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All Forum Posts by: Ryan Braman

Ryan Braman has started 15 posts and replied 36 times.

Post: Insurance companies leaving markets - government reaction

Ryan BramanPosted
  • Investor
  • Lexington, VA 24450
  • Posts 38
  • Votes 6

With the latest news of State Farm's 'strategic withdrawal' from California, how do you think states will deal with this? Not care, introduce legislation to bridge mortgage insurance requirements with lack of providers, get in the insurance market themselves?

Post: Alternative analysis of BRRR vs sale?

Ryan BramanPosted
  • Investor
  • Lexington, VA 24450
  • Posts 38
  • Votes 6

 @Andrew Postell and @Robin Simon thank you for your responses..I'm in a super small market so there weren't a whole lot of alternatives to re-invest the money in, but ultimately I think you were right in that it comes down to comparing against other marginal investments. Against a notional property with a comparable ARV around $360k, the BRRR gives better returns.

@Deandre P. that was what I was looking for! Different numerical answer, but the same result as above in that I ultimately needed to make a yes/no decision..ended up keeping the property and will BRRR it in the next few months.

Post: Alternative analysis of BRRR vs sale?

Ryan BramanPosted
  • Investor
  • Lexington, VA 24450
  • Posts 38
  • Votes 6

Does anyone have an alternative way of calculating the value of a BRRRR in terms of future income - present value? Annuity, perpetuity, zero-coupon bond with a speculated maturity value? What I'm trying to solve is finding a present value baseline to compare the BRRRR'ing a property vs selling. Am I overthinking this? Does anybody have a simpler way of comparing the two scenarios?

Specifically, I'm in for $230k on a property that will need another $60k to finish renovating. Once completed, I can cash flow without refinancing, around $22k annually. If rates drop I can refi cash out...dependant on rates. A neighbor has given me an unsolicited offer (no $ amount mentioned) to buy the house so they can level it and improve their property value. I'm trying to analyze what the property is worth to me, in order to sell it?

Thank you!

Post: Negotiating for a state-owned commercial property

Ryan BramanPosted
  • Investor
  • Lexington, VA 24450
  • Posts 38
  • Votes 6

BLUF: I've never bought government-owned or commercial property, but I'm putting together an offer for one (government) and I'm looking for anyone else who may have bought/offered on state-owned and can provide their experience to help me frame negotiations.

About the property: State (Virginia) owned property..currently in conservation and the County will convert it to Agriculture post-sale. Mothballed facility (10+) years, costs the state $10k/month to keep up..been on the market for over a year, they are using a commercial real estate company out of Richmond. They dropped the price this summer by about $500k, I'd still like to offer significantly less than asking.  Lot of unknowns regarding the septic system..even the state isn't sure what's going on. Structures on the property need a decent amount of work. 

My motivation: The property makes sense for me b/c of the particular layout and existing infrastructure..it is the only property that I'm aware of in the entire County that I can use for a specific non-profit purpose that I've been looking for.

My concern: I've made a couple offers and purchased a few residential/multifamily properties, but I'm definitely more intimidated at the prospect of dealing with the state and/or a commercial broker. I'm not a good negotiator, I suck at building rapport, and the one thing I remember from all the podcasts/posts on negotiation is that you need to understand seller motivation/build rapport..so there is that. And I'm not sure how much that matters with the state.

My question: Anybody been here before? Negotiated for a state owned property..is it a 'normal' negotiation, should I expect them to be pretty firm on the price?

Post: How do you value equity in a deal?

Ryan BramanPosted
  • Investor
  • Lexington, VA 24450
  • Posts 38
  • Votes 6

I have an opportunity to put an offer on 7 units (5 SFH + a duplex) that were recently appraised for about $700k. They all have serious deferred maintenance, I'm looking at probably 2 new roofs, 2 new furnaces, 2 new mini-split A/C systems, and probably a lot of new appliances within the first 3 years if I purchase. Right now, their gross rents are $4,100, and I can renovate/occupy one of the duplex units for $60k to bump my gross rents to $5,100. There is not a whole lot of other work I can do in terms of increasing cash flow.

I was considering making an offer of $400k, which would allow me to put in the $60k to reno the duplex and another $50k for the mentioned needed repairs plus the inevitable ones that I don't see coming. Financed at 80/20..that would put me in at $190k for about $60k/yr gross. This would let me hit my cash flow objectives.

If the seller doesn't want to sell for that, and asks for something closer to their appraised value, how do I place a value on the equity that I capture in the deal. In other words if I buy for $600k, value is $700k, so I have an automatic $100k equity on the project...is there some guidelines on how much equity makes it a good deal? Or is this one of those things that is completely dependent on my individual position? I've only used cash flow to analyze deals before, so I'm struggling to wrap my head around how to consider equity..

Thanks!

