All Forum Posts by: Darren Wayne Shanks

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Kansas City.

Purchase price: $190,000
Cash invested: $11,000

My husband, Darren, and I bought our first property in Dec 2017. I have to admit, I did not have a large hand in buying our first property. We had a six month engagement and Darren ended up buying this while I was being a busy bride-to-be! We got this before we started learning about REI, but we both knew this was what we wanted to do to better our future.

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

We knew we wanted a duplex to house hack. Beyond that we didn't have a specific investment strategy as long as we felt we were smart with our money.

Bonus- that is still our strategy 2 year later ¯\_( • ᴗ • )_/¯

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

Darren worked with our Real Estate Agent through conventional ways to find and negotiate the deal.

How did you finance this deal?

We financed our deal with a VA loan. The lender requires you to have a turn key property so it was pretty simple once all the requirements were met.

How did you add value to the deal?

We did not need to rehab since we used a VA loan, but we had planned to live in one side and rent the other. We house hacked for a year until we left for our deployment and rented out the other side. WIN!

Lessons learned? Challenges?

A major lesson we learned was the length of your financing depends on the goal of your property. Neither a 15yr or a 30yr loan is bad. Want equity for a HELOC in the future? Get the 15yr loan! How about more cashflow? Go with a 30yr!
We chose a 15yr loan and later learned that investors go with longer loans for more cashflow. We thought we were wrong- until we learned about HELOCs! THEN we learned sometimes there is no wrong answer- just different ways to take advantage of the spot you're in.

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

We had an awesome real estate agent! Although she moved to a different state sadly.

Hello BP Fam,

My husband and I are in the middle of purchasing our second property and we want to run the number right this time! Our lending is similar to ARV loan, where the purchase and renovation of the property is all included in one loan. We are using that one loan and do not plan to refinance or use a hard money lender.

In short, I do not know which calculator is best. 

I have used the Rental Property Report lately. My main issue with plugging in our loan information, is that the amount of the loan is automatically selected as the "Purchase Price" of the property. I have been going around this by adding the renovation cost to how much we want to offer on the property as the "Purchase Price" and typing in $0 on our renovation costs.

Another idea my husband had, was to use the BRRRR calculator, and treat the purchase of the property as the "Purchase Loan Details" without the rehab calculated into the loan, but with all the same details (interest rate, down payment, amortized years) and our "Refinance After How Many Months?" / "Estimated Rehab Time in Months" will be 1 (even though it might not be 1 month to rehab we though this was best for calculating the loan numbers?). THEN, on the "Refinance Loan Details" our loan amount will be the total we spend on on purchase and reno with all the same information as before on interest, DP, amortization, but have $0 closing costs.

What do you think fam? If our loan includes the purchase and rehab, what calculator would you use?

Bonus Round: How would you plug in the numbers on a loan like in the calculator of your choosing? (If different from what I explained above)

Thanks for your interest friends and folks. I appreciate your time.

Hey @Robert T. King, Sr.! I am glad you are staring the journey into real estate investing. I have to admit, you ask a question that has an endless answer! The numbers you need depends upon how you plan to play the game. Between house flipping, BRRRR, and multi-family or single family renting (just to name a few!), there are different calculations that you need to crunch.

If I haven't scared you off yet, I am going to admit anyone could regurgitate a list of terms but they mean nothing if you the effort to learn them. I have a few videos linked below from BP on youtube that will give you a starting place till you know how you want to invest.

https://www.youtube.com/watch?v=T_7vhsSBi7c

https://www.youtube.com/watch?v=B9MVEg0LI1w

https://www.youtube.com/watch?v=2GUe5Y41sbU

Also, find a few books that fit your real estate goals that outline how to calculate the information you need to be successful. I have paper copies that I tab and keep on hand to reference. 

15yr loans are great to build equity (higher payments mean more of the loan is being payed off). Most investors tent to opt for a 30yr loan (lower payments) for more cash flow. They use that immediate income to buy more investments sooner. 

Either way the tenant is paying for the mortgage and the opportunity cost of where your want that money to go equity or income.

Hey @Joshua S.

Practical- We thought we were smart by having a shorter loan on our first property and in-turn having less interest to pay with a 15yr loan. Turns out 2 months later we actually started learning more about REI and found having a 30yr loan would have been more in line with our goals of have more cashflow. A refinance later we felt wiser!

In General- Everyone I commit to doing business with had to pass the same test. They had to be responsive, helpful/friendly, and be knowledgeable in the capacity I plan to hire them.  Whatever standards you set for working with others, be the same in return. 

Enjoy and Good Luck! 
 

Hey @David Sajous and @Kyle Fairbanks. On average closing costs are 2% to 5% and the down payment can be up to 20% (Some situations more!). Because the down payment can vary drastically on your source/situation, the best way to find out how much money it will take is to talk to the source. Find some lenders, whether its at a bank, credit union or here on BiggerPockets and dive in! Don't worry about learning all the lingo before, but defiantly ask if you don't understand something. If the lender seems difficult to work with because you are wanting them to explain things, or they think you won't be able to get the down payment, then you probably don't want to work with them or ask to talk to someone else. The best way I start a conversation with professionals I want to work with, is by telling them I want to learn from them and find something that works for the both of us. 

Also- my personal vote- I recommend house hacking! Whether its a small multi-family home or a single family home with roommates, you can make the most of your property by giving yourself a place to sleep while getting extra income. Just remember that even if your roommates are friends, they still sign the lease! 

Hey Casey! From what I can tell, I am currently where you want to be at the end of next year (we are on the verge of buying our second property!). I highly encourage you to keep reading all the comments from the seasoned investors and wanted to share my advice from the past year of learning, planning, and practicing for launching our business. 

Background: My husband and I have been preparing to buy our second property for a year now. We bought our first property (a duplex) about 2 and a half years ago. It wasn't a risky first-time buy, but it made us realize we needed to #1 Save #2 Learn #3 Plan. 

Looking back: In the past 3 months I have been doing home renovations along with contacting accountants, commercial lenders, private lenders, hard money lenders, property managers, real estate agents, and other business owners. I have learned more in the past 3 months than I did in a year of reading books, listening to podcasts and planning. I don't want to dismiss the saving, learning and planning stage but I do want to encourage you to get hungry to start. You might need to save less than you think. Or you may be able to start with house hacking a duplex similar to what we did starting out- even if you are still in school! You are already strides ahead by being active in a REI network like BiggerPockets.

Take away: You can still be active in real estate investing without buying. Join a REI group, take on a home projects for family or friends, watch the market in your area, tour other apartments or houses for fun. The more you are active the faster you learn and the more people get to know your face!