All Forum Posts by: Frank Maratta

@Kyle Root

Congrats on getting started. Unfortunately this is the one problem with real estate - if you don’t have the capital your “stuck” until you save up. The only way to get around this is through a process called syndication. This is where you raise money from other investors to invest in a deal. Unfortunately in your case it may prove difficult as you don’t have a track record yet that investors may want to see. But if you find the right deal- money will come. BRRRing is the most efficient way to grow quickly with limited capital, and certainty gives the most bang for your buck. The beauty of syndication, though, is let’s say you find a deal that offers you a 15% cash on cash return (based off the 25% down you have to put on the property for the bank), if you offer your investors ANY percentage of return less than 15%, your cash/cash return will go up.

What I don’t like about syndication, and the reason I have yet to try it is that you are responsible to other people. You really need to know what your doing or not only is your money at stake - so is your reputation.

@Chris M.

If you have the $24k why not use it to fund the purchase of the house. If it will spread you too thin then immediately apply for a HELOC on your moms house since it will be in your name anyways? I have never taken out a HELOC but I don't believe they look at your income? Someone correct me if I am wrong.

With that said- and didn’t I see a 33% interest rate somewhere?- let this one go. You’re trying to put square pegs thru round holes. You are not financially ready to buy this house. With a $24k house you are going to need to shell out $$$ for repairs. Somewhere. There are going to be unexpected expenses SOMEWHERE. I promise you. Is this your first time purchasing a home? You seem very educated but if this is your first house it’s not as simple as putting down the $24k and moving mom in. What about insurance. Taxes. Closing costs. Repairs. Repairs. Repairs. They are going to be hidden somewhere if you haven’t seen them yet -

@Carlena Alva

If your financial resources allow you to do the deal without a partner, I say just jump in and do it. You learn things much quicker when it’s your own money on the table. Find the deal, run the number by us here at BP and go for it. I agree with @Nathan Roberts view on partners being made organically anyways. It sounds like what you are looking for is a mentor anyways. Do you have a family member with some construction experience? My first deal I ever did was a 3000sq ft $120k gut rehab on a two family. At that point in my life I could barely change a door knob. I learn by doing, so that was what I needed. I had a mentor, but it was mainly phone conversations.

Find the deal, run the numbers by us on the forum and go for yourself.

@William Huston

I am having a hard time understanding where your primary residence is. The house that burned down was a rental, yes? If your accountant filed your tax returns with that house as a rental- which it sounds like he did by giving you the write off benefits of depreciation on it - I don’t see how you could turn around and sell it as a primary residence. The IRS basically already has knowledge due to prior years tax returns that it is a rental.

Maybe go back and amend your tax returns? All in all I would just pay the depreciation recapture and the long term cap gains rather then risk an audit by the IRS.

@William Huston

How are you screening these tenants? That is the most important thing. All my rentals are in low income areas, about 50% of my tenants are section 8, and most are phenomenal. I have had every single tenant screened by a professional. The one tenant I tried to screen myself I ended up with an eviction on my hands 5 months later.

On an unrelated note, out of curiosity how long are your notes? Assuming you are doing 15 yr notes?

@Adam Dudziak

One thing I missed was your 8 week close. A cash close should not take this long. I’ve closed in as little as 2 weeks after signing the purchase agreement.

I am assuming you are not hiring a home inspector?

Sounds like you may need to shop around for different law firms as well.

@Adam Dudziak

You could shop around for different lenders but I think the six month seasoning requirement is pretty much standard. I am actually waiting a year on my last BRRR to refinance but this is completely unrelated (found a bank that will refi at an owner occupant interest rate -currently 3.625% and dropping).

Another option is to build cash reserves so you can have multiple projects going at once. For your next rehab why not GC the job yourself? This is what I do and I save a ton of money from not having to pay a GC, you also have complete control over the project and are not dependent on a GCs timelines. Not to mention you will learn ALOT and find cheaper and more efficient ways of doing things.

Finally, your last option is to use hard money to buy the properties so you can have a few going on at once. Just don’t bite off more then you can chew.

@Pope Lake

I think if a recession happens it will be at the next presidential election if one of these socialist dems get elected. With that said, people think it’s going to be like ‘09 again. It’s not. We had a bubble in 09 directly correlated to poor lending guidelines. People who got mortgages could barely afford to pay them and then once the economy downturned everything spiraled out of control and everyone lost their homes. We are not going to ever see the low housing prices we saw in 09 again, in my opinion. I think the worst that could happen to us as investors is this “bond bubble” I keep hearing about, which would make it difficult to get financing, which now that I think about it - would probably have a giant impact on housing prices. But I’m not an economist and take what I say with a grain of salt. If anyone has any info on the “bond bubble” please chime in because if this is true, that is what we should really be concerned with.

@James De Stefano

When I do a BRRR I make sure all the cap expeditures are done. I buy the houses that are really wrecked. If you are BRRRing something that just needs cabinets paint and some lipstick on it, then yes you are going to have some capital improvements down the line to take care of. I think those kinds of deals are extremely rare in today's market anyways though. Most of the deals I find need all six sides of the house done. I gut everything including the knob and tube wiring and the old cast iron plumbing even if it is still in good shape. When I'm done I have a house that I know is 100% and unless I plan on keeping it for 20-30 years no more capital improvements will be needed. Let's face it we can save for cap ex but it might not be necessary- deals come across where we may sell the property and trade up. So it's good to factor in cap ex to be safe but it can get extremely discouraging to factor in 10% repairs 10% vacancy rate 5% cap ex .... when you are first starting it's definitely good to keep an eye on those things but once you get going you will find a way to reduce all the expenses including vacancy.

I have a very sharp friend who factors in all of these expenses (cap ex, vacancy, repairs, cleaning) when searching for deals. Well I’m not saying he’s wrong for doing so, but if for every 100 deals he looks at he buys 1 that meets his criteria and out of every 100 deals I look at I buy 5, who do you think is going to be more successful?

I love owning real estate, yes I want the cash flow but if you have the mindset of wanting to own property I think that is what separates successful investors between those who never get started because they get too focused on the numbers. Find a good mentor and see how they do it. Remember there are investors that don’t all use the analysis formula that we use here on BP.

@Pat L.

Also which brand did you go with for your dehumidifiers?