All Forum Posts by: Calvin Watkins

Hey Irene!

I'm sure I am beating a dead horse here but just because the duplex doesn't cashflow with you living in it doesn't mean its a bad deal. My first home I purchased I rented a room basically and didnt cashflow until I moved out. What I did do though was lower my monthly living cost from $800 a month to $400 a month. I live in Ohio so the rents werent terrible to start but a saved $4,800 a year is a saved $4,800 a year.

I would suggest running the numbers with you not living there and see if it would cashflow then. Additionally I prefer to be playing the game how you are and househacking. The benefit is the low down payment so you can save a lot in reserves incase something goes wrong. You can use the money as runway now and if/when you move out you can use that as a bulk payment toward principal and maybe get to where PMI is eliminated which should help cashflow more. There is a wonderful middleground price for you since you live there and can do 3%-6% down that puts you at an advantage against 20% down investors. With house hacking you have what I feel as the largest toolbelt and the most wiggle room since its comparative to renting.

My mindset is rent is paid with post tax dollars so in my instance with my first house that is about 20 work hours that I no longer need to do in order pay for my lifestyle. I think finding the inspiration behind you wanting to invest is the best way to justify your moves in the market.

I hope this helps and good luck on your investing! 

Investment Info:

Single-family residence buy & hold investment in Columbus.

Purchase price: $70,000
Cash invested: $3,600
Sale price: $196,000

The one that started it all, the OG, sold to scale up. This was my first ever home purchase that was used as my personal residence before being leveraged to get a new home. After moving out this was used as a rental to two different tenants one of which ended up being the end buyer.

What made you interested in investing in this type of deal?

This investment changed my monthly living expense from $800 a month total for rent to $820 total a month for a mortgage. It took a lot of work to get it in to good living condition but it definitely catapulted me to keep buying more units and scaling up.

How did you find this deal and how did you negotiate it?

This deal was found on Zillow with the same pictures that are still on there at the time of this posting. It was a freshly emptied horder house so even though not a lot of items left strewn about it was neglected from maintenance and cleaning.

How did you finance this deal?

Bank Financed for the mortgage and personally paid for renovations as I earned money from my W-2.

How did you add value to the deal?

Value was added by fully gutting the unit and getting updated Electrical, Plumbing, and a Cosmetic Overhaul.

What was the outcome?

5 year investment with all in investment of $105,000 over the first two years as work was done on it and I lived there. Final sale of $196,000.

Lessons learned? Challenges?

Being brand new to the investment world is hard but over 3 months of late nights working on the house and listening to the BP Podcast it flys by. I literally invested in my backyard as the house was behind the apartment complex I was living in at the time. The biggest lesson I learned is that delaying your gratification of cool things is a massive help to get real estate. I sold my dream car because the different in the payment is what got me qualified for this home.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with Thomas Maurer and would definitely recommend him. He is actually the reason I was able to close as he negotiated with the seller's agent to close the deal as I was not the highest but I was the best offer with the highest chance to close.

I agree this is likely a positive move economically for Ohio. I am sure it will cause some issues for landlords with protecting units from smoke smell but seeing how large of an economic move it is it seems like a small hurdle to overcome. I believe STRs will likely have to invest in Ozone Generators and add it to the cleaning list between visits if marijuana is smoked but for the low cost of 50 bucks it should be fine. 

Im excited to see what type of impact this could have in areas currently overrun with drug use and if areas previously hit hard by heroin and other drugs will see a drop off in usage/ hospitalizations.

I had discussed with some friends if maybe the lawmakers looked at MI dispensery records to see the number of Ohio licenses being scanned in to see if they could determine voter sentiment before proposing the bill. If they are willing to drive to another state they are willing to drive to the polls ya know.

Quote from @Austin Delk:

Other areas I am analyzing are West Jefferson/Lake Darby, Marysville, and Delaware which all seem a more affordable than about everywhere in the 270 belt. 

I have family in Marysville and Delaware and in Dayton so that is why I am more interested in these areas. Aka I don’t have much desire to buy something SE of town since my long term plans are to be northwest of Columbus.

Hey Austin!

I know Marysville is a great location and definitely safe which is a huge thing I look for in my LTRs here in Columbus. Most of my co-workers live in the Delaware area so if you are targeting more white collar individuals for renting then I would for sure suggest those locations. Obviously the cash flow might be a little suppressed due to the neighborhoods being higher quality. I would suggest looking to Delaware for appreciation and I believe Marysville appraised pretty well when my friends lived up there. If you want to just message me and I can drop you some contacts that have lived in the area if you want to reach out. Good to see you investing in the area and Go Devils!

Hi All!

Just wanted to post this and see if anyone could advise me on total cash reserves that would be appropriate for different sizes of investing. I have been investing in buy and hold rentals for the last 5 years and am currently at the point where I am toying with what I need on cash reserves versus what makes more sense to pay down and eventually off. I know there are two schools of thought for paying down loans versus holding them with the cash as a runway. I would love to hear both sides of the discussion and currently think holding about 10% in cash reserves of the retail value of the properties held sounds like a healthy number. An example would be $500,000 Assets Under Management and having $50,000 cash reserves.

I am sure this number would change based on unit types being either SFR, Multi-family, Apartment Complexes etc. Please let me know what sounds like a healthy amount to hold.

Thank you!

Hey Armando!

I love the excitement to move forward on your next deal and congrats on getting ready to take the next step! I would suggest that if you are not going to live in the next property I would avoid a HELOC and see if maybe a cash out refinance would work better for you. With the HELOC rate being a floating rate (typically around 10% currently) it almost would make more sense to take a hard money loan to get the next property. To avoid the risks of hard money I would suggest a cash out refinance if you have a little bit of equity in the Condo. Even thought rates are a little bit higher currently the loan you get wont be subject to Fed rate hikes and if rates drop significantly again you can refinance again to get the lower rate. I have only used HELOC funds to purchase a new property if I was going to be living in it as then the total debt load is lower and typically paid back off before the next refinance.

I hope this helped!

Hey Cory!

I would honestly just suggest using the calculators and rent estimators on BP since you are a Pro account member. I would run some smaller multifamily options that are listed on Zillow to start as LoopNet is typically larger Commercial locations and they include office space. The big thing to focus on is just run analysis at what the rent estimator states rents should be and price it is currently at. Once you have that work on solving for the price at which the property would work for you. Running an analysis is great to do but the extra step is see what it needs to be at for it to work. Worst case you can submit offers based off of what works for you if you ever wanted to move forward with a property.

I hope this helped!

Hey Juan!

So I am an investor in the Columbus and Dayton Ohio area and similar to yourself have had some issues getting cashflow in these more compressed markets. I have done the BRRR strategy for all of my purchases, leveraging up each time. I had the good fortune of being single on my first purchase as I could buy, live in, and fix up a real "charmer" of a home. Recently due to compressed CAP rates I have pivoted to a new market and a new strategy.

What I would suggest is since this would be your first deal, don't be scared to try a different strategy than what you previously thought you would be in. You haven't specialized yet so be adventurous. Maybe do mid term rentals in a multifamily in order to get more cash flow per unit and take advantage of the low down payment for owner occupied. If you are single, buy a camper a home with a water sewer hookup away from the main property and post up in that. Maybe look at building a manufactured home on a new lot depending on zoning. 

What I would emphasize is that most of the time getting started you will be in an uncomfortable (but reasonable) spot. Embrace that knowing that it is short term struggles for long term gains.

I hope this helps!

Hey James!

I am actually of the mindset that purchasing is always better not only for a learning process but also for insulation from a downturn in the market. Granted I don't think a downturn should come to Columbus any time soon, it is always good to be in a good CASH spot if it does. I agree about the moving to the hood comment in response to housing costs but I would suggest a couple alternatives to get you in to a purchased home versus an investment property.

Having cash available provides runway for possible turnover so knowing that expensive houses are out there that would fit what you want to live in, see if any of them have rentable space that you could use to offset the mortgage. You are in a 1BR apartment comfortably for 1.4K so see if there is a property with say a 2-3 car garage that has a mortgage of about 2-3k a month and you could rent out the garage space to supplement income. Houses in the nicer part of town are only going to appreciate more so purchasing that type of property would show high appreciation boosts year over year above rental increases in less ideal parts of town.

Have The Cash In The Crash - I cannot stress enough how having cash during a recessionary period will benefit you. Growing up in the 2008 crash we lost our home which was appraised pre-crash close to 1M and sold for 500k afterward. Currently the home is valued back where it should be and then some. I mention this because if you do a 3% owner occupied purchase you would then have the cash to move up and into a home of that nature if the market tides shifted.

The cashflow might look to break even in the less desirable locations but remember the other fees associated with that such as turnover, damages, and management fees. Just because rent covers the mortgage it doesn't mean the property will net you anything at the end of the year except a tax write off.

If you are putting 20% down in all cases then these arguments don't hold as much weight. I always suggest purchasing the home then using the equity you capture to expand. That being said I hate to side with the expensive house purchase but I see that being the most profitable move in the next 5-10 years.

I hope this helped!

Hey Adam!

I was right there with you back in 2018. I bought my first house, which was a full gut, in the Columbus area and I closed at 23. I think you are in a unique scenario since you cannot physically come and do the renovation like I did. In addition with the market being so wild I doubt you would be able to find as cheap of a property as I did back then. That being said I do have some friends up in IL that want to break in to real estate and live in the McHenry area so the suburbs might be a good place to look for yourself as well.

I hate to say it but I would suggest trying to get a spot for yourself and just House Hack one property near you that you could live in first. I know this is probably not what you want to hear because I am sure real estate is super expensive where you are or it would lead to a longer commute in to work. The way I thought about it was it was 1 year of suffering for the rest of your life of prosperity. 

Some creative options you could do, pending zoning, is to buy land outside of Chicago say like a 30-45 minute commute and build a tiny home/manufactured home on the land. Obviously I don't know your financial situation but if it allows for such an option you could then open a HELOC on the property once there is some equity and use that to purchase your next home. That is in essence what I did but the land I bought just happened to be in the Columbus interloop.

The biggest benefit here is that it shows banks you know what you are doing and even better it lets other cash investors know you understand how the process works. You also have the option to leverage your home later to help supply funding for a deal coming up.

TLDR: I wouldn't say its unreasonable but I think a better path is to House Hack and use the equity to get your second home a year after you purchased your first and then rent your first one out. I would then look for partnerships as the experience level is high enough that people will gladly partner with you.