All Forum Posts by: Jake Harrington

One common distressed seller I've been finding are landlord-managed multifamily properties that have a commercial side and residential side in C/C- areas.

At first glance, they have good cash flow... but they come with a tangled mess of existing tenants who pay way less than market value and usually have a longer term lease on the commercial side, meaning you'll have to sink in a lot of time and energy to maximize their profit.

It seems like it could be a good niche to go after if you know how to maximize the cash flow OR it could just be a massive headache and money sink if approached the wrong way.

Plus they seem hard to sell further down the line because they have such a small buyer pool.

Finding a good local property manager could be a solution, but I wouldn't know where to start with that. Keep in mind most of the tenants would be immigrants who may or may not speak English.

Honestly, these seem like a total headache and I can understand why these sellers want to sell. So my question is, how do you go about navigating these deals?

If the price is makes sense, at the very least it could be a good wholesale deal, right?

1 Vote

Houston, Texas

Quote from @Jay Hinrichs:

Quote from @Account Closed:

Quote from @Jake Harrington:

I've been stalking these forums for a while now and y'all are so helpful. Thought I would put out my first post :)

For background, I'm a new investor in the Houston area doing research before my first flip. It looks live ARV will be around 275k-300k.

My question is, when starting out is hard money the way to go? It seems like most investors start out this way.

But based off the books I've been reading, such as J. Scott's book, hard money isn't always recommended and it's better to go with a portfolio investor such as smaller banks, or partnering with other investors, or of course seller financing.

Jumping into hard money as a new investor seems insanely risky. I suppose I'm looking for any advice on how you found an alternative to hard money.

Or on the flip side (see what I did there?), what made you feel secure taking the leap with hard money and going after that first flip.

Partnering with an investor or doing seller financing would be ideal, but I'm still growing my network by cold calling other investors and real estate agents and attending local events. Trying to build out that dream team of contractors and subs as well.

A mentor would also be super helpful, but like I said, still building out that network.

As far as my personal situation, I have a good credit score, a decent amount of savings (200k cash) and a little more than that in investment accounts along with some equity in my current home, a mortgage, and car payments.

Any advice would be greatly appreciated.

@Jake Harrington: There are times to use Hard Money and times not to, as you might guess. Wisdom is knowing which is which.
We do something a little bit differently, we buy "off market" and take over thier loan & we expect to get low interest rates and equity up front like this. Then we can fix & flip and not need Hard Money or much of or own.

issue with sub to is its a fraction of the market by the time you find someone willing to do this for you your competition will have bought sold and profited on many deals.. Sub to is one arrow but certainly not one you can count on..

the idea of a bank or CU or portfolio lender lending you on your first fix and flip will be very tough to find unless you have subtantial banking relationships with them ( read deposits) .

HML lenders exit because they are basically the only ones that will do this for new or newer fix and flippers.

My suggestion is to use your own cash to do your first couple make sure you work out the kinks then you can leverage with private money HML or find that unicorn sub to deal.

I see what you mean. I appreciate your perspective on the different loan options and how Sub To would fit more as a tool to use in the right situation and not the 100% solution.

It seems like using my own money might be a good starting point or at least doing a smaller % as HML

0 Votes

Houston, Texas

Quote from @Robin Simon:

Its definitely dependent on a lot of variables, personal situation/risk tolerance, etc.

But high-level, I would say that there can certainly be a balance - sometimes people forget that when using hard money or any sort of financing, for some reason you need to "MAX out leverage" - i.e. do a 100% financing for a flip or a max cash-out refinance etc..

However, most hard money lenders would be totally willing to do a lower leverage loan (and would probably prefer it) such as 50% or 60% LTC instead of the usual max amount. This gives cushion and greatly reduces risks on all sides - but doesn't require you to go "all cash" or wait to save up to jump in and get started

Love this, thank you for the advice. I don’t want to go all in on the first deal and get wiped out. I know it’s probably not ideal from an efficiency perspective but I’d definitely like to manage the risk as much as possible.

1 Vote

Houston, Texas

Quote from @Andrew Postell:

@Jake Harrington thanks for the post here. Always great to hear from a fellow Texan.

The main question I would pose here is - what are your options?

I say this because we usually execute with Hard Money because our other loan options aren't good enough.

I don't think Hard Money is risky at all. It's one of the most consistent forms of acquisition money out there for us as investors. Now, I'm saying this because the Hard Money lenders I use on my own properties I know, like, and trust. It is risky to use anyone blindly...and there are entire discussions on how to vet vendors and it usually starts with leaning on other investors in your market. But I'm off target a little here.

Hard Money allows us to come out of pocket next to $0 on a property. Just because it's possible doesn't mean it's easy to do. It is common to purchase a property with about $10k-$15k out of pocket. But with DSCR or conventional loans I need 20% down or so. I have millions of dollars of real estate. There's no way for me to acquire that much real estate with traditional lending. Which is why the BRRRR Method or Sub To or Assumptions or all of these other strategies are important. All of those help me purchase a property with as little out of pocket as possible and we usually execute with Hard Money.

Hope all of that makes sense but feel free to ask anything additional. Thanks!

Thanks for the detailed reply Andrew. Sounds like there's a big knowledge gap that I have to fill when it comes to HML such as vetting them and choosing one I can trust. Along with the other ways to acquire properties you mentioned such as Sub To or assumptions.

It's tricky because there is a lot to flipping and acquiring real estate and financing that I'm (unintentionally) ignorant about.

Lots to learn. Just trying to balance the learning with action so I don't freeze up with analysis paralysis.

Any advice is always welcome

0 Votes

Houston, Texas

Thanks for the reply Erik, lots of stuff to think about.

At the moment, I am interested in flipping only. Trying to stay focused on flipping while learning the ropes. Maybe I'll branch out in the future, but not sure yet.

Slow flipping or house hacking would be great, but I have a 4 month old and we love our house, so that's off the table.

I guess I'm looking at ways to minimize risk when starting out. At the end of the day I might need to go with hard money and jump in head first.

But for now I'm still building out the local network. If I'm lucky I'll find an opportunity to partner with someone or shadow another investor first.

0 Votes

Houston, Texas

I've been stalking these forums for a while now and y'all are so helpful. Thought I would put out my first post :)

For background, I'm a new investor in the Houston area doing research before my first flip. It looks live ARV will be around 275k-300k.

My question is, when starting out is hard money the way to go? It seems like most investors start out this way.

Jumping into hard money as a new investor seems insanely risky. I suppose I'm looking for any advice on how you found an alternative to hard money.

Or on the flip side (see what I did there?), what made you feel secure taking the leap with hard money and going after that first flip.

A mentor would also be super helpful, but like I said, still building out that network.

Any advice would be greatly appreciated.

1 Vote

Houston, Texas

All Forum Posts by: Jake Harrington

Jake Harrington has started 2 posts and replied 6 times.

Post: Small mixed-use multifamily properties (3-4 doors)

Post: Is hard money recommended for your first flip?

Post: Is hard money recommended for your first flip?

Post: Is hard money recommended for your first flip?

Post: Is hard money recommended for your first flip?

Post: Is hard money recommended for your first flip?