All Forum Posts by: Eric Johnson

Hey Mark, I'm not from the area, but I think you have a good start with the 2-4 hour drive criteria. For the first one, pick something that is manageable by a drive should the need arise to go to the property under emergency. Look into secondary markets that have a rise in population, stable employment, and diverse employers. Good luck! 

I don't think a storage facility will have that big of an impact. It's more about the condition it's in. Is it nice? Well maintained etc... run the numbers and see!

@Sean McKenna my assumption was that it is legal, obviously that’s the kicker :) Hahahah

FHA will take gifts, so that's not an issue. Make sure you underwrite the rents correctly and make sure the building still hits the return you want with only 3 of the 4 units paying. Assume your brother will not pay you at all even after the year and expected $500-800. I wouldn't even factor that into the underwriting. FHA will calculate the subject properties as follows (the rent of the total number of units - 1) multiplied by .75.

You can find a management company, but I don't know enough about the market. If you're not in a major market, it's going to be tough, like Ben said. I would definitely start asking around ASAP and look at who is managing the other buildings in your market and giving them a call. 

Baseline for stock market returns are usually.. what 6-7% something in the long-term? If you put 30k into the basement and rent it (I'm assuming you know how to get permits, check with local ordinance to see if it's legal etc.) for $1,000 that's an annual gross revenue of $12,000. 

$1,000 x 12 months = $12,000 gross / year

$12,000 / by cash invested ($30,000) = .4 or 40%. You are making 40% gross return.

To calculate net, just subtract your expenses. Should still be way higher than stock market. And yes, he can then take the cashflow from this and reinvest it into other asset classes or investment vehicles. That's my take and it's a kind of a no-brainer, assuming you can do it.

Look, I fund multifamily deals and commercial deals nationwide.. it's about getting a lender that will close the deal and at reasonable price (rate and fees) that you know is reliable and has good communication. Nothing is worse than a commercial deal that's held up or lost because a lender has in-efficient processes and procedures.

Pay what you think is reasonable for a dependable transaction. It's a balance. That's why it's also difficult the first couple times around because you don't know who is reliable or not, which is why the default inclination is to shop for the best 1/8th of a rate. In reality, some lenders just throw buy-down points to sell the rate to you.

I would be glad to assist more if needed!

EDIT: forgot to answer the original question. Yes that's a stupid comment. You should definitely care about the rate and his statement also worries me as I would not be working with them if they said something like that. Thx.

If the numbers work, then do it. Relationships over transactions for sure. 

@Michael Veloso I agree with Evan that you should definitely not buy a deal from a wholesaler. They are in for the $$. Buy off market with at least one agent involved. Why? because they are held too much higher standards and code of ethics than any wholesaler. You want to be using Board drafted purchase agreements (if possible) which ensures there are no sketchy clauses involved. Usually with custom contracts, you need to have an attorney review it (more time and dollars).

Hope this helps! 

@James Wise I’m honestly not surprised. You have to get turnkey company’s closely. Don’t think you’re just going to take the easy way out and think it’s going to work out perfect. Good lesson learned here is if you want to invest, kno what the principles are instead tossing money into a property you know nothing about and haven’t done any due diligence on.