All Forum Posts by: Jody Schnurrenberger

I've never used a HML, myself, but I googled and found a link on BP. Hahaha

https://www.biggerpockets.com/hardmoneylenders/north-carolina 

You could try another crowdfunding campaign on another site, but I doubt it will get you the tons of money you need. Perhaps ask if they would be willing to refinance after the stuff is built. Maybe that would be easier and you could go with a hard money lender in the beginning. People who buy really crappy homes that need serious amounts of work often can't get traditional funding, so they go through a HML at first, then after the rehab is done, get a traditional loan. Of course, because HML loans tend to be shorter and have higher interest rates, you'd need to be pretty sure a lender would finance you when the project is done so you don't have to fret about the HML costing so much for a longer period of time than absolutely necessary. That's my only thought.

I just wanted to be sure you weren't planning to do AirBnB in the actual city limits of Asheville. As I understand it, it's a really bad idea or perhaps not even allowed. You mentioned the county, so hopefully you're just near Asheville, but not actually in the city limits. If you haven't already, check out the local Carolina Real Estate Investors Association (CREIA). You can go to 1 meeting for free, then once you pay, there are like 8 different meetings to attend monthly, though you wouldn't qualify for some like the Advanced or probably even Intermediate, but if I recall, there is actually one just for people who do vacation rentals, along with one for beginners and the regular one and even one in Hendersonville, if you're interested. These are great places to meet folks, get ideas, and maybe even get some money...after you've developed relationships. If you actually live in Charlotte, as your profile suggests, I'm sure you can still benefit tremendously from joining your local REIA. :-) Google it or find it on MeetUp.com (or better yet, do both so you don't miss out on anything lol).

Good luck!  

For me, part of it depends on your own strengths and weaknesses.  I'm a total spender.  I know it.  I'm not going to change it.  It's just who I am.  Thus, I learned to channel that more appropriately.  I like properties to be paid off.  (I know, some folks disagree, but that's another topic for another thread.)  When I first bought my house, my mortgage was something like $700/month, but I always had just enough to get by, never more and never less.  So, I decided my mortgage was $1000.  In fact, I purposely didn't know the exact amount so I wouldn't be tempted to pay that amount in a "lean" month.  Miraculously, I always found the $1000.  Now, some months, perhaps due to a bonus or Christmas gifts or whatever, I'd have even more money.  I'd put that toward the house as well.  I knew I'd just waste it on something stupid if I didn't, so l managed paid it off in 12 1/2 years while making less than $30k.  Not too bad for a spender.  :-)  

I joined the Army and after I paid off my house, I decided to add to my Thrift Savings Plan (Army 401K). I'd started at the recommended 10% when I joined, then every time I got a raise or a promotion, I bumped it up that same percentage until I reached 25%. For 7 years I never saw a raise in my actual pay check because it was all going to my TSP. I figured I managed to live on that amount last year, I can again this year.

Well, now that I got medically retired, I'm no longer able to contribute to that, so I'm back to figuring out what to do with my "extra" money so as not to waste it.  I just bought a house.  I bought it through a line of credit against my stock market because they wanted to close with cash and quickly.  However, I plan to refinance to a traditional mortgage.  Partly, I want to be able to free up that line of credit in case I need it again.  Partly, because I'm just going to waste my money on something stupid if I don't get rid of it another way.  Paying a mortgage seems like the perfect way.  The renters will be paying it as well, so the house should get paid off very quickly.  :-D

I'm not a saver, but I've found ways to have something set aside for the future.  I always say, "Life isn't about being perfect.  It's about working around your imperfections."  If you know you can save, maybe split the difference between your 401K and your impending property purchase account.  But if you know you can't save (no shame in it, just shame in not knowing it), then put it away in the 401K.  

Take a good, realistic look at your abilities and your plans.  See what fits best.  :-)  Good luck!

I also invest out of state--Auburn, AL.  I think that even if you have a turnkey company, you'd do well to have visited the city first, and preferably the houses if you can get there fast enough.  I've heard rumor that some turnkey companies aren't reputable (as in every industry) and will sell you things in a war zone type of area, jacking up the price so you don't even realize what you're getting.  If you visit the area, you can map out the locations you are interested in, visit the PMs you are considering using, meet with agents if you decide to go that route, etc.  

