All Forum Posts by: Everett Stephens

Greetings -- I have around 40 SFRs in the Memphis, TN area currently insured by Lloyds, plus an umbrella covering excess liability. I've had this same insurance relationship in place since starting out in the biz about four years ago. Lloyds seems reasonable, but I've never compared them to any other carrier in the rental investment space. I'd appreciate some suggestions on any other preferred carrier that specializes in rental markets. As a side note, I'd also appreciate any feedback regarding budget estimates / guidelines used for insurance planning purposes on investment properties, please. Thank you much!!

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Memphis, Tennessee

Quote from @Shanna Pettie:

Quote from @Everett Stephens:

Quote from @Shanna Pettie:

Quote from @Everett Stephens:

Leaning a bit into what Brandon said, I would start with your local community banks. We had a great start-up experience with a local community bank who could move faster with local decision making and good terms compared to large national banks (I use to work for one). The local banks also tend to be a bit more flexible with your equity requirements permitting you to be able to approach the 15% down mark. This will also depend on the obvious: Personal credit rating and available cash as your down payment. You will eventually get there if you're not already! Good Luck!!

Thank you so much Everett!!! Was your first property a SFR or multifamily?

Greetings Shanna -- I ended up with a line of credit that left me the flexibility to purchase whatever I wanted. I recommend you consider this. The decision to go SFR or Multifamily was strictly a matter of financial performance for me. We ended up with several SFRs initially before a multi-family became available that could financially perform at the level our SFRs were performing at. My point being is I encourage you to build a financial model that works for you that meets your business goals. Let your model be your objective decision maker for you. As such, you're able to keep your emotions out of the process. This has served us very well. We stick by our model and we're able remain financially healthy. The model may adjust over time as you learn more, but keep the core fundamentals in place to help you navigate your decisions. I'm pretty passionate about all I do, but I let my financial models and business goals do the decision making for my real estate investments. Hope this helps...Ev

I have a question about your line of credit. Is it a HELOC or business credit card line of credit or what???

Hello Again -- Our initial line was a straight commercial line of credit we secured with 15% cash. For example, for the sake of simplicity, let's say we sought $200,000 initially: The bank committed to a business LOC that required us to commit 15% of the $200,000 in cash, or $30,000 (15% x $200,000 = $30,000). Additional terms to consider negotiating: 1. Drawdown period (how long you have to use the LOC) 2. Interest Only Payments during drawdown; 3. Length of repayment period of Principal & Interest. 4. Interest rate. Of course all of this will be dependent on credit rating, personal financial statements, etc. But, don't sweat it as this is just one of a number of ways for you to get involved. This particular path worked well for us after years of saving and developing good bank relations. We were also fortunate to get a few of our initial properties with true no money down thanks to focusing on the absolute fundamentals of BRRRR. Hope this helps!!!

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Quote from @Shanna Pettie:

Quote from @Everett Stephens:

Thank you so much Everett!!! Was your first property a SFR or multifamily?

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Quote from @Scott Sklare:

Hello again, where is your investment located?

Good Morning Scott -- We're located in Memphis, TN. It's consistently ranked as one of the best cities in the in the U.S. for investors. I'm just coming to the realization of why that is...

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Quote from @Jeff Copeland:

In your case, you essentially have infinite returns - a home run and textbook BRRRR (congrats!). But just because you can put very little money down does not always make something a great investment.

Cash on Cash return does not tell you how the property actually performs compared to the market, or to other properties in the same class. It's a personal metric that really only applies to you in the context of a single deal.

Cap Rate is a better metric for comparing the performance of different properties, or a single property to the broader market.

Both metrics are useful, they just have different purposes.

Thanks much Jeff! I appreciate your solid and thoughtful context. I never thought about the these deals as the "Textbook BRRRR" structures until this thread. It definitely feels reassuring. I've been in this about a year, and just acquired my 20th property. I've been able to score sufficient equity to zero out my actual cash investments in about 25% of my deals (SFRs in Memphis TN). I do like the Cash On Cash Return metric, as you pointed out, as a benchmark of asset specific returns. I'm definitely going to adjust my goals slightly after reading this to tackle more opportunities that have a greater likelihood of zeroing out my initial investment. Thanks again for taking the time to respond.

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Quote from @Chris John:

@Everett Stephens

In that case, your only choice of action is to get on BP and humble brag. haha. Just kidding. Congrats! That's awesome!

That's funny! I promise that was not my intent at all...I'm hungry to learn being relatively new to the biz. But, yeah, I'll take it and try to keep this acquisition model on repeat.

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Quote from @Scott Sklare:

Your cash on cash is infinite. That is what makes BRRRR so amazing.

Many thanks Scott. This is definitely that proverbial Ah-Hah moment for me.

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Greetings -- Thanks much in advance for your consideration. Measuring Cash On Cash returns is a go-to benchmark for me. However, it doesn't seem to make sense in the case of a cash-out refi when there's sufficient equity to take your initial actual cash investment completely out. For example: What investment ROI metric should I use when:

1. We acquire a rental property for $80,000. 2. We invest $25,000 for rehab. 3. The rehabbed property appraises for $160,000. 4. The bank is willing to finance 80% of the appraised value up to $128,000. 5. We refi for $105,000 essentially zeroing out our cash investment. In this example, our Cash Investment is ultimately zeroed out. As such, how do you measure a Cash On Cash Return when the Initial Investment is, more or less, zero, but still results in a positive annual cash flow of around $5,000.00? Thanks much for helping me think through this...I feel like Captain Obvious is about to deliver me some tuition. :) I'm OK with that....

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Quote from @JR Paulemon:

Hey Everett,

Great question, I am also looking to make my first purchase in the Multi-family space. I agree with Felipe, the comps for multi-family are a guide to how much value you can create with rents, but it does not determine the overall value of your property like SFR. Multi-family properties are businesses and the more value you can create i.e. raising rents, additional stream of income, decreasing expenses, etc. by increasing your NOI the more your property will be worth independent of the comps.

My additional question to the group would be can someone speak on the difference in financing. Non-recourse loans are available for multi-family properties, but are there non-recourse loans available for SFRs?

Hello JR...Have you had any luck of recent with your multi-family discovery? BTW, I've yet to find any real appetite for non-recourse in SFRs. I'd dump my IRAs into our SFRs if I could find an institution willing to go non-recourse. Ironic that I've had non-recourse in HUGE international commercial projects, but not on local SFR???!!!

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All Forum Posts by: Everett Stephens

Everett Stephens has started 4 posts and replied 20 times.

Post: Insurance Recommendations & Comparisons

Post: Loan options for investment property in MS

Post: Loan options for investment property in MS

Post: Cash On Cash Return...Or, should I use another metric?

Post: Loan options for investment property in MS

Post: Cash On Cash Return...Or, should I use another metric?

Post: Cash On Cash Return...Or, should I use another metric?

Post: Cash On Cash Return...Or, should I use another metric?

Post: Cash On Cash Return...Or, should I use another metric?

Post: Analyzing my first multi-family transaction...