All Forum Posts by: Dave DeMarinis

@Michael Malmrose Congratulations on getting started in real estate and having capital. I think you should start with the following three questions.

1. Are you an accredited investor? (>$200K annual income single OR >$300K married OR net worth >$1M, excluding primary residence)

2. Where do you want to be on the scale of Passive-------------------------------------------Active

3. Will your ideal place on the scale above mover over time or stay where you want to be today

As an example - Yes, Passive, Stay the same = set goal to identify and vet best sponsor for larger syndicated deals

Or Yes, Passive and migrate Active = find a local flipper or a BRRRR investor, loan them on an acquisition/rehab and shadow them on the process so you can start learning on the BRRRR (you will need to research lending, etc.) Go to a local REIA and you will progress all of these.

There are a ton of possibilities but I'd start with those three questions. (Since you answered the first question of what you want (Passive income to

@Bridget Hosey I'm a lender, originally from the midwest. I lend in Ohio, California, Alabama and working on Virginia, South Carolina and Indiana. In the markets I'm "working" on - I still need to speak with a local attorney to make sure I understand and comply with the lending laws there. I'm interested to see where you are working and what you are doing.

@Shawn McCoy the standard deviation on R/E IRR is much tighter than PE because the underlying asset (real property) is more stable in value than a business enterprise undergoing the PE value add. Or said in finance terms, the Beta is much higher in Private Equity than most value add real estate.

 As @Ben Leybovich said, the shorter the hold (5 yr) the higher the IRR because the large majority of value add is created in the first 3 years. After Year 5, you generally are only growing income if revenue increases faster than expenses AND cap rate expansion (hard to defy the market here).

Finally, in real estate, as Taylor said - any real estate offering with an IRR >20% is a red flag right now. One caveat, if it is a development deal, especially if it includes getting entitlements - the above would not apply. It isn't my area of expertise but I would expect it to be more similar to PE, if not even higher Beta.

@Kim Rose Huntsville is an amazing market and it is very diverse. Literally $50K homes to $500K with in a few blocks. Are you looking for zip codes with top schools or top rent ratio or highest % of home owners, lowest % of home owners ...

Job growth, income growth, rent increases, good rent to sales ratios all create so much opportunity in Huntsville and surrounding markets. Those things also create intense competition. @Brian Boyd the only thing I don't like in Huntsville is the small MF market. It is hard to say any one thing is the worst investment somewhere but I can't think of something in Huntsville that is worse than small MF. One caveat to that is where you are creating an additional unit(s) in an existing SFH. That is a great investment.

Hi Stephen - congratulations on getting started with BP and real estate. Huntsville is an awesome market. I think wholesaling is extremely difficult without cash for marketing. Are you trying to find a wholesaler to work with so you can learn from them? Alternatively, you could try to find an investor and offer to work for them sourcing deals. (If I were starting out, I'd offer to do this for free for a good investor) There are plenty of ways to start without money, you just have to offer your hustle and then keep working at it!

@Latavia Banks That definitely sounds high for Huntsville 4plex. Personally, I'd start with the current rents and the brokers "market rents" and then verify the market rents yourself. You can do this by looking for units in the area, calling property managers, using a tool like rentometer, etc. Next, are you planning to raise rents? How will you do that, will it work in the area and keep in mind it will take sometime to do that. With those two figures, you can tell a lot about the type of tenant you will attract. 3X income (minimum gross income required is 3X monthly rent) - if you have $550 rent, the minimum income will be $1750. X12= $21K per year. Look at City-Data or something similar to check the average income of the area and compare that to the state. 

If the area is 70% of the state mean and you are 70% of the area, you are in a rough area and you will generally be pulling from the lower quartile of that as an example. Savvy investors make money there, so it is possible. However, it is much harder for OOS to succeed there. Also, your economic vacancy, repairs and maintenance and CapX will all be much higher than any rule of thumb. That is a long way of saying what others above said, cash flow will be a challenge. Hopefully this helps explain, why.

In general, it is not expected that Turnkey would provide a BRRRR opportunity.

As @Stephen Glover said, BRRRR requires 20% more value than your total cost into it. Usually, this is done by adding value in rehab with SFH. If you bought it at a steep discount and/or it appraises significantly higher than your cost then you would be able to BRRRR it.

Who is the speaker?

Can anyone recommend an attorney in South Carolina who can advise on the lending laws and paperwork in South Carolina? I lend in Ohio, California, Alabama and looking at lending in Virginia and South Carolina.

Shout out to @Jeff S. for a wealth of detailed information. One thing for @Steve Buchanan the "second getting wiped out" is just bluntly stating part of what would happen to their investment if they were a partner. 2nd actually gives them more protection than a partner as they aren't liable for losses in addition to their investment which a partner could be.