I encourage folks to invest where they have friends and/or family so when they to visit their property (which should be done at least annually, even with everything done for you), they have a free place to stay to cut down on expenses.  Also, if there is a hurricane or tornado, the friend or family member can drive past the property and give a basic report much faster than the PM can as they may have hundreds of properties to check on.  

When you are picking a PM, be sure to read the management agreements before making a final decision.  Also, make sure they handle everything you think you might want to get into.  For example, I've decided to start investigating Section 8 properties.  Well, my current PM doesn't do them.  Now I need to find another PM.  I'd rather have everything under 1 roof, if possible.  When looking for other PMs, I read one contract that specified that they charge 8% or $100, whichever is higher.  If I'm renting out a low income place for $500, I'm overpaying with them.  The other 2 agreements I read charge a straight 8%, no matter what the rent is.  Also, the required insurance in my agreements ranged from $300k to $1M, so that might play into your decision as well.  Basically, read the agreements before making a final decision.

Good luck!  :-D

@Vernell D Watson, I can't say exactly how many properties a bank will allow you to finance. I hear rumor that by law it's 10, but that's also if you have the income to support that plan. My first property was simply my house I got with a traditional mortgage. I paid it off in 12 1/2 yrs. During that time I acquired 2 sets of duplexes, but I did those through a line of credit on my stock market account. That's how I also bought my newest house, but I plan to refinance it to a regular mortgage in order to free up that line of credit for future quick cash type purchases. I only did that for my new house because the sellers wanted cash and a quick closing in order to agree to my low offer. So, as you can see, I can't really tell you about what banks will let you do, but I'm sure a high paying job will let you do a lot more than me just living on my VA disability check. ;-)

Another thing you can consider is investing where you have family or close friends.  They can go see the properties, show them to you through FaceTime or Skype, tell you about the various neighborhoods, etc.  Ideally, you'd be able to do this with a trusted agent AND a trusted friend or relative.  ;-)  Another benefit to investing where you know someone is that you can hopefully stay with them for free when you visit your properties (which you should do at least annually).  But don't rely on them for things like property management.  However, if there was a big storm, they can drive past your property to tell you if there are any limbs down that will need to be removed.  It might take the regular managers several days to get in contact with all the properties to see if there was any damage and then contact all the owners.  Of course, in the long run, you'll get an answer, but if it was something like a hurricane or tornado, your friend or family member can tell you in a matter of minutes rather than waiting for a day or more to get word from your PM.

Also, be sure to interview and read the management contract of several different PMs.  No 2 contracts are alike.  For example, I recently read 3 contracts and all 3 said they charged 8%.  But 1 also said they charged $100 if the 8% was less than $100.  I'm looking at getting into Section 8 and my properties probably wouldn't go for $800, so I'd do better going with another company.  Ironically, they wouldn't even handle Section 8, so it doesn't matter, but not the point.  Read the contracts and be sure you can live with what they say.  ;-)

Good luck!

Welcome to BP!  Another thing I'd like to add is to know your strengths and weaknesses when it comes to your niche.  For me, I wanted long-term income to provide for me when I'm elderly since I have no kids to help out.  I decided on rentals, but I quickly discovered I'm a horrible property manager.  I'm entirely too nice and folks get away with murder when I'm in charge.  Now, when I'm looking at a property, I include the property management fees when I do my calculations to be sure the house is still a good investment if I give away 8% of the money every month.  I say, "Life isn't about being perfect.  It's about working around your imperfections."  Know what you're good at and what you're not and consider those when you're deciding what and how to work your real estate plans.  :-)

As for what steps to take for flipping to make a good ROI, be sure to know the neighborhood. Not all areas are a good flipping area. Also, if you put granite counters in a neighborhood where no one else has them, unless you got them for a steal, you probably won't make back that money. Know what's an appropriate upgrade for the neighborhood. Hopefully your agent and contractor can help with this part. In flipping, time is money, so if you know you're going to be going away for vacation, but you had planned to do a lot of the work yourself, schedule your closing for after the vacation so that you don't waste time not working (unless you have a trusted contractor who can do work while you are away). On the flip side (pun intended), if you have upcoming vacation time you were going to spend locally just hanging out in your pjs, and planned to do the work yourself, try to schedule the closing (or your vacation) so that you can work on the house while on vacation.

