All Forum Posts by: Elliot B.

Anyone have experience with doing short-term rentals in condos in Maine? Have HOAs been restrictive?

Are you cash flowing? What does the off season look like?

@Cody L. haha he probably makes money both ways.

He's the co-host of the BP podcast and he did an in-depth episode about BRRR investing (and wrote a book) that I referenced in my first post.

Awesome conversation - thanks everyone for sharing.

I think there are a few core questions here that we all have our own answers for:

1. What does wealth look like to you?
2. What kind of a lifestyle do you want?
3. How valuable is a "highly leveraged" (75% LTV) SFR portfolio?

Does a large portfolio of highly-leveraged low-cash flow SFR feel like wealth to you? What's the end game?

Does managing a large portfolio of SFR suit your lifestyle? (Or managing the people who manage your portfolio) How do you want to spend your time?

What can be done with a 75% or even 65% LTV SFR portfolio? LoC? Sell and transition to MFR with better cash flow opportunity? What's the goal?

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@Steve Hall Value-add / BRRR plays on MFR is a great strategy and takes time to get there. That's where I'm headed. I'd only call 75% LTV highly leveraged because I can't figure out what value that 25% actually has.

@Jaysen Medhurst ROE is a good tip - thanks.

@Cody L. How does the leveraged vs paid-off assets argument pan out when the **** hits the fan?

@Mike Dymski Can you really call a refi cashflow when it was your cash to begin with? I call cashflow income generated by the asset.

@Tyler Bushey No thanks - that feels like a job!

@Jay Hinrichs Yeah - 25% seems slim. Definitely not a new things but it is nice to put a name to it!

Hey BPers -

I just listened to the excellent podcast show #327 where @David Greene lays out all of the details of the BRRRR strategy. It is clearly a powerful strategy that has worked well for him and many others but I'm still questioning how it builds wealth.

Here is what I'm struggling with...

If you execute the perfect BRRR, you are left with a renovated, rented asset with none of your cash left in the deal. The property has been refinanced at about 75% LTV at the maximum appraised value.
The issue I see is that rents track home values. So while you're trying to maximize your appraisal to get your cash out, you are effectively also killing your future cash flow. And when you're only cash flowing a couple hundred per month and a bigger maintenance expense comes up - you've killed your income for the year.

Poll: What does the average 75% LTV, conventionally financed SFR cashflow?

This is the classic equity vs cash flow debate. But even the equity in a BRRR deal isn't all that useful. Given the 75% LTV, you can't tap that equity until you pay down the principal or the asset appreciates. For example, a HELOC wouldn't be worth it because most banks want 80% LTV.

Perhaps, I'm missing other ways that you can use this equity - or ways in which that 25% equity boost to your net worth can be used. I can imagine that once you have a portfolio of BRRRed homes, you may be able to get a LoC on them, even at higher LTVs.

Maybe I'm not seeing the big picture but isn't the BRRRR approach effectively creating a risky portfolio of low cash flow, highly leverage assets?

@Charlie MacPherson

This is an interesting and daunting opportunity. I live in Maine and have plans to invest in MHPs in the near future.

From my research, developing parks is a difficult and capital intensive task. Just getting a pad up to code could be 15k (septic systems alone are in the 10k range) and then placing a decent used home won't happen for less than 8k, best case scenario. Then you face the challenge of convincing tenants to buy your home using your rent-to-own program in a completely/mostly vacant park.

It's not impossible but my opinion would be to find a park with a lower vacancy rate so you have some baseline income and private utilities if possible.

Can you tell us a little bit more about the park? How many pads is it licensed for? How many existing pads? Septic & last service date? Any idea about lot rent?

I'm happy to help take a crack at the numbers if it materializes.

@Carl Hebert all good info. Thank you. The rent discount if paid by the 5th is a great strategy.

@Carl Hebert Sorry I should have been more specific... I meant, once the tenants is 15+ days late on rent, do you send them a letter/statement that tells them that they now owe a late fee? Or do you leave it up to them to understand that they owe it and include it with their next payment?

@Carl Hebert I'm curious about if/how you document that fee? Do you have a letter stating that they are being feed for late payment?

@Jim Goebel

Thanks for taking the time for the thoughtful response.

I think that if one were to submeter, the fairest/most accurate way to do so would be placing the sensors/meters IN the units. That way you can confidently say that all heat that gets clocked on the meter has reached the living space of the individual footing the bill. Any losses incurred along the way are chalked up as inefficiencies / common area heating costs.

Whether this is a good idea, IMO, is based on markets trends. If no other landlords in the area charge for heat, you'll probably have a tough time. However, there is a nice marketing aspect to "only pay for what you use" because if there are heavy utility users in a building, it essentially gets subsidized by all residents over time.

I'm lining up some meters for testing and will report back on any findings.

@Matthew Paul not if the oil tstat is located in the locked boiler room. You can trick your heatpump tstat all you want on your own dime 😁🥶