All Forum Posts by: Jacob Lapp

@Avery Heilbron

Thank you for the response. I agree. But that’s interesting I haven’t heard of that ever happening so good to know!

@Kaylee Walterbach

My biggest rookie mistake on my first deal was selecting one of my first tenants.

I bought a vacant (pretty much turnkey) triplex to househack. I had a trustworthy friend interested in living in one unit and paying a cheaper rent to take care of grass/snow and to act as a buffer or property manager between myself and other tenants. This actually worked out great and is still working out great to this day!

So I needed one more tenant.

After the AOS was fully executed I listed the final unit on Facebook and got a lot of interest before I had ownership. I told everyone that I didn’t have ownership yet and would start showings the day of settlement. (August 28th) and my goal was to have all leases in place starting September 1st.

Settlement came and a ton of people showed up and filled out applications. Then someone showed up and said they would pay the year in advance (just sold their house) all I saw were dollar signs!!! So I looked past their low credit and didn’t do a background check😑

The check cleared and I was overjoyed. That was the majority of the mortgage for the whole year and it all came in at once!

8 months later I noticed I didn’t see the father out recently and asked where he’s been.

“He’s back in jail”

Mind you his daughter who was living there did not make enough money to cover the rent on her own. I told her she can definitely stay until the year was up and that I would help her find a place to go.

This was an extremely stressful couple of months. During the middle of COVID I knew I couldn’t evict but helped her find a place and helped her move there as well.

So aside from a stressful couple months everything worked out and I didn’t lose money which is the key. I learned the importance of thoroughly screening tenants and not jumping at the quick pay day.

Hopefully this helps someone haha

What’s up everybody! The title says it all.

I am currently on my second househack living for free and cashflowing $1700 a month.

Based on my current plan and strategy I’ve had in place househacking more expensive multi-family properties I have 2 or 3 more years/deals until I hit my cash flow goal.

I am still working my W-2 and my savings has significantly increased with the extra cash flow, still living extremely frugal.

My initial plan to buy a property each year at first seemed super reasonable because that’s the time I thought was necessary to save for down payments. With the extra income it is happening much faster and I want to take advantage of some deals I am coming across.

The money maker and key to the excellent COC I have been getting has been through house hacking.

I am conflicted whether or not I should buy as an investment just because I am able to buy and sacrifice the COC I've been getting from househacking.

What’s holding me back is the “claiming residency for a year” and I know a lot of people say “ who’s gonna check” or “you don’t need to wait that long it’s just a suggestion so that you actually move in and don’t immediately rent it out”. I guess it’s a moral dilemma and I am scared to get caught up breaking the rules.

My other option and purpose of the post is I’ve been approached by a few cash heavy partners who don’t want the work involved but want to use their money to have equity in the deal.

I’ve talked to my CPA and attorney and have ironed out good partnership agreements. It really came back to the underlying question. Do I want a partner? My initial answer is no. But I have a hard time passing up more passive income that will let me achieve my goals quicker.

I’m curious if anyone else has been in a similar position and if so what advice would you have told yourself when you originally had these thoughts?

Thanks in advance!

@Donald MacMillan

Listen to BP podcast 448 it changed what my strategy will be for this.

Create a binder with picture of the property and the amount you purchased for.

Include other apartments in the the area with same number beds/baths, Sq ft etc.

Ask tenants what they think is fair. They know they are most likely going to be asked to leave when there’s a new landlord. And if so you provided them the local options to move to.

If they still don’t want to pay more and you have to serve them the 60 day notice. Offer “cash for keys” for their deposit on the next place so they don’t just burn you and stay.

I haven’t done this personally. So I’m not sure he success rate. Out of my 4 tenants I’ve only inherited one. And I told them the rent was going up or they needed to leave in 60 days. They paid higher rent for 3 months and I helped them buy a house.

Good luck!

@Lilach A.

395k purchase price

25% down aka 100k plus closing costs plus any rehab equal maybe 110k-125k depending on how much needs to be done. But even without those extra costs lets say you just put the 100k down. For $500 a month in cashflow is 6k a year thats a 6% coc return...

Still better than a mutual fund since you will eventually own it and hope for some appreciation.

Personally I wouldnt do this deal but if thats all that available in your market it is what it is.

See if theres other ways to get more rent. What would you need to do to get there?

Best of luck

Hey Everyone,

This is my scenario. My ex real estate broker wants to partner on a deal. He has no experience with investing and isn't handy. My strategy has been claiming residency at a multifamily every year which I am planning to do this year also and wouldn't want to tie much capital up in a lower yield partnership. He proposed funding the down payment and for me to do rehab and manage property for 50/50 split. I just found one I think looks good. Listed for 215k its a duplex once rehabbed should collect $2500 and after piti, utilities, cap ex, vacancy should cashflow around $1000. With 50/50 split $500 a month each. Purchasing as investment the down payment will be close to 60k which my partner will pay and the rehab will be around 25k from a licensed contractor ( I will do work and fund) probably close to 8k in materials plus labor. then his role is over and i become property manager and maintenance guy. At a 10% property management fee ($250 per month) I will make up the difference in his down payment and my rehab cost in 11.6 years. For his COC from putting that money down is 10% without accounting for appreciation in rent or gained equity. And mine will be higher but I am doing the heavy lifting. We will be working with an attorney but I have a few questions.

My questions are

Does this seem like a fair partnership?

How would you structure this in terms of who’s name is on loan/title?

Should we create an LLC?

Should we create a joint bank account where reserve is kept, rents go into, bills are paid from etc.?

I was thinking of having a 10 year term to then re-evaluate the partnership and at that point we could split the cost of property management. Does that make sense?

I’m sure I left some details out but any help is much appreciated!

@Jennifer Torino

Sorry first property triplex was completely split with electric baseboard. Duplex had the furnace so they isolated vents so it only heated one unit and then installed electric baseboard in the other unit

@Jennifer Torino

I just bought my second mutlifamily the first triplex was already completely separated. Each tenant pays their own electric water and sewer. The one I just bought was originally similar to yours a gas furnace for the whole house. What the previous owner did was isolate the duct work to only heat the second and third floor unit. Then installed electric baseboard downstairs since the electric was already split. I just got a quote for a water monitoring system so I can send bills to each tenant for their water use only $900 for parts and service I just need to do the install!

Hope this helps! Good luck!

@Jason Polykoff

I’m assuming this is for your first deal?

Use your 5% conventional first. You will not be able to get this again as it is for first time home buyers. Plus it is better seen from the seller perspective as people have already stated.

Then you can save your 3.5% FHA or FHA 203k loan for a bigger property.

Personally I used my 5% conventional on my first house (triplex). Then I did 15% conventional on my second house (duplex). And now I am looking to use my 3.5% FHA 203k Loan and getting the most out of this that I can on a Quad.

Looks like you are pretty local to me send me a message anytime if you want to chat!

@Jose De La Macorra

That’s a good point. Either way you can’t really lose.

He lives for 20 years - At 20 years it still wont be a loss maybe just not the best ROI. But on the flip side you were able to help an older man with no one live his last years in peace. And that's of extreme value to him and to you. Good karma is real.

Or he passes sooner- Could be one of the best investments ever made.

Either way you were able to provide the financial comfort to this guy in his last years and I think that’s definitely worth it. Especially if the $1200 a month isnt putting a burden on you and better yet is paid for by other cashflowing rentals!