As for contractors, don't pay them ahead of time, even for materials.  If they need materials, ask them for a list of what they need or go with them to pick them out, then have them delivered (or take them yourself) to the job site (inside).  There are a LOT of stories on here about folks forking out money at the beginning of a job, only to never see the guy again.  You can pay in installments if he's doing a lot of work.  For example, you can pay him for completed work on the counters before he starts on the floors.  But don't pay him until he's totally 100% done, even with clean up.  Once he's been paid, why would he bother to clean up?  Good luck!

Keep in mind, I have only been looking into Section 8 and do not actually own any myself (yet).  However, I can tell you somethings from my research.  Be sure to get a PM in place first.  In my town, there is only 1 Section 8 PM in the whole city.  No one else will touch it.  This concerns me because I read their management agreement and don't totally love it.  (Nothing to do with S8, just other things in the agreement for any property they manage.)  But if I go with Section 8, these are the people who will be managing for me. 

At least in my area, the S8 PM said property damage only happens "occasionally" because they can lose their voucher if they damage the property.  I feel like this is safer than regular low income because they have more incentive to keep the place in good order.  Of course, there are no guarantees, but even regular middle class folks will sometimes trash an rental, so...

Talk to your local housing authority and read through the information packet they give you.  (At least mine gave me one.)  My PM also told me the going rate for the size and area of the houses I was looking at, which was at least $100 more than I was expecting.  

The only real downside I've seen that doesn't come with normal rentals (besides the inspections, but for me, that's not a downside) is that if someone starts to work their way out of the program, there is a period of time when they don't make enough to easily cover the rent, but they make too much for S8 to cover most of it.  A local friend has a tenant in that situation right now.  She really likes the tenant, but the tenant got a job and S8 kicked her out of the program.  She was finally able to get back in, but now S8 only pays something like $32 and the tenant struggles to pay the rest all at once.  I suggested a compromise--The tenant could pay her rent in 2 installments with her paychecks instead of having to pay it all at the beginning of the month.  Because my friend really likes her tenant and respects that she's trying to better herself and serve as a good example for her kids, my friend thought this was a great idea and is going to discuss it with her tenant.  People should be rewarded, not punished, for getting a job.  ;-) 

One thing I'd say about investing in low income or Section 8 is that make sure your PM is on board with the plan.  Don't just assume all PMs will manage that type of property.  In my town, only 1 company does Section 8 and the one I use for my other properties doesn't even do regular low income.  If you're looking at Section 8, I'd suggest going to your local office to get some information.  Ultimately, you might want to go to the office in the area you'll be investing, but you might as well start with your local one since it's a national program.  (Fyi, it's no longer officially called Section 8.  It's called the Housing Choice Voucher Program, but unofficially, it's still Section 8 by pretty much everyone.)  

I haven't done any low income or Section 8 yet, but I'm strongly considering it (and have looked at several houses, even offered one 1, but got outbid).  But I'm going to probably go with Section 8 over regular low income.  My understanding is that if they trash your place as Section 8, they can lose their voucher, so they are less likely to do so.  The agency that does Section 8 in my area said it happens "occasionally."  That doesn't seem too often to me...of course, if it happens to me once, I'll feel like it happens way too often.  lol

Also, in all my properties, but especially low income types, I favor brick homes.  I have a theory that with a brick home, if all else goes wrong, at least I have the exterior walls and thus still have a house.  But that's just me being weird.  lol

Good luck with whatever you do!  And while I don't have one yet, my numbers on the Section 8's are always a lot better than on my $100k+ properties, so assuming you don't care if it never appreciates, it's not a bad investment to consider, IMO.  :-)

I  have a PM that does my inspections quarterly.  They also change the air filters and ask if there is anything else that needs attention.  While it's a bit sneaky, you could ask several local property managers what they do.  Ask to read their management contracts, rental agreements, and ask what they do during inspections.  They're professionals and can tell you a lot more than I can.  ;-)