All Forum Posts by: Brandon Allenczy

Hey BP!

I haven't been able to find this answer anywhere. I'm trying to buy this 6 unit, and split the financing between the seller (willing to hold the note) and my bank. My plan is to finance some from the bank and get the seller to hold the rest.

My question is this: My bank said they have to be all in collectively at 75% LTV, but I can negotiate the rest with the seller (meaning he can take a second position). I'm assuming they mean if they took a second position. Does his loan amount have to be smaller in order for it to be a 'second position'?

Example: Could I borrow $100K from my bank, and have the seller's note be $350K but is still a second position? Or would someone look at that and say the bank loan is actually in a second position, and I couldn't do it because I exceed the LTV?

Thanks!

Thanks Nicholas, I get what you mean. I do have about $35K in reserves for expenses, and the $300 is after setting 15% aside for repairs/Capex as well

*Detailed Post*

Hey BP!

I have an awesome opportunity to purchase a 6 unit apartment building in a fantastic location 2 blocks from my home. My problem is I just can't figure out how to finance this thing. Let me just start by saying this is a very long term play for me. Day 1, it's an OK deal. 5-10 years from now, it's a pretty good deal. But retirement age, this thing is an absolute slam dunk.

A seller (with whom I have a great relationship) has a 6 unit that is around a 6% cap rate in a great area. My realtor (huge investor in the area) told me a 6 cap in this area could appraise for $500K depending on the condition. The collective rents are about 70% to market value, so there is a lot of value add here. It needs some exterior  work and some interior cosmetics, but the units themselves are in pretty good shape. The seller is asking as close to he can get at $500K but I think it would appraise for around $445K-$465K.

The owner is willing to finance, but only hold the note on around $300K and have the rest upfront. I don't have that amount of cash available, and am trying to figure out what to do. Below are the options I've considered, and the roadblocks I'm hitting. PLEASE let me know what thoughts/other ideas you have.

1. Seller holding the note on $450K and bringing $50K as the down payment.

Roadblock: After negotiating, the seller just needs more money up front.

2. BRRRR using hard money/private money

Roadblock: In order to do a clean brrrr, I'd have to get this at a pretty crazy price for the seller (around $350K).

3. Having a local bank fund the DP (Currently in progress)

Roadblock: I spoke with my bank and the guy told me they might be able to give me a business loan as the DP and I was overjoyed, but over the weekend I remembered they will probably want to see a collective LTV on the property of around 75%-80% including the seller's note. So that leaves me with still needing to come up with a huge chunk of capital. If I borrow capital from 3 places, are there risks of crowd funding? Am I over leveraged? Even with 3 notes, the cash flow would still be a couple hundred/month.

I own 2 duplexes in the area, one of which I have around $60K of equity in and it cash flows about $200/month. Possibly 1031?

I'm crazy about this deal because like I said, day 1, this property cash flows around $300 (not great for a 6 unit). But after raising rents appropriately and making improvements, this will just get better over time. I estimate in around 5 years I could bring cash flow up to around $1200/month. In 30 years when I'm retirement age, this 1 property could literally be our retirement, adding $500K to my net worth and $6-$7K/month in cash flow.

Thanks for your help!

Hey everyone:

Following up on this, I'm running numbers on some mid term rentals and just wondering how you account for vacancy? I assume you have some vacancy, and your unit isn't rented 100% of the year. Ex: if I see that a good monthly rental rate in my area is $1800/month, would estimating 75% occupancy for the year be conservative (so my actual average monthly income for the year would be $1350?).

Just trying to gauge an average monthly income while factoring in vacancy. I know how to do this for LTR's but not extended stays.

Thanks!

Thanks for the input everyone. I think the most important thing for me is to have a general understanding of what I want to do, take big action, then perfect and fine tune along the way. So instead of having specific targets to hit, I just need to find a way that I'm always moving, always taking some sort of action, and working in this awesome business.

It's ironic that I've been slow to reply here because a couple of days after I posted this I got a call back from a lead I have and am in negotiations now trying to get the deal locked up.

Thanks again everyone!

@Mark Fein unless you buy as a primary residence, live in it for a year, then move/rent out, or you use your FHA loan to buy/househack a small multi family.

You can use FHA to buy a rental, you just have to occupy it for a year in some way.

Hey BP!

I'm having some issues figuring out what my next moves should be and was looking for some advice.

Where I'm At: 

Currently, my wife and I are house hacking 1 duplex, and own another duplex as a rental. We have about $20K in reserves and I'm securing a HELOC for an additional $20K. We're cash flow positive, and I'm looking on how to get to the next step.

Where I want to be:

I've recently made the decision to get involved in mid-term rentals (extended stay STRs). I've done some due diligence, and I think my market would be good as we have a solid amount of traveling professionals. Eventually, I'd like to have a portfolio of at least 6 of these units (but no specific time frame). I'm in a town called Hagerstown, MD and am an hour from DC and Baltimore.

Where I'm stuck:

I started off this year using the BP intention journal to get some clarity on where I want to go, but I felt myself focusing WAY too much on the planning, the tracking, the journaling, etc. instead of actually doing activities that moved the needle. For those of you who have scaled and gone to the next level, my questions are:

- How do you balance goal setting, and actually implementing your strategy? Do you spend a lot of time up front "sharpening your axe", or do you just start doing what you want and get good at replicating down the line?

- How should I be spending my time? Should I be setting goals and metrics to hit? Or should I spend my time doing what I can to get more deals, then work on systems/processes along the way? I feel the need to sit down and write an entire business plan on my model, but 1 week in to that I feel like I'm wasting time and start analyzing deals/working toward financing.

Any insight/advice is very much appreciated!

Hey Pamela:

I don't believe it does. I remember using an FHA on our househack and the number that was showing as my mortgage payment was like $200 less than my actual payment, and the reason was PMI. Besides entering in everything manually, I actually really love the calculators and use them all the time.

Good luck!

@Kellyn Cameron I recently did this and I did see a few listings on there, so at least I know it's somewhat a thing. Thank you!

For those of you who are currently using this strategy, are individual nurses booking you? Or is it the hospital's agency that has you on a list of rentals? I've been told recently that it's the agency that places these guests instead of them booking themselves.

@Ron Brady and @Dan Maciejewski

Thank you so much for your suggestions! I found some listings on Furnished finder in my area (I had never heard of this website before) and am listening to Al Williamson as we speak. I was also able to talk to a nurse at my local hospital who said that hospital has a pretty high regular demand of travel nurses.

@Jen Whitehead

That makes a lot of sense! I use apartments.com for my LTRs now so I didn't think of listing a monthly rental on there. Thank you!