All Forum Posts by: Emma Powell

I wouldn't move forward: the rents are too low to justify the sales price, from what you've shared. There's not enough head room in there between the mortgage and the gross rents to account for any expenses, vacancy, delinquency, minor or major repairs. It would average a negative cash flow with any large expenses (new water heater, new roof, major damage of any sort). If you move forward, You could require the tenant be evicted before you close and have a long due diligence.

This can be really tough: we had this issue on a personal home we bought where two appraisers literally had no comps, and it was extremely difficult to get a loan for it. If it's rural, look at a USDA loan/Canadian rural equivalent (these often have no comps), and those appraisers can often do a better job of getting a value the banks will accept. If you are flipping it, you can hire a Realtor to do a current market analysis CMA or broker's price opinion BPO, usually about $50, if you can't find one to do for free (if it's challenging, be ready to pay for it). You can also hire an appraiser for about $400 if you need some teeth behind the price opinion. You'll find the closest possible comp and adjust up or down from there on features that don't match: chat with a local appraiser to find out how much. Around here it's $10k for .1 acres per of land difference, $5-8k per garage bay difference, apply the same price per square foot for extra bedrooms, $10-15k per bathroom difference, etc. Hope that helps!

We are dealing with this concept on our current new build as well since buying the land/building to knock down is so much less than the total equity needed to close the construction loan. If you can close the construction loan and break ground right away when purchasing the land, it would work. If it's all spread out like ours, it probably won't. We are consulting with our tax accountant because the details are where this stuff starts to work or break down!

Enjoy! It's so important to recognize a good deal not only to put in under contract but also to raise investor capital for it. Have to know the numbers either way. I don't love underwriting, but I love being able to

Thanks, Jana! Have loved working with both of you and glad you enjoyed the book too. It's been fun coordinating with you on underwriting more deals together. (She's an appraiser, y'all! Talk about wealth of knowledge! Be sure to reach out to her with questions about that)

I've had several people reach out to ask for the ebook I mentioned in my BP interview this week. My partner John Stoeber wrote it, it's free, and comes with a simple spreadsheet plus an advanced one to purchase: the ebook makes it a lot easier to use the big sheet! He's really changed the way I underwrite my apartment deals.

Here's the link to download it. While we are partners, I am not affiliated with the ebook or the spreadsheet, just wanted to share with everyone.

https://www.amazon.com/Analyze...

We are close to your point, but my husband is the one who doesn't want to quit his W-2: he loves his job and the company he works for. He is enjoying feeling what it's like to choose to work and contribute to something he believes in rather than having to work for income. We are putting a few things in place to ease his transition to possibly not working, if that is what he chooses down the road.

1. Downsize our lifestyle, buying a smaller/cheaper home I can more easily afford on my real estate income alone. This also comes with no yard work, so more time for hobbies and travel!

2. Purchased a few larger deals in syndications for acquisition/developer fees to bring in extra income in addition to rental income that I can place into others' deals/businesses/syndications as passive investments. This one is important so there's income rolling in that is NOT directly tied to my business, and some of it not even tied to real estate (diversified)

3. Save a year's worth of his income so he has plenty of time to think about it without feeling pressured. We are putting it in our life insurance policy by paying off a loan, and the rest paying down a HELOC, just sitting there until he feels ready. This money is coming from investments maturing, rental income we don't need to live off yet because he's still working, and some fees for closing on larger deals. THIS is the big one, that big cushion. It also improves our liquidity for better loan terms!

4. Finding a new hobby/volunteering that would be more fun without him having a job, requiring extended periods off work, homeschooling the kids, etc. For us, it's long-distance hiking and taking a family humanitarian trip. Find out what hers is and build that dream little by little.

5. Having him take some time while we are saving up that year's worth of income to ponder what his next thing will be, income wise, whether it's coming into my business, starting his own business, investing on his own in something he's an expert at, becoming an independent contractor working less hours, unjobbing for awhile, etc. He knows it's coming, this gives him time to think about earning a part time income rather than just quitting outright, and he might even still be able to contract for his current company, which he loves.

Watch out what you post publicly, however, until you're pretty close to ready, because other people read this stuff and have gotten fired over it! For us, it's more important that he COULD quit, than that he actually would. That will change his relationship to his job to more of a passion project.

Hope that helps!

Investment Info:

Large multi-family (5+ units) buy & hold investment in Little Rock.

Purchase price: $800,000
Cash invested: $200,000

16 and 18 unit heavy rehab value add multi family, 2 complex portfolio 34 units total in SW Little Rock

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

I wanted to scale quickly, and commercial was the best way to do this

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

The deal came to me through a broker who was wholesaling it. After COVID shut down most lending, I negotiated with the seller to buy the units on seller financing, which turned out to work best as a master lease option

How did you finance this deal?

seller financed with a down payment from joint venture partners

How did you add value to the deal?

heavy rehab, we are remodeling units as fast as we can and raising rents $150-200/mo

I have 3: a 16-unit and 18 unit in Little Rock AR bought in a joint venture for just under a million for both, $250k rehab in progress, and a 50-unit in a 506(c) syndication in Pocatello ID about $2.3M with $450k rehab in progress. We are building 60 units in downtown Salt Lake. You'll be expecting to put down 30% right now at about 3.5% interest on long term debt, or 8-9% interest on bridge/construction debt. Will need to have a net worth at least the value of what you're borrowing, and 10% of that should be liquid (cash, equity, stocks, life insurance, etc).

Only regret is not doing it sooner!

In Utah Rentler is a fantastic resource for new landlords. I use it self manage my small properties in Salt Lake and Pocatello to list rentals, accept payments, schedule maintenance etc. Kirk Cullimore provides legal docs and leases on Rentler for $25 and is a premier tenant law attorney in Utah. The forms are easy to use. I also use the apartment association resources for extra forms especially COVID related.

I use property managers for my large multi-family, but self managing my couple of small ones keeps me grounded in the game and makes me a better asset manager for my larger properties. Highly recommend!