All Forum Posts by: Brian Kantor

I don't know what the rest of your financial picture looks like, but you could possibly consider Asset-Based Lending. It's essentially the same thing as a HELOC, but uses the assets in your brokerage account as collateral instead of a home.

Some points to note:

These types of loans are only available in managed brokerage accounts, so if your stocks/bonds/ETFs are in an eTrade account (or whatever), you'd need to move them first.

These accounts typically require something like a $100k to $125k minimum asset value to approve a loan, so if you've got less than that it wont work.

Most managed accounts cost a 1% annual management fee, so think of that as an extra 1% on top of the interest rate.

These accounts typically let you borrow up to 75% of your equity, but due to market fluctuations, you should consider imposing your own, smaller limit.

Interest rates are comparable to a HELOC, plus that extra 1% management fee, and like a HELOC, it's a revolving line of credit vs a fixed, monthly payment. You only pay interest when you borrow against it and while there is an outstanding balance.

I have someone I can recommend, if you want to discuss with a professional. DM me, and I can share his contact info.

Elevators require routine inspections and will add to your insurance costs. With that said, it's just one more expense line item to factor into your calculations. 

The bigger issue is if/when you need to replace it, which is a massive expense. They can last forever if well-maintained, but modern elevators are legally required to be large enough to fit a gurney. If your property was built before that law was put in place, it's POSSIBLE (depending on your local laws) that upon change of ownership, you'd be required to upgrade the existing one or add a second, larger one.

Net-net be sure to check with your local municipality before you put in an offer to make sure you know what you're getting yourself into.

@Obed Calixte is right. Start by niching down Find something super specific, and it really doesnt matter what that is. Every strategy you named works; just pick the one that works for you. Read one book on that strategy cover to cover and take notes. Pick the strategy, the area, the type of property. Do your research (that you learned from the book) and start putting in offers.

My first deal was the opposite of a home run. Base hit at best. That property has barely broken even in cash-flow, but in the 2 years I've had it, it's appreciated about 30%. I learned so much more from that one deal than I did with everything else. Just start.

Good luck.

Hi, Alex. I have a recommendation for you. Shoot me a DM.

@Paul Defngin asks a good question. If they are of the legal retirement age, a bank should be able loan based on their net-worth instead of their income. Other options to consider would be:

• A DSCR loan (worse terms than a standard mortgage, but way better than hard money)
• A HELOC or refinance on their town house, and put that money towards the new property buying it outright in cash. A HELOC typically has great rates and buying the new property in cash could bring down your cost.
• A loan against a whole life policy, if they have one
• A loan against their stock portfolio, if they have one (must be in a broker-managed account, similar rates and structure to a HELOC)

With that said, it's worth asking if they are planning to self-manage or hire a property manager. I point that out, because you said the expenses on the town house are $1700 and the rent would be $2000. That doesn't leave a ton of room if there are other expenses you havent considered. And if a property manager isnt budgeted for, and they hate self-managing, that could be an issue.

@Bhargavi Karumanchi, you're very welcome!

Thanks, @Andrew Freed! I like this a lot. I will definitely DM you. Anyone else have any tactics that work well for them?

Just like many of you, my preference when purchasing a new property is for it to be vacant, so that my property manager can vet quality tenants vs the roll-of-the-dice that comes with inherited tenants.

That said, where I primarily invest—Detroit, MI—inherited tenants are pretty commonplace in 1 to 4-unit properties, and sometimes those deals are just too good to pass up. 

So with that in mind, I'm looking for any suggestions on how best to handle inherited tenants with the below end goals in mind (in order of importance):

1. Protecting my investment and cash-flow
2. Serving the tenant well
3. Treating the seller fairly

Here are the questions I have... 

Estoppel Certificates:

1. Do you ever submit an estoppel certificate to tenants in properties with so few units? 
2. If you do, does this request get included in the Purchase Agreement?
3. Have you ever had sellers push back on this and if so, how have you gotten them to agree?

Transitioning from MTM to a lease and raising rents:

1. If a tenant is currently month-to-month at a below-market rent, do you suggest having them resubmitting an application in order to be "approved" for a long-term lease?
   
2. Do you offer the tenant a window of something like 1 to 3 months to stay on a month-to-month situation before requiring that they commit to a longer commitment and annual lease?

Anything else I should think about or any other suggestions?

Please note that I am not coming in and raising rent without cause; I'll always come in and fix up the property so that the tenant feels like they are being treated fairly.

Thanks!

I'm going to give a little plug here to Bigger Pockets' "Multifamilly Millionaire Vol 1", which comes with an estimator tool for CapEx and Repairs that I really like.

Prior to reading this book, I'd simply use the "% of rents" strategy, which I always found to be a little inaccurate because it's based on averages, and what rental property is "average", right? 

A brand new build with Class B tenants in a Class A neighborhood is going to have very different repair and CapEx expenses than a Class B property built in 1940 with Class C tenants, but where you just installed a new roof, windows and mechanicals. Every property is unique.

The book includes an algorithm that calculates both of these numbers starting at a baseline of $100 per unit per month for CapEx and Repairs and nudges that $100 up and down from there based on all of the specifics of your target property.

You certainly could take out a traditional mortgage to buy a property, renovate it and refinance it. With that said, cash is the more common first step because many properties with the most BRRRR potential are not in good enough condition for a bank to approve a traditional mortgage on in the first place. Also, you typically will get a better price with a cash-offer, so there will be more meat left on the bone for your BRRRR. That said, essentially anytime you pull enough equity out of your home to pay off all or most of your purchase price and use that cash to buy the next property, you're executing a BRRRR.