All Forum Posts by: Chad Carson

Who is the Infamous Allison? Sounds like a good blog post title to me @Allison Leung ?  Or maybe a movie title? What 'ya got? Lol.  

I'll second Scott's comment about how awesome Allison is. She's like a magician with online words, presentation, formatting, and more. She definitely helps me up my game as an author.

 I have to admit I got a laugh out of the original post too. 

By the way Allison, I've got a post coming soon. I think it's a good one. Sorry, I've been dormant for a couple of months:) Traveling to Ecuador and some other projects got me off schedule.

@Brett Holmes  - some of the other commenters have given good ideas. 

I began real estate investing out of college with very little down payment funds, so I had to face these types of scenarios often.  

Over the short-run you may need to give away part of your deal to a partner or pay a higher interest rate in order to get funds from a private lender and do a deal. But I'd rather have part of a deal than all of nothing, so over the long run it can be worth it while you save up funds to do it on your own.

The question is how to split the deal with someone in order to raise the down payment funds. You have a few choices, and in all cases you want to have full-disclosure to your bank lender about what you're trying. If they don't like it, move on to someone who does or use a different strategy: 

1. You could do a traditional partnership with someone who has the 20% down. You could buy the house together. I don't like this scenario for only one deal because of the amount of work and trouble and administration and tax returns you'll need to deal with. If you're doing a lot of deals together, maybe that's ok. If it's only one deal, I'd prefer the next option.

2. Sell an option on the property to a private lender/partner. For example, this option could give them the right to buy 50% of the property for 50% of your purchase price for 10 years (or some length of time). Their option would be recorded in 2nd position behind the bank's. This isn't borrowed money. You have no payments. You're selling a future interest in your deal to a "partner" using an option. But there is no partnership tax return because you own it, you get the depreciation, you pay the mortgage, etc. The perfect lender is a self-directed IRA who has $10,000-20,000 sitting around doing nothing and who wants a passive deal.

I haven't tried this type of arrangement lately with conventional lenders. If they don't like it, perhaps try local banks and credit unions.  

3. Let a credit-partner who DOES have the down payment buy the property, then you lease it back with the option to buy within a few years. You'd sublease the property to your own tenants to generate income. Your option price will be for a higher price than the purchase to give the credit partner an incentive to do this.  Your lease to the credit partner would cover their payment, taxes, insurance, etc.  For a long-term keeper, your goal would be to get a loan eventually and execute your option to purchase. 

4. Try to negotiate a lease option or seller financing from a seller. Be sure to get help from a local attorney to prepare and record good documents to secure your investment. But you can often get in much lighter using this scenario while you save up a down payment for a refinance later.

Those are just some ideas. As someone else said, if you find a great deal - you can figure out a way to find the money. These are just a few ideas to get started.

I wrote an article here on BP about a Creative Financing Toolbox if you start to look more outside traditional financing. 

Good luck!

Hey Gus,

It sounds to me like you're assuming you will pay retail price for the rental and not do repairs or other changes that will increase its value over a short period of time. Forcing appreciation through those changes is the key to a really solid BRRRR deal.

For example:

- Buy a 4-plex for $100,000

- Invest $10,000 per unit ($40,000 total) to turn it around

- Raise rents and/or re-rent units, get full occupied, season for minimum time needed by refi lender

- New appraisal at $180,000

- Refinance at 80%, or $144,000. Pay back cash and short-term loans + pay for new closing costs.

- Move on to next deal with your cash back in hand

For an additional example, I outlined all of the numbers on a real deal BRRR deal I did on a 4-plex house hack in this article.

Hope that helps! Best of luck.

welcome, Donathan! Sounds like you have a good game plan so far.

Live-in flips or house hacking are two of my favorite ways to get started, and they would transition nicely into your overall plan. Plus you learn a lot by doing it. 

Best of luck. Reach out to me if I can help. 

 I am with you on the waffling between the two, Natasha.  But I think the main criteria is how many good deals you can find. I have found plenty of deals, so I've bought more. If I couldn't, I'd reduce debt and stash cash even more. But even while acquiring more I like to still reduce my debt ratios and own some of them free and clear while owning others with safe debt.

As far as the boring part -- I think it was Buffett or someone that said look for excitement somewhere else, not in your investing. Lol.  Boring and slow is a winner.  You can start a business (or chase after those kids) for excitement. That's what I do:). 

Best of luck.

@David Sohn - thanks for mentioning my ARV article. You also gave some great advice.

