moved out after their 12 month lease expired.  

If you're struggling to find great tenants and don't trust standard lease timelines, read Brandon's book on property management. It should help a lot!

Good luck.

Hey Mark,

You're the man.  Way to save so much and be investing from a position of strength!

My opinion is that the 30yr fixed rate mortgage is one of the best, if not the best, financial tool available anywhere.  You'll never get access to less expensive money ever.

You'll also only be able to take advantage of the owner-occupied, low money down loans a few times throughout your life.  The rest of the loan you'll get will be investment style and will require you to put 10-25% down.

Based on that, I'd only put down the minimum, 0-5% and save the rest to enable you to continue investing in more properties or being able to rehab out of pocket.  The return on your investment of 10-20% down isn't going to yield hardly any difference from 0-5% down.  You'll get the same appreciation, tax, loan paydown, etc. benefits either way as long as you just buy the property.  

Buy the property with as little down as possible and then start saving all of that good house hacking money for your next investment and put 20% or whatever down on it would be how I'd manage your situation personally. 

Good luck!

Hey Sean,

Are you an agent or are you working with an agent?  If so, this is definitely an appropriate situation to get the managing broker to look at the finite details of the REPC and agreement.  All purchase contracts vary from state to state and like Karen said, the devil is in the details.

If you're not working through a brokerage and can't get a quick broker's opinion, you can also contact a real estate attorney to get a quick opinion.  That might cost you a little money but hopefully you can find one through a personal connection (by posting on FB or something) and get a quick clarifying piece of advice.  

In most states, the contract dates formally end at 5:00pm so if you need to back out to save your earnest money or something, keep the hours of the day in the back of your mind to ensure you're protected.  If you're running out of time, you can always ask for an extension to the due diligence contract for a few more days while you and the seller negotiate things.

Good luck!