Ryan

Post: My first offer letter - deal analysis

Ryan BramanPosted
  • Investor
  • Lexington, VA 24450
  • Posts 38
  • Votes 6

Good question @Jimmy Lieu, they had an appraisal that was less than 6 months old and didn't seem to be in a big hurry to unload the property..so they weren't really motivated sellers. I felt like I needed to put extra attention into walking them through how much it would cost to get the house to either resale or rent condition, so they understood why my offer was so much lower than the appraisal and so they would understand the cost involved if they decided they wanted to go that route themselves. I spent a good bit of time on BP looking for tactics on how to approach sellers who aren't motivated...this seemed to be a common approach. I probably wouldn't do the same thing if they were motivated.

Post: My first offer letter - deal analysis

Ryan BramanPosted
  • Investor
  • Lexington, VA 24450
  • Posts 38
  • Votes 6

Thank you @Cody Barna I had a couple great conversations with the granddaughter and her mom that helped make everything in that letter authentic. I've really wrestled with trying to make offers that fill my need to provide for my family, but that also fulfill the needs for the people who have to let go of family homes and all the emotions and memories that entails. This has not been easy for me, I'm finding that I don't have nearly the detached perspective needed to do this on a large scale..conversations with the owners and building a relationship seems to be my stronger suit.

Post: My first offer letter - deal analysis

Ryan BramanPosted
  • Investor
  • Lexington, VA 24450
  • Posts 38
  • Votes 6

Just made my second off-market offer, first offer letter. The first time I went over to the seller's house with a bunch of spreadsheets and walked them through it for about 30 minutes..this time I'm using a letter and sending via email. Context is, they've already had an appraisal that put the home value at $88k, it was the grandfather's who left it to his three elderly children, who picked one granddaughter as the executor. She told me a realtor had suggested she start at $88k, but she was okay negotiation on it as long as she sold it for 'market value.' Please let me know what you think..Thanks!

Dear Ms. XXXXs,

Thank you for letting me make an off-market offer on your family's home. My offer for XXX Massie St in Lexington VA is $66,000. I plan to renovate the home and rent it out through a local property management company and this offer is contingent on obtaining financing through Cornerstone Bank, which will take from 30-45 days.

While this offer is probably lower than what you would ask for if you were to list XXX Massie, selling it to me off-market provides the following benefits:

No agent commission - You will save anywhere from $4,000 to $5,000 on agent commissions.
No contingencies besides financing - I am buying the home as-is. Even if you list the home in as-is condition, many buyers will still try to negotiate home inspection/repair contingencies into the contract, wasting your time and holding up the sale..I am offering a pure as-is purchase.

Relatively quick financing - due to COVID and the massive numbers of small businesses seeking loans in response, many lenders are overwhelmed and delaying lending actions. I’ve been pre-approved by Cornerstone for this amount. The 30-45 day timeline is what they require to go through the actual lending mechanics.

Security - there is significant upheaval in the real estate community due to the market uncertainty caused by COVID. The expectation is that late fall will be the earliest that we expect to see some stability and more predictability, with the possibility that these conditions extend well beyond. By selling to me now, you are offloading that risk to me and you don’t need to worry about future market drops and their effect on your ability to sell the home.

My requirements for a property include two primary factors, it must return over $100 a month in net profit, and that net profit must represent at least an 8% return on any personal cash that I’ve invested. I came up with the offer price through the following analysis:

Purchase $66,000

Renovation +$60,100

Closing/holding costs +$8,300

Total costs $134,400

After-renovation financed -$116,000 ($145,000 home value * 80%)

Personal cash expenses $18,400

Anticipated rent $1,250

Monthly mortgage -$678 ($116,000 at commercial terms - 5% and 25 yr)

Monthly operating costs - $448 (management, insurance, taxes, maintenance, etc)

Monthly cash flow $124

                        x12 months

Annual income $1,488

÷$18,400 (personal cash invested)

8.1% return on investment

Thank you so much for your consideration and allowing me to look at, and make an offer on your home. Regardless of you and your family’s decision, it was a pleasure to meet you and your mother and I wish you both the best!

Respectfully,

Ryan Braman.

Post: Finding out if my CPA is the right fit

Ryan BramanPosted
  • Investor
  • Lexington, VA 24450
  • Posts 38
  • Votes 6

"Your accountant can't help you get somewhere they themselves have never been."  That's gold..thanks @Mitch Messer

Post: Finding out if my CPA is the right fit

Ryan BramanPosted
  • Investor
  • Lexington, VA 24450
  • Posts 38
  • Votes 6

Any advice on what types of questions to ask my accountant to determine if they're the right fit for my REI business? Just started investing late 2019, I own a couple of properties under a LLC, and asked him if I needed to do anything specific/different due to my status as a real estate investor / property manager and his response was to 'just keep track of expenses.'

In fairness, it was a generic question so I should have expected a generic response..I've since read the Book on Tax Strategies, and I feel like there was some additional things that I could have been doing..not necessarily the CPA's fault for not knowing/offering the same info to me, but I can't afford to leave any money on the table here.

The only reason I'm asking the hivemind is I want to tread lightly because I respect this guy; he reached out to me and gave me an hour of his time when my wife passed to help me get stuff straightened out..but I also want to feel confident that he's going to be giving me recommendations tailored to my situation.

I was just thinking of asking if he knew about self-directed IRAs as a kind of litmus test..anybody else have any non-confrontational questions that I could use to see if I should still use him?