All Forum Posts by: Dustin Beam

Hello beautiful people of BP, 

Sorry for the auto correct in my title, I can't fix that, but "Re: Pro Formas" 

I hope to be in a position to buy a smaller (10-15 units most likely) apartment building in the next 6 months. My first purchase was a 12 unit (3 fourplexes to be precise), but that was a different situation. Totally off market so I could and did go directly off rents at that given time. Plus, it could have been viewed as non-commercial, so the same refinance rules may not have applied to what I'll be doing next. 

At the moment, I'm reviewing pro formas, typically what is on a broker's website. The question I have, how much do you base your offer on what current rents are vs how much they could go for. Obviously, the selling broker loves to point to how much it could go for and base the purchase price on that. I personally will always expect a nice discount if I'm going through the effort of repairing the building and raising the rents. 

But what do you more experienced investors do? Only offer on current rents? What the rents could be? Somewhere in the middle? 

FWIW, my goal is buy at a price where I can add enough value to a level where I can pull most of my money out w/in a year or so via refinance. 

Even at your numbers that's a 43% ROI. Hey, it's JMO, but that's good. I'm not a flipper though so take it FWIW.

 I'm no flipper, but if I can be all in at $80k (his high numbers) and make $60k-ish profit, I'm calling that a home run! :) 

 I actually uploaded it on BP:  https://www.biggerpockets.com/files/user/DustinB17...

I'll give the same advice I (try to) give when I share this link. Check out others too, maybe mine makes more sense to you, maybe someone else's does. Not trying to advertise mine, I don't get anything out of it either way. But do check it out among others to help you make the best decision for you! Good luck

 Do banks even take second positions... At least to a private lender? I have no idea, but always assume "no". 

I use a spreadsheet. I can fill it out in less than 5 minutes using semi rough numbers (estimates on market rents, insurance, property tax, etc) , or maybe 10-15 minutes to get a better analysis.

But one reason people say to analyze X amount of properties each day is because the more you do, the easier it will be to see the property that is a good deal. If you don't know what a good deal is, you might pass it up. If you've looked at 50 duds, the deal may be apparent. 

I think I just turned 36 when I started. I'm 38 now, so about 2.5 years ago. 

Goal #1 for me is to "retire" in my early 40s. Hopefully things go well, but I think I'm on track. Hoping to reduce my W2 hours next year. 

Good luck with your investing! I'm not sure there's ever a bad age to invest, assuming the person is getting a good deal and they aren't over extending. 

Read Set for Life by BP's own Scott Trench. It's the closest thing to a road map in this game that I've personally read. Just lots of good advice in there, even if you don't follow it perfectly.

I'm not an attorney or CPA, so absolutely take my thoughts for what their worth. 

Not sure if you can or not, but even if you can, I wouldn't want two LLCs. First, at least in my LLC, it's just a "pass through". Meaning there aren't really any tax benefits. Any profits/losses are "passed through" to my personal statement. That may not be the case in your state, or maybe your CPA is better than mine? Either way, I don't of any benefit.

Secondly, the primary benefit of an LLC is typically thought to be asset protection. Meaning, if something to do w/ your property is deemed your fault and you get sued, only the assets held by the LLC can be taken and not your personal property. If the veil of the LLC is pierced, then that goes out the window. So what happens if one LLC is "pierced" and the other not? I have no idea, but the point is that you're opening more entities up to be scrutinized and potentially taken advantage of.

Hope that makes sense, and hopefully that's all correct. It's the way I understand it though, so someone please correct me if wrong. If I am correct, I don't see a benefit. 

With a little searching you might find the podcast where they discussed it. One guest did similar, but I can't remember the episode.