All Forum Posts by: Eric Swint

When I started in Toledo a few years ago I house hacked a duplex with an FHA loan. Learning to be a landlord while you live in the property is a great way to ease into real estate and property management. Listen to the podcasts, read the books everyone recommends in real estate, and connect with other people who are navigating the same waters. Pay attention to what you like and don't like doing throughout the process. You can pick/create your niche based on what you learn about yourself. As you progress you can build your team of professionals around you. Talk about real estate with everyone you meet. It's amazing how many conversations lead to other investors and contractors.

@Aaron Romine First of all, congratulations on purchasing your first rental property! You're off to a great start, and you've come to the right place for a wealth of knowledge on REI.

I purchased my first duplex in Toledo in 2018. I house hacked this property living in the left unit and renting out the right. I undertook a serious remodel on my unit while living there (increased rent 25%). 

As an investor and landlord it is important to have a system in place to achieve your goals. I knew I wanted to self manage my properties from the get-go. I also knew I wanted to learn as much as possible about renovating and scaling my business as well. 

Landlord: Focus on applicant criteria, vetting potential tenants, thorough lease agreements, outline tenant expectations, perform regular walk throughs with tenants, and use web-based rent collection and maintenance requests. 

Investor: Don't overpay for a property, add value when it makes sense to, and be competitive with rent. Get your hands dirty. Tackle projects on your own. Build relationships with other investors/contractors. 

Hopefully this helps a little. I'd be happy to discuss further if you would like. Feel free to message me anytime if you have a question. Every path in RE is unique. Sometimes there are multiple routes to achieve your goals.

@Landon Bleau

Welcome to BP and best of luck on the search for your first deal! You are making a fantastic choice starting so early. 

I agree with what Daniel and Michael have said. Start with a 2-4 unit multifamily property if you can! Pay down bad debt, save your money, and take advantage of the opportunity while you can afford to dedicate the majority of your free time to it. 

Build relationships with other local investors and real estate professionals with like minded goals. Study up on the different zip codes and neighborhoods within them. Get a feel for what areas you'd be comfortable investing/living in if house hacking.

Feel free to message me anytime with any questions, or let me know if you'd like to meet up and discuss local real estate over coffee.

@Brandon Drayton

After you've selected your target areas, and start receiving properties from your agent in those areas, I'd run every one of them through the BiggerPockets rental property calculator using very conservative numbers. When doing this, I would focus in on my DSCR. Making sure this value is above 1.25 will allow you to eventually work with portfolio lenders, but it will also help you align other criteria as well. With a specific marker like this you can ensure that you are preparing for the unexpected, cash flowing positively, and not overpaying for the property.

Everyone's market and situation is different, but understanding this metric gave me a more clear picture of what I needed to continue to grow in real estate. Before learning about DSCR I was adjusting my numbers to get to a desired cash flow value without understanding the bigger picture. Seeing risk from a bank/lender perspective can't hurt.

Good luck to you!

@Noah Swank, @Daniel Dietz 

In your partnership agreements is there an interest payment attached to the Capital Contribution payback to the money partner if it's a 50/50 deal? I wasn't sure if this was expected.

And if not, could I attach an interest payment for a larger ownership share upon payback of the Capital Contribution? Would this make a buyout more feasible? Or is this not recommended?

Noah, where does your deal structure scenario differ from Daniel?

Thanks in advance!

@Daniel Dietz I know my partner has other interests besides this partnership, but I have just been moving forward based on what he has told me. I certainly would want him to be aware of the generational long term value of this as well. 

I really appreciate your feedback Daniel. Thank you.

@Daniel Dietz

That is pretty close to what we need. Thanks for your input! 

My partner doesn't want to have ownership in the LLC at a certain point due to age. So in your scenario how do I negotiate/structure a buyout to obtain full ownership down the road? I know I wont have cash to buy out his 50% stake given the size of the portfolio.

@Derek Dombeck 

Assuming I can negotiate an upfront ownership stake in this scenario, what (in your opinion) would be necessary to take full ownership of the properties? Would asking to pay back my partners down payment on each property plus the interest to ensure full ownership for myself be a reasonable suggestion?

Need some help wrapping my head around an opportunity, as well as making sure this partnership is a fair deal. I don't know what I don't know.

I have a partner that wants to purchase 2-4 unit multifamily properties with a line of credit. I find and structure the deals using very conservative numbers in the BP calculators that cash flow nicely. The properties would then placed in an LLC where he is considered 100% owner (I would have first right of refusal). The P&I on (20yr fixed) will be paid to my partner. He receives an interest rate of 8% from me, his interest rate to the bank is 5%. He does not want to be an active participant in these deals.

I manage and renovate the properties for a 8-12% of rental income fee depending on the property with the expectation that these properties are to be transferred to my LLC at a 7 year balloon mark. The 25% down payment he supplied through his credit line for the initial purchase will be nearly payed off (+ interest) at this point.

This is where I'm having trouble understanding. I feel as though I'm missing some key pieces of information to make this partnership work.

1. Will I refinance through the lender to a new 20 year fixed conventional mortgage?

2. How do I obtain ownership of all the properties acquired? 

3. Is it possible to be included on the initial LLC to simplify the property transfer process?

4. What else am I missing here? Any and all questions and observations welcome.

Investment Info:

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

Purchase price: $118,000
Cash invested: $15,750

House hacking the first year. Expected cashflow while fully rented after renovation is $456.20/month. Upgrades include fully remodeled kitchen (stainless steel appliances), partially remodeled bathroom, new carpet, new doors, new landscaping, new paint, and waterproofed basement.

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

House hacking made the most sense for me at the time, and this property had one vacant unit with value add opportunities.

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

Found on MLS. Standard negotiation using agent. Note* seller was the agent on the property as well.

How did you finance this deal?

FHA 3.5% down. $7,600 out of pocket at closing.

How did you add value to the deal?

Real value add was in the kitchen's. Fully remodeled one kitchen while living in the unit. Also remodeled bathroom, new carpets, new doors, fresh paint, new landscaping, updated all electrical. Updated second unit a little at a time while tenants were still under lease.

What was the outcome?

Before purchase units were renting between $650-$700 per. After renovation units are renting for $850 per.

Lessons learned? Challenges?

I learned that there should be an order of operation to these renovations. Certain items need to be ordered first and timing is key to efficiently finishing each job. I didn't order some materials for the kitchen when I should have which caused a delay in completion.