@Dakoda Spencer - you are right on thinking the skill of calculating ARV is a valuable thing to learn. I think the question is just how is best to go about learning. While you would certainly learn a lot getting your appraisers license, I think a lot of the other stuff you'd have to deal with my distract from your original goal of focusing on real estate investing.

I would look for real estate agent continuing education in your area where you can go in person to classes that teach valuation of properties. They might call it "Comparative Market Analysis."  A course like that would be worth your money.

Then when you get your license, you'll have to work under a broker, right? Some companies you pick will have built in education opportunities. You could try to find some about valuation. But within that brokerage, I'm sure you could ask for advice or even pay for an experienced agent's time and ask them to help you learn the skills.

And then, there's just practice, practice, practice. Read my article linked above. Read J Scott's book. And then go try to value 100 properties on your own. You're bound to get better by doing it. 

Best of luck!

@Michael H. - congrats on your $47,000 first deal, by the way!! That is awesome. Do you mind sharing some of the details?

And I love your focus on intentionally spending time with your kids. I've certainly got a lot of room to grow in that area, but it's a priority of mine as well. 

And I appreciate the kind words. I may have more time once I get settled in a new location. So let's stay in touch. 

All the best!

@Karen Young

This has been an interesting thread. I have rentals in SC, and I've never used this criminal bad check threat. I have heard of it before, and the link shared above from the SC bar seems legit.

But the situation seems clear to me - the rent isn't paid (NSF or no NSF).  So, why pursue criminal charges? Why not just file an eviction?  And that could have been done immediately after getting the NSF.  If tenant pays rent + backed fees + eviction fees, then you could still keep them in place.

But that eviction clock ticking is what motivates. And it's what will get either your rent paid or your property back the soonest.

You mentioned a 30 day notice. Is that just to let them know you'll no longer be renting to them? An eviction notice is only 5 days, and in SC if the notice is written correctly in your lease (your PM should definitely have this), then you don't even need to mail notice. You can just file eviction after 5 days.

Good luck getting this resolved.

Hey  @Michael H. , I'd agree with some of his sentiment. There are plenty of successful people in real estate who don't go hire a coach. If information and strategies are all you need, just read and network.  And there are so many people parading around calling themselves some sort of coach, that it is indeed a gamble with many of them.

But there's a reason Michael Jordan, Tiger Woods, LeBron James, CEO's, actors, leaders, etc have all hired coaches and consultants.  The right one can up your game tremendously. We all have blind spots, and there is often a gap between information you learn and application to your life.

So ... to each his own. I'm not trying to sell coaching because I don't need to. But let's not paint everyone who seeks coaching into the box of "those who look for all fast attractive cash phrases like no money down, subject to, creative financing, etc." There's obviously more to it.

Wow, Natasha.  What a thread. Thanks for including my 3-legged stool article to get it all started. Jack Miller, a now deceased investor and teacher coined the concept. He was great. 

I certainly can't quote macroeconomics, hedge-fund strategies, or international currency statistics like some of the others have.  But they were interesting to read!

Like some of the posters, I fall into the "can't predict the future" camp.  I do the best I can to study my local trends (jobs, incomes, housing inventories, construction prices, etc), and then buy deals with solid current fundamentals (yield > expenses, no risky debt, potential upside from adding value).

Lately we've invested a lot of cash with some debt (about 50-60% LTV in most cases) because we've found deals in our market with good yields. The deals were not obvious, though. We bought value-add multiunit deals in good locations that eventually cap out at 8-10%. They start at 4-6% when we buy them. Rents have gone up locally because of increasing student populations, so there have been pockets of these opportunities where old landlords keep their rents too low and we can raise them. We've also found some sellers open to long-term, low interest financing at 4%. That's a winner.

In the big picture, if we can get 7-10% cap deals with non-balloon debt at 4-5%, we'll keep doing it. Natasha, unless you can get mortgage debt cheaper than that, I would be nervous about local yields too. Maybe look elsewhere? 

But a lot of what I've read here so far sounds like people with BIG hedge-fund type money to invest. For us little investors, it also matters thinking about your personal phase of life. If my portfolio and passive income is enough to pay for my lifestyle using free and clear 6% yields, that's a pretty good place to be.  Just keep risk low, set aside plenty of cash, own in solid locations, and enjoy your life.  

It's the people who have to constantly grow and chase yields that need to worry the most about all of this.  I wouldn't envy you hedge fund managers for anything. Lol. But I do appreciate your insights!