All Forum Posts by: Jim Kittridge

Hey @Arta Montero. Sorry you have had a bad experience with your property manager. I would recommend reaching out to other property owners from local REIAs or on BP and getting recommendations from them. 

Interview each one and select who is best. It’s also a good idea to use two (on separate properties) so you can get a feel for which management you like better. 

Harry Marsh Law is very popular with investors and wholesalers in Charlotte. I’m not sure about Hickory. 

@Luis Torrico

A 10% return will be difficult there. A lot of people use it to park money which inflates the values.

Have you considered investing out of state? What about investing passively as a private lender on RE deals?

@Greg San Martin Jumbo refi’s are difficult right now. You can look at some larger banks like HSBC that do them frequently. I’d also recommend talking to your banker.

As a side note, you can definitely outperform 3% appreciation with investments outside of Berkeley.

For example, you can find 8-10% cap properties in the Charlotte metro that will have much stronger cashflow. They will still appreciate 3-4% per year and you still benefit from amortization and depreciation.

 I don’t know the amount of money the equity partners put it, but litigation gets expensive fast. It’s often better to try and work things out with the partner on the deal or ask for guidance from people in your mutual network. 

First of all, do not do an investment solely because it's in an OZ. If you wouldn't do the deal if it wasn't in an OZ, I would pass. 

Having said that, it can be very advantageous if you stand to benefit from the tax advantages and can execute it properly. The tax deferral and discount is nice, but the biggest benefit it has is the tax-free readjustment of your basis at year 10. 

For example, say you put $1M into a building an apartment community and it's worth $4M in 10 years. Your basis get's adjusted to $4M and you don't pay taxes on the $3M in appreciation. Yes you discounted your capital gains taxes by 10-25% and deferred it but the most significant benefit is in the basis adjustment at year 10.

I'm not sure if BP has done a podcast on the subject, but we did a podcast with one of the top CPA's in the QOZ field:
http://whoknowsrealestate.com/podcast/qualified-opportunity-zones/

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Concord.

Purchase price: $140,000
Cash invested: $30,000

Purchased two duplexes for $140k and have no money in the deal after BRRRRing it.

We retained the tenants, made moderate improvements, and negotiated a $200/mo increase in rent for each unit.

It appraised for $340,000 when we refinanced it at month 9.

What made you interested in investing in this type of deal?

Substantial amount of equity and room to add value in a fast growing suburb.

How did you find this deal and how did you negotiate it?

We found the deal through our direct seller marketing efforts and were able to help the seller get out of the landlording business at the price he wanted.

How did you finance this deal?

Financed it through a commercial lender at 85% LTC on purchase and rehab.

How did you add value to the deal?

Made moderate repairs and increased the rent by $800/mo or $9,6000/year in total.

What was the outcome?

We pulled $60k out of the deal after paying back the initial down payment and still have <60% LTV on the property.

Lessons learned? Challenges?

If you see a good deal, jump on it. We called the owner every day after he told us he wanted to sell to us and that he was just busy. 3 weeks later, we almost lost this deal to another investor for the same price.

 You're correct but you're typically lending 60-70% of a home value, not purchase price. The interest rates vary depending on the deal and the borrower and are negotiable. Inexperienced borrowers or riskier deals will yield much higher interest rates (15-20%)

Here is an example deal we did recently:
The house is worth $330,000 after rehab (ARV). The purchase price was $130,000 with a rehab of $95,000. The lender funded the full purchase and rehab of $225,000 on a 12% IO loan with a year term and first lien position.

Breakdown:

• $330k ARV
• $130k Purchase
• $95k Rehab
• $225k Loan amount (funding 100% of purchase and rehab)
• $2,250 Monthly Interest Payments
• 68% = LTV
• 100% = LTC
  

There are a lot of benefits to the borrower like, being able to close quickly, leveraging other people's money (OPM), no condition requirements, appraisals, the surety of being able to perform, and some may not be able to get attractive terms with a bank. Also, a lot of banks are hesitant to finance 100% LTC even if it is a deal with a significant amount of equity.

 Thanks for clarifying Dmitriy. It’s much appreciated. 

Have you considered bringing in a partner who has experience in this asset type and has the funds available to do the deal 50/50?