All Forum Posts by: Chad Kirchner

@Dan O'Neill Well, the numbers didn't turn out like I expected with the City Taxes taking up a sizable chunk of the pie. I didn't fully understand the ramifications of a commercial loan. Especially the pros and cons of the automatic 5 year rate reset, that scared me. Or the mindset of why someone would want to live in any of the units. That was a big hangup for me too. If I couldn't see myself living there, then I don't really understand the investment, and if I don't understand it, then don't do it.  

I also wasn't quite ready mentally. 16 units felt like too much, too many tenants, more repairs than I was prepared for, too many unknown issues, and I had a full time job. If I had the same opportunity now, I would take it because the scale is not really a problem with a PM, it would have been a good learning experience for me, and you can still get some significant tax advantages with commercial loans. However, I went in another direction instead of waiting for another one of those to come along, or to do a long distance version. 

I knew I wanted to hold at least some 30 year fixed loans in this low rate economy. So, I purchased a 4-plex that cashflows well, a short term rental, a foreclosure for a BRRR to keep me busy this summer while I learn to manage more rentals, and some Fundrise shares. This will give me 9 doors to deal with and plenty of problems to solve.

So, I'm using this year to learn what works best for each investment, and to understand the pros and cons first hand. 

@Jaysen Medhurst thanks for the tips. I ran the numbers on the 16 plex, and although a B neighborhood, the property does closer to a 10-12% cap rate which is closer to my real estate goals. And after thinking about it I really like the idea of all the units in the same location.

Next steps, shop around the local credit unions for loans.

Thanks for the guidance. I’ll send updates as I progress.

@Jaysen Medhurst , thanks for the feedback. Nothing like learning trial by fire. 

Agreed on the quad: I want a higher margin, but I also want to be actively investing instead of sitting on a money market account. 

For the 16, my understanding is that it will need a commercial loan. Do you know if there any way to get a 30 year payoff on something like that, or would I be restricted to the 5-7yr commercial loan requirements? 

I'm still learning about commercial loan options, and am wondering if it's better to get a few 3-4plex's under a typical 30 year bank loan before venturing down the commercial path. 

Thanks for your help!

My story so far: I bought a duplex in MA and sold after 5 years and made enough to take larger strides in real estate.

I’m trying to figure out what to do next.

I just bought a 3 family owner occupied that pays for itself while I live there. I have to live there 6 months to satisfy my loan requirements before I can buy an FHA.

My options:

I am looking at a quad plex that cash flows at COC 8% or about a 3.5% cap rate with 25% down. I can buy now.

I'm considering waiting six months and buying an FHA with low money down and saving my capital for other projects.

or, I have an opportunity on a 16 unit that cash flows close to my goal, and is under rented. But it uses up all my capital. I could buy now.

- Do I save capital (FHA) and stay in the game longer, go for a base hit (quad plex), or go into unknown territory (for me) with the 16 unit?

Thanks,

Chad

@Trevor Ewen Thanks for that response, Trevor.

I also focus on MF, 3-4 units. It sounds like you may be doing larger MF investing but as part of a development. Is that correct?

I just purchased a house hack 3 family (distressed property in an A neighborhood) for 5% down, and put an agreement on a 4 family w/25% down in a class A/B neighborhood that is just below market rate. Had I seen the 4plex first, I would have done that at 5%. I’m not interested in single family unless they are solid vacation rentals.

It’s my style to pause and reflect after each deal, then rerun the numbers once it’s running smoothly and make better data driven decisions moving forward. I’m enjoying the learning.

Part of my concern is putting 25% down on the next property (4plex) and eating up my capital, instead of waiting for the BRRR method to be complete with the distressed house hack property. My area does not have many MF houses, so when one comes up at a reasonable price and in a great neighborhood I have a hard time letting it go and wait for the next one.

@Don Konipol Thanks for the reply. 

I am okay with the ups and downs, and fully expect there will be some. I'm looking for properties that cash flow positive (like we all are). I'm also in it for the long haul. I am not worried about living expenses, or not being able to get another job. I'd like to devote more time to all that Real Estate entails, and a balanced lifestyle.

It's more of a question of strategy for me. I've been studying RE for the last 3 years (I know I can't learn it all in a lifetime) and I am now in a position to make a move. I could drain my savings to living expenses for 1 year, and have ~60k coming in from rentals. Or go bigger over a 4 year time-frame (maybe we'll see a dip in the market then). Of course, it's entirely my choice and I have clear criteria which helps. 

I'm wondering, as a seasoned investor, What would you recommend to set yourself up for both passive income (for retirement) and potential appreciation down the line?  Do 1 great deal a year for 4 years, or 4 good deals in 1-2 years?

I’ve run into analysis paralysis and I’m looking for help. My goal is to have passive income enough to leave my 9-5 ASAP. I have a plan where I could be financially independent in 3 months, or financially free 60k/yr in six months, but it would require moving quickly and doing deals that have lower cap rates than my ideal (doing a buy, rehab, rent, hold strategy).

There's another plan where I could be financially abundant 140k+/yr in 2-4 years. Looking for higher cap rate deals and doing the BRRR method. But loan requirements tell me it would require staying in the 9-5 to get there. Looking for low interest 30 yr fixed mortgages. I'm just unhappy in the 9-5. But the comfort and longevity (as well as being able to give back more) of financial abundance is very appealing.

I really enjoy the real estate game and all the moving pieces. I’m handy and can do all (most) of the renovation work. If I had 100k in passive income now, I would follow my favorite hobby (outside real estate) full time. I’m highly employable, I just don’t want the job, I want my time.

What